Activity-based costing : the essence of the method, the basic elements and accounting

The article highlights one of the major problems of the modern Russian companies – the method of cost management. The specificity of one of the modern methods – functional method of cost management or activity-based costing has been examined. The author points out factors influencing the choice of the basis for distribution of indirect costs at the places of occurrence and cost center, features of the cost classification and detailing, criteria for their grouping, conditions for applying the method and its possibilities. The detailed procedure of preparing the unit cost of the product by the functional method of the cost accounting is provided. The methods of distribution of indirect costs within the functional approach are reviewed. Limitations of the method of activity cost accounting, its advantages and disadvantages are underlined.

costing, unit cost calculation, functional method of the costs accounting, direct costs, overheads, business processes, coefficient of acquisition, cost-forming factors, costs distribution basis, cost center, non-productive costs