Activity Based Management a Summary
Activity Based Management
A Summary
Managerial Accounting
Abstract Activity-based management (ABM) is an approach to management that directs the focus of cost managers towards activities analysis. Theoretically by concentrating on activities, this will increase the ability of management to control costs be improving efficiencies. Activity-based management (ABM) uses activity-based costing (ABC) information. ABM/ABC has been around for over 25 years and has gone through its peaks and valleys. This paper will give a short overview of ABM/ABC as well as discussing the main points of ABM including its goals, merits and drawbacks.
Activity-Based Costing (ABC) “Where It Begins” for ABM Activity-based costing (ABC) is a costing method that assigns resource costs to products or services based on activities performed. The whole idea of this costing approach is that an organization’s products or services are produced or performed as a result of activities and activities use resources which incur costs. The costs of resources are assigned to activities based on the activities that use or consume resources and costs of activities are assigned to products or services based on activities performed. It is imperative in using ABC to identify the relationships between resource costs, cost drivers, activities, and products/services in assigning costs to activities and then from activities to products/services. The order of this process in determining these relationships would start with indentifying the product or service that you wish to analyze. Then an organization would attempt to indentify all the resources and processes that are required to make the product or deliver the service and identify their particular costs. Determining the cost drivers for these costs would be the next step. This is a very critical step and determining the correct cost drivers
A Summary
Managerial Accounting
Abstract Activity-based management (ABM) is an approach to management that directs the focus of cost managers towards activities analysis. Theoretically by concentrating on activities, this will increase the ability of management to control costs be improving efficiencies. Activity-based management (ABM) uses activity-based costing (ABC) information. ABM/ABC has been around for over 25 years and has gone through its peaks and valleys. This paper will give a short overview of ABM/ABC as well as discussing the main points of ABM including its goals, merits and drawbacks.
Activity-Based Costing (ABC) “Where It Begins” for ABM Activity-based costing (ABC) is a costing method that assigns resource costs to products or services based on activities performed. The whole idea of this costing approach is that an organization’s products or services are produced or performed as a result of activities and activities use resources which incur costs. The costs of resources are assigned to activities based on the activities that use or consume resources and costs of activities are assigned to products or services based on activities performed. It is imperative in using ABC to identify the relationships between resource costs, cost drivers, activities, and products/services in assigning costs to activities and then from activities to products/services. The order of this process in determining these relationships would start with indentifying the product or service that you wish to analyze. Then an organization would attempt to indentify all the resources and processes that are required to make the product or deliver the service and identify their particular costs. Determining the cost drivers for these costs would be the next step. This is a very critical step and determining the correct cost drivers
References: Abdallah, A., & Wei, L. (2008). Why Did ABC Fail: at the Bank of China?. Management Accounting Quarterly, 9(3), 7-17. Cokins, G. (1999). Learning To Love ABC. Journal Of Accountancy, 188(2), 37-39. Cokins, G., & Căpuşneanu, S. (2011). Sustaining an Effective ABC/ABM System. Theoretical & Applied Economics, 18(2), 47-58. GHICAJANU, M. (2008). Activity Based Management - Efficiency Method of the Management Control Systems. Annals Of The University Of Petrosani Economics, 8(1), 219-222. Hicks, D. T. (1999). Yes, ABC Is for Small Business, Too. (cover story). Journal Of Accountancy, 188(2), 41-43. Kren, L. (2008). Using Activity-Based Management for Cost Control. Journal of Performance Management, 21(2), 18-27. Stratton, W. O., Desroches, D., Lawson, R. ., & Hatch, T. (2009). Activity-Based Costing: Is It Still Relevant?. Management Accounting Quarterly, 10(3), 31-40. Tardivo, G., & Di Montezemolo, G. (2009). Using Activity- Based Management to Achieve Excellence. Journal of Financial Management & Analysis, 22(1), 67-84.