Implementing Activity-based Costing in an Enterprise Resource Planning System

The main objective of this study was to examine how activity-based costing would be carried out by a standard Enterprise Resource Planning (ERP) system. According to Cooper and Kaplan the requirements for operational-control and ABC systems have fundamentally different purposes and a single, fully integrated approach cannot be adequate for both of these. Nevertheless, the purpose was to extend the standard costing routines by treating indirect factors of production as direct resources in an Enterprise Resource Planning system. The procedure was tested in a case company. The results of the study show, undoubtedly, that the idea of activity-based costing seems to be applicable to the ERP system. However, the cost management tools have their own role in modelling corporate's functions and in applying a multiphase process of allocating resources to end products. The model achieved is modified for the corporation’s ERP system. The method used is described and analyzed. In addition, restrictions and deficiencies of the method are pointed out.