There are two main reasons why managers undertake ABC/M projects; explicitly to save costs – or more generally to provide support for decision making at both the strategic and operational level.
Initiatives to save costs may be variously described as downsizing, right-sizing, business process review, re-engineering, process improvement, shared services or a host of other titles. […]
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 […]
Introduction to Activity Based Costing
In the modern business world, we are “blessed” with more management information than ever before. But how much of that information is really valuable or even useful? How much of the information that lands on our desks or arrives in our email in-boxes actually helps us to make decisions that will […]
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 […]
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 […]
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 […]
Have you ever wondered how do companies set up their prices? The truth is that many rely on one of two methods:
· Added margin
· Match competitors
Of course there are myriads of permutation of these two methods, but most of them add certain margin, usually standardized across products or services range, and then reduce it based […]
