The significance of investment is transparent in the world of competitive business. Traditional costing systems in which their emphasizes are for short term savings rather than long term benefits have shown some lacking in providing accurate and reliable cost data for the investment decisions. Activity-based Costing (ABC), which is developed to satisfy some of the weaknesses of the traditional costing systems, can provide valuable insights into the operating processes and come up with more accurate cost data. In this paper, ABC is used to provide significant information for investment decisions. Although, the ABC method provides accurate operating product costs, it does not identify which products are economic valued added creators and so contribute to companies’ wealth. This drawback can be overcome by applying Economic Value Added (EVA). The adoption of ABC and EVA can represent a considerable change in the managerial thinking and to corporate strategies and business performance.
Cooper, R. and Kaplan, R.S. (1988), Measure Cost Right: Make The Right Decisions, Harvard Business Review, pp. 96-102. (September-October 1988)
Drury, C. (1989), Activity-based costing, Management Accounting, pp. 60-66. (September 1989)
Bailey, J. (1991), Implementation of ABC Systems by UK Companies, Management Accounting, pp. 30-32. (February 1991)
Cooper, R. and Kaplan, R.S.(1992), Activity-Based Systems; Measuring the Costs of Resource Usage, Accounting Horizon, pp. 1-13. (September 1992)
Dhavale, D. (1992), Activity-Based Costing in Cellular Manufacturing Systems, Industrial Engineering, pp. 44-46. (February 1992)
Sohal, S.A. and Chung, W.C. (1998), Activity-Based Costing in Manufacturing: Two Case Studies on Implementation, Integrated Manufacturing Systems, vol. 9, no. 3, pp. 137-147.
Shrieves, R.E. and Wachowicz, J.M. (2001), Free Cash Flow (FCF), Economic Value Added (EVA), and Net Present Value (NPV): A reconciliation of Variations of Discounted-Cash-Flow (DCF) Valuation, The Engineering Economist, vol. 46, no. 1, pp. 3352.
Hubbell, W.W. (1996), Combining Economic Value Added and Activity-Based Management, Journal of Cost Management, pp. 18-29. (Spring 1996).
Cooper, R. and Slagmulder, R. (1999), Integrating Activity-Based Costing and Economic Value Added, Management Accounting, pp. 16-17. (January 1999)