Implementation of the Activity-Based Costing Model for a Farm: An Australian Case

By Cedric Lu; V.G. Sridharan and Michael S. C. Tse

Due to the unique nature of agricultural production, costing of agricultural products presents a major challenge to the management of farms and other organisations that involved in agricultural production. Activity-Based Costing (ABC), with its ability to apply non-volume driven cost drivers and disentangle resource costs and cost objects through two-stage allocation process, has the potential to address issues in costing of agricultural products. This paper presents a case study of ABC implementation in a family-owned Australian farm.

The objectives of the study are to develop an understanding on how the ABC model can be implemented in farms and to examine issues associated with the implementation of the ABC model in farms. Findings from the case show that implementing the ABC model in farms is possible with the use of heuristics. Technical factors are found to be dominant over behavioural factors in the development of the ABC-based costing model for the farm.

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