FACULTY OF BUSINESS

ACCOUNTING SCHOOL

ACADEMIC REPORT

COURSE:

ADVANCED COST ACCOUNTING

AUTHOR:

LOLI OLIVAS, SILVANA ELVIRA

TEACHER:

CHIPANA CHIPANA, HILARIO

Sede - Perú

(2024)
 INDEX
I. INTRODUCTION...............................................................................................................2
II. DEVELOPMENT..................................................................................................................3
2.1 Characteristics of Activity-Based Costing (ABC)..................................................3
2.2 Tools for Business Creativity..................................................................................3
2.3 Characteristics of Activity-Based Costing (ABC)..................................................3
2.3 Implementation of ABC
2.4 Challenges of ABC
III. CONCLUSIÓN....................................................................................................................4
IV. BIBLIOGRAPHIC REFERENCES...............................................................................4

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I. INTRODUCTION

Activity-Based Costing (ABC) is an advanced accounting methodology designed to

assign costs more accurately by identifying and analyzing activities that consume
resources within an organization. It emerged as a response to the limitations of
traditional costing methods, providing a detailed view of indirect costs. This report
examines the characteristics, advantages, implementation, and challenges of ABC,
concluding with a reflection on its relevance in the contemporary business
environment.

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II. DEVELOPMENT

2.1 Characteristics of Activity-Based Costing (ABC)

Identification of Activities
The first step in ABC is to identify the activities that generate costs within an
organization. These activities can include production, material handling, customer
service, among others. Each activity is analyzed to determine how it contributes to
resource consumption.

Assignment of Costs to Activities

Once identified, direct and indirect costs are assigned to the corresponding activities.
This is achieved by identifying the resources required for each activity and their
associated costs.

Assignment of Costs to Products and Services

Finally, the costs of activities are assigned to the products and services that
consume them, accurately reflecting the real costs of production and operation.

2.2 Advantages of ABC

Accuracy in Cost Allocation

ABC significantly improves the accuracy of indirect cost allocation, avoiding arbitrary
distributions and more accurately reflecting resource consumption.

Enhanced Decision Making

It provides detailed information on how products, services, and customers consume
resources, facilitating more informed decisions on pricing, eliminating unprofitable
products, and resource allocation.

Promotion of Continuous Improvement

By clearly identifying activities and their costs, ABC promotes process optimization
and the elimination of inefficiencies, fostering a culture of continuous improvement.

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Relevance in Complex Environments
ABC is particularly useful in organizations with diverse products and services and
complex production processes, helping manage complexity and avoiding
oversimplifications that distort cost reality.

Better Management of Indirect Costs

It allows for more effective control of indirect costs, improving overall financial
management.

2.3 Implementation of ABC

Preparation Stage
It involves training staff and selecting appropriate software for data collection and
analysis.

Identification and Analysis of Activities

The activities that consume resources are identified and analyzed to understand
their impact on costs.

Cost Allocation
Costs are assigned to activities and then to products and services based on
resource consumption.

Monitoring and Continuous Improvement

The ABC system requires constant monitoring and regular adjustments to remain
accurate and relevant.

2.4 Challenges of ABC

Complexity and Implementation Costs

ABC can be complex and costly to implement, requiring significant investment in
time and resources.

4
Need for Accurate Data
The accuracy of ABC depends on the availability and precision of data, which can be
a challenge in some organizations.

Resistance to Change
The adoption of ABC may face resistance from staff accustomed to traditional
costing methods.

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III. CONCLUSIÓN

Activity-Based Costing (ABC) offers an advanced methodology for cost allocation

that can provide numerous benefits, including greater accuracy, better decision-
making, and the promotion of continuous improvement. While its implementation can
be challenging, the long-term benefits can justify the initial investment. In an
increasingly complex business environment, ABC presents itself as a valuable tool
for improving cost management and operational efficiency. Organizations seeking a
more detailed and accurate understanding of their costs may find ABC an effective
and strategic solution.

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IV. BIBLIOGRAPHIC REFERENCES

Cano Arenas, J. A., Montoya Bernal, E., & Gómez Montoya, R. A. (2020). Método
costeo ABC con simulación de Monte Carlo en la logística en la cadena de
suministro en la industria 4.0. Cuadernos de contabilidad, 21.

Montoya, R. A. G., Arenas, J. A. C., & Bernal, E. M. (2020). ABC Costing Method
with Monte Carlo Simulation in Supply Chain Logistics in Industry 4.0/Metodo costeo
ABC con simulacion de Monte Carlo en la logistica en la cadena de suministro en la
industria 4.0/Metodo de costeio ABC com simulacao de Monte Carlo na logistica da
cadeia de fornecimento na industria 4.0. Cuadernos de contabilidad, 21.
https://doi.org/10.11144/Javeriana.cc21.mcas

Vicente Bejarano, R. M. (2023). Método de costeo ABC y rentabilidad en una

compañía minera peruana. Gestión En El Tercer Milenio, 26(51), 213–224.
https://doi.org/10.15381/gtm.v26i51.22014

Sierra Vargas, J., & Londoño Osorio, J. I. (2023). Propuesta de distribución de

costos indirectos de fabricación por el método algebraico para complementar las
metodologías de costeo tradicional y ABC en empresas manufactureras. Cuadernos
de contabilidad, 24. https://doi.org/10.11l44/Javeriana.cc24.pdci

Escobar-Mamani, F., Argota-Pérez, G., Ayaviri Nina, V. D., Aguilar-Pinto, S. L.,

Quispe Fernandez, G. M., & Arellano Cepeda, O. E. (2021). Costeo basado en
actividades (ABC) en las PYMES e iniciativas innovadoras: ¿opción posible o
caduca? Revista de investigaciones altoandinas, 23(3), 171–180.
https://doi.org/10.18271/ria.2021.321