Page 22 - MA - May 2017
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COVER STORY
ACTIVITY BASED
METHOD FOR PURELY
FINANCIAL
ITEMS
T
adoption of various tools
he estimation of the cost of product or
service yields innumerable benefits, as it facilitates to and techniques will finally
improve the efficiency and economy of the operations result in to get the goods and
of the entity. The identification and removal of the services at the acceptable lower price and
ineptitude activities will enable to identify and remove thus facilitate to improve the general standard of living
the unprofitable products or services by applying the of the general public.
various doctrines of costing. The inappropriate costing There are many techniques to determining the cost of
of products or services may lead to erroneous fixation of the product as well as services. At the time of evolution of
price and result in fall in demand and consequent loss to costing, cost of commodities or services was determined
the entity. by summing up of materials, labor and overheads
The techniques of costing assists management to incurred. During those times the apportionment
formulate proper planning and control of various of overheads was made with reference to labor
scare resources and also to take various decisions hours or materials consumed, which was decided by
such as make or buy, dispose management. Robert Kaplan invented a new technique
or retain, expand or shrink etc Activity Based Costing, which created a big bang among
at the appropriate time. The Industries. It shows a new spectrum of costing of
CMA Dr. L. Kailasam
Deputy Accountant General
Office of Principal Accountant General
Thiruvanathapuram
22 The Management Accountant l May 2017 www.icmai.in