Effective cost allocation method in an industrial enterprise environment in mining industry

Abstract

The ability to optimize costs based on knowledge of business processes during the period of change represented by the fourth industrial revolution is absolutely crucial. This paper is dedicated to the issue of cost management and allocation of overhead costs using the Activity Based Costing (ABC) method under the condition of an industrial enterprise. The aim of the authors was to propose a model that focuses on the allocation of overhead costs and calculation of assignment rates of overhead activities, which mutually cooperate. The proposed model enables objective stipulation of assignment rates of mutually cooperating overhead activities using exact economic-mathematical methods -the Leontief structural model. It was proven that use of the structural model, even in the case of multiple overhead and primary activities, leads to the considerable simplification of calculations when determining the assignment rates of overhead activities.