[ Basics Concepts ]
[Additional Information]Responsible : Prof. Henrique Rozenfeld
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Source: COGAN; NAGAKAWA, Masayuki; DAVENPORT Thomas H.; COOPER, Robin. (See additional information)
The ABC system of activity based costing is a new enterprise tool. Its main aim is to measure and improve the activities that compose the business processes and to calculate, with accuracy, the costs of products. An enterprise represented by a succession of business processes that uses the Activity Based Costing identifies which resources and activities are consumed for each product of the company. This help to place, in a coherent way, the indirect costs consumed by each product.
The ABC system aims to supply information about indirect expenses, which the traditional costing system fails to cover. The old system uses sharing criteria, based on the direct labour or the direct materials, etc., which promotes distortions. This technique was very useful in the past when the indirect costs (overhead) did not exceed 10% of the total costs.
Currently, however, the indirect costs can represent up to 70% of the total costs, the proportion of direct labour has reduced significantly. For companies that are very automated, in some cases, no more than 5% of the total costs of manufacturing are attributed to direct labour.
The ABC (Activity Based Costing) determines what activities consume the company’s resources, grouping them in centres of costs for activities. After that, and for each one of these centres of activities, it attributes costs to the products based in its depletion of resources. With this, it is possible to determine which are the "sub costing" products and which are the "super costing" products, making it possible for management to make improvement decisions. The ABC system allows the company to continuously improve tasks, such as; services, quality initiatives, waste, business processes, etc., which contribute to reducing the cost of overheads.
COOPER, R. (1990). “Implementing an activity based cost system”. Journal of cost management, Spring.
COGAN , S. (1994). Activity based costing (ABC) : a poderosa estratégia empresarial. São Paulo : Pioneira. (Available in Library FEA -USP).
DAVENPORT, T. H. (1994) Reengenharia de processos: como inovar na empresa através da tecnologia da informação. Trad. por Waltensir Dutra. 3. ed. Rio de Janeiro: Editora Campus. ( Available in Library Engineer EESC - USP).
NAGAKAWA, M. (1991). Gestão
estratégica de custos: conceitos, sistemas e implementação. São Paulo: Atlas.
(Available in Library EP - USP ).
Activity -Based Costing(1998) - http://www.saffm.hq.af.mil/SAFFM/FMC/ABC/Index.htm
ABC Technologies (1998) -www.abctech.com