A management accounting system in sawmilling using activity based costing techniques

Abstract

In a case study at a local sawmill, the authors analysed the cost and production information and designed a managerial accounting system using Activity Based Costing (ABC) techniques. With ABC, activities are viewed as the fundamental cost objects and the cost of a product is derived as the sum of the costs of all the activities needed to manufacture that product. It was concluded that ABC cost information enhanced the planning, control and decision making abilities of management. However, ABC is a management accounting system which involves much time and effort, making it an expensive system. Like any other purchase, the benefits of a management accounting system must be carefully weighed against the cost.