ABC or TOC? The Differences between Activity Based Costing and the Theory of Constraints

Activity Based Costing
Knowledge Center

Activity Based Costing > Forum

New Topic

Anneke Zwart
Student (University), Netherlands
In past literature, the Theory of Constraints (TOC) has been seen as more or less contradicting the concept of ABC-costing and its assumptions. The main contradictions between ABC and TOC mentioned in those studies are: 1. Variable costs: While the Theory of Constraints (TOC) assumes that there exist few variable costs in an organization, ABC-costing assumes the largest part of a companies’ resources are variable ones. It is for this reasons that the TOC is seen by some as a short-term technique, and ABC-costing as a long-term one. 2. Bottlenecks Resources: - The TOC argues that constraining resources or the outputs with the lowest capacity should be improved. In other words, the bottleneck resources that cause the highest costs in a company should be improved so as to maximize efficiency. - ABC-costing, however, implicitly assumes no bottleneck resources to be present in an organization, but rather certain activities are seen as barriers. In ABC-costing, total resources purchased (...) Read more? Sign up for free


More on Activity Based Costing
ABC in service companies such as airlines?
Degree of Detail in ABC
Activity Based Costing Implementation
ABC and Decision making
Time-driven ABC (TDABC)
Activity Based Management (ABM)
ABC or TOC? The Differences between Activity Based Costing and the Theory of Constraints
Comparison Activity Based Costing, Time-Driven-ABC and Lean Accounting
ABC Costing in Make to Order of Repetive Manufacturing
Over Recovery / Under Recovery Level
🔥What is Process Costing?
ABC in the Federal Environment
An ABC Initiative is Only as Effective as the Software That Supports It
Organizational Issues when Introducing ABC
What is Job Order Costing?
How to Derive Overhead Cost from a P&L?
Best Practices
Limitations and Advantages of ABC for Budgeting
Limitations ABC monitoring operations
ABC in an Advertising Firm?
The Cost of Non-value-added Activities
ABC: reduce non value adding activities?
Consequences of ABC Analysis
Capacity Minutes and Industry Norms
Drivers still Right?
ABC Helps Companies Survive Recession
Traditional Costing versus Activity Based Costing
Conditional Resources in ABC
The Process of Activity Based Costing (ABC) simplified
Activity Based Costing (ABC)
Overhead Costing - Food Manufacturing
Calculating the Most Profitable Way of Manufacturing a Product
Recommended ABC Software
Special Interest Group

Are you interested in Activity Based Costing? Sign up for free

Notify your students

Copy this into your study materials:

and add a hyperlink to:

Link to this discussion

Copy this HTML code to your web site:

Activity Based Costing
Knowledge Center


About 12manage | Advertising | Link to us / Cite us | Privacy | Suggestions | Terms of Service
© 2021 12manage - The Executive Fast Track. V15.8 - Last updated: 26-2-2021. All names ™ of their owners.