Activity-Based Cost Management (ABC/M) (PowerPoint PPT)

Critics have claimed that traditional managerial accounting is at best useless and at worst dysfunctional and misleading. Today's general ledger and budgeted spending systems support departmental and "stovepipe" managerial philosophies. In contrast, activity-based costing (ABC) information supports process-based thinking. ABC is a key component of the increasingly popular enterprise and corporate performance management (EPM/CPM) systems.

Cross-functional processes are now recognized as the integrating theme for how work gets done, how outputs are produced, and how customers get served. Only ABC can bring truly accurate fact-based measures and visibility to costs. ABC does not use broadly averaged cost allocations, but rather traces cost using cause-and-effect activity cost drivers. The resulting cost visibility informs manager about what things costs and more importantly why things have costs. ABC goes beyond product costing to also measure channel and customer profitability.

ABC also helps reduce costs and improve productivity by reporting per-unit costs that can be used as benchmarks and to monitors cost trends. ABC can also associate costs with value, quality, and waste, with their strategic importance, with their level of performance, and other "attributes" of work. All of this cost and trait data are further translated into which products, channels, customers or internal company-sustaining workforce staff cause and consume all of the in exactly what proportions.

Ultimately cost data is simply a means-to-ends where the ends are the decision-making of the organization. Today an emerging focus is to become a "learning organization." Unlike traditional accounting reports to which managers react by being happy or sad, ABC data makes them smarter!

This presentation is ideal for managers who have faced challenges in implementing strategic cost management using ABC principles. It also serves as a valuable resource for those looking to champion ABC initiatives within their organizations.