An analytic hierarchy approach to activity based costing

An analytic hierarchy approach to activity based costing

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Article ID: iaor1992815
Country: Netherlands
Volume: 22
Issue: 2
Start Page Number: 151
End Page Number: 161
Publication Date: Nov 1991
Journal: International Journal of Production Economics
Authors:
Keywords: analytic hierarchy process
Abstract:

This article presents an estimating model for determining how overhead costs might be allocated to different products. The model, which is loosely based on Activity-Based Costing (ABC), incorporates Saaty’s Analytical Hierarchy Process in estimating the overhead costs associated with each product. The proposed model uses overhead cost categories and other cost-correlated information, as well as managers’ subjective judgments for detail classification of overhead costs when ‘hard’ data are not available. This model allows business to determine the benefits of ABC before actual implementation. A real-world example illustrates the model.

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