Activity-Based-Model (ABC) is used for the purpose of significant improvement for overhead accounting systems by providing the best information required for managerial decision. This paper discusses implacability of ABC technique on inventory valuation as a management accounting innovation. In order to prove the applicability of ABC for inventory control a material driven medium-sized and privately owned company from engineering (iron and steel) industry is selected and by analysis of its production process and its material dependency and use of indirect inventory, an ABC model is explored for better inventory control. The case revealed that the necessity of ABC in the area of inventory control is significant. The company is not only able to increase its quality of decision but also it can significantly analyze its cost of direct material cost, valuation of direct material and use its implications for better decision making.
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