Integration of the activity based costing (ABC) and economic value added (EVA) methods and sample of application

For labour-intensive technique has turned into capital-intensive method, manufacturing overhead costs rates have raised within production cost. Traditional cost accounting which allocates manufacturing overhead costs on product costs through using allocation keys such as direct labour or direct materials falls behinds before such development and goes far away from producing accurate costing information. ABC came out in 1980s is a system of allocating manufacturing overhead costs more accurately in comparison to traditional costing accounting. ABC adopts that expenses are consumed for their activities not for end products in contradistinction to traditional costing accounting. Therefore, costs are initially accounted by allocating expenses to activities; afterwards end products are shared out from each activity in accordance with utilization rate. So such decomposition in costing information is hindered.In ABC systems, manufacturing overhead costs are allocated more accurately, however in accounting of activity costs, it can not be viewed which activities or products create value because of taking no account of capital cost. For value based management view, an enterprise creates value only when it has earned more than invested capital. The objective of this study is to attend to make up the deficiency of ABC system via integrated ABC-EVA system. Integrated ABC-EVA is a system of costing and performance, while ABC focuses on activities EVA centers on capital costs in this system thence, added-value created by each activity or product can be calculated.In this thesis study, proposed integrated ABC-EVA system was applied in an accommodation business and it has been extrapolated that added-value created by each customer is lower than the profit per costumer ascertained in accord with ABC system.