Abstract:

Activity based costing is relatively new paradigm which can be encountered in business practice. Nowadays companies are forced to implement various lean practices and concepts to reduce their costs and improve their competitiveness. Activity based costing is one of paradigms or tools which can be useful to determine which internal business processes should be enhanced, improved, modified or eliminated regarding their final added value to the company. Even Activity Based Costing is relatively new paradigm in literature in bussiness practice the idea of ​​cost allocation is not new at all but it is just different view of costs than classical accounting. Activity-based costing is based on the concept that products consume activities and activities consume resources. All costs are than allocated to specific products or customers. This concept leads to results which corresponds with reality more than classical costing of direct material and direct labor with overhead added as a plant wide percentage.

Most examples to demonstrate the Activity based costing methodology, which may be encountered in the literature is very simple, or aimed at the demonstration of a specific problem within methodology. According literature research there is no complex example of Activity Based Costing analysis usable for education of this subject at university or explaining in detail all the problems we wish to demonstrate during the lectures. Following paper describes our results with practical education of Activity based costing using case study model of virtual company.