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Thanks to ABC we are now much closer to determining the truth about what it costs to produce something. Traditional product costing systems were designed when most companies manufactured a narrow range of products, and direct labour and materials were main factory costs. Overhead costs are relatively small, and information processing costs were high. It is called volume-based costing system. Today, companies are producing a wide range of product. The costs of labour are only a small part of the total costs, and the overhead costs become more important. Many organisations occur for activities that are not related to physical volume, which means, the volume-based costing system is not suitable for these organisations. Activity-based costing (ABC) was first published in 1988. Only few companies used this system by 1990s. In recent years, ABC has gained popularity among both financial and operational managers. ABC is a tool for analysing cost flows and interdependence...

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