The integrated activity-based costing and economic value-added system for the service sector

This paper examines the implementation of the Integrated Activity-Based Costing and Economic Value Added System in the service sector. This system is intended for use by those service companies for which the traditional costing system is not adequate. Motivations for tracing overhead cost as well as capital cost, using the integrated system, are discussed. Resulting improvements in the reliability of product cost information are illustrated through the example of a consulting firm which moved from intuitive cost estimation to reliable cost analysis. Finally, the impact of this integrated system on the service sector’s decision-making process and long-term business performance is discussed.