Cost Concept .

Running head: COST CONCEPT 1
Cost Concept
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COST CONCEPT 2
Cost Concept
The History of ABB Limited
This company is a forerunner in technology that deals with products in electrification,
power grids, motion and robotics and is a leader in industrial automation. The company serves its
customers with industry and transportation, utility services and also global infrastructure. The
company has been in the innovation industry for more years and is also a pioneer in digitalization
sector using its value proposition. ABB contributes to the sustainability of the future by pushing
electronics mobility boundaries. It also operates in many countries with about 100 branches
comprising of 147000 workers, (ABB Annual Report 2017, 2018).
ABB Limited is divided into four divisions globally which are committed in value
creation through the use of technology. The four divisions which operate globally comprise of
power grids, the electrification products, robots and motion and the last division deals with
industrial automation.
ABB was formed as a result of two companies merging up which are BBC Brown Boveri
and ASEA, AB. The company has its headquarters in Zurich New Zealand. Since the merger in
1998, ABB limited was able to increase manoeuvrability, space on board and also efficiency.
ABB is the leader in the use of robots with regards to picking and packing of products. In 2000
ABB limited became the world’s first high voltage commercial shore to ship electric power
which helps in reducing gas emissions from the greenhouse. In the year 2002, it linked Victoria
and South Australia with an underground transmission which was the longest. In 2004 it
launched extended automated system which was the application that was adopted by thousands
of companies in the delivery of continuous product enhancements. (Dividend.com, 2018)

COST CONCEPT 3
Since 2004, the company has developed many links using power networks and providing
a breakthrough for solving technical problems. ABB has been able to unveil world collaborative
robots for example in the year 2014. Lastly, in the year 2017, it offered the world with a
pioneering digital solution and providing the customers with the ability to easily use the internet.
Methods of Calculating Cost Used by ABB Limited
ABB limited uses activity-based costing (ABC) in the calculation of the historical cost of
products, whereby the actual cost of raw materials and the historical cost used in production are
calculated. It also uses the activity-based budgeting whereby budgeting is based on each activity.
ABB calculates the cost of output and activity using the activity-based costing and the results are
used in the estimation of the company's future budgets
ABB calculates first the historical costs of the services using the activity-based costing
and then the outcome is compared with the historical cost of the current municipal accounting
system which is usually calculated using the conventional way. The values are compared so as to
find out if there could be an important difference between the results of the two costing methods.
The activity-based budgeting is also compared with the budget created using the traditional
(Conventional) way to determine if there is any significant difference, (Mclaney & Atrill 2012)
Whether the results of the activity-based budgeting and activity-based costing can be
applied in the Sirik municipality or not they are the ones used by ABB Limited. If the results
show that there is a significant difference between the historical cost of activity-based costing
and those calculated using the traditional way, the values calculated using the activity-based
costing will be used. Also the same applies to the activity-based budgeting. The above methods
of calculation of cost by ABB enable it to produce information which is useful in making useful