The Impact of Activity-Based Costing on Banking Industry Performance

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The impact of activity-based costing on banking industry performance Activity-based costing (ABC) gives a true cost for the bank compared to traditional costing, which allocates most of the expenses. Banking has become very competitive, and it has become imperative that banks like any other businesses allocate their resources to the most profitable areas.  For banking industry, in particular, the potential benefits of activity-based costing (ABC) implementation can be numerous. These include the proper costing of transactions, the ability to trace specific costs to bank customers and the ability to measure customer and product profitability. The end result of these benefits is the ability to improve decision-making and help organizations meet their strategic objectives. These three cases from three different countries use activity-based costing (ABC) in their banking system. It provides a picture to analyze the performance of banking industry using activity-based costing. Summarizing from findings based on the analysis of these three case studies, the objectives of this research can obtain the clear explanations.

First of objectives is to understand the basic concepts of activity-based costing (ABC). From the literatures and the implementation experiences in these three cases, the basic concepts of activity-based costing (ABC) have been identified. Activity-based costing (ABC) was mainly applied as a superior method for allocating overhead costs. According to the case of Tripoli Libya, it mentioned activity-based costing (ABC) has received its name because of the focus on the activities performed in the realization of a product. Costs are traced from activities to products, based on each product's consumption of such activities. Because of the assumption that a product uses activities and the allowance for batch and product level cost-drivers, it is generally agreed that activity-based costing (ABC) systems are superior in modeling and tracking costs...
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