Project Management
Project Management
1. Activity Based Costing (ABC)
Introduction:
There are a number of costing models used in the domain of business, and Activity Based Costing is one of them. In activity based costing, various activities in the organization are identified and assigned with a cost.
When it comes to pricing of products and services produced by the company, activity cost is calculated for activities that have been performed in the process of producing the products and services. In other words, activity based costing assign indirect costs to direct costs. These indirect costs are also known as overheads in the business world.
Let's taken an example. There are a number of activities performed in a business organization and these activities belong to many departments and phases such as planning, manufacturing, or engineering. All these activities eventually contribute to producing products or offering services to the end clients.
Quality Control activity of a garment manufacturing company is one of the fine examples for such an activity. By identifying the cost for the Quality Control function, the management can recognize the costing for each product, service, or resource. This understanding helps the executive management to run the business organization smoothly.
Activity based costing is more effective when used long-term rather than in short-term.
Implementation in an Organization:
When it comes to implementing activity based costing in an organization, commitment of senior management is a must. Activity based costing requires visionary leadership that should sustain long-term. Therefore, it is required that the senior management has comprehensive awareness of how activity based costing works and management's interaction points with the process.
Before implementing activity based costing for the entire organization, it is always a great idea to do a pilot run. The best candidate for this pilot run is the department that suffers from profit making
1. Activity Based Costing (ABC)
Introduction:
There are a number of costing models used in the domain of business, and Activity Based Costing is one of them. In activity based costing, various activities in the organization are identified and assigned with a cost.
When it comes to pricing of products and services produced by the company, activity cost is calculated for activities that have been performed in the process of producing the products and services. In other words, activity based costing assign indirect costs to direct costs. These indirect costs are also known as overheads in the business world.
Let's taken an example. There are a number of activities performed in a business organization and these activities belong to many departments and phases such as planning, manufacturing, or engineering. All these activities eventually contribute to producing products or offering services to the end clients.
Quality Control activity of a garment manufacturing company is one of the fine examples for such an activity. By identifying the cost for the Quality Control function, the management can recognize the costing for each product, service, or resource. This understanding helps the executive management to run the business organization smoothly.
Activity based costing is more effective when used long-term rather than in short-term.
Implementation in an Organization:
When it comes to implementing activity based costing in an organization, commitment of senior management is a must. Activity based costing requires visionary leadership that should sustain long-term. Therefore, it is required that the senior management has comprehensive awareness of how activity based costing works and management's interaction points with the process.
Before implementing activity based costing for the entire organization, it is always a great idea to do a pilot run. The best candidate for this pilot run is the department that suffers from profit making