Fuzzy Logic Application in Activity-Based Costing System for Small and Medium Size Manufacturing Enterprises

Suha O. Werikat, Ibrahim A. Rawabdeh


Activity-Based Costing (ABC) has received extensive attention during the past decade because it achieves improved accuracy in allocating costs, by using multiple cost drivers to correlate the activities with the products that are associated with the resources consumed by those activities. The complexity and uncertainty in determining Cost Drivers (CDs) limit its use. This paper presents the use of Fuzzy Logic (FL) in tackling the complexity and uncertainty in implementing the ABC system in Small and Medium Size Manufacturing Enterprises (SMMEs). Specifically, this paper examines two new concepts: Multi Criteria Cost Driver (MCCD) and Production Line Cost Driver (PLCD). By using MCCD, all related cost drivers are integrated in one suitable cost driver to relate the expenses to the activities. The multi criteria cost driver which emerges from using Fuzzy Logic increases the ABC system reliability. Moreover, complexity is reduced by applying ABC system; since production line cost driver is developed to select one cost driver for each production line instead of one cost driver for each product. The results showed that combining Fuzzy Logic with ABC system improves the ability to decrease uncertainty and complexity in ABC system for Small and Medium Size Manufacturing Enterprises.


Activity-Based Costing; Fuzzy Logic; Cost Drivers, Multi Criteria Cost Driver, Production Line Cost Driver.

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