DOWNLOAD PDF ACTIVITY-BASED COSTING, ECONOMIC VALUE ADDED, AND APPLIED INFORMATION ECONOMICS

Transcription

1 Chapter 1 : Integrated Activity Based Costing and Economic Value Added Framework Integration, Activity Based Costing (ABC), Economic Value Added (EVAâ ), EVA-ABC Model To cite this article Tandung Huynh, Guangming Gong, Anhtuan Nguyen, Integrating Activity-Based Costing with Economic Value Added, Journal of Investment and Management. Clarify the problem by defining observable phenomenon The result is a decision model Calibrated Probability Assessments Document the current state of uncertainty The result is a decision model populated with initial calibrated estimates Calculation of the Economic Value Of Information Compute the value of additional information for each variable in a business case The result is economically selected and prioritized measurements IT Investment as an Investment Portfolio Optimize the decision based on new measurement information The result is a recommendation to improve the decision and the portfolio it is part of AIE suggests that instead of choosing a single point value of any set of variables, rather realistic results could be achieved by ascribing the probabilities on them. For this reason, AIE derives the probability distribution graph of the net benefits of a particular type of investment. Used with permission of Douglas W. AIE further builds on typical Monte Carlo methods by the use of calibrated estimates and information value calculations. Calibrated probability assessments allow the decision maker to model the current state of uncertainty about a decision in a way that is neither over nor under confident. Once this is accomplished, AIE uses standard information-value calculations to compute the value of further measurements for each uncertain variable in the model. This allows the decision maker to focus on measurements that matter the most. Finally, once uncertainty is removed to the point where further measurement is not economically justifiable, the decision maker makes a risk vs. IT Investment as an Investment Portfolio: Each Investment is analyzed on a Risk Return basis with regard to its contribution to the portfolio. By using techniques from Modern Portfolio Theory, AIE determines whether the uncertainties inherent in a given IT investment decision are acceptable given Risk return profile of the organization. This is a chart that shows how much risk is acceptable for a given return for a particular investment size. In this case, risk is shown as a chance of getting a negative internal rate of return IRR from the investment computed from the Monte Carlo simulations. The objective of an investment is to plot below the investment boundary where the risk is more than acceptable given the return. Such a graph would sometimes show that a lower return investment is preferred to a higher return investment if the risk of the first is much lower. Example Risk Return Profile. Hubbard The net result of this process is to present the uncertain value and risks of any investment like EA in a way that would be consistent with more sophisticated actuarial and statistical analysis. Not only does this quantify risk in a meaningful way, but it optimizes the measurement process itself by focusing on the highest payoff measurements. The lesson learnt for the Enterprise is that measurement is the key for any investment decision. Therefore, a strategic viewpoint alone should not drive any EA investment plan under any circumstance. Projects ought to be spawned based on the outcome of the economic benefit analysis process and by prioritizing the payback potential. These seven steps are as follow: In our step 1, it is highly recommended that one makes a consolidated list of appropriate metrics, which includes but is not limited to models, charts and graphs 2. In this step 2, Metrics are generated. In this step 3, actual interpretation of these evaluations is done. This is our Step 4 wherein different interested areas of the metrics are picked up and highlighted in order to enable some formatting of conclusive points. This is the actual decision making step. Here, one returns back to the original problem statement with a particular decision. This step embraces the next iteration point. Application Information Economics primarily acts as a strategic decision enabler, showing us the direction alongside strategic, economic and analytical triangle. Page 1

2 Chapter 2 : Accounting: Activity based costing. 