ABSTRACT
An activity-based costing (ABC) system has been widely employed as an advanced tool to measure more accurate costs for products, services and clients in the private sector and secondarily by public sector organizations. With the advent of performance-based budgeting (PBB) systems, ABC systems were repeatedly emphasized for the successful implementation of PBB system. Assume that through a closer investigation, an ABC system identifies three types of overhead or indirect costs incurred by fire fighting, inspection system administration and inspection. From a management perspective, ABC-based cost estimation is more relevant. Another agency that implemented ABC was the Small Business Administration (SBA), which implemented ABC systems as early as 1999. In 2002, the SBA found that 81 percent of its operating costs were labor costs. It conducted an agency-wide survey to allocate SBA-wide labor costs to each SBA program by tracking SBA employees time spent on specific program activities. Cokins introduce multiple success stories with federal agencies that implemented ABC systems.
