Application of Activity-Based Costing (ABC) method for assessing product line profitability in IT companies

modern IT companies face increasing cost management challenges due to the high proportion of indirect costs, the intangible nature of products, and project-based organization. Traditional costing methods based on simplified allocation bases (e.g., labor costs) often distort information about the profitability of product lines. In these circumstances, Activity-Based Costing (ABC) is an effective strategic management accounting tool that allows for the precise attribution of costs to their sources and ensures the validity of management decisions. The purpose of this study is to adapt and test the ABC model in a typical IT company. This article presents the theoretical and methodological foundations for implementing ABC, describes an algorithm for identifying activities and cost drivers, and presents the results of a case study demonstrating the impact of this method on the accuracy of profitability assessments for individual products.

Activity-Based Costing, management accounting, IT industry, product line, profitability, indirect costs, cost drivers, strategic management, digital economy