Logistic costs case study - an ABC approach

Activity based costing (ABC) represents a radical departure from the tradit ional cost accounting systems. The BBC methodology, rather than allocating costs to individual units, identifies the activities that consume resources , matching costs to the level of such activities. The key aspect of this me thodology is the development of the models that represent a logical and qua ntifiable relationship between the utilisation of resources, the performanc e of activities, and the products or services that they provide. With these models one can simultaneously mirror the flow of orders and products along the logistic chain, capturing the costs at a level of desegregation that e nables the analysis of profit by type of client, market segment and distrib ution channel. This application of ABC costing to a logistic operator illus trates the main difficulties and benefits of this approach.