Abc Costing System Essay

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The ABC costing system and customer sustaining Introduction During the 1980s the limitation of traditional product costing began to be widely publicized. These systems were desgined decades ago when most companies marketed a narrow range of products. Indirect costs were relatively small, and the distortion arising from inappropriate overhead allocation was not significant. Information processing costs were high and it was therefore difficult to justify for sophisticated methods of assigning indirect costs to the cost objects. And gradually find ways to know the customer demand, and how to deep in the relationship with the loyal and profitable customer. By the 1980s companies were marketing a wide range of products, indirect costs were no longer relatively unimportant and information costs had ceased to be a barrier to introducing more sophisticated systems. From another side keeping the relationship with the customer would be much less costly than trying to make a new one every time. Furthermore, the intense global competition of the 1980s resulted in decision errors from poor cost information becoming more and more costly. It is against this background that a new, and more sophisticated costing systems, called activity-based costing (ABC) emerged in the late 1980s. Here are we going to study and analyze this method, and see if it fits and work for all companies or not, and what we think of it. Aim of model The aim of the model is to find out if the new costing method, activity based costing (ABC), is developed and has been advocated as a means of overcoming the systematic distortions of traditional cost accounting and for bringing relevance back to managerial accounting. And it would help the organizations to soundly estimate the cost elements of entire products and services, and to eventually gain customer sustaining. Method Activity based costing

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