Activity Based Costing is a superior costing technique Finance Essay (Term Paper Sample)

Table of Contents TOC \o "1-3" \h \z \u Title: Whether Activity Based Costing is a superior costing technique PAGEREF _Toc348869700 \h 21.0 Introduction PAGEREF _Toc348869701 \h 22.0 Limitations Associated With Traditional Costing PAGEREF _Toc348869702 \h 23.0 Why Activity Based Costing Is a Superior Costing Technique PAGEREF _Toc348869703 \h 42.1 Activity-Based Costing is Effective PAGEREF _Toc348869704 \h 42.2 Cost Drive Fitness PAGEREF _Toc348869705 \h 52.3 Cost Calculation Accuracy PAGEREF _Toc348869706 \h 52.4 Cost Information Creditability PAGEREF _Toc348869707 \h 62.5 Cost Reporting Usefulness PAGEREF _Toc348869708 \h 72.6 Activity-Based Costing Effectiveness PAGEREF _Toc348869709 \h 73.0 Conclusion PAGEREF _Toc348869710 \h 8Bibliography PAGEREF _Toc348869711 \h 9
Title: Whether Activity Based Costing is a superior costing technique
1.0 Introduction
In the recent past, scholars, consultants, and other practitioners have observed that Activity Based Costing (ABC) techniques, formulated to improve decision making and the accuracy of cost and profit measurement methods, in many cases have given less than expected results. This promoted Kaplan and Anderson (2004) to assert that many organisations have shifted from ACB since it does not give details of an operation; it takes a lot of time to apply, and it very costly to develop and maintain. More criticism is given by Bromwich and Bhimani (1989) who points out that ABC is very difficult to apply. However, Stratton, Desroches and Lawson (2009, p1) argues that “Despite the negative results of these studies, there are many case studies and anecdotal reports of organizations that have adopted ABC methods and reported satisfaction with the value they provide”. Accordingly, this paper discusses whether Activity Based Costing is a superior costing technique, providing evidence from the literature.
2.0 Limitations Associated With Traditional Costing