36 Tandung Huynh et al.: Integrating Activity-Based Costing with Economic Value Added profit margins. Companies may know their overall margin, but they often do not have confidence in the. ABC is generally used as a tool for understanding product and customer cost and profitability based on the production or performing processes. As such, ABC has predominantly been used to support strategic decisions such as pricing, outsourcing, identification and measurement of process improvement initiatives. An independent report concluded that manually driven ABC was an inefficient use of resources: Historical development[ edit ] Traditionally, cost accountants had arbitrarily added a broad percentage of analysis into the indirect cost. However, as the percentages of indirect or overhead costs rose, this technique became increasingly inaccurate, because indirect costs were not caused equally by all products. Consequently, when multiple products share common costs, there is a danger of one product subsidizing another. During this time, the Consortium for Advanced Management-International, now known simply as CAM-I, provided a formative role for studying and formalizing the principles that have become more formally known as Activity-Based Costing. Kaplan, proponents of the Balanced Scorecard, brought notice to these concepts in a number of articles published in Harvard Business Review beginning in Cooper and Kaplan described ABC as an approach to solve the problems of traditional cost management systems. These traditional costing systems are often unable to determine accurately the actual costs of production and of the costs of related services. Consequently, managers were making decisions based on inaccurate data especially where there are multiple products. Instead of using broad arbitrary percentages to allocate costs, ABC seeks to identify cause and effect relationships to objectively assign costs. Once costs of the activities have been identified, the cost of each activity is attributed to each product to the extent that the product uses the activity. In this way ABC often identifies areas of high overhead costs per unit and so directs attention to finding ways to reduce the costs or to charge more for costly products. Activity-based costing was first clearly defined in by Robert S. Bruns as a chapter in their book Accounting and Management: A Field Study Perspective. For example, increased automation has reduced labor, which is a direct cost, but has increased depreciation, which is an indirect cost. Like manufacturing industries, financial institutions have diverse products and customers, which can cause cross-product, cross-customer subsidies. Since personnel expenses represent the largest single component of non-interest expense in financial institutions, these costs must also be attributed more accurately to products and customers. Activity based costing, even though originally developed for manufacturing, may even be a more useful tool for doing this. Drucker in the book Management Challenges of the 21st Century. Activity-based costing records the costs that traditional cost accounting does not do. The overhead costs assigned to each activity comprise an activity cost pool. Management accounting Lean accounting methods have been developed in recent years to provide relevant and thorough accounting, control, and measurement systems without the complex and costly methods of manually driven ABC. However lean accounting is a snapshot concept for capturing just partial derivatives or differentials of selected cost functions. Lean accounting takes an opposite direction from ABC by working to eliminate peculiar cost allocations rather than apply complex methods of resource allocation. Lean accounting is primarily used within lean manufacturing. The approach has proven useful in many service industry areas including healthcare, construction, financial services, governments, and other industries. However the more thorough insight into cost composition for the inspected processes justifies the study result: ABC may deliver a better structured analysis in respect to complex processes, and this is no surprise regarding the necessarily spent effort for detailed ABC reporting. Page 2

3 Chapter 3 : Integrating Activity-Based Costing with Economic Value Added :: Science Publishing Group Abstract. This article is interested in the success rate of the ABC diffusion method also called the strategic accounting of costs or the activity-based costing when linked with the performance indicator of the economic value added creation (EVA). Introduction Activity-based Costing came into being in the late s, which was a huge progress in corporate cost calculation and management. It has been widely accepted and used in many industries of western countries[1]. With intense competition in modern society, ABC still faces many disadvantages although it has been well developed. It does not consider capital cost and make incomplete cost calculation. So it will lead to policy mistakes, especially in long-term operation decision making. In reality, value created by products may not be able to cover the opportunity cost, i. Economic Value Added has been widely concerned in recent years. It equals to net operating profit after tax minus all of the cost of capital including both debt and equity. It also talks about various calculation and adjustment rules of capital cost. Drucker pointed out that the prevalence of EVA reflected the demand for total factor productivity in the information age. There are many advantages to introduce economic value added into activity-based costing and establish activity -based management based on EVA. Thus make the decision making and performance evaluation more effective and accurate. The remainder of the paper is organized as follows. Section 2 is literature review. Section 4 presents an application of refined activity-based costing system to Chinese insurance industry. And conclusion is presented in section 5. Literature Review