Critically evaluate the usefulness of activity based costing (ABC) / activity based

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Activity Based Costing /Management (ABC /M

Activity Based Costing can be defined as a costing system that easily determines specific activities of an organization and allocates the costs to these activities in relation to the products and services taking into consideration the actual consumption by each . It involves assigning of overhead or indirect costs into direct costs . This gives an organization an opportunity to determine the position of the costs of its products and services for the sole objective of detecting and doing

br away with those products and services that are not profitable . Taking such measures also assists in the reduction in the price of the same products and services that may be overpriced

In 1930 's when security and exchange acts placed a greater emphasis on financial accounting , cost accounting was split off as a separate accounting surviving in the mainstream of accounting (Taney , 1998 . The application of ABC system of costing and management involve the allocation of resource costs in line with its activities to the products and services . It is a vital tool used to undertake the important policies such as outsourcing , pricing , improvement of products and services and finally determining procedures that if undertaken could lead to the improvement of the delivery of such products and services to the customers

In the past , accountants applied techniques that were not very effective in price reduction and lacked means of identifying numerous bottlenecks in the achievement of customer satisfaction . The two decades of...