Activity Based Costing: By: Zachary Golden Dr. Yelvington November 13,2008 The method of Activity-Based Costing (ABC) was developed primarily for solving problems which emerged from traditional cost management systems. Troubleshooting in the management of companies throughout the late 70's and especially the early 80's held a constant presence. The problems generated were mainly from the traditional cost accounting systems' way of functioning which provided the management with inaccurate data. Where the old cost accounting systems failed badly was in supplying the company's management with inappropriate information in order for crucial decisions to be taken in the correct and true perspective of a given company's true position in its market territory. Since this currently accessible "itemized" information could not be provided to a company's decision making sector, the information provided had an impact which of course distorted the decision which would have otherwise been taken in the light of different and more accurate information. This misinformation had an adverse impact on a multitude of managerial decisions especially in the multi-product firm sector in respect of long-term, mid-term and short-term consequences such as investments in technology, quantity and specification of product production. The accuracy of data on which management decisions are based in order to maximize efficiency and establish one's company identity in a competing market through, besides quality, a selection of sound marketable prices applied in the proper time scale to all of a company's product range, is of paramount importance. In other words activity based costing pin-points problems by focusing on the activities associated with operating the business. The traditional cost systems haven't the capability to afford this insight, and so do not touch the subject, only in the case of reports that isolate salaries, benefits, and so on. If a manager were told that the cutting of...