On Saturday 20 November 2021 an online guest lecture was held on the topic "Recent Trends in Activity Based Costing". This guest lecture invited guest speaker Dr. Sandeep Kumar Kesarwani from Gopal Narayan Singh University Bihar India. This guest lecture was attended by approximately 150 undergraduate study program students taking Cost Accounting and Management Accounting classes.
Dr. Sandeep opened the presentation by discussing the definition of Activity Based Costing (ABC). ABC is a costing system that focuses on the activities carried out to produce products or in other words, costs are first traced to activities and then to products. ABC is generally used as a tool to understand product and customer costs and profitability. As global competition becomes increasingly fierce, companies produce increasingly diverse products and services. They find that producing different products and services places varying demands on their resources. So the need to more accurately measure increasingly diverse products and services has caused companies such as American Express, Boeing, General Motors, and Exxon Mobil to refine their costing systems. One of the primary ways companies around the world improve their costing systems is through activity-based costing or ABC.
After explaining the definition of ABC, Dr. Sandeep then explained the evolution of the ABC concept which originally came from a traditional system or what is often referred to as Traditional Based Costing. He then continued by explaining the differences between traditional costing and ABC. If focused on costs incurred, traditional costing fails to capture cause and effect relationships. Traditional accounting is limited to providing information at the product level. Meanwhile, current manufacturing technology demands feedback from performance while production is still in progress. Therefore, the ABC system is used to overcome these shortcomings. Apart from presenting the material, Dr. Sandeep also provides a case study on ABC calculations.
