Activity-based costing systems and incremental costs

摘要: This article derives, in a comprehensive but informal way, the essential conditions for activity-based costing (ABC) and costs proportional with output volume (CVO), such as variable material component costs, to measure economic defined incremental costs. Without this property these systems may give incorrect signals decision making, pricing, altering product portfolio, make or buy outsourcing decisions cost management. In contrast existing literature, are found be extensive require fairly detailed exploration of complex multifaceted nature technology. Conditions on technology allow usual definition pools shown that production involves neither complementarities nor non-complementarities, inputs pool independent those other takes form input mixes fixed invariant volume. Essential market system also considered. It will indicated perfect is required drivers linear homogeneous their pools. type function can entertained restricted by permissible technologies which generated. These assumptions thus imported into all uses methods. Failure satisfy suggests many cannot easily treated using ABC CVO. Such failure leads distorting accounting numbers away from