The theory of activity-based costing was put forward by Cooper and Kaplan in In the s, theoretical researches mainly focused on how to calculate actual cost of the company. Implementing ABC needs to reanalyze the whole production processes, which is a dynamic endless process. In recent years, the researches mainly focused on: The relative researches mainly focus on following aspects. Tully put forward three ways to improve economic value added[11]. The results showed that EVA did not dominate earnings in relative information content and earnings generally outperformed EVA[15]. William first proposed the idea of combining activity-based costing with economic value added. But his research did not mention how to implement the integrated system in practice[19]. Homburg used the concept of relative profit instead of EVA and discussed the integration of relative profit and ABC[21]. Labro and Vanhoucke studied the consumption patterns of various cost resources and the stability of cost calculation, and laid a theoretical base for introducing cost of capital into ABC system and building ABC calculation model based on EVA[22]. Although existing researches have made some progresses on integrating ABC and EVA, it is not systematic and deep enough. The following respects should be further discussed. How does it work? What is its influence? And how about its effectiveness? Principle of Traditional Activity-based Costing Activity-based costing is an activity-focused costing and management system, which provides relatively accurate information on product cost and increases scientific nature, effectiveness of decision-making and planning through activity identification, activity cost calculation and choice of cost drivers. As a result, loss and waste are minimized, and business management is improved. The aim of activity-based costing is to calculate the resources consumed by all kinds of activities and make their prices. Its basic principle is that products consume activities and activities consume resources shown in Figure1. Traditional activity-based costing In Figure l, 1 and 2 means the forming process of product costs; 3 and 4 means the process of product costing resources. Different from traditional methods, the focus of ABC is on activities. Activities are objects when calculating product cost. And allocate resource costs to corresponding activities according their resource consumption until all the support resource costs are assigned. Then calculate cost driver rate for each activities, and trace all the activity costs to product cost. Thus the final product costs are determined. Improvement of EVA on Activity-Based Costing The paper analyzes the improvement of EVA on activity -based costing referring to two-stage model of investment evaluation in material handling system created by Ioannou. The first stage is to collect input data, and calculate activity costs and capital costs according to ABC principle. The second stage is to build Page 3

4 investment decision-making model based on activity costs and capital costs. In this model, capital cost drivers are used to allocate capital resources, while operating cost drivers are used to allocate operating resources. At the same time, the hierarchy of cost objects is highlighted in this model shown in Figure 2. Then divide them into capital resources and operating resources. The implementation of refined activity-based costing includes following steps: First, collect resource costs and separate them into capital resources and operating resources according to their use. Especially the resources should be paid attention to, which are associated with product variety and those having low relationship with traditional assignment benchmark. The second step is to set up activity centers and activity cost pools. It is the foundation of RABC system to identify the product and service activities in the company. At this step, the important activities in production should be determined and analyzed whether they need to be further decomposed or not, whether they need to be combined with other activities or not. The third step is to determine operating cost drivers and calculate operating cost driver rate. Then distribute operating resource costs to the corresponding activities. The fourth step is to determine capital cost drivers and calculate the rate of capital cost driver. Then trace capital costs down to the corresponding activities. Finally, allocate the costs in cost pools to products or customers according to their consumption of activities. Then calculate total cost of cost objects. Characteristics of Cost Calculation in Chinese Insurance Company Insurance is a risk-sharing arrangement whereby one party insurer agrees to indemnity another party insured against certain losses specified by a contract. Saying in detail, the insurer accepts a fixed payment or premium from the insured in the insurance contract and in return undertakes to make payments if certain events occur[24]. The characteristics of cost calculation of insurance company are followed[25]: Other than manufacturing industry, the insurance cost cannot be determined on the sale of insurance products. Only after the insured consumed the products can it be exactly calculated. So usually