Abc Project PART II
* PART II The company/industry’s primary objectives for implementing ABC/ABM systems. How does ABC help in cost reduction and accurate cost information?
Activity-based cost (ABC) and activity-based management (ABM) systems aimed to satisfy the necessity of accurate information regarding the cost of resource demands by individual products, services and customers. ABC also enabled indirect and support expenses to be driven first to activities and processes and then to products, services and customers. This has provided managers with a better source for decision-making by showing a more transparent picture of the economics of their operations.
The reasons to implement ABC/ABM are driven by the need to improve customer profitability, to gain accurate and relevant cost information for pricing or budgeting, to modernize cost systems, improve cost control and improve business processes, to meet current managerial needs and to improve product profitability. However, the implementation process has also disadvantages and faces difficulties such as resistance to change in firms, uncertainty about the implementation costs and about the risk of the implementation, absence of technical conditions required to successful implementation, the reluctance of employees or managers, uncertainty about the support from top management, difficulties in identifying and selecting activities and problems when collecting data for these new systems.
An ABC system gives managers information about costs of making and selling diverse products. Manufacturing and distribution personnel use ABC systems to focus on how and where to reduce costs. Managers set cost reduction targets in terms of reducing the cost per unit of the cost-allocation base in different activity areas. Management can evaluate how its current product and process designs affect activities and costs as a way of identifying new designs to reduce costs. Many companies implementing ABC systems for the first time
Activity-based cost (ABC) and activity-based management (ABM) systems aimed to satisfy the necessity of accurate information regarding the cost of resource demands by individual products, services and customers. ABC also enabled indirect and support expenses to be driven first to activities and processes and then to products, services and customers. This has provided managers with a better source for decision-making by showing a more transparent picture of the economics of their operations.
The reasons to implement ABC/ABM are driven by the need to improve customer profitability, to gain accurate and relevant cost information for pricing or budgeting, to modernize cost systems, improve cost control and improve business processes, to meet current managerial needs and to improve product profitability. However, the implementation process has also disadvantages and faces difficulties such as resistance to change in firms, uncertainty about the implementation costs and about the risk of the implementation, absence of technical conditions required to successful implementation, the reluctance of employees or managers, uncertainty about the support from top management, difficulties in identifying and selecting activities and problems when collecting data for these new systems.
An ABC system gives managers information about costs of making and selling diverse products. Manufacturing and distribution personnel use ABC systems to focus on how and where to reduce costs. Managers set cost reduction targets in terms of reducing the cost per unit of the cost-allocation base in different activity areas. Management can evaluate how its current product and process designs affect activities and costs as a way of identifying new designs to reduce costs. Many companies implementing ABC systems for the first time