Impact of Activity Based Cost Method on the Company Profitability

The current global economic situation highlights the costs and the need for the rationalization of it. Cost as unavoidable phenomenon of each business events is impossible to eliminate, because it represent the existence of each company, so cost reducing does not necessarily mean business improving. Also, the changes in the costs structure reduced the effectiveness of traditional costing method. Therefore, companies in order to improve business situation have to apply modern method of cost allocation instead of traditional costing method. One of the most frequent methods of cost allocation is Activity Based Cost method with which companies seek to ensure a profitable business. In this paper intention is to present benefits of Activity Based Cost method which results on better business decisions and also business profitability.