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Activity based management and costing

Discuss Activity based management and costing within the Elements Of Logistics (Logs) forums, part of the Resolve Your Query - Get Help and discuss Projects category; ACTIVITY BASED MANAGEMENT & ACTIVITY BASED COSTING Activity- based Management is implemented through Activity- based Costing. Thus Activity- based Costing ...

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Sunanda K. Chavan
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Activity based management and costing - September 6th, 2010

ACTIVITY BASED MANAGEMENT & ACTIVITY BASED COSTING


Activity- based Management is implemented through Activity- based Costing. Thus Activity- based Costing is a subset of Activity- based management.
Cooper and Kaplan developed Activity- based Costing in 1988. The limitations of traditional cost systems led to the emergence of Activity- based Costing.

Stages in Activity Based Costing

Identification of the activities that may take place in an org.

Higher no of cost centers

No must not be too high for practical applic

.:. More accurate than traditional system.

Assigning costs to cost pool for each activity

Using resource cost drivers

Support activities spread across primary activities

Determine the cost driver for each activity

Relate o/h collected in the cost pools to cost objects / products

What causes the activity to incur costs?

Assigning the costs of activities to products according to product demand for activities

Activity cost driver rate = Total cost of activity / Activity driver

It can be used to cost products, customers, customer segments, distribution
channels.

Activity Based Cost Management ABM


The Use of ABC as a costing tool to manage costs at the activity level.

ABM utilizes cost information gathered by ABC

ABC has greater benefit if applied to Cost Management

Activity Based Management Model

Def ABM:- “adds a dynamic, continuous improvement dimension to the more static ABC model.

Cost Driver Analysis

Activity Analysis

Performance analysis

Activity-Based Management (ABM)

Activity-based management (ABM) is a systemwide, integrated approach that focuses management’s attention on activities with the objective of improving customer value and the profit achieved by providing this value.

Activity-based management encompasses both product costing and process
value analysis.

Process Value Analysis

Process value analysis is fundamental to activity-based responsibility accounting, focuses on accountability for activities rather than costs, and emphasizes the maximization of systemwide performance instead of individual performance.

Process value analysis is concerned with:

Driver analysis

Activity analysis

Performance measurement

Activity Analysis

Activity analysis should produce four outcomes:

What activities are done?

How many people perform the activities?

The time and resources required to perform the activities.

An assessment of the value of the activities to the organization, including a
recommendation to select and keep only those that add value.

Value-Added Activities

A discretionary activity is classified as value-added if it simultaneously satisfies three conditions:

The activity produces a change of state.

The change of state was not achievable by preceding activities.

The activity enables other activities to be performed.

Activity based management:

Reprice products.

Substitute products.

Redesign products.

Improve processes and operations strategy.

Technology investment.

Eliminate products.
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Re: Activity based management and costing
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Bhautik Kawa
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Re: Activity based management and costing - February 20th, 2016

Quote:
Originally Posted by sunandaC View Post
ACTIVITY BASED MANAGEMENT & ACTIVITY BASED COSTING


Activity- based Management is implemented through Activity- based Costing. Thus Activity- based Costing is a subset of Activity- based management.
Cooper and Kaplan developed Activity- based Costing in 1988. The limitations of traditional cost systems led to the emergence of Activity- based Costing.

Stages in Activity Based Costing

Identification of the activities that may take place in an org.

Higher no of cost centers

No must not be too high for practical applic

.:. More accurate than traditional system.

Assigning costs to cost pool for each activity

Using resource cost drivers

Support activities spread across primary activities

Determine the cost driver for each activity

Relate o/h collected in the cost pools to cost objects / products

What causes the activity to incur costs?

Assigning the costs of activities to products according to product demand for activities

Activity cost driver rate = Total cost of activity / Activity driver

It can be used to cost products, customers, customer segments, distribution
channels.

Activity Based Cost Management ABM


The Use of ABC as a costing tool to manage costs at the activity level.

ABM utilizes cost information gathered by ABC

ABC has greater benefit if applied to Cost Management

Activity Based Management Model

Def ABM:- “adds a dynamic, continuous improvement dimension to the more static ABC model.

Cost Driver Analysis

Activity Analysis

Performance analysis

Activity-Based Management (ABM)

Activity-based management (ABM) is a systemwide, integrated approach that focuses management’s attention on activities with the objective of improving customer value and the profit achieved by providing this value.

Activity-based management encompasses both product costing and process
value analysis.

Process Value Analysis

Process value analysis is fundamental to activity-based responsibility accounting, focuses on accountability for activities rather than costs, and emphasizes the maximization of systemwide performance instead of individual performance.

Process value analysis is concerned with:

Driver analysis

Activity analysis

Performance measurement

Activity Analysis

Activity analysis should produce four outcomes:

What activities are done?

How many people perform the activities?

The time and resources required to perform the activities.

An assessment of the value of the activities to the organization, including a
recommendation to select and keep only those that add value.

Value-Added Activities

A discretionary activity is classified as value-added if it simultaneously satisfies three conditions:

The activity produces a change of state.

The change of state was not achievable by preceding activities.

The activity enables other activities to be performed.

Activity based management:

Reprice products.

Substitute products.

Redesign products.

Improve processes and operations strategy.

Technology investment.

Eliminate products.
Hey sunanda,

Nice information you share on Activity based management and costing, i am also uploading some detailed on Activity-Based Management.

Thank you
Attached Files
File Type: pdf Activity-Based Management.pdf (85.8 KB, 0 views)


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