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996-Article Text-2374-2631-10-20220401
996-Article Text-2374-2631-10-20220401
996-Article Text-2374-2631-10-20220401
ISSN: 2576-5973
Vol. 5, No. 3, 2022
Abstract: Activity Based Costing is one of the most modern systems in which more
accurate Cost data can be obtained than those provided by traditional system, resulting
from the fair basis for allocating costs to products or services by identifying the main and
group them into cost Pools and costs of each activity based on the consumption of those
products or services from the formation of the various activities of the company, instead of
the loading rates used by the traditional system and built on a single basis and thus obtain
cost data for the service with more accuracy, appropriate, and fair
Introduction:-
The technical developments that the world witnessed during the 1980's have
complicated production processes, and indirect costs have become a large part of the
facility’s expenses, as traditional costing systems do not meet the needs of decision users,
which led to the need to use cost accounting systems that are based on Activities in order
to avoid making wrong decisions and to assist them in setting an appropriate price policy
for their products or services to reduce costs and maximize their profitability.
From this point of view comes the importance of the research in dealing with the issue
of cost on the basis of activity and the possibility of its application to service companies,
and what it includes in achieving accuracy and justice in the distribution of indirect costs,
and to achieve the goal of the research has been divided into four sections, the first topic
was concerned with the research methodology, and the second explained the cost On the
basis of activities ABC, the third topic included the practical application of preparing the
cost on the basis of activities ABC, and the conclusion was the fourth topic, which
discussed the most important conclusions and recommendations related to the topic of
research.
2.2 The difference between traditional costing systems and the ABC method
Indicated each form (Drury, 2000:338), (Muhalhal, 2013: 44) to difference between
traditional costing systems and the ABC
(1) In terms of cost pools:
• Traditional costs : The accumulation of costs through departmental cost pools,
therefore, the costs of the cost pool are heterogeneous and are not affected by a
single element.
• ABC: Accumulation of costs through activity cost complexes, which are designed
to be consistent with the main activities and operational processes, and when
designing, the costs of each cost complex are affected by a single element called
the cost vector.
(2) In terms of the basics of personalization:
• Traditional costs: Reduce costs on products by using the basis of allocation related
to volume: number of units, direct labor, machine hours, value of sales..
• ABC: Allocate costs to products and services and any other cost objectives of the
activity cost pools on the basis of principles consistent with the cost vectors of
activity costs.
(3) In terms of the cost hierarchy:
• Traditional costs: It estimates the costs of all the organization on the basis of the
volume of production of goods and services.
• ABC: It allows the non-linear relationship in the organization because it
recognizes that these costs are not caused by the number of units produced.
(4) In terms of cost targets:
• Traditional costs: Focuses on estimating the cost of one unit of a product or
service.
• ABC: Focus on estimating costs for many cost objectives: units, batches,
production lines, operations, customers, suppliers.
(5) In terms of decision support:
Allocation of indirect industrial costs to products using activity cost base loading rates:
It represents the last step of the activity-based costing system by allocating activity costs
to cost targets (products or services) as is the case in any other costing system, where
activity costs are allocated by multiplying the cost-benefit rate for each activity by the
product consumption of the activity cost driver (Lanen et al., 2011:322).
In addition to the steps for implementing the activity-based costing system, a final step can
be added to the previous steps, according to (Garrison et al. al.2008:324-325) which are.
Preparing management reports: The most common reports that are provided based on
the information provided by the costing system on the basis of activities are related to the
product and customer profitability .These reports help the company direct its resources
Travelers
15464 x 1026432.9 = 15872758726
The goods
1768 x 1026432.9 = 1814733408
Travelers
1425 x 362019.38 = 515877621.2
The goods
250 x 362019.38 = 90504845.82
Travelers
12666×132927.97 = 1683665764
The goods
8250 x 132927.97= 1096655815
Travelers
139000000×1.586154 = 220475459.6
The goods
45000000 x 1.586154= 71376947.36
3.3.5 Civil Defense activity:
The number of civil defense for both passengers and goods was chosen as a cost guide
for this activity, and the cost of this activity was distributed, which amounted to
(508,998,205) dinars, noting that the number of civil defense for both passengers and
goods amounted to (3350), and as follows:
Rate cost = dinars
Travelers
2850×151939.76 = 433028323.7
The goods
Travelers
1425 x 34895= 49725483.04
The goods
250 x 34895 = 8723768.955
Table No. (3) shows the cost wave for each activity and calculating the rate of charging
indirect costs
Table No. (3) The cost wave for the activity of passenger transport and the activity of
transporting goods and calculating the rate of charging indirect costs
Cost wave Cost
for wave for Total
activity cost-oriented Rate
passenger cargo activity cost
activity activity
maintenance Maintenance times 1026432.9 15464 1768 17687492134
Stores Number of
passenger and
freight trains 362019.38 1425 250 606382467
Transfer Transfer and
and playback times
operation 813292 12666 8250 2780321579
beams Travel Kilometers 1.586154 139000000 45000000 291852407
Civil Preparing the civil
defense defense for the
activity of
passengers and
goods 1519397.6 2850 500 5089982050
police Number of
passenger and
freight trains 34895 1425 250 58449252
Sources
1. Al-Khafaji, Natiq Jabarsalem. (2014): The role of the activities-based management
entrance in analyzing, measuring and controlling quality costs (an applied study in the
Wasit State Company for Textile Industries) unpublished doctoral thesis, University of
Baghdad, Higher Institute of Accounting and Financial Studies.
2. Al-Musawi, Haider Atta Zabin. (2014): (Determining the target cost in light of the
implementation of the budget on the basis of activities) an applied study in the Wasit
State Company for Textile Industries, unpublished doctoral thesis, University of
Baghdad, Higher Institute of Accounting and Financial Studies.
3. Al-Naeli, Ahmed Hassan Mohamed (2008): “Application of Activity-Based Costing
Technology (ABC), an applied study in Al-Rafidain Bank, right-side branch/217, an