Application of Activity-Based Costing in Cost Management

Discussion Post 3
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Activity-based costing (ABC) is essential in cost management. It involves controlling and reducing expenses while producing quality goods. According to Nallusamy et al. (2017), ABC enables firm executives to identify how various departments use resources and highlight where to improve. Rizkya et al. (2020) note that ABC is mainly used in the manufacturing industry. However, service firms, such as airlines, banks and insurance companies, are currently utilizing it. The technique enables entities in the service sector to achieve similar goals. It also allows them to control and reduce costs to make accurate pricing decisions and raise their profitability margins.
Most service companies had problems developing a decent cost accounting system in the past. However, the utilization of ABC has made it easier. Financial institutions such as Chase Bank currently use activity-based costing to make decisions regarding restructuring branches, outsourcing decisions, and providing exclusive services in certain outlets (Rizkya et al., 2020...