ACTIVITY-BASED MANAGEMENT

2 Types of Activity-Based Management

• Operational & Substantial

• Organizational & Sustainability

• Operational & Strategic

What is the impact of ABM?

• Using the cost dimension of ABC to help manage cost

• Increase Non-Value added activity

In Operational ABM , it is about ......

• not doing things right

• doing the right things

• doing things right

By using ABC data it helps ABM to focus on ....... ?

• costing

• redirect and improve the use of resources

• measure cost performance activity

Stages in ABM

• Identify the activities that the organization performs

• Calculate the cost of each activity

• Identify the activity cost driver for each activity

• all of the above

What is the application of ABM?

i. Cost reducing

ii. Benchmarking

iii. Strategic

iv. Organizational

• i only

• i & ii

• iii & ii

• i & iv

Benefits of ABM ?

• identify activities with low impact and does not eliminate unnecessary.

• helps organization in provide more accurate information thus resulting more accurate pricing

• Offers better understanding and justification of costs in manufacturing overhead

Limitation of ABM

• Requires Substantial resources

• Lack of support of higher level management

• Impossible to allocate overhead costs to specific activity

In the ABM Model, Process view consists of .....

• Cost assignment view , Cost driver and resources

• Cost drivers , activities and cost objects

• Cost drivers , Resources and process view

• Cost drivers, Activities and Performance measures

What is the purpose for Cost Assignment view?

• to make decision for your life

• to maximize profit and minimize losses

• to make decisions including pricing , product design decision and priorities improvement effort

• to provide support in the decision making