Essay On Activity Based Costing Method

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The Activity-Based Costing Method: Development and Applications Gregory Wegmann* This paper analyzes the management accounting applications, which try to improve the Activity-Based Costing (ABC) method. First, the paper describes them using the Strategic Management Accounting (SMA) stream. Then it presents the main features of these applications. Second, the paper examines in detail two of these features: the widening of the analysis perimeter and the relevant level of details to analyze the costs. Subsequently, it analyzes several proposals, such as Customer-Driven ABC, Interorganizational Cost Management (IOCM), Resource Consumption Accounting (RCA) and Time-Driven ABC (TDABC). Finally, it describes an experience observed in the IT …show more content…

For instance, Simmonds (1981) and Bromwich (1990) suggest to use qualitative and external measures with three dimensions of analysis: the products and customers dimension, the competitive and the environmental one. According to the academic literature, the main reasons for implementing an SMA tool, lie in the evolution of the environment. This is described in successive stages—stable and predictable, unstable and difficult to anticipate, and finally, turbulent and unpredictable. As a consequence, scholars explain that management accounting tools like ABC, must take into account, strategic aspects and integrate them into the company’s drive. In order to be an efficient decision tool, an SMA system must closely follow each step of implementation of the strategy and the achievement of predefined objectives. Tomkins and Carr (1996, p. 165) explain that “… there is still no agreed comprehensive conceptual framework for what SMA is …, and it is still the case”. Despite these limitations, SMA is a good way to analyze the ABC developments. 3 Organizations like the Cam-i (Consortium of Advanced Management, International ( and the (IMA Institute of Management Accountants) ( support these investigations. According to us, SMA refers to various other expressions

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