Activity-based Costing & Activity-based Management

Introduction

The increasingly dynamic environment of business world has brought revolution in the way accounting methods and various cost related activities are carried out . Costing has always been an integral part of management with its nature of providing a platform to assist managers with several decisions regarding purchasing , selling , planning and controlling . It is also vital in analyzing the shortage of resources and preparing budgets accordingly and being cautious of marginal cost concepts for becoming economical and profitable (Kaplan Bruns 1987

Approaches to cost accounting and management have varied along the

br timeline with various theorists coming up with various forms of cost accounting approaches . Some of cost accounting approaches include Standard accounting , Lean accounting , Activity-based costing , Resource Consumption accounting and Throughput accounting . The standard approaches to cost accounting do not provide detailed overview of manufacturing output but rather focuses on the financial performances of firms (Hall 2008 . The most commonly used method for accounting purpose is the Activity-Based Costing also known as ABC method . The activity-based approaches to business and management are a step towards being a process oriented rather than functions oriented firm Activity-Based Costing and Activity-Based Management are the modern day management tools that are considered to be a part of Management (TCM , where focus is on making continuous improvement and effective decisions based on dynamic and accurate costing methods (Ernest Young et al . 1992

Activity-Based Costing

Activity-Based Costing is a tool or accounting technique used to identify and isolate the cost factors for a firm...