Evaluation of Activity by Activity-Based Costing

Abstract

In a globalized economy there is a severe competition between companies. In this situation the necessity for taking measures to reduce costs arises. In traditional costing there is a problem with distribution of overhead costs. Explaining the model of P. B. B. Turney, which evaluate activities by cost pools and cost drivers and also mentioning the research of J. A. Brimson that include non-added value into evaluation, I discuss activity-based costing that calculate exact costs. Correct evaluation of activities helps the right decision making. Particularly elimination of non-added value and decrease in cost driver rate increase price competitiveness of product costs.