(Determining Cost Drivers in Activity Based Costing with Analytical Hierarchy Process: A Case Study)

Abstract

Purpose – The aim of this study is to establish the Activity Based Costing system based on the Ana-lytical Hierarchy Process, which could provide a more accurate calculation of the unit product cost, and to ensure that the expenses collected in the activity drivers are distributed to the activities and the products correctly. Design/methodology/approach – In this study, the drivers to be used in the distribution of costs were determined with the help of Analytic Hierarchy Process (AHP). For this purpose, five different experts made evaluations to determine the allocation keys. The agreement between the evaluations was achieved with the help of the geometric mean. Findings – The results obtained were compared with the results of the traditional cost system that the enterprise has already implemented. It has been determined that there are differences between the unit costs calculated with ABC-AHP technique and the traditional method used by the enter-prise. Discussion – The findings obtained from the study are of great importance for the enterprises which want to calculate the unit costs related to the products correctly, but they also show the insufficiency of the unit manufactured costs calculated using traditional methods. It has been determined that the ABC-AHP integrated method used in this study to determine unit product costs can be easily used by enterprises and can give competitive advantage to enterprises.