- Published on
KembaraXtra- Financial Terms- activity-based costing (ABC method) is a costing system developed to allocate costs more accurately according to the activities performed within an organization.
The method was proposed by Professors Johnson and Kaplan in their 1987 book Relevance Lost: The Rise and Fall of Management Accounting. They criticized traditional absorption costing techniques.
Activity-based costing recognizes that costs are generated by activities and that products or customers should absorb costs based on the resources and activities they actually use.
Supporters of ABC argue that it produces more accurate cause-and-effect cost allocations than traditional costing systems, especially in complex organizations.
The system is widely used for budgeting, pricing, cost control, and profitability analysis because it provides clearer insight into operational efficiency and resource consumption.
The method was proposed by Professors Johnson and Kaplan in their 1987 book Relevance Lost: The Rise and Fall of Management Accounting. They criticized traditional absorption costing techniques.
Activity-based costing recognizes that costs are generated by activities and that products or customers should absorb costs based on the resources and activities they actually use.
Supporters of ABC argue that it produces more accurate cause-and-effect cost allocations than traditional costing systems, especially in complex organizations.
The system is widely used for budgeting, pricing, cost control, and profitability analysis because it provides clearer insight into operational efficiency and resource consumption.
0 Comments