Top management attitudes towards the Activity-based costing

Top management attitudes towards the Activity-based costing

Top management is in the position of approval of the costing system used in the apportioning of the company’s overhead costs in any Sri Lankan organization. There is a constant support of top management to implementing activity-based costing system changing from the traditional volume-based costing system. Now a days accurate costing information is crucial for businesses to achieve a competitive advantage over its competitors. Currently there are experiences of the use of ABC in many different kinds of businesses. It depends on the objectives of the company and its businesses. Small businesses usually do not use ABC because of the high cost. With respect to the objectives, the ABC company works as a set of activities, calculating their costs through cause-effect relationship.

It is also implemented in types of businesslike hospitals, libraries, in large banking and telecom firms. There are improvements around activity-based costing in logistics and supply chain.Activity-based costing was mostly attentive on production companies. Manufacturing companies use activity-based costing to improve cost estimation and effective customer service. Afurtherfacet is that the result of ABC can be used for internal benchmarking of the efficiency of activities. Activity based costing is being implemented by a growing number of companies around the world. Specific ABC applications vary from organization to organization. A few organizations use ABC as their basic, ongoing cost accounting system.

In my view, companies which have high degree of complexity in their processes, which include supplementary activities prior to production (complex production), expanded product mix, combined with different types of customers and sales teams. It has also been used by departments to sort supplies vendors and standardize prices for those types of companies ABC is more suitable to effective calculation of costing.