ABSTRACT
In traditional volume-based costing systems – mostly utilizing volume related allocation bases – costs are traced on the basis of the structural level of the organization at which costs are incurred. This traditional approach, in which cost objects consume resources, is still considered as the most familiar costing system and relatively easy to implement. In the case of direct labour intensive processes that are characterized by high material costs and low overhead costs (that is, those costs that are not included as direct labour or direct materials), this approach is reasonably accurate; this is not true anymore when overhead costs and capital costs become higher.
