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Every enterprise seeks to determine as accurately as possible the cost of the products or services it produces. The allocation of indirect costs causes considerable difficulties in this process. In the search for the most accurate alternatives for allocating indirect costs, the Activity Based Costing (ABC) method has become more popular in recent decades and is increasingly used by companies. The ABC method has many advantages, but it also has disadvantages, which have led to further development of the method by proposing newer versions. These include Fuzzy Activity Based Costing (FABC), which reduces the risk of uncertainty in data collection conditions and inaccurate cost allocation. However, while the literature provides a theoretical model of the FABC approach, there is very little research focused on sector-specific companies. Given that the issue of indirect cost allocation is particularly relevant for manufacturing companies, this paper explores the possibilities of applying the FABC method in manufacturing companies, using the example of a paper and cardboard manufacturing company. The aim of the research: after revealing the principles of ABC and FABC implementation, to improve the indirect cost allocation process in a paper and cardboard manufacturing company using the FABC method. The methods used for the study were document analysis, observation, conversation, interview, and fuzzy set analysis. The results showed that the FABC method has lower cost drivers for some activities and higher cost drivers for others than the ABC method. The improvement path developed for the allocation of indirect costs using the FABC approach could serve as a good model for its implementation in other manufacturing sectors.

No costing method can guarantee that cost accuracy will be 100% correct. This is primarily due to the problem of attributing indirect costs to the cost of a product or service. However, in recent decades, most of the research on the allocation of indirect costs has focused on Activity Based Costing (ABC) method, which is too complex and too costly for many companies. In contrast, research into the method of allocating indirect costs to departments has been unduly reduced. This method, often referred to as the traditional approach, is popular with the vast majority of companies and, if properly applied, would result in a reasonably accurate allocation of indirect costs to the cost of goods and services. The objective of the study is to reveal the peculiarities of the application of indirect cost allocation method based on the assignment of indirect costs to departments, with a view to improving the efficiency of the use of this method in the assignment of indirect costs to the cost of goods or services. The paper examines the peculiarities of the traditional method of allocating indirect costs, proposing not only a sequence for allocating these costs, but also the criteria for selecting the basis for the allocation of indirect costs, alternative methods of allocating indirect costs to production units, and the principles for calculating the indirect cost rate. All of this would allow enterprises to apply the indirect cost allocation method, based on assignment oh indirect cost to departments, much more effectively, both in financial accounting, for the purpose of determining cost of sales for the preparation of financial statements, and in management accounting, for the purpose of making various management decisions.