ACTIVITY-BASED COSTING ON THE EXAMPLE OFPRUNE-DRYING COMPANY

This paper examines the possibility of application of the activity-based costingin a company engaged in drying fruit. Activity Based Costing (ABC) wasdeveloped due to the shortcomings of traditional cost accounting systems, whichwas shown to have serious limitations, on one hand, and due to the need for moreaccurate cost price, on the other. This is of great importance for business decisionmaking, which requires quality data and information, because the intense technicaland technological progress has significantly altered the environment companiesoperate in. Along with this fact, major changes in cost structure occurred, whichreflected through the increase of the indirect cost portion, and decrease of directlabor and material costs. Traditional cost accounting methods allocate indirectproduction costs using keys which are no longer appropriate for the newcircumstances, and therefore typically allocate unreasonably high amount ofindirect costs to those products which are produced in larger series. ABC costaccounting system firstly allocates indirect costs to pre-defined activities, andafterwards carries them to cost and profit drivers. The application of ABC costingin Serbia is at the very beginning. Having in mind that the privatization and therestructuring phase in the economy is followed by the establishment of a newmanagement with fresh ideas, this can be a good timing for companies to introducemodern approach and modern methods of cost accounting. ABC method is veryconvenient for application in service companies, food processing industry,confectionery companies, driers, sugar refineries, breweries, dairies, mills etc.