insurance cost is first estimated when products sold, then the price of it is determined on this basis. Thus cost calculation of insurance company has the characteristic of estimation. Risk costs in insurance company depend on the probability of insured events, and their occurrence is contingent. So this kind of uncertainty determines the uncertainty of insurance cost. Insurance cost includes risk cost and risk operating cost. But risk cost of per policy is very difficult to calculate because of its uncertainty. Even if the risk operating cost is known, the whole cost of a policy still cannot be achieved. So only the cost of insurance variety is calculated, not the cost of policy. Activity Analysis of Insurance Business and Cost Drivers For insurance companies, it is needed to compute the costs of each activity link and sum them up to calculate the cost of single insurance variety. So it is better to figure out all the main activities in insurance business. It means to identify the activities in the process of insurance operation correctly. Then analyze cost drivers of each activity and calculate the cost of each activity. In general, the main business of insurance operation includes product design, business development, insurance acceptance, disaster prevention, and claim settlement. Figure 3 shows the details: Main business of insurance operation Table 1. Material of Activity Centers in Insurance Operation Then identify the activities in insurance operation according to the course and set up activity centres and cost pools, as shown in table 1. The corresponding cost drivers are analyzed in Figure 4 according to activity costs collected by activity centres in table 1. These activities are important activities in insurance operation. In practice, there will be hundreds or even thousands of activities in insurance company. If establishing corresponding cost pools and cost drivers respectively, the results will be more accurate. But the implementing cost will also increase. So some drivers are combined under reasonable precision in calculation in terms of cost-benefit rule. It is the extension of activities based costing. The principle is taking cost objects i. Then calculate the whole consumption and costs of activities, identify resource drivers and activity drivers, and perform cost driver management and activity-based management to improve the performance and competition of the company[26]. When performing ABM, all the activities should be identified first in business operation. Then analyze the incremental value of activities, whether they are value-added activities or non-value-added ones. Further, distinguish the efficient activities and inefficient activities, and discuss whether the activity cost could be reduced. After that, ABM makes an effort on process reengineering according to the results of activity analysis Page 4

5 in order to eliminate non-value-added activities, improve inefficient activities and increase value-added activities. Finally, activity management system is established, which could improve business performance and reduce waste. When analyzing incremental value of activities, the following conditions should be met: From the above activity analysis in insurance operation, it can be seen that the activities of information collection, safety inspection, and policy checks are all non-value-added activities. The department of insurance acceptance will make a judgment on policyholder when deciding whether to accept the policy. And in the course of judgment, the information about the holder is very important. Page 5

6 Chapter 4 : Applied Information Economics (AIE): Not just calculate, scientifically MEASURE IT CioIndex Economic Value Added theory was used to improve traditional activity-based costing in this paper. It analyzed the relationship among resources, activities and outputs, discussed the consumption of operating resources, capital resources and activities, and then established the model of Refined Activity-Based Costing to evaluate the effectiveness. Visit for more related articles at Journal of Internet Banking and Commerce Abstract This article is interested in the success rate of the ABC diffusion method also called the strategic accounting of costs or the activity-based costing when linked with the performance indicator of the economic value added creation EVA. Its objective consists in showing the extent to which the diffusion of the latter next to Tunisian companies could succeed or fail in the presence of the following contingencies variables: A survey was carried out next to a sample of 60 Tunisian private small and medium companies located in different areas and in different economic sectors in Tunisia. It revealed that the main factors affecting the success of the ABC method diffusion linked with the EVA next to these companies are the type of the applied technology, the problem of costs of the products, activities and of the capital distortion and their affectation. Similarly the financial and innovation culture as well as the intensive competition affect the diffusion success of the ABC method linked with the EVA. Keywords ABC, EVA, Diffusion, Cost Distortion, Contingency Variab Introduction Among the present innovations we