Peter Drucker: Activity Based Costing vs Traditional Cost Accounting

” Activity Based Costing (ABC) shows us why traditional cost accounting (TCA) has not worked for service companies. It is not because the techniques are wrong. It is because TCA makes the wrong assumptions. Service companies cannot start with the cost of individual operations, as manufacturing companies have done with TCA. They must start with the assumption that there is only ONE cost = that of the total system.” Peter Drucker

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