Activity-Based Costing (ABC)AS A Strategic Tool For Achieving The Contemporary Approach To Cos Measurement In The Context Of A Traditional Manufacturing Environment

Abstract

This research aims to apply the Activity-Based Costing (ABC) technique in the Men’s Garment Factory in Najaf as a modern approach for achieving more accurate production cost measurement and enhancing operational efficiency in a traditional manufacturing environment. The study addresses the problem that traditional methods of allocating indirect manufacturing costs do not accurately reflect the actual consumption of resources by each product, leading to distortions in unit cost estimation and managerial decision-making. An applied methodology was adopted by identifying the main production activities (such as preparation, sewing, ironing, packaging, and quality control) and determining the appropriate cost drivers for each activity. The indirect manufacturing costs were then traced to activities and assigned to the main products — the men’s suit and the military parka — based on their actual resource consumption.

The findings revealed that the ABC technique provides more precise and objective cost information than the traditional method. It highlighted variations in resource consumption across activities, identified non–value-added operations that generate waste, and supported management in improving decisions related to pricing, production planning, and performance control.

The study concludes that the ABC technique is a strategic tool for cost management within Iraqi industrial organizations, as it offers reliable data that enhance decision-making and operational efficiency. It recommends the gradual implementation of this technique in the factory and its extension to similar industrial units to optimize resource utilization and reduce waste.