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Activity‐based costing: a powerful tool for pricing

John C. Lere (Professor of Accounting, Department of Accounting, St Cloud State University, Minnesota, USA)

Journal of Business & Industrial Marketing

ISSN: 0885-8624

Publication date: 1 February 2000

Abstract

Explains the differences between traditional cost behavior, which divides costs into variable and fixed categories, and activity‐based costing (ABC), which divides these same costs into those that vary with unit‐level activities, batch‐level activities, and product‐level activities and facility‐level costs. Describes how recognition that cost may vary with something other than volume can make ABC a powerful tool for industrial marketers in three ways: yielding cost estimates to use in pricing that reflect significant differences among product specifications; providing the industrial marketer with guidance as to which product specifications may be adjusted in negotiations to yield significant cost reductions; and indicating areas in which to change company operations to yield cost reductions that will allow the company to satisfy customer wishes better.

Keywords

Citation

Lere, J.C. (2000), "Activity‐based costing: a powerful tool for pricing", Journal of Business & Industrial Marketing, Vol. 15 No. 1, pp. 23-33. https://doi.org/10.1108/08858620010311539

Publisher

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MCB UP Ltd

Copyright © 2000, MCB UP Limited