Gary Cokins: The Truth about Activity-Based Costing

How to implement progressive management accounting techniques.

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With Steven Sacks
The NEW Fundamentals: Thriving in Disruption

Management finance expert Gary Cokins says there’s nothing wrong with activity-based costing. Except that you’re probably doing it all wrong.

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The problem is, Cokins says, it’s convenient for the accountants to allocate the overhead based on allocation factors, like labor hours, number of units produced in a manufacturer, headcount, number of employees, and square feet, even though none of them reflect the unique consumption relationship between how the outputs products and services consumed.