Applicability of activity-based management system in coal mines – a case study of an underground coal mine

Jump To References Section


  • ,IN
  • ,IN
  • ,IN



Activity-based costing, activity-based management system, coal mining, activity cost drivers


In a traditional system of costing, the costs of services and products are not accurate as overhead costs are allocated through cost centres or departments. On the other hand, activity-based costing purports to costing technique in which products or services are assigned costs on the basis of their consumption of resources caused by activities and provides effective tool for activity based management system (ABMS). The cost assignment is done on specific activities like planning, design, engineering, production or despatch and thereafter the activities in the value chain are associated with different products or services. The implementation of ABMS facilitates proper decision-making by management and result in improvement of business process in terms of effectiveness and efficiency. In other words, by the process of determination of the real cost of products and services by ABC methodology, it becomes easy to identify the products and services which are economically non-viable, break-even or economically viable. Eventually, the economic break-even point can be determined and thus it is possible to compare the different options and explore opportunities for cost control by strategic decision-making. Evidently, ABMS, in a business, endeavours to analyse the information base of activity-based costing and identifies activities in order to eliminate those which do not add to the useful value of the product and focus on those activities which contribute to useful value and support the improvement of product to satisfy the consumer demands. The paper attempts to examine the efficacy of activity-based management system in underground coal mine through case analysis of a selected operating coal mine in India. To determine the cost of mining, all activities in the mine are identified first. The available resources for the activities and actual consumption based on activity cost drivers have been determined by field investigation and analysis. The costs derived by ABC method and traditional system are compared and analysed for managerial decision-making. The case study unfolds non-value added activities and inadequate capacity of underground coal transportation entailing managerial action.


Download data is not yet available.


Metrics Loading ...




How to Cite

Kumar Sinha, V., Chandra, B., & Pattanayak, J. K. (2021). Applicability of activity-based management system in coal mines – a case study of an underground coal mine. Journal of Mines, Metals and Fuels, 68(4), 120–130.



Received 2021-04-18
Accepted 2021-04-18
Published 2021-04-18



Abdullah, K. A., and Irshaidat, M. (2009): Activity Based Costing (ABC) A Proposed Costing Model for Phosphate Industry - Jordan Phosphate Mines Company as a Case Study. Dirasat, Administrative Sciences, 36(1), 199-217

Anand, M., Sahay, B. S., and Saha, S. (2005):. Activity Based Cost Management Practice in India: An Empirical Study. Decision, 32(1), 123-152

Anderson, S. W., Hesford, J. W., and Young S. M. (2002): Factors influencing the performance of activity based costing teams: a field study of ABC model development time in the automobile industry. Accounting, Organizations and Society 27 (2002), 195–211

Blocher, C. L. (1999):. Cost Management – A strategic emphasis. Irwin McGraw Hill, 95-107.

Botin, J. A., and Vergara, M. A, (2015:. A Cost Management model for economic sustainability and continuous improvement of mining operations. Resource Policy, 46 (2015), 212-218

Capusneanu, S., Ileana-Sorina B., Barbu, C., Rof, L., Topor, D. (2013): Implementation of Activity-Based Budgeting method in the economic entities from mining industry of Romania. International Journal of Academic Research in Accounting, Finance and Management Sciences, 3 (1), 26-34

Carolfi, I. A. (1996): ABM can improve Quality and Control Costs, Costs and Management, May, 1996, 1216

Cooper R and Kaplan R. S., (1992): Activity-Based Systems: Measuring the Costs of Resource Usage. Accounting Horizons, September 1992, 1-13

Cooper R. (1988): The rise of Activity Based Costing – Part One: What is an Activity-Based Cost System?. Journal of Cost Management, 2 (Summer), 45-54

Cooper R., Kaplan, R.S., Maisel, L., Morrissey, E., and Oehm, R. (1992): Implementing ABC Management, 1992, New Jersey: Institute of Management Accountants.

Cooper, R., and Kaplan, R. S. (1991): The Design of Cost Management Systems, Englewood Cliffs, NJ: Prentice Hall.

Doughlas, C., and Bouwman, M. J. (2002): The Association between Activity-Based Costing and improvement in Financial Performance. Management Accounting Research, 13(1)

Gosselin, M. (1997): The effects of strategy and organizational structure on the adoption and implementation of ABC. Accounting, Organizations and Society, 22

Gupta, M. (2001): Activity-Based Throughput Management in a manufacturing company. International Journal of Production Research, 39 (6), 1163-1182

Ittner, C. D., Larcker, D. F., and Randall, T. (1997): The Activity-Based Cost Hierarchy, Production Policies and Firm Profitability. Journal of Management Accounting Research, 9 (1997), 143-162

Jonek-Kowalska, I. (2013): Introduction to a methodology of cost management in a colliery from a perspective of longwall life cycle. European Scientific Journal, 9 (25), 380-402

Kaplan, R. S., & Anderson, S. R. (2003): Time-Driven Activity-Based Costing

Kapoor, N. (2014): Strategic Implication Of Activity Based Costing For Indian Companies, Episteme. An online interdisciplinary, multidisciplinary & multicultural journal, Bharat College of Commerce, Badlapur, 3 (3), 170-184

Kennedy, T., and Affleck-Graves, J. (2001): The Impact of Activity-Based Costing Techniques on Firm Performance. Journal of Management Accounting Research, 13 (2001), 19-45

Kren, L. (2008): Using Activity-Based Management for Cost Control, Journal of Performance Management, Atlanta, 21 (2), 18-27

Krumweide, K. R. (1998): The Implementation Stages of ABC and the Impact of Contextual and Organizational Factors. Journal of Management Accounting Research, 10 (1998), 239-277

Kumar, N., and Mahto, D. (2013): Current Trends of Application of Activity Based Costing (ABC): A Review. Global Journal of Management and Business Research Accounting and Auditing, 13 (3), 11-24

Lind, G.H. (2001): Activity Based Costing: Challenging the way we cost underground coal mining systems. The Journal of the South African Institute of Mining and Metallurgy, March/April, 2001, 77-82

Maelah, R., and Ibrahim, D. N. (2007): Factors Influencing Activity Based Costing (ABC) Adoption in Manufacturing Industry. Investment Management and Financial Innovations, 4 (2), 113-124

Major, M., and Hopper, T. (2005): Managers divided: Implementing ABC in a Portuguese telecommunications company. Management Accounting Research, 16 (2005)

Malmi, T. (1999): Activity-based costing diffusion across organizations: an exploratory empirical analysis of Finnish firms. Accounting. Organizations and Society, 24 (1999), 649-672.

Man, M., et. al. (2012): ABC method- guarantor of real costs in the mining extractive industry entities, MPRA Paper No. 4061, Retrieved from

Mariana, R. (2013): Modernizing Management Accounting By The ABC Method. Internal Auditing and Risk Management, Anul VIII, Nr.4(32), 1-11

Phan, T N., Baird, K., and Blair, B. (2014): The use and success of activity-based management practice at different organizational life cycle stages. International Journal of Production Research, 52 (3), 787–803

Sharma, G.L., and Gupta, P.K. (2009:. Activity Based Costing: Strategic Implications for Indian Companies. LBS Journal of Management & Research, Delhi, 5764

Swenson, D. (1995): The Benefits of Activity-Based Cost Management to the Manufacturing Industry. Journal of Management Accounting Research, 7 (1995), 167-180

Tardivo, G., and Montezemolo, G. C. (2009): Using activity-based management to achieve excellence. Journal of Financial Management and Analysis, 22 (1), 67-84

Walker, M. (1999): Attribute Based Costing for decision making. Management Accounting, June, 1999, 18-22.