Structured 7-Phase Approach to Activity Based Costing PPT
This PPT slide, part of the 29-slide Activity Based Costing PowerPoint presentation, outlines a structured 7-phase process for implementing Activity Based Costing (ABC). Each phase is clearly delineated, providing a step-by-step framework for organizations looking to adopt this costing method.
The first phase, "Develop Cost Objects," emphasizes identifying the primary cost objects under analysis, such as products or customers. This foundational step is crucial as it sets the stage for the entire costing process. Following this, the second phase, "Group Cost Objects," involves categorizing these cost objects into logical groupings, which may include product lines or customer segments. This grouping aids in simplifying the analysis and enhances clarity.
The third phase, "Develop Process Maps," focuses on creating high-level flow maps of the processes involved. This visual representation helps in understanding the workflow and identifying areas where costs may be incurred. The fourth phase, "Identify Cost Elements," requires a review of financial statements to pinpoint the major cost elements, ensuring that all relevant costs are captured.
In the fifth phase, "Map GL Costs," the emphasis shifts to mapping overhead and general ledger costs to specific activities. This mapping is essential for accurately attributing costs to the right areas. The sixth phase, "Allocate Costs," involves the allocation of direct and activity costs to the identified cost objects, which is vital for assessing profitability.
Finally, the seventh phase, "Verify Economic Logic," ensures that the economic rationale behind the ABC analysis is sound. This verification step is critical for validating the overall approach and ensuring that the insights derived from the analysis are actionable and reliable. Overall, this slide serves as a comprehensive guide for organizations aiming to implement ABC effectively.
This slide is part of the Activity Based Costing PowerPoint presentation.
This presentation is created by former McKinsey, BCG, Deloitte, EY, and Capgemini consultants. It teaches a practical consulting framework actively used by tier-1 consulting firms.
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Costing Management Accounting Activity Based Costing Process Maps
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