Scholarly record

THE APPLICATION OF THE ACTIVITY BASED COSTING METHOD AND ITS INFLUENCE ON THE SELECTED FINANCIAL PERFORMANCE INDICATORS

H. Jacova, R. Hojna

Abstract

With the constantly changing conditions of the market environment, companies and their managements have been under permanent pressure to find sufficient economic reserves and resources allowing to further grow and improve their financial performance. Financial performance considerably affects the company position in the market and also the level of its competitiveness. Besides other factors, the company financial performance and competitiveness are influenced by the amount of costs consumed. Practical experience acknowledges that the traditionally used costing techniques do not always provide sufficient information on costs incurred for business activities. It is therefore necessary to implement more precise costing techniques allowing to determine the origin of costs and causal relationship between the costs and outputs produced. For this purpose it is advisable to apply the Activity Based Costing (ABC) method that makes the costing calculations way more precise and relevant. This method may facilitate important managerial decisions that will not only result in considerable cost savings but may also help to improve the company financial performance. The aim of the paper is to verify – using statistical methods – whether and how the application of ABC in practice influences the values of selected financial performance parameters. In order to get the required primary information on business entities operating in the Czech Republic, a structured questionnaire was developed. Financial data necessary for the calculation of financial performance indicators were taken from the Bisnode-MagnusWeb electronic database. Analyzed results were assessed and commented.

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DOI resolver: doi.org/10.5593/sgemsocial2018/1.3/S03.042

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