2SYSTEMS SUPPORT OF THE ACTIVITY-BASED COSTING PHILOSOPHY: STAND-ALONE ANALYTICAL ABC VERSUS INTEGRATED ABC

Chapter 1 addresses differing costing philosophies common throughout the business world today, ending with a detailed look into the Activity-Based Costing approach. When trying to support an ABC philosophy, three types of software applications can be used.

  1. A custom-developed system may be designed to support a variety of functionality. However, this option is not addressed here, as the individual functionality can vary too widely.
  2. A stand-alone analytical ABC tool, such as Metify ABM or Oros ® Analytics may be used.
  3. An integrated enterprise resource planning system, also sometimes referred to as an enterprise-wide system, with embedded ABC functionality, such as SAP R/3, may be employed.

Many ERP vendors have directly developed or have formed partnerships to interface ABC functionality into their packages.1 Additionally, some ABC companies have independently built interfaces to various ERP packages.2 The maturation of ERP systems to include ABC functionality is an indication that the ABC costing philosophy is here to stay and is now considered a common or standard method for costing and supporting management analysis. Within SAP, ABC is no longer used as just an analytical tool but is integrated as part of the normal operational costing engine. The acceptance of the ABC costing philosophy into ERP systems raises several questions. For example, are ERP systems a replacement ...

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