Activity based costing in printing industry: Profitability enhancement through realistic pricing

Abstract

Activity Based Costing is a costing methodology that assign costs to activities and cost objects based on the consumption of resources, rather than the traditional costing approach in which costs are allocated to products based on arbitrary bases such as direct labour/machine hour. It enables organizations to analyse resources/costs in terms of activities and cost objects. An attempt has been made in this paper to identify and analyse activities, cost drivers, both product and customer driven. This analysis may help the printing industry in cost reduction through eliminating unwanted, non-value adding activities and result in overall increase in profitability of the firm. Based on the analysis of activities and cost drivers a pricing model is developed to suit the printing industry which may help the printing industry to quote for any complex job with ease and accuracy.