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Activity-based costing was first clearly defined in 1987 by Robert S. Kaplan and W. Bruns as a chapter in their book Accounting and Management: A Field Study Perspective. [8] They initially focused on manufacturing industry where increasing technology and productivity improvements have reduced the relative proportion of the direct costs of ...
Activity-based costing establishes relationships between overhead costs and activities so that costs can be more precisely allocated to products, services, or customer segments. Activity-based management focuses on managing activities to reduce costs and improve customer value. Kaplan and Cooper [1] divide ABM into operational and strategic:
Activity-based costing (ABC) is a system for assigning costs to products based on the activities they require. In this case, activities are those regular actions performed inside a company. [8] "Talking with the customer regarding invoice questions" is an example of activity inside most companies.
RCA Open-Source Application (ROSA) is an open-source management accounting application that aims to provide decision-support information to managers. Resource consumption accounting (RCA) is a principle-based approach to management accounting that combines German management accounting techniques known as Grenzplankostenrechnung (GPK) with a disciplined form of activity-based costing.
The Activity Based Costing (ABC) approach relates indirect cost to the activities that drive them to be incurred. Activity Based Costing is based on the belief that activities cause costs and therefore a link should be established between activities and product. The cost drivers thus are the link between the activities and the cost of the product.
The specific functions and principles followed can vary based on the industry. Management accounting principles in banking are specialized but do have some common fundamental concepts used whether the industry is manufacturing-based or service-oriented. For example, transfer pricing is a concept used in manufacturing but is also applied in banking.
Flexible use of activity-based drivers (only where needed) based on specific, and restrictive rules; Value chain integration [11] of management accounting into operational systems; Use of fundamental operations transactions as the primary source for financial and quantitative data (rather than the general ledger);
In business planning and management accounting, usage of the terms fixed costs, variable costs and others will often differ from usage in economics, and may depend on the context. Some cost accounting practices such as activity-based costing will allocate fixed costs to business activities for profitability measures. This can simplify decision ...