of activity-based costing
by: Nitza Geri & Boaz Ronen
After having been exposed on how activity-based costing works, I am wondering why it is not adopted by all of the companies. While it is true that the debate between the traditional cost system and the activity-based cost system seem to be endless, here is paper written by Nitza Geri and Boaz Ronen that introduces another concept and that is global decision-making methodology or GDM. Through their research and case study, they have seen that GDM is an effective alternative to costing methods, which improves the quality of decisions and enhances organization value.
Before digging into the matter deeper, I decided to do a handful of research so as to make my critic fair and legitimate. Traditional Cost Accounting vs Activity-Based Costing:
the rise of the ABC
The authors have begun their paper at the height of the Activity-Based costing management. They have stated that this type of system appeared a promising decision support tool as against traditional costing system. The paper gave an introduction about the many paradoxes of cost accounting. However, it didn’t pay much attention to the traditional cost account in relation to the ABC and the system that is being introduced, the global decision-making methodology.
It would have been very true to the title of their paper should the authors stream down the significant events and terms of the ABC system. This is to give truth about its rise. For me to appreciate how the system fell, I add traditional costing in comparison to ABC as my benchmark for my critic.
In the field of accounting, activity-based costing and traditional costing are two different terms. They are two methods for allocating indirect or overhead costs to producers.These systems assess overhead costs related to production and then assign these costs based on a cost driver rate.
Traditional costing on the one hand is...