Activity Based Costing

Traditional costing techniques are now rapidly being replaced by activity based cost accounting. Traditional costing builds cost from the bottom up- labor, material, and overhead. it concentrates primarily in on manufecturing relating costs. the so called inventoriable cost.activity based costing starts from the end and asks.which activities and related costs are used in carrying out the complete value chain of activities associated with the cost object?. Activity based costing include the cost of quality and service.
By designing quality in to products and services during the design stage. design cost may increase . but warranty and services cost are likely to decrease thus overcoming any cost increase experienced at the front end of the chain. And unlike traditional costing it include all cost of producing a product or service.