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Figure 3. Process view of CAM-I cross. Activity based costing (ABC) is a methodology measuring the cost and performance of activities, resources, and cost objects (products and services). Resources are assigned to activities and then activities are assigned to cost

Figure 3 Process view of CAM-I cross. Activity based costing (ABC) is a methodology measuring the cost and performance of activities, resources, and cost objects (products and services). Resources are assigned to activities and then activities are assigned to cost

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Figure 1. Traditional cost allocation methods. To open your management’s eyes to the common sense benefits of activity-based approaches, target an area within your organization to perform an ABC/M pilot study. This could be purchasing (supply management), man- agement information solutions (MIS), supplier quality, or even test engineering. Perform the ABC/M pilot study to demonstrate the basics of the activity-based approach versus the traditional costing methods used today which you can obtain from accounting. You will be amazed at the reception you will get when management reviews the pilot
Figure 1. Traditional cost allocation methods. To open your management’s eyes to the common sense benefits of activity-based approaches, target an area within your organization to perform an ABC/M pilot study. This could be purchasing (supply management), man- agement information solutions (MIS), supplier quality, or even test engineering. Perform the ABC/M pilot study to demonstrate the basics of the activity-based approach versus the traditional costing methods used today which you can obtain from accounting. You will be amazed at the reception you will get when management reviews the pilot
Figure 2. Cost assignment view of CAM-I cross.
Figure 2. Cost assignment view of CAM-I cross.
‘igure 5. Traditional view of supply management.
‘igure 5. Traditional view of supply management.
Figure 6. Traditional vs. activity based view. Accompanying the widely used six-step ABC/M process is an easy to use FastTrack ABM _ software package which is a Y 2K compliant PC-based system that is run time software based on the Microsoft Access product. This tool features an ABB module with major features not found in the major ABC software packages. Most of the ABC software packages “backflush” activities to form budgets. Under backflushing, the only variable in the budgeting process is the volume quantities, FastTrack ABM _ will backflush but will also have variables for inflationary factors, capital investment, and quality improvement initiatives— all of which are significant variables and thus improving the accuracy of effectively planning and budgeting for quality.
Figure 6. Traditional vs. activity based view. Accompanying the widely used six-step ABC/M process is an easy to use FastTrack ABM _ software package which is a Y 2K compliant PC-based system that is run time software based on the Microsoft Access product. This tool features an ABB module with major features not found in the major ABC software packages. Most of the ABC software packages “backflush” activities to form budgets. Under backflushing, the only variable in the budgeting process is the volume quantities, FastTrack ABM _ will backflush but will also have variables for inflationary factors, capital investment, and quality improvement initiatives— all of which are significant variables and thus improving the accuracy of effectively planning and budgeting for quality.
In addition to defining activity costs, output quantities, and unit costs, FastTrack ABM greatly enhances the quality professional’s view of how his/her budget is consumed by appraisal, prevention, internal or external cost cen- ters. Once the activities’ descriptions have been well defined, you can develop a “fact-based” balanced scorecard to report your quality costs breakdown at monthly quality reviews, budgeting reviews, and most importantly the birth of a “cost based” system to drive quality improvements for the next budgetary period. Figure 8 depicts the FastTrack
In addition to defining activity costs, output quantities, and unit costs, FastTrack ABM greatly enhances the quality professional’s view of how his/her budget is consumed by appraisal, prevention, internal or external cost cen- ters. Once the activities’ descriptions have been well defined, you can develop a “fact-based” balanced scorecard to report your quality costs breakdown at monthly quality reviews, budgeting reviews, and most importantly the birth of a “cost based” system to drive quality improvements for the next budgetary period. Figure 8 depicts the FastTrack
Figure 8. Costed activities summary.
Figure 8. Costed activities summary.
Figure 9. Process map of activity.
Figure 9. Process map of activity.
Related topics:
Activity based costing
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