Activity Based Costing- A pragmatic decision.


Made in India will be lost if we are not globally competitive in input cost-
This is a statement made by RC Bhargava –chairman of Maruti Suzuki-the biggest player in the Indian auto sector recently.

Though he spoke in context of labour input cost and the absence of kaizan type labour maturity, I think it would also extend to rationalization of other costs and expenses as well.

There is an urgent need to compile and analyze costs with the powerful tool of Activity based Costing across manufacturing and service industries so that we can achieve a sustainable competitive international edge.
But the irony is that most of the companies in our country are completely ignoring the cost aspect of business and focusing on the market dynamics solely to achieve this.

It is not that ABC is unique sophisticated model which can eliminate all the ambiguities in the cot allocation to products. It’s adoption is rather a cost consciousness and renewed cost culture on the part of a pragmatic management who prefers avoiding the lethal, short termish weapon of cost cutting and manpower ‘ firing’.

Jamila Lokhandwala
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