The well accepted Activity-Based Costing (ABC) Principle includes the assignment of costs to activities based on their use of resources, and the assignment of costs to end products and services based on their use of activities. Since ABC assigns costs to activities based on their use of resources, the logical formulation of ABC must be premised upon the existence of some given or identifiable unit resource cost that must be associated with each resource required by an activity. Notwithstanding this obvious rationale for unit resource cost being absolutely essential for ABC, there has been little or no development in the field of ABC to solve two fundamental problems relevant to ABC: (i) What unit resource costs are associated with a resource? (ii) How does one deduce unit resource costs so that direct, indirect and overhead costs are accounted for within the costs of a resource? The solving of these two fundamental problems relevant to ABC is the central focus of this research.; Though centered within the cost domain, this research presents a holistic solution by crossing over several fields which, in themselves, are expansive and highly specialized areas. More specifically, the perspectives integrated are from the fields of: (a) Computer Science and Artificial Intelligence for the development of knowledge-based information systems and the deductive reasoning of solutions in a distributed agent environment; (b) "New Industrial Engineering" that applies the capabilities of information technology to analyze, engineer and re-engineer business processes on an enterprise wide basis; (c) Strategic Cost Management that seeks accurate and consistent solutions for product and service costs to formulate strategies for competitive advantages.; First, based upon real cost related problems put forth as common sense queries posed by industrial partners, this research presents the analysis and design of a Cost Ontology for Enterprise Modelling that identifies and reasons with Resource Cost Units of a resource. A Formalization of ABC and a Micro-theory of ABC are established based upon the Cost Ontology. Secondly, it develops the Principle of Resource Probing, the Principle of Activity Probing, a Formalization of Overheads, and a Micro-theory of Resource Cost Units that collectively form a Theory of Resource Cost Units. This theory establishes the framework of axioms and concepts that enables one to deduce costs with ABC so that direct, indirect and overhead costs are included in the Resource Cost Units.; The theories and developments of this research are tested for practical applicability by finding solutions to real world scenarios as presented by corporate partners - deHavilland Inc. (Bombardier, Canada) and BBP Steel (Broken Hill Proprietary, Australia) for purposes of strategic cost management.
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