Abc Is It Still Relevant?

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Activity-Based Costing: Is It Still Relevant?
BY WILLIAM O. STRATTON, PH.D., CMA; DENIS DESROCHES; RAEF A. L AW S O N , P H . D . , C M A , C PA , C FA ; A N D T O B Y H AT C H

THE

POPULARITY OF ACTIVITY BASED COSTING -

(ABC)

GREW RAPIDLY DURING THE

1990S, AND,
ABOUT

IN THE FOLLOWING DECADE, MANY SURVEYS REPORTED USAGE RATES OF PAST

50%. OVER THE

10 YEARS,

HOWEVER, THERE HAS BEEN DEBATE ABOUT THE

OVERALL RELEVANCE OF THIS COSTING METHOD. TO INVESTIGATE THE CURRENT IMPORTANCE OF WIDE.

ABC, WE OUR

SURVEYED

348

MANUFACTURING AND SERVICE COMPANIES WORLD-

RESULTS INDICATE THAT

ABC

CONTINUES TO OFFER ORGANIZATIONS

SIGNIFICANT VALUE FROM STRATEGIC AND OPERATIONAL PERSPECTIVES.

O

ver
…show more content…
For external reporting, production costs must be assigned to products for both income and asset reporting purposes. For operational cost control, strategic decision making, and performance measurement purposes, however, many organizations also capture and assign costs from the other functions in the internal value chain. What methods are used to measure costs and profits across the value chain, and does their usage vary by function? We identified the most frequently used types of methods as: x Actual costing, x Normal costing, x Standard costing, and x Activity-based costing.

Manufacturing

12.1% 7.4% 6.8% 6.8% 6.0% 2.7% Total 39.5%

Public Administration/Government/ Not-for-Profit Conglomerate Total

Total 6.0% Total 0.8% 100.0%

M A N A G E M E N T A C C O U N T I N G Q U A R T E R LY

32

SPRING 2009, VOL. 10, NO. 3

While the set of costing method types is as diverse as the kinds of operating systems, most organizations in the survey chose from this short list. In fact, most companies used more than one of these methods. Figure 1 shows the

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