From Apparent to True Customer Profitability: An Applied Study Using Insights from Attribute-Based Costing and Hidden Cost Accounting

Abstract

This study expands on the results of our previous research on the Attribute-Based Costing System (ABCII) and its contribution to cost measurement and rationalization, resource consumption management, and strategic decision-making. Accordingly, the present study does not seek to replicate the assessment of these effects; rather, it builds upon the findings of the previous research as a methodological foundation for advancing the analysis through the integration of hidden cost accounting. In this context, an integrated model was developed to link the cost of cable products determined under the Traditional Costing System and the ABCII System to move from apparent customer profitability toward true customer profitability by incorporating measurable hidden costs. The model was empirically applied using the revenues generated by ten customers, leading to several key findings. The findings suggest that variations in the product cost between the Traditional Costing System and the ABCII System directly affect customer profitability, either increasing or decreasing it. The obtained results show that the lower product cost calculated by ABCII leads to higher profitability, while the higher cost calculated by the Traditional Costing System leads to lower profitability. This finding supports the view that accurate cost measurement is an essential foundation for the efficient management of profitability. In addition, the hidden cost accounting model, which uses the outputs of the ABCII System, represents a further advancement in expanding the scope of the analysis beyond the simple calculation of costs associated with product features and specifications. The analysis is extended to customer service costs and measurable hidden costs. This provides an empirical basis for assessing the impact of including these costs on true customer profitability.