DEVELOPING A GREY ACTIVITY BASED COSTING (G-ABC) METHOD TO CAPTURE THE INHERENT UNCERTAINTY IN IDENTIFYING COST DRIVERS' CONSUMPTION RATES

Activity Based Costing (ABC) has been adopted as an efficient cost estimation instrument during the past decades, and several practitioners have verified its efficacy over traditional costing approaches by implementing it in various areas. However, it is occasionally discussed that implementing ABC is not cheap, simple and straightforward and many firms have abandoned the attempt due to rising costs and complexity. The increasing operation costs of implementing ABC systems then, to a great extend originate from the insistence on obtaining accurate data related to cost drivers consumption rates. Not only these data are not easy to obtain, but also they cannot be completely relevant and authentic in all production circumstances, and they carry uncertainty in their nature. To capture this uncertainty grey system theory has been developed and grey data could be assigned. This study introduces a Grey Activity Based Costing (G-ABC) method to develop a more realistic, cheaper, and easier to implement ABC system. [PUBLICATION ABSTRACT]