Proposal for evaluation and implementation of activity based costing and management for decision making on pricing and customer profitability

Abstract

In this project we have attempted to demonstrate how Activity Based Costing (ABC) can be used to come up with accurate product/service cost with Indian Railways as the target organization. We identified the major activities performed by Indian Railways (IR) and resources consumed for these activities. We finally arrived at the cost information on per passenger km basis for various coaching service provided by IR. Further, we have analyzed advantages of ABC system over current costing method used in IR. We have looked into how IR can implement cost reduction using activity management and by better understanding of cost behavior. Also, we believe that an ABC implementation at IR will lead to better pricing decisions. The structure followed for the project can be broadly described as:? Understand various services offered by Indian Railways,? Understand the current costing methods followed by Indian Railways,? Come up with a scalable method that can be used to calculate costs for a particular service using Activity Based Costing.? How the Activity Based costing can improve the decision making on Pricing and customer profitability