Productivity and Quality
Activity Based Costing for Activity Based Management
Meiklejohn Paul, Director Management Consulting 17 February 2012
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 success factors Appendix: KPMG ABC and Cost Optimisation tools
© 2012 KPMG Limited, a Vietnamese limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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1. What is Activity Based Costing? 1.1 What is ABC and Why should it be used?
What is ABC? (the Definition)
ABC (Activity Based Costing) is a technique for measuring the cost and performance of activities, products and services on the basis of the resources consumed by the various activities which produce that product or service.
Products and services in themselves do not cause costs to incurred. Rather work itself consumes resources which in turn incur costs.
Why it should be used? (the Benefits)
• Bringing cost and operational information to the level needed for management decisions • Gaining tighter control over overhead and indirect costs • Pricing products/services more accurately • Establishing foundation for activity-based management and performance measurement • Promoting a continuous improvement framework and mindset
To put ABC into context as a performance management tool
© 2012 KPMG Limited, a Vietnamese limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG
Meiklejohn Paul, Director Management Consulting 17 February 2012
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 success factors Appendix: KPMG ABC and Cost Optimisation tools
© 2012 KPMG Limited, a Vietnamese limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
1
1. What is Activity Based Costing? 1.1 What is ABC and Why should it be used?
What is ABC? (the Definition)
ABC (Activity Based Costing) is a technique for measuring the cost and performance of activities, products and services on the basis of the resources consumed by the various activities which produce that product or service.
Products and services in themselves do not cause costs to incurred. Rather work itself consumes resources which in turn incur costs.
Why it should be used? (the Benefits)
• Bringing cost and operational information to the level needed for management decisions • Gaining tighter control over overhead and indirect costs • Pricing products/services more accurately • Establishing foundation for activity-based management and performance measurement • Promoting a continuous improvement framework and mindset
To put ABC into context as a performance management tool
© 2012 KPMG Limited, a Vietnamese limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG