ABC methodology has been around since early 1980s, but it’s only relatively
recently that it has begun to gain acceptance. This recent enthusiasm for the
methodology is largely because the make-up of the cost base has changed over
the last 30 years or so.
Over the last 30 years there has been a proportionate decline in direct costs and
an […]
This post contains a step-by-step illustration of a very simple ABC modeling exercise, which illustrates many of the aspects of the methodology. We will be using a credit control function as our example, for three main reasons:
• 1. Most organizations operate such a function, so it should be reasonably familiar;
• 2. Credit control is often […]
Activity Based Costing is not a new concept, and many organizations have struggled with it in the past. Activity Based Costing was primarily used by the manufacturing industry to monitor and reduce costs. Activity Based Costing has had a mixed reputation with many connecting the term with overly complex calculations and laborious manual measurements of […]
Overview
In every business Customers and Products have a “Cost to Serve*” associated with them. Activity based costing (ABC) is a powerful tool to determine the “Cost to Serve” by Product and Customer. Once this is calculated the true profitability by Product and Customer can be determined.
Understanding the true Product and Customer profitability allows companies […]
Introduction
The other two papers in the series cover an Introduction to Activity-Based
Cost Management and Practical Applications of Activity-Based Costing.
All three papers in the series, as well as additional reference material on ABC
and other related subjects, are available from www.algsoftware.com.au
When you implement activity based costing (ABC), remember that you won’t be
the first organization to do […]
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. […]