can observe with much interest the predominance of debates related to the management activity-based costing ABC with a parallel interest in the improvement of the economic value added in the industrial and scientific fields. In the frame of this method, we have chosen to study and analyze its diffusion in connection with the economic value added EVA which is an excellent financial reporting tool. It seems for us that this choice is justified by the fact that this method could be considered as a managerial innovation in the way that most of the consultants, the software editors and the scientific researchers have presented the ABC method under the same title as the EVA since they are two managerial innovations capable of helping managers and stakeholders to acquire the added value. According to this fact, the managers must be interested in both the development of the creative activities capable of creating the added value in the operational process of the value [ 2 ] and the ability to cover the capital costs necessary for each activity with the required financial revenue of assets portfolio [ 3-7 ]. The legitimacy of the value creation by the integration of the two last methods is backed up by the ABC, which often forces itself to emphasize in a direct way the role sought by the EVA activities. The fact that the last ones are granted with specific tangible and intangible assets represents at his level a major obstacle to overcome on the way to improve the value added [ 7 ]. Actually the ABC, which requires a strategic activity management within the business process, consists in developing strategies being able to create the added value in the eyes of the stakeholders [ 8 ]. The noncreative activities of the value will be either underestimated or integrated within the rest of the activities of the value process or simply turned down. In Tunisia, It seems that a study of the factors that affect the diffusion of the ABC linked with the EVA next to companies would be of a great importance. In our current work we are going to raise the problematic success rate of the spreading of the ABC method linked with the EVA as being a managerial novelty working for the creation of the added value in a general way as well as the space of its diffusion mainly next to the industrial companies. Our aim will consist in showing the extent to which the diffusion of the ABC method linked with the EVA next to Tunisian companies could succeed or fail in the presence of the following contingent factors: The hypothetical-deductive methodology used to achieve this survey about the attitude of the Tunisian companies towards the diffusion of the ABC method while taking care of the EVA is backed up by the use of various collection methods and by the data analysis. The use of the questionnaire also allowed us to determine the data and the analysis of variables to make them flexible to the binary logistic regression. This method of data analysis, especially by means of SPSS 17 software, was developed to enable the checking of the well-based hypotheses. We will draw them after a theoretical sweeping of the literature about the ABC diffusion linked or not with the EVA and that we allow ourselves to Page 6

7 concisely elicit a priori as follows: Companies having a value creation culture in the eyes of the stakeholders are open to the ABC method diffusion. Companies having distortions in the calculation of their indirect costs while simultaneously seeking the control of their capital costs assimilate the ABC method better. Companies located in an environment of a high competition are sensible to the diffusion of the ABC method. Large companies offer an idealistic diffusion place in the choice of the ABC method. The literature of the innovation diffusion in its broad meaning has so far been concentrating on the three following questions: The Diffusion for Rogers For Rogers [ 12 ] the diffusion of an innovation is the process by which this innovation is spread through some communication channels in time and among the members of a given social system. The expected advantages from the diffusion of the management techniques will be, according to this author, the relative advantage, accounting, complexity, the trial possibility and the observable character. In fact Rogers [ 12 ] does not stop neglecting the fact that all the receivers and users can be interested in the question of diffusion, but not in the same way. However, this model is suffering from some deficiencies whose most important one is that which considers that the receivers of the innovation have the same social, cultural and intellectual maturity. The diffusion literature has also focused on the mechanisms and the bases that motivate the adoption of an accounting or management practice as well as the factors of the diffusion efficiency. The Diffusion Bases of the Management Innovations The review of literature about the diffusion of innovations enables us to point out five basic elements that can favour the adoption and diffusion of a new practice either in management or in financial accounting. These elements are respectively as follows: For Banerjee [ 14 ] when an actor adopts and applies a certain practice it will be recognised by the other actors