Activity-Based Costing ( ABC ) Essay -- Essays Papers

Activity-Based Costing ( rudiment ) Summary The task environment in the 1990s is markedly different from thatof the past when conventional personify accounting procedures wereestablished. Activity-based be (ABC), pioneered in the late1980s, offered a new costing approach consis 10t with the changedenvironment. However, ABC did not diffuse rapidly into the businesscommunity. This article demonstrates why adopting ABC is important bydocumenting the potential of ABC in supporting contemporary managerialdecision making.Introduction Everything happens double-quick in business today. Even new management tools(some say fads) look on a meteoric path. For example, the ink on newarticles describing activity-based costing (ABC) was just now dry beforeconsulting firms had integrated it into their slick brochures andpresentations. All they needed was psyche to use it. To illustrate,Romano identified only 110 installations by August 1990, most twoyears after the procedure was developed, with 77 portion of these intwo major firms 13. Perhaps this phase, in the process ofintroducing the new procedure, could be called the period of wildover-promise. However, even by the mid-1990s, ABC has not banquetwidely throughout the industry and even in large firms, generalsuccess of ABC is not obvious 16.According to Ness and Cucuzza, thousands of companies tolerate adopted orexplored the feasibility of adopting ABC. However, (they) estimatethat no more than ten percent of companies now use activity-basedmanagement in a meaning(a) number of their operations 11. A surveyconducted by the Institute of trouble Accountants cost managementgroup found that only 29 percent of companies used ABC instead oftraditional systems, but this was an increase from 25 percent in theprevious year 10. Among reasons cited for low adoption were employee defense and major organizational changes required with the use ofABC 11. Some spot the source of slow adoption of ABC to technicalas intumesce as cultural issues 5. Others feel that ABC would be more general in industry if it were marketed better by the costaccounting professing itself 1.As the dust has settled, ABC has turned out to be little a revolutionarytechnique than a useful refinement to be systems. The costs ofproducts and services must be accurate, or management crumb be misled.Decisions... ...8. Lewis, R.J. Activity-Based Costing for Marketing. focussing Accounting, November 1991, pp. 33-38.9. Lofgren, G.Q. Quality System Registration A Guide to Q90/ISO 9000 Series Registration. Quality Progress, May 1991, p. 37.10. More Companies Turn to ABC.journal of Accountancy, July 1994, p. 14.11. Ness, J.A. and T.G. Cucuzza. Tapping the Full Potential of ABC. Harvard Business Review, July/August 1995, pp. 130-131.12. Port, O. Custom-Made, Direct from the Plant. Business Week, November 18, 1994, p. 158.13. Romano, P.L. Trends in Management Accounting. Management Accounting, August 1990, pp. 53-56.14. Roth, A.V., C. Gaimon, and L. Krazewski. Optimal Acquisition of FMS Technology matter to Technological Process. Decision Sciences, Vol. 22, No. 2, Spring 1991, pp. 308-334.15. Schonberger, R.J. and E.M. Knod Jr. Operations Management Continuous Improvement. Richard D. Irwin, 1994, p. 44.16. Selto, F.H. and D.W. Jasinski. ABC and High Technology A Story with a Moral. Management Accounting, March 1996, pp. 37-40.17. Smith, R.B. Competitiveness in the 90s. Management Accounting, September 1989, pp. 24-29.