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Activity-Based Costing ABC started as a methodology that recognises the need to understand how costs actually relate to individual products and services Cooper Kaplan 1989 that later resulted in a more refined system of allocating overheads to products and services according to the demand of each activity Homemade Pty Ltd - Food Dikolli Smith 199647-55 was a pilot project where it took part in an ABC feasibility study during the mid 90s This company has been chosen for this study because it has met some of the prime criteria of ABC The criteria are diverse product or service lines high overhead large distribution costs Downes 199649 to name a few Homemade manufactures 170 types of finished stock and is a market leader It relied heavily on labour and incurring high overheads in processing food in terms of machinery salespersons pay and occupancy of factory floor Three other companies are selected to observe ABC implications in their systems to see if there is difference or similarity as compared to Homemade These companies are NASAs Lewis Research Centre LeRC - Government Tampa Electric - Public Utility and Mobil - Oil Gas see as attached at Appendix They have fulfilled the following prime criteria and have already gone through the phase of actual happenings when they adopted ABC into their costing systems 1Product Service Diversity CustomersCompanies with more diversity in products the harder it is for them to trace the source of profitability especially when they are catering to various consumers For example LeRC conducts research and development in both aerospace and aeronautics specialising in micro-gravity science aero-propulsion and space systems Its internal customers include government agencies defence affiliates and the Congress itself Without ABC the sources and uses of funds are hardly visible Walters et al 2000 because it is difficult to measure its employees time spent on a given activity Similarly Mobil supplies more than 30000 lubricants to retail customers and
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