who themselves will be motivated to adopt this method or practice. The model often spreads through the established channels between the central organisation and the original one. They link the first concept with the old institutional theories [ 15 ] and the second concept with the recent ones [ 13 ]. For Weick [ 16 ], the norms, the beliefs and the values represent a crucial part in the attitude and in the choice of the managerial practices by individuals. The Educational System As far as the cultural acceptance is concerned, the educational system also favours the diffusion and adoption of the new practice in a direct or an indirect way [ 17 ]. The Regulation The organisational regulation and power can also favour the adoption and the spreading of the new practice in management accounting more than others [ 13 ]. The State employs its incentive and legislative authority as a catalyser to oblige the companies to adopt a practice or a method of accounting or of financial management. Besides, some authority agents, such as large companies, can drive companies belonging to their network to apply a well-specified practice [ 18 ]. The Technical Rationality According to Zeitz et al. The innovations often propagate when they help to lessen the non-performance crises caused by the environmental change. We first show the method so that later we can deal with the adequate frame of the appropriation of the ABC method linked with the EVA. It became known throughout the world thanks to the writings of Berliner et al. The aim of the researches, which led to the ABC, was to remedy the insufficiencies and the limitations of the traditional methods of cost calculation following an economic contextual evolution and the appearance of new company managerial needs. The logic system of the activity-based costing can be summarized as follows: In this new cross vision imposed by the coming up of the ABC, the company becomes a place of a value creation for all its partners [ 21 ]. In fact, this value creation is about not only the satisfaction of the customers but also the rest of the partners including the shareholders whose satisfaction depends on the respect of the management rules of the share value after taking off capital costs from the discounted financial earnings. The EVA comes to strengthen these orientations by covering the capital costs with equilibrated financial revenue. The Adoption, the Appropriation, the Diffusion and the Assimilation Dynamism of the ABC Literature suggests two ways of explaining the assimilation dynamism of a management accounting tool. The first one is known as the linear mode, which considers innovation as being well established to be able to spread thanks to its intrinsic qualities. The second, known as the model of interest, has the principle that perfection has never been original. Innovation builds itself up progressively in accordance with the network development. Schumpeter [ 22 ] admits that the economic development can be achieved only by applying several azimuth Page 7

8 innovation processes. We jointly agree that the innovation of the managerial methods coincides with the technological one. The success of their spreading is based on the deep study of the way we are going to be appropriated with. The Appropriation of the ABC Diffusing meticulously, cautiously and in a well-studied way, the ABC linked with the EVA could be relevant due to its organizational, financial, informational and strategic advantages. At this level, we can ask the following question: For Zghal [ 23 ] the excess appropriation in technology needs some preliminary conditions it lies in the way of using intellectual and creative, individual and collective capacities in order to control the available technological novelty. We can set up the following hypothesis: Companies having a culture of value creation in the eyes of the stakeholders are open to the diffusion of the ABC method. The adoption of the ABC method depends on the existence of some characteristics. Cooper [ 24 ] asserts that the cost structure indirect charge rate, the cost calculation system, the variety of the products and the competition intensity are factors that affect the choice of the ABC method. These variables were used by Bojernaneck [ 25 ] in his survey about the diffusion of the ABC method in Norway. His aim was to see if the adoption of the ABC method coincides with the variables suggested by Cooper [ 26 ]. The surveys carried out by Kennedy et al. The Continuous Existence of a Cost Distortion Potential According to Boivert [ 28 ], there are two major causes for the distortions in the full cost calculation: The cost distortions can also be caused by the diversity and the number of products [ 29 ]. All the more the latter generates an implacable reflection about the destiny of the capital cost calculation and its combination with an activity-based costing calculation. In literature the variable cost distortion existence was measured either by means of the indirect charge rate in the cost structure or by the diversity and the variability of the products [ 25 ]. All this leads us to set up the second hypothesis: Companies that have distortion in their indirect cost calculation while seeking the control of their