The Activity Based Costing Method Applied to the Analysis of the Clients' Profitability

Abstract

The paper presents the Activity Based Costing (ABC) method and its application in analyzing the clients’ profitability. The case study is outlined using the data of an accounting services company, and it aims at investigating the profitability of the clients and group them according to their contribution to profit. Compared to traditional methods, the results obtained by applying the ABC method are more nuanced and less subjective and contribute to the decision-making process by the company’s management, as the allocation of overheads to the cost of the product is more thorough.