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An innovative application of activity-based costing and management in decision support modelling

Author

Listed:
  • Amir H. Khataie
  • Akif A. Bulgak
  • Juan J. Segovia

Abstract

The purpose of this article is to introduce a new cost management and decision support model. The current cost monitoring models act as real-time cost calculators rather than as decision support tools. The model presented in this study can monitor and analyse the costs in real-time. This will allow for timely and effective marketing and operations decision-making, e.g., selling price, marketing strategy, cost control, etc. Several studies have proven the capability of activity-based costing and management (ABC/M) in generating detailed and valuable cost information in production or service providing processes. The integration of ABC/M into the model expands its cost assignment and process views. System dynamics (SD) is used as the modelling tool due to its main characteristic, i.e., the integration of qualitative factors and learning loops. As such, the model presented in this paper benefits from SD's main characteristic as well as ABC/M's cross-functional cost structure.

Suggested Citation

  • Amir H. Khataie & Akif A. Bulgak & Juan J. Segovia, 2011. "An innovative application of activity-based costing and management in decision support modelling," International Journal of Engineering Management and Economics, Inderscience Enterprises Ltd, vol. 2(4), pages 369-392.
    • Handle: RePEc:ids:ijemec:v:2:y:2011:i:4:p:369-392
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