Activity Based Costing


Activity Based Costing (ABC) can be an extremely useful tool for those involved in process improvement and cost reduction programmes. The concept describes ABC as an accounting methodology that assigns costs to activities based on their use of resources.

Technique Overview

Activity Based Costing

Activity Based Costing Definition

Activity Based Costing (ABC) is an internationally recognised system in which staff timings and costs are produced by breaking down each activity into its constituent parts to determine the work effort required. This enables staff costs to be attributed to all activities within an organisation and provides a measure of the amount of resource used to undertake a specific element of work. This in turn provides invaluable data to support any planning, monitoring and control system, enabling managers to make better and more informed business decisions (CPS, 2011).

Activity Based Costing Description *

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Business Evidence

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Business Application

Activity Based Costing Implementation *

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Measures of Activity Based Costing *

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Professional Tools

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Further Reading

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Activity Based Costing References (4 of up to 20) *

  • Adler, W.A. (1999) Management Accounting. Making it World Class. Butterworth- Heinemann, Oxford and Woburn, MA.
  • Atkinson, A.A., Kaplan, R.S., Matsumura, E.M, Young, M.S. (2007) Management Accounting. (5th edition) Pearson Prentice Hall, Upper Saddle River, NJ.
  • Bahnut, B. (2010) Activity-Based Management for Financial Institutions. Driving Bottom-Line Results, John Wiley & Sons, Hoboken, NJ.
  • Bhimani, A. and Pigott, D. (1992) Implementing ABC: A Case Study of Organizational and Behavioural Consequences. Management Accounting Research, Vol. 3(2), pp. 119-32.

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