Activity-based costing

Profit is a critical consideration in project selection. Using traditional cost-accounting techniques standardized during the Industrial Age, estimators and accountants determine project costs. Those techniques result in costs that are substantially different from costs calculated using activity-based costing (ABC). Knowledge of ABC principles is important for project managers because it offers an alternative costing methodology that allocates costs through a cause-and-effect relationship that is more appropriate for today's operating methods. This paper reviews cost determination methods included in A Guide to the Project Management Body of Knowledge (PMBOK’ Guide) and offers an argument for enhancing the PMBOK’ Guide by including ABC as a cost-determination methodology.