Activity-based costing (ABC) is a costing methodology that identifies activities in an organization and assigns the cost of each activity with resources to all products and services according to the actual consumption by each. This model assigns more indirect costs(overhead) into direct costs compared to conventional costing. CIMA Official Terminology‚ 2005 A development of the principles of activity based costing (ABC) is activity based management (ABM). Operational ABM is defined as: ‘Actions
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chosen Hong Kong company………..…….……………….P.3 2. Characteristics of an organization contributing to the use of activity based techniques ………………………………………………………….……P.4-5 3. An appropriate ABM example in chosen company……......................................................................................P.6-8 4. How the ABM information can be used by managers………………….……………………………………...……….P.9 5. Problem causing an organization to decide not to use or to abandon use of activity based techniques…………………………………………P
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Topic Gateway Series Activity Based Costing Activity Based Costing Topic Gateway Series No. 1 1 Prepared by Stephanie Edwards and Technical Information Service Revised November 2008 Topic Gateway Series Activity Based Costing About Topic Gateways Topic Gateways are intended as a refresher or introduction to topics of interest to CIMA members. They include a basic definition‚ a brief overview and a fuller explanation of practical application. Finally they signpost some further
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Terrance_Pohlen@dscc.dla.mil 9-6-95 Activity-Based Costing (ABC) General Readings - Activity-Based Costing Ali‚ Hamdi F.‚ A Multicontribution Activity-Based Income Statement‚ Journal of Cost Management‚ F94‚ pp. 45-54. The author outlines the development of an ABC based income statement. The multicontribution income statement reflects the individual contribution by product‚ product line‚ operations and facilities. The ABC based income statement attempts to incorporate contribution margin
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Agenda 1. What is Activity Based Costing (ABC)? 1.1 What is ABC and Why should it be used? 1.2 Traditional costing vs ABC 1.3 Activity based costing processes 2. How ABC should be used to manage (Activity based management)? 2.1 When to use ABC? 2.2 How to use ABC for ABM? 2.3 Scoring High - Low value adding activities 2.4 Activity Based Management applications 3. ABC/ABM implementation 3.1 Where ABC has been used 3.2 Steps to develop ABC Cost Flow Model 3.3 ABC Implementation Project 3.3 Challenges and
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ACC 6301 – Exam I Study Suggestions You are responsible for any questions and problems that you were assigned for homework or that we worked in class. Also‚ you should be able to discuss and/or answer questions related to your readings/case(s) and the Wall Street Journal. Cost Management and Strategy – refer to your assigned questions and problems Cost Drivers and Basic Cost Concepts -- What is a cost? Define cost pools. What is a cost object? cost assignment? Contrast a direct cost with an
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services which they use. It doesn’t change or eliminate any costs; it provides detailed information about how costs are consumed. (Online manager-net.com). Traditional cost accounting looks at what is spent‚ while ABC methods look at what is done in terms of activities. In ABC it is much easier to identify opportunities to reduce costs and improve performance‚ while maintaining the quality of care provided. Traditional Cost Systems use cost allocation methods‚ do not focus on where or why
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should be used to allocate overhead expense. • In such situations‚ managers need to consider using activity based costing (ABC). ABC Definitions • Activity based costing is an approach for allocating overhead costs. • An activity is an event that incurs costs. • A cost driver is any factor or activity that has a direct cause and effect relationship with the resources consumed. ABC Steps • Overhead cost drivers are determined. • Activity cost pools are created. – A activity cost pool is
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system such Activity-Based Costing (ABC). ABC system has emerged as an alternative to traditional costing system to meet the need for accurate cost information about the products‚ services‚ customer and processes. ABC performs the arithmetic to provide accurate cost information while Activity Based Management (ABM) is focused on using this information obtained from ABC to manage activities in order to improving business (Gunasekaran et al.‚ 2000). Generally ABC systems enable indirect and support
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CUSTOMER PROFITABILITY ANALYSIS Customer profitability analysis (CPA) can be defined as a method used to compare the costs of all the activities used to support a customer or a customer group with the revenue generated by that customer or customer group. It is the analysis of the revenue and costs that relates to the customers which can be determined by considering the similarities and differences in customers’ buying behaviours and customer preferences. From the definition‚ it shows three features
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