Activity Based Costing: Why Implement?
Activity Based Costing: Peter Drucker Tells Why!
Peter Drucker in Managing in a Time of Great Change
says "Activity based costing represents both a different concept of the business
process...and different ways of measuring. ...the cost that really matters for
competitiveness and profitability is the cost of the total process, and that is what the
new activity-based costing records and makes manageable. Its basic premise is... an
integrated process that starts when supplies, materials... arrive... and continues after
finished product reaches the end user. Service is a cost of the product, and so is
installation, even if the customer pays.
...Activity based costing records cost of not doing, ...downtime, waiting ...waiting to be
shipped, and reworking or scrapping a defective part. Costs of not doing, which
traditional cost accounting cannot and does not record, often equal and sometimes even
exceed costs of doing. Activity based costing gives not only much better cost control: but
increasingly, it also gives results control. ... Activity based costing
integrates ... several activities--value analysis, process analysis, quality management,
and costing--into one analysis..... Its greatest impact is likely to be in services.
Activity Based Costing Approach
by James A.
Activity based costing "is a process of accumulating and
tracing costs and performance data to a firm's activities and providing feedback of actual
results against the planned cost to initiate corrective action where required. It is
a tool for understanding cost. An activity based costing system assigns costs as
they actually exist at a point in time--not as they should or could be performed."
Activity Based Costing by CAM-I
CAM-I (consortium that brought us Activity Based Costing) says that activity based
costing is a: "Methodology that measures cost and performance of activities,
resources and cost objects, assigns resources to activities and activities to cost objects
based on their use, and recognizes causal relationships of cost drivers to activities. An
activity based costing system maintains and processes financial and operating data on a
firm's resources, activities, cost objects, cost drivers and activity performance
measures. It also assigns cost to activities and cost objects.
To achieve your organization's goals, contact our experienced Activity Based Costing
consultants who transfer Activity Based Costing knowledge to your organization. We look
forward to helping you achieve your Activity Based Costing goals.