Using activity‐based costing and economic profit to grow the bottom‐line

Purpose – The purpose of this article is to present an approach and a case that shows how activity‐based costing (ABC) and economic profit (EP) can be used to improve the profitability of a company. Design/methodology/approach – The objectives of the article are achieved primarily through the discussion of a case combined with a few literature references. The subjects are forecasting, ABC, EP and the approach to the topic is mainly a case study. Findings – On the theoretical side it seems evident that combining ABC and EP is a good idea for a variety of purposes. In the case study. numerous practical findings for the specific company are also presented. Research limitations/implications – From a research perspective it is clear that we cannot judge from this article whether combing ABC and EP is smart in all cases or not. Practical implications – The article clearly shows that ABC and EP can be combined with great results (at least) in some cases. The article also addresses some insight that might be useful for many practitioners. Originality/value – The value of this article lies in providing a clear and real case for why and how to combine ABC and EP. As far as I know the value offered by this article is quite unique. The article's audience is practitioners as well as academics.