A management accounting system in sawmilling using activity based costing techniques
In a case study at a local sawmill, the authors analyzed the cost and production information and designed a managerial accounting system using Activity Based Costing (ABC) techniques. With ABC, activities are viewed as the fundamental cost objects and the cost of a product is derived as the sum of the costs of all the activities needed to manufacture that product. It was concluded that ABC cost information enhanced the planning; control and decision making abilities of management. However, ABC is a management accounting system which involves much time and effort, making it an expensive system. Like any other purchase, the benefits of a management accounting system must be carefully weighed against the cost.