Activity-Based Costing and Manufacturing Efficiency

Abstract

Manufacturing organizations operate in an increasingly competitive environment where cost control, efficient resource utilization, and productivity improvement are critical for achieving sustainable growth. Traditional costing systems often fail to provide accurate product cost information due to the complex nature of modern manufacturing processes and the increasing proportion of indirect costs. Activity-Based Costing (ABC) has emerged as an effective cost management approach that allocates overhead costs based on the actual consumption of activities, thereby providing more precise and reliable cost information. the impact of Activity-Based Costing on manufacturing efficiency by evaluating its influence on cost accuracy, resource allocation, production planning, operational performance, and managerial decision-making. A quantitative research design was adopted, and data were collected through structured questionnaires administered to managers, accountants, and production personnel from selected manufacturing organizations. Appropriate statistical techniques were employed to analyze the relationship between Activity-Based Costing implementation and manufacturing efficiency. The findings indicate that organizations adopting Activity-Based Costing experience significant improvements in cost estimation, process efficiency, waste reduction, capacity utilization, and overall manufacturing performance. that Activity-Based Costing is an effective strategic management tool that enhances operational efficiency and supports informed decision-making in manufacturing organizations. The findings provide practical implications for managers seeking to improve productivity, optimize costs, and strengthen organizational competitiveness in an increasingly dynamic industrial environment.