This industrial sector of Tirupur accounts for more than 90% of cotton knit exports from India. Wet processing/dyeing is one of the major activities which involve fixing of appropriate color in the knitted fabric. Earlier, the process was fully manual but now it's aided by the advent of the latest technologies. The performance of this industry is subjected to seasonal fluctuations. Traditional costing system is mostly based on assumptions and estimates that subsequently affect its output. This article studies the defects of the traditional costing system as brought out by Activity Based Costing (ABC) with reference to a dyeing unit in the textile industry at Tirupur.

With the liberalization and globalization of Indian economy, Indian companies are facing intense competition in their product markets. Several new competitors are entering the manufacturing and service sectors of our economy. The variety of products and services are increasing. Customers are increasingly demanding better quality, wider variety, with quick delivery and improved after-sales service at highly competitive prices. To maintain sustainable growth in the face of severe competition in the international markets total quality management through six sigma, business process reengineering and value chain analysis is imperative. Strategic measurement enables organizations to improve their focus, integration, self-accountability, learning and foresight. This increases their strategy implementation, which results in higher profits and greater agility. Corporate strategic objectives should be broken down to specific goals for the various parts of the organization. Activity Based Costing (ABC) has emerged as a powerful tool for management to achieve cost-effectiveness, improve productivity and arrive at relevant costs for price fixation and studying product profitability. Critics have ridiculed ABC as just another method of overhead allocation. However, ABC is beyond simply another method of costing. It assigns cost to activities based on their usage of resources. It is rather now viewed as a management concept which enables taking key decisions. The biggest advantage of ABC is the rationale it has towards identifying the cost pertaining to a product, which is not only concerned with overheads but also to variable costs, which is considered a more straight forward cost to be assigned to the product.

The Accounting World Magazine, Dyeing Industry, Industrial Sector, Activity Based Costing, ABC, Traditional Costing System, Globalization, Liberalization, Indian Economy, International Markets, Total Quality Management, Strategic Implementations.