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It is because of all the reasons mentioned above, that companies needed a new costing system and hence the emergence of ABC.
What is activity based costing? Offtech Computing Pty Ltd, (2002) stated that Hicks (1999) has defined ABC as, " a concept around which it can construct an economic model of its business that will provide the accurate and relevant cost information necessary to support sound business decisions of all types”. Activity-based costing is a costing model that identifies the cost pools, or activity centres, in an organization and assigns costs to products and services (cost drivers) based on the number of events or transactions involved in the process of providing a product or services...
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