Well-Documented Analysis Of The Design

ABC or GPK or RCAActivity-based costing (ABC) came into prominence in late 1980s when the relevance of management accounting was being lost. ABC is a methodology of costing in which expenses are mapped to activities and costs identified with these activities are assigned to final consumption point that is to all products and services according to the actual consumption by each. This costing method assigns more indirect costs (overhead) into direct costs compared to traditional costing.The concept of ABC was propounded by Robert Kaplan and William Burns with an initial focus on the manufacturing industry due to increased proportion of overhead and indirect cost in total product cost as compared to direct labour and material costs.The traditional system of costing techniques allocated indirect expenses to products based on character of a single allocation factor that may not be casually related to the type and level of work consumed. Traditional system relied on the arbitrary addition based on cost allocation factors such as number of labour hours to allocate proportion of overhead costs on to direct costs to attain a total product cost. The traditional approach first accumulated costs within a production or non-production department then allocated non-production costs to