History of ABC Costing
The history of ABC Costing is based on the period when it became important for organizations to understand the costs of products. This was at the beginning of the 19th century. Beginning in 1920, after the First World War, in the United States and Europe, a period of creation of many companies with many new products, increasingly complex and sophisticated, began. The industry at that time sought to accurately know the costs of these new products. At that time, the limitations of traditional accounting in the allocation of costs began to become evident. Likewise, there was no system that could support the calculations that had to be made to gain precision in costs.
In 1985, CAM-I (formerly the Consortium of Advanced Manufacturing International and now the Consortium of Advanced Management International) began the creation of a “Task Force” to focus on the costing problems that its member companies were already facing. It was in 1986 when CAM-I launched the book of cost recommendations, entitled “Cost Management in Today’s Advanced Manufacturing Environment: The CAM-I Conceptual”.
As a continuation of the “Task Force”, CAM-I launched the “Cost Management System” program. It was the first step that gave continuity to ABC Costs and ABM.
The history of ABC costing was actually consolidated when, in the early 90s, the work of CAM-I was being highly recognized. In 1992, the concept of ABC Costing and ABM began, which denotes the use of activity costs to manage and make decisions. The development of software to support the analysis of activities and its cost, began in 1990’s, which further supported the rapid growth of the ABC Costing methodology.
Later, the first researchers of “management” became promoters of ABC Costing, including Robin Cooper and Robert Kaplan.
Traditional costing assign indirect costs using volume proportion. ABC Costing identify which activities consume indirect costs in order to be assigned, allowing for accurate costing of products or services, customers, channels, regions.