Contributions of Activity-Based Costing (Abc) to the Modern Business Environment
Contributions of Activity-Based Costing (ABC) to the Modern Business Environment
In the increasingly competitive business environment, the enterprises who intend to maintain and enhance competitive advantages must build an efficient costing system to control, plan and decide how to improve the profitability and efficiency of the operation. Activity-based costing system (ABC) is such an advanced costing system that satisfies the needs of companies in modern business environment. This essay gives a whole picture about the ABC from five parts: background introduction, definition of ABC, comparison with traditional costing system, evaluation of ABC and conditions of acceptability. The reason for the development of activity-based costing
Business enterprises exist in and are surrounded by the environment that includes a set of conditions-political, economic, social and technological (PEST) (Vadim Kotelnikov,2011) that uncontrollable in nature and affect the operating of companies. Such kind of environment is commonly known as business environment, and is divided into two components: internal environment and external environment (What is business environment?, n.d.).
In modern society, as economic globalization is developed widely and quickly, business environment becomes more competitive and complicated with the introduction of better technology and more automation. The external environment has powerful impact to the corporations. Under this condition, corporations have a far more multifaceted producing process, and provide an increasingly various range of products for sophisticated consumers (David Russell et al., 2002). Labour resources have been replaced by automatic machinery, and some large corporations even do not set up their own workshops because of production outsourcing. Consequently, the cost structure of such companies has changed, with indirect costs having a larger proportion of total cost than before. The production processes in modern business
In the increasingly competitive business environment, the enterprises who intend to maintain and enhance competitive advantages must build an efficient costing system to control, plan and decide how to improve the profitability and efficiency of the operation. Activity-based costing system (ABC) is such an advanced costing system that satisfies the needs of companies in modern business environment. This essay gives a whole picture about the ABC from five parts: background introduction, definition of ABC, comparison with traditional costing system, evaluation of ABC and conditions of acceptability. The reason for the development of activity-based costing
Business enterprises exist in and are surrounded by the environment that includes a set of conditions-political, economic, social and technological (PEST) (Vadim Kotelnikov,2011) that uncontrollable in nature and affect the operating of companies. Such kind of environment is commonly known as business environment, and is divided into two components: internal environment and external environment (What is business environment?, n.d.).
In modern society, as economic globalization is developed widely and quickly, business environment becomes more competitive and complicated with the introduction of better technology and more automation. The external environment has powerful impact to the corporations. Under this condition, corporations have a far more multifaceted producing process, and provide an increasingly various range of products for sophisticated consumers (David Russell et al., 2002). Labour resources have been replaced by automatic machinery, and some large corporations even do not set up their own workshops because of production outsourcing. Consequently, the cost structure of such companies has changed, with indirect costs having a larger proportion of total cost than before. The production processes in modern business
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