Date of Award


Document Type


Degree Name

Master of Science


Department of Systems Engineering and Management

First Advisor

James R. Aldrich, PhD


The purpose of this thesis was to develop a tool that would allow the user the ability to determine the activities an organization should track using Activity Based Costing (ABC). This was accomplished through the assignment of costs to the maintenance of ABC data and the determination of the benefit received as a result of using ABC. While obtaining the information pertinent to the cost of ABC was relatively straightforward and well documented, the information regarding the value of the benefit of ABC was not available. Therefore, using information provided in the literature concerning savings resulting from making the polluter pay for the amount of pollution generated, a benefit ratio was established based on the idea that when an organization is given both the financial ability and responsibility to pay for its actions, savings will immediately occur. Current tools and techniques available in the ABC literature concerning the cost and benefit of ABC focus on the development of cost drivers. Nothing is available which focuses on the activities that should be used by an ABC system. This thesis expands the body of knowledge on ABC by developing such a tool. In addition, nothing currently is available which allows an ABC practitioner the ability to know what value of benefit must be received from ABC in order to recoup the financial investment involved in using such a system. Success stories have been written citing 10 to 100 times the investment gained as a result of using ABC, but this may or not be the case for every organization. This thesis fills the gap between hoping to receive a 10 or 100 times payback and knowing what the expected payback must be in order to use ABC beneficially (in terms of dollars invested).

AFIT Designator


DTIC Accession Number