Determination of Product Costs Based on Resource Consumption Accounting- A Comparative Application

Abstract

The Activity Based Costing (ABC) system, which has been developed as an alternative to traditional cost systems, has been used by many companies since it offers a more accurate cost system than the traditional method. Nevertheless, the system has begun to lose importance to businesses due to its incomplete aspects such as the difficulty of implementing and updating the system, expensive, too time-consuming, not supported by employees, and incurring idle capacity costs on products. Two new costing methods have been developed in order to eliminate these disadvantages of ABC and at the same time to incorporate the strengths of ABC. The first is the Time-Driven Activity Based Costing Method (TDABC), which uses time as cost effectiveness, and the second is Resource Consumption Accounting (RCA) Method. The RCA method, which constitutes the subject of the study, is regarded as a powerful management tool that classifies costs on the basis of resources, focusing on resources as well as the activities that make up the focus of the ABC method, thus providing detailed cost information to management. In the study, first of all the RCA method is explained in detail, followed by a sample application for the implementation of the method. In order to emphasize the difference of the results produced by the RCA method according to the results produced by the ABC and TDABC methods, the cost calculation was performed according to the ABC and TDABC methods using the data in the sample application and the obtained results were compared with the application results of RCA.