In a DOD environment Hughes Aircraft sets the standard for ABC
Article Abstract:
Hughes Aircraft Co has implemented activity-based costing (ABC) in order to meet the new demands of Department of Defense contracts and to meet enhanced competition in the defense industry. Traditional cost accounting systems do not give defense contractors like Hughes reliable data, so the firm implemented ABC concepts over the last five years. The implementation of ABC required cost centers to be broken-up into multiple burden centers. To assign costs to the appropriate burden centers, drivers were used to reflect the time, volume, or complexity to perform the services used by the burden centers. Activities were decomposed so that the cost effectiveness of each activity was maximized, and activity analysis was performed to evaluate the cost component of each cost driver, including capital, labor, materials, and customer requirements.
Publication Name: Management Accounting (USA)
Subject: Business, general
ISSN: 0025-1690
Year: 1991
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A new view of activity-based costing
Article Abstract:
Cost information, used by management in assessing business subsegments, is critical to operations control and strategic planning. Proponents of activity-based costing (ABC) argue that the concept of attributable costs should be incorporated into the management accounting system. This would maximize managerial decision-making by providing an alternative to cost measurements of resources consumed. It is suggested that ABC be modified to obtain full absorption costs for reports identifying total resources consumed, while using direct costs for the majority of decision-making processes.
Publication Name: Management Accounting (USA)
Subject: Business, general
ISSN: 0025-1690
Year: 1991
User Contributions:
Comment about this article or add new information about this topic: