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A critical review on application of activity-based costing in the construction industry

Jaya, NM, Pathirage, CP and Sutrisna, M 2010, A critical review on application of activity-based costing in the construction industry , in: CIB World Congress 2010, 10-13 May 2010, The Lowry, Salford Quays, United Kingdom.

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Abstract

Activity-Based Costing (ABC) has been around for more than two decades and challenges the relevance of simplistic traditional costing practice. Academics and practitioners together in institutions such as the Consortium for Advanced Management-International (CAM-I), the Chartered Institute of Management Accountants (CIMA), and so on are playing an important role in popularising the ABC system worldwide. The fundamental concept underpinning philosophy of the ABC method highlights that organisations to produce products and services require performing activities, and those activities cause the organisations in incurring costs. The Royal Institution of Chartered Surveyors (RICS) indicated that overhead and profit is added on percentage basis of main contractor’s building work and preliminary estimates. It appeared from the literature study that this percentage basis may not provide reliable baseline for planning and controlling project overheads in the construction stages. This paper aims to explore and critically discusses the drivers, barriers, challenges, benefits, and further research possibilities on application of the ABC system in the construction industry. Through a thorough literature review, it highlights the potential of the system in implementing sophisticated cost drivers and proves its excellences in assigning accurate overheads to increase project cost control by showing insight to cost cause-and-effect relationships between overheads, project activities, jobs, products and services. Keywords: activity-based costing, cost planning and controlling, overheads, construction industry.

Item Type: Conference or Workshop Item (Paper)
Themes: Subjects / Themes > H Social Sciences
Subjects outside of the University Themes
Schools: Colleges and Schools > College of Science & Technology
Colleges and Schools > College of Science & Technology > School of the Built Environment
Colleges and Schools > College of Science & Technology > School of the Built Environment > Centre for Disaster Resilience
Colleges and Schools > College of Science & Technology > School of the Built Environment > Management in Construction Research Centre (MIC)
Refereed: Yes
Depositing User: Nyoman M Jaya
Date Deposited: 14 Dec 2010 10:16
Last Modified: 20 Aug 2013 17:43
URI: http://usir.salford.ac.uk/id/eprint/12540

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