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A Discussion on Activity-Based Costing

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A Discussion on Activity-Based Costing

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A Discussion on Activity-Based Costing
ACC-532 Graduate Paper

A Discussion on Activity-Based Costing

When we think of cost of accounting it is easy to come up with numerous different cost accounting methods which is because over the year’s cost accounting has developed in numerous ways to accommodate different types of situations. While every type of cost accounting is important and has its own benefit and disadvantages this paper will focus on what I believe is one of the most important cost accounting methods. The method that this research paper will focus on is the activity-based costing method, more commonly known as the ABC method. “A costing method that first assigns costs to activities and then to goods and services based on how much each good or service uses the activities” (Hilton, 2014), this is the definition of the ABC method according to the textbook Advanced Cost Accounting. While I believe that this definition gives us a good idea of the general idea of what the ABC method is it does not even begin to crack the surface of how important this costing method is and how essential it is to the companies that utilize it. In order to get a broad understanding of the ABC method this research paper will focus on three focus points. The first focus point is the history of the method, the second focus of this paper is why a company would use the ABC method and how it is set up, and the last focus point of this paper will be the role of the ABC method in today’s business environment. The goal of this paper is to focus on these various aspects of the ABC method in order to come to a better understanding of the process and its importance.

The ABC method came about in the 1980s because companies felt that the current cost accounting methods were becoming less and less relevant due to technological advances that had occurred since cost accounting methods were developed. “The traditional cost accounting methods were designed around 1870 -...
A Discussion on
Activity-Based Costing
ACC-532 Graduate Paper