Activity Based Costing

The Challenge
This businesses profitability came under pressure due to the various external changes which had recently occurred in the automotive industry. These changes increased the Cost to Serve in this market and increased competition. These changes included:

Changes in Australian diesel fuel standards in 2007 meant the introduction of more car manufacturers offering diesel fuelled models. […]

Businesses recognise that their customers, products and distribution channels consume different levels of resources and as such incur a varying “cost to serve”. The challenge lies in identifying which of these customers, products and channels are consuming relatively more costs and why. The ability to understand the cost to serve and the true net profitability […]