Preliminary communication
The Benefits of the ABC Method Application in Croatian Companies
Dubravka Pekanov-Starčević
; Faculty of Economics of University of Osijek
Abstract
New business environment has changed the structure and behaviour of company costs. The changes are primarily reflected in the increasing share of overhead costs in the total costs. Given that competitiveness is reflected in the unit product cost, the exact determination of unit costs by cost drivers, primarily the
precise allocation of overhead costs to cost drivers, have become crucial to the survival of companies in a turbulent market environment. The biggest problem in determining the exact product costs is incorrect allocation of overhead costs to cost drivers. In the 1980s, a new method of allocating overhead costs was developed – activity-based costing (ABC method). Advocates of this method claim that it allows a more accurate determination of product costs and identification and elimination of activities that do not add
value to the company, thereby reducing costs and increasing profits, and ultimately creating and sustaining a competitive advantage. Using a sample of Croatian companies listed on the Zagreb Stock Exchange, we investigated to which extent they applied activity-based costing; its benefits to the cost management system, and which factors influenced the application of this methodology. This study provides a new insight into the development of cost management systems in Croatian companies.
Keywords
ABC method; overhead costs; cost management
Hrčak ID:
108133
URI
Publication date:
24.7.2013.
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