Term Papers on Activity Based Costing

Term Paper Title	Activity Based Costing
# of Words	11190
# of Pages (250 words per page double spaced)	44.76

Activity Based Costing

Abstract

The dissertation discusses the ABC (Activity Based Costing) method and how it can help or influence management decisions. The method of Activity-Based Costing (ABC) was developed primarily for solving problems which emerged from traditional cost management systems. Troubleshooting in the management of companies throughout the late 70’s and especially the early 80’s held a constant presence. The problems generated were mainly from the traditional cost accounting systems’ way of functioning which provided the management with inaccurate data. Where the old cost accounting systems failed badly was in supplying the company’s management with inappropriate information in order for crucial decisions to be taken in the correct and true perspective of a given company’s true position in its market territory. Since this currently accessible “itemized” information could not be provided to a company’s decision making sector, the information provided had an impact which of course distorted the decision which would have otherwise been taken in the light of different and more accurate information.

The Dissertation gives an overview about the historical background that led to the development of Activity-Based Costing. It discusses in detail the problems of the Traditional Costing system and guides through step by step the development of ABC, illustrated with different examples.

The author of the dissertation used various text books, magazines and publications as a source of information on theories.

COST ACCOUNTING – IT IS AS EASY AS THE ABC
DISSERTATIONFOR BA (HONS) IN BUSINESS STUDIES
2000/2004

Table of contents
1. Introduction                                                                                                           3

2. History overview                                                                                                   5

2.1 Cost accounting in the XIX century                                                         5

2.2 Management accounting in a different aspect                                6

2.3 First half of the XX century                                                                        7

2.3.1 Reorganisations – controlling                                                                    7

2.3.2 Financial Accounting in the spot light                                                    8

2.4 Second half of the XX. Century                                                                 10

2.5 Criticism of the 1980s                                                                                      14

3. The emergence of Activity-Based Costing                                            16

3.1 An outdated costing system                                                                       16

3.2 The development of Activity-Based Costing                                     19

3.3 The basics of Activity-Based Costing                                                     20

3.3.1 Activities as the drivers of costs                                                              20

3.3.3 Most costs are variable                                                                                 21

3.3.3 Hierarchical categories of activities                                                     22

3.3.4 Measuring the resource consumption                                                     23

3.4 Criticism of the ABC theory                                                                       24

4. The design of the Activity-Based Costing system                             26

4.1 Stages of ABC system design                                                                        26

4.1.1 Activity analysis and activity model                                                    27

4.1.2 Creating cost pools and gathering costs                                             27

4.1.3 Determining cost drivers                                          ...

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