Activity-Based Costing provides a process-oriented, cross-functional view of overhead, in contrast to the traditional location-oriented view provided by Cost Center Accounting. Activity-Based Costing thus complements and enhances Cost Center Accounting.
Activity-Based Costing allocates process quantities based on resource and process drivers, allowing you to define cost allocation along thevalue-added chain more exactly than is possible with overhead rates. Activity-Based Costing also complements and enhances product costing by assigning costs to the business processes where they originated. Cost center resources can allocate to business processes based on their true utilization of activities.
Activity-Based Costing in the SAP System
By integrating Activity-Based Costing into profitability analysis, you can create more realistic views of your revenue position.
The primary goal is not simply to lower costs in individual departments but to optimize entire process chains. Other goals of Activity-Based Costing include shortening lead times and improving quality.
From SAP R/3 Release 4.0 onwards, you can use the Activity-Based Costing component in parallel with your existing traditional cost accounting system, or you can use it as an operational component integrated with product costing and profitability analysis in the Controlling component (CO).
See also:Parallel Activity-Based Costing Integrated Activity-Based Costing