The Cost Accounting System in B-to-B Service Companies: Cost Centers or Activity-Based Costing?

Abstract

Service business-to-business (b-to-b) companies
provide a wide range of services characterized by a high level of
variability and complexity, very often due to the so called ‘service
customization’. In this context, the need to manage the trade-off
between customer satisfaction and cost control emerges:
therefore the choice of the right cost accounting system acquires
an important role in order to identify and manage the links
between the services offered to the customers and the costs of
their production processes. In this article the two main cost
accounting systems are analyzed (cost centers system and
activity-based costing system), focusing in particular on the need
to identify the final object of cost measurement (service
component). The activity-based costing system together with the
introduction of new cost containers (cost destinations), allows to
accurately calculate the costs of the services provided and to
identify the causal relationships between costs and services. The
article analyzes the case of a b-to-b company which supplies IT
services to banks.