ACTIVITY-BASED • MARIAM ESSAM

COSTING (ABC)
• VERONIA REFAAT
• RODINE OSAMA
OVERVIEW:

History of activity-based costing

What is activity-based costing?
Steps of Activity-Based Costing (ABC)
Advantages and Disadvantages
Activity-based costing in Egypt
References
 HISTORY OF ACTIVITY-BASED COSTING

The system of activity-based costing, also known as A.B.C., was suggested by Staubus in
1971
The activity-based costing (ABC) system emerged in the 1980s as a costing method capable
of overcoming traditional costing systems’
Since the work of Johnson and Kaplan (1987) on the “Relevance Lost” of Management
Accounting, the Anglo-Saxon scholars have been very dynamic.
The ABC method was designed in the United-States during the 80’s (Cooper and Kaplan,
1988)
This system is a significant development in the cost accounting field because it applied the
advantages and objectives of many prior systems we will discuss it .
WHAT IS ACTIVITY-BASED
COSTING?
•A relatively new cost accounting system that consists of data on
the financial and operational performance of a company's
business-related activities.
• This approach is reported to be superior to the traditional cost
accounting system because it does not have the latter's
shortcomings. Internal auditors can help increase the
effectiveness of ABC by becoming involved in several areas.
STEPS TO DESIGN ACTIVITY-BASED
COSTING
ADVANTAGES OF ABC
•Provides realistic costs of manufacturing for specific products
•Allocates manufacturing overhead more accurately to products and processes that
use the activity
•Identifies inefficient processes and target for improvements
•Determines product profit margins more precisely
•Discovers which processes have unnecessary and wasted costs
•Offers better understanding and justification of costs in manufacturing overhead
 DISADVANTAGES OF ABC
•Collection and preparation of data is time-consuming

•Costs more to accumulate and analyze information

•Source data isn't always readily available from normal accounting reports

•Reports from ABC don't always conform to generally accepted accounting principles
and can't be used for external reporting

•Data produced by ABC may conflict with managerial performance standards

previously established from traditional costing methods

•May not be as useful for companies where overhead is small in proportion to total
operating costs
ACTIVITY-BASED COSTING IN
EGYPT
Activity Based Costing (ABC) system is one of the main alternatives to cost
systems for manufacturing firms, however this system has not widely spread in
Egypt.
To implement this system in Egypt, we conducted a questionnaire covering some
important aspects of the obstacles to implementing the ABC system.
The statistical analysis showed that there are statistically significant differences
between these aspects of the obstacles to implementing the ABC system in Egyptian
manufacturing companies
 REFERENCES:
1-Peter B.B. Turney, PhD (2020), Activity-Based Costing An Emerging Foundation for Performance
Management

Gregory Wegmann,University of Burgundy IAE Dijon School of Management.