Abc Is It Still Relevant?

3384 WordsJan 20, 201014 Pages
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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