Activity-Based Costing

Paper Summary:

The paper discusses "activity-based costing" or ABC, and states that it is a modern performance measurement tool that assists in identifying, describing, and assigning costs to a company's operations. The paper highlights the principles and advantages of the system and mentions that the most suitable products for which the ABC method can be used are support services, given the units of output they produce. This concept can support managers in seeing how to maximize shareholder value and improve corporate performance.

Outline:
Introduction
Activity Based Costing Methodology
Activity Based Costing Implementation
Activity Based Costing Advantages
Activity Based Costing Disadvantages
Traditional Cost Accounting
Comparison between ABC and traditional methods

From the Paper:

"In opposition, the ABC method is based on a different approach, which is called project-management approach. By following this approach, "ABC starts by determining the level of effort for a specific resource (person) to perform a given task (activity). This level of effort is typically calculated using an algorithm derived from experience and analysis of the cost and time drivers that affects each activity. After calculating the effort (in work hours), one can derive costs for that specific task by factoring in the hourly cost of the person who performs that task. The compilation of costs for all tasks in the project is the total project cost."

Sample of Sources Used:

• Activity Based Costing (2007). OSD Comptroller iCenter. Retrieved September 25, 2007 from http://www.defenselink.mil/comptroller/icenter/learn/abcosting.htm.
• Activity Based Costing method and ABC methodology (2007). Value Based Management. Retrieved September 25, 2007 from http://www.valuebasedmanagement.net/methods_abc.html.
• Activity Based Costing. An introduction to concepts of Activity Based Costing (2007). Accounting Software Advisor. Accounting Software Research. Retrieved September 25, 2007 from http://www.asaresearch.com/articles/abc.htm.
• Cost driver (2007). Wikipedia, the free encyclopedia. Retrieved September 25, 2007 from http://en.wikipedia.org/wiki/Cost_driver.
• Roztocki, Narcyz (1999). Introduction to Activity Based Costing. Internet ABC Online Presentation. University of Pittsburgh. Retrieved September 25, 2007 from http://www.pitt.edu/~roztocki/abc/abctutor/.

More papers on Activity-Based Costing:

• Business Plan # 104635 : "Implementing the Activity-Based Costing System"
• Case Study # 142626 : "Activity Based Costing"
• Research Paper # 88712 : "Activity-Based Costing"
• Analytical Essay # 141107 : "Value-Added Activity Based Costing"

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