Importance of Activity Based Costing
ABC methodology has been around since early 1980s, but it’s only relatively
recently that it has begun to gain acceptance. This recent enthusiasm for the
methodology is largely because the make-up of the cost base has changed over
the last 30 years or so.
Over the last 30 years there has been a proportionate decline in direct costs and
an increase in overheads (notably technology, sales, marketing and other
support costs). At the same time the creation of products, whether traditional
manufactured products or individual services, has become more and more
sophisticated. The importance of customer-service functions has also increased,
with a commensurate cost increase in those areas, as companies seek to
maintain a competitive edge.
As a result of all this change, overheads form a much more significant part of
corporate expenditure and it is perhaps not surprising that ABC has been
adopted as a more robust way of allocating cost.
For more articles go to www.activitybasedcosting.com.au
For information on ABC software go to www.algsoftware.com.au
For information on ABC services go to www.bestrane.com.au
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