Cost driver selection and aggregation for activity-based costing

Cost driver selection and aggregation for activity-based costing

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Article ID: iaor20012647
Country: South Korea
Volume: 17
Issue: 2
Start Page Number: 115
End Page Number: 124
Publication Date: Nov 2000
Journal: Korean Management Science Review
Authors: ,
Abstract:

Activity-Based Costing (ABC) is an accounting cost system which allocates the overhead cost to each cost object more accurately. ABC system achieves improved accuracy in estimating the cost of cost object by using multiple cost drivers to trace the cost of activities to the cost objects associated with the resources consumed by those activities. The selection and the aggregation of these cost drivers from cost driver candidates can pose difficult problems. This paper deals with these problems in mathematical programming approach. The first model is formulated as an integer programming model in cost driver selection and the second model is formulated as multi-objective goal programming model in reduction of cost drivers already selected.

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