IntroductiontoIntroductiontoActivityBasedActivityBasedConceptsConceptsHowDoesYourCompanyHowDoesYourCompanyAnswerTheseQuestions?AnswerTheseQuestions?Whichproducts/servicesaremostprofitable?Whatfactorscontributemosttocost?HowcanIreducemydepartmentcostby10%?Isourcurrentproduct/servicecostaccurate?Whatprocessesshouldbeimproved?Why?How?TraditionalCostSystemsTraditionalCostSystemsManageDollarsManageDollarsLabor$250,000Fringes70,000Supplies50,000Depreciation60,000Other32,000$462,000WarehouseBudgetWarehouseBudgetnHowwouldyoureducecostsby10%?WhyIsn’t“ManagingWhyIsn’t“ManagingDollars”Enough?Dollars”Enough?⬛Informationaboutthetruecostofdoingbusinesseitherdoesnotexistorisdistortedthrougharbitraryallocations⬛Thereisnorelationshipbetweenthecostofaproductorserviceandtheactualeffortexpended⬛Duetolackofrelevantcostinformation,effortstoreducecostsareoftennotdirectedtowardtheareaswhichconsumethemostsignificantresources⬛Thecostinformationprovidedtodayisafterthefact–historicalreportingDoesYourCompany...DoesYourCompany...⬛Believethatcurrentproductorservicecostsarecorrect?⬛Understandwhydifferentproductsorserviceshavedifferentcostsandprofitability?⬛Knowwherecostscouldorshouldbeeliminated?⬛Knowhowtoreduceoreliminatethosecosts?WhatWouldAssistinWhatWouldAssistinAnsweringThoseQuestions...AnsweringThoseQuestions...⬛Asupportsystemformakingstrategicandoperationaldecisionswithconfidence⬛Afoundationformodifyingorenhancingexistingsystems⬛Amechanismwhichidentifiesareasforcontinuousqualityimprovementandprocessreengineering⬛Asupportsystemthatisusableandunderstandabletoeveryemployeeintheorganization⬛Thepracticeofunderstandingwhatcausescosttooccurandthenusingthatinformationtoachieveamoredesirableoutcome.⬛Possibleoutcomesinclude:•Reducingcost•Increasingthecapabilitytosatisfycustomerdemand•FacilitatingachievementofprofittargetshatisCostManagement?W...ACostManagementSystem...ACostManagementSystemActivityBasedSystemsActivityBasedSystemsManageActivitiesManageActivitiesReceivematerial$92,000Pickmaterial50,000Storematerial46,000Deliverparts46,000Housekeeping41,000Inspect/sortmaterial42,000Expeditematerial25,000Searchforlostparts70,000Supervision50,000$462,000WarehouseActivitiesWarehouseActivitiesnWouldyoumakeadifferentdecisionabouthowtoreducecostsby10%?WhyUseanActivityBasedWhyUseanActivityBasedSystem?System?⬛Areeasilyunderstoodbydiversegroupsofpeople⬛Areactionable-theyrepresentwhatisdonewithinanorganization⬛Highlightdepartmentinterdependencies⬛Providethebasisforcontinuousimprovement⬛Canbeusedtointegratefinancialandnon-financialperformancemeasuresctivities:AWhatInformationDoWhatInformationDoActivityBasedSystemsActivityBasedSystemsProvide?Provide?⬛Activitycost⬛Businessprocesscost⬛Visibilitytotherootcausesofcosts⬛Highlightandassistinfocusingonimportantcosts⬛Productandcustomerprofitability⬛ReliablecostinformationaboutproductsandservicesLabor$250,000Fringes70,000Supplies50,000Depreciation60,000Other32,000$462,000WarehouseBudgetWarehouseBudgetReceivematerial$92,000Pickmaterial50,000Storematerial46,000Deliverparts46,000Housekeeping41,000Inspect/sortmaterial42,000Expeditematerial25,000Searchforlostparts70,000Supervision50,000$462,000WarehouseActivitiesWarehouseActivitiesMoveFromMoveFromManagingDollarsManagingDollarstotoManagingActivitiesManagingActivitiesDoesThisMeanTraditionalDoesThisMea...
