P/M/469. Effective management techniques: activity-based costing (ABC) and theory of constraints (TOC)

The paper presents a review of the activity-based costing (ABC) model and the theory of constraints (TOC). ABC is analyzed from the perspective of its implementation, advantages, disadvantages and applications in the practices of the Lehigh Steel Company, a specialty steels manufacturer; comparisons with traditional costing are drawn. The development, principles and applications of the TOC are reviewed; recommendations are made about each calculation method.