capital costs assimilates the ABC method better. The Competition Intensity The most distinctive element of the environment development is the increase of the competitive pressure. If we consult the research of [ 30 ], carried out in the particular frame of the Scottish companies in the computer sector, we can claim that, in a highly competitive market where the new products are abundant, the tariff policy is essential and so is the product differentiation. The intensity of the competition is then a factor that would affect the accessibility to the ABC method. In other words, the more intense the competition in an activity sector is the case of the computer industry [ 31 ] the more important to acquire more accurate information about the costs and the ways of reducing them is. The error in the cost calculation can destabilize a company in relation to its rivals. In literature the competition intensity variable has often been measured according to the turnover rate in exports as well as the number of rivals in the sector [ 25 ]. At this stage it is necessary to mention a third hypothesis: Companies located in an environment of a fierce competition are sensitive to the diffusion of the ABC method. The Company Size The company size can affect the choice of the cost calculation method. The possible reasons for the size variation lie mainly in the availability of the human, material and financial resources. Actually, the larger the company is, the more important the number of its activities is and the more difficult the tracking of the behaviour of its costs will be. Krumwiede [ 32 ] showed that companies that were open to the introduction of the ABC method are on the average larger than those that did not accept it. On his side Mevellec [ 33 ] mentioned that the method of the total cost or the ABC method becomes necessary as soon as the organization complexity and size require management decentralization. It seems that the large size of companies favours the success of the ABC method. In the carried out studies, the size variable has been measured according to the number of employees and the capitalistic intensity in the company. Based on this, we suggest testing the following hypothesis: Large companies present an idealistic place of diffusion in the choice of the ABC method. The relationship between the type of technology applied by the company and the adoption of the ABC method linked with the EVA can be a subject of another questionnaire of a great importance [ 3 ]. The benefit of such a definition lies in the fact that it stresses two essential points: The development of technology can also be considered as the source of the structure change of the whole costs. This will drive us to test a fifth hypothesis: Companies applying up-to-date industrial technologies are accessible for the diffusion of the ABC method linked with the EVA. Page 8

9 Empirical Survey and Validation After presenting the diffusion theory of the management innovations, the theoretical foundations of the ABC method linked with the EVA and the factors affecting its diffusion success, we will tackle the empirical part of this survey about the response of the Tunisian companies to the diffusion of the ABC method linked or not with the EVA. We will present first of all the methodology and the sample so that we can later show the results of this survey. Methodology and Sampling The methodology applied to carry out this survey about the attitude of the Tunisian companies towards the diffusion of the ABC method linked with the EVA was endorsed by the use of various methods of data gathering and analysis. All the companies of this sample belong to the industrial sector but they have different activities: They are of different size and they can be interested in the production of one or many products. Chapter 5 : Activity-Based Costing for Economic Value Added This article presents a cost and perfonnance measurement system that integrates activity-based costing (ABC) with the economic value added financial perfonnance measure. This proposed ABC-and-EVA system is a management support tool for managing costs and capital. The integrated ABC-and-EVA system. Chapter 6 : Value added activities; activity based costing based Costing (ABC) and Economic Value Added (EVA) are advanced approaches to costing activities and estimating economic profit of a firm, DuPont analysis using ABC and EVA information can be more appropriate. Chapter 7 : Activity-based costing - Wikipedia Economic value added (EVA), which is the currently popular term for the traditional accounting concept of residual income, subtracts from operating income an interest charge for invested capital. This paper provides both a normative justification for EVA and an activity-based cost system that supports EVA maximization. Chapter 8 : EVAâ s Improvement on Activity-based Costing and Application in Insurance Company Activity-Based Costing for Economic Value Added by J.S. Jordan* Department of Economics and Carlson School of Management, University of Minnesota. Chapter 9 : Activity-Based Costing (ABC) The solution provides a detailed discussion for each question presented involving value added activities and cost pools with the use of ABC costing methods. Page 9