Activity Based Costing

BASE DE DATOS PROQUEST DIRECT

Activity-based costing for a hospice

Strategic Finance; Montvale; Mar 2000; Sidney J Baxendale; Victoria Dornbusch;

Abstract:
Gone are the days when activity-based costing was just for manufacturers. Now, it has
crept into service industries such as healthcare, banking and insurance. When the Hospice
of Central Kentucky (HCK) was feeling the squeeze of cost increases while 3rd-part
reimbursements remained constant, it thought that the only solution was to cut costs. But
ABC revealed other options. HCK's management found that ABC could provide accurate
cost information, and it used 6 steps, that can be applied to any organization, to develop its
ABC system.

As easy as ABC? It seems not!

Accountancy Ireland; Dublin; Feb 2000; Martin Fahy; Gerry O'Brien;

Abstract:
Manufacturing industry is still an important part of the Irish economy, however it faces
significant threats in an increasingly global environment. An essential part of ensuring the
long term competitiveness of Irish firms is to configure and manage the manufacturing,
sales and distribution processes in a way which reflects correct product and process choices.
In this regard, Activity Based Costing/Activity Based Management (ABC/M) techniques have
an important role to play. In particular, ABC/M supports a more strategic approach to cost
management, product pricing, channel selection, product design and other important
decisions

Activity-based cost management system architecture--part II

Strategic Finance; Montvale; Dec 1999; Robin Cooper; Regine Slagmulder;

Abstract:
As more powerful ABC (activity-based cost) systems become more available, the
temptation to design overly complex ones will increase. These maximalist systems will
rapidly become obsolete if they are not maintained continuously. In contrast, an integrated
architecture approach will allow systems to emerge that are based on intelligent design
principles. Splitting apart the strategic costing and operational improvement functions can
improve the quality of system design dramatically.

Using ABC to allocate audit costs

The Internal Auditor; Altamonte Springs; Dec 1999; Daniel L Haskin;

ACTIVITY-BASED COSTING (ABC) HEIGHTENS management's ability to trace indirect costs

and thereby provides more accurate data for evaluating results. Internal auditors may find
that ABC is an ideal technique for allocating the cost of internal audits to responsible
managers. The end result may represent substantial improvements in process and product
for both auditors and auditees

Activity-based costing

Computerworld; Framingham; Aug 9, 1999; Joyce Chutchian-Ferranti;

Abstract:
Activity-based costing (ABC) is a budgeting and analysis process that evaluates overhead
and operating expenses by linking costs to customers, services, products and orders. It
allows managers to see which products or services are profitable or losing money. The first
step is to establish the activity centers and activities. Once the activities are established,
you must determine the parts of each activity that cost money. Next, the data is collected
and input to an application. From there, managers can determine what changes need to be
made to give a company optimal profitability. This is called activity-based management the process of using ABC to analyze how efficiently activities are performed and how to
manage them. The key to implementing ABC is to have a cross-functional team that
includes representatives from IT, finance and the people who own the processes.

Learning to love ABC

Journal of Accountancy; New York; Aug 1999; Gary Cokins;

Abstract:
Activity-based costing works best with a minimum amount of detail and estimated cost
figures. By training and inclination accountants are detail oriented, abhorring lack of
precision and vagueness. These qualities are incompatible with ABC. As a result, when CPAs
undertake an ABC project, they typically become overwhelmed with data. This article
attempts to get CPAs to see that activity-based costing is not that hard to implement, and it
can truly enhance their roles as business partner and consultant.

Yes, ABC is for small business, too

Journal of Accountancy; New York; Aug 1999; Douglas T Hicks;

Abstract:
Contrary to conventional wisdom, activity-based costing is not only for large companies. It
works just as well for small organizations. While it is true that ABC is still being used mostly
by large organizations, that is largely because the large-company myth became deeply
embedded in conventional business thinking. That is beginning to change: Smaller
businesses are adding ABC to their management tools and recognize it as a powerful aid.
The experience of a small manufacturer that realized that a direct-labor based, plantwide
manufacturing rate did not accurately reflect the cost of individual products is presented.
The management assembled a multidisciplinary team to apply the basic concept of ABC to
create a cost model that would accurately cost out each of the company's parts. Once the
ABC team determined appropriate methods for costing the manufacturing and several
nonmanufacturing activities, it created a cost model and a spreadsheet template that used
the rates generated by the model to cost individual products.

Designing ABC systems for strategic costing and operational improvement

Strategic Finance; Montvale; Aug 1999; Robin Cooper; Regine Slagmulder;

Abstract:
As the demands of a strategic costing system and an operational improvement system are
different, trying to design a single system to perform both tasks can rapidly lead to conflicts
with the principles of intelligent design. Probably the most effective solution is to develop 2
separate systems, one for strategic costing and the other for operational improvement. The
primary challenge created by the decision to develop the 2 cost systems is to ensure that
the 2 systems articulate. Articulation of the 2 activity-based systems occurs when,
periodically, the strategic costing system is refreshed to reflect the latest values of the
updated standards from the operational improvement system.

BASE DE DATOS EBSCO

Title: Activity-based costing: a powerful tool for pricing
Author(s): John C. Lere Professor of Accounting, Department of Accounting, St Cloud State University, Minnesota,
USA
Source: The Journal of Business & Industrial Marketing, February 17, 2000, Vol. 15, Issue 1, 11 p, pp. 23-33
ISSN: 14648180
Keyword(s): pricing; activity based costing; product costing; cost accounting; industrial marketing; negotiating
Abstract: Explains the differences between traditional cost behavior, which divides costs into variable and fixed
categories, and activity-based costing (ABC), which divides these same costs into those that vary with unit-level
activities, batch-level activities, and product-level activities and facility-level costs. Describes how recognition that
cost may vary with something other than volume can make ABC a powerful tool for industrial marketers in three
ways: yielding cost estimates to use in pricing that reflect significant differences among product specifications;
providing the industrial marketer with guidance as to which product specifications may be adjusted in negotiations
to yield significant cost reductions; and indicating areas in which to change company operations to yield cost
reductions that will allow the company to satisfy customer wishes better.

Title: Systematic approach to activity based costing of the production planning activity in the book manufacturing
industry
Author(s): Curtis Walker Bard Fiber Optics, Michigan, USA, and Nesa L'abbe Wu Eastern Michigan University,
Michigan, USA
Source: International Journal of Operations & Production Management, January 19, 2000, Vol. 20, Issue 1, 13 p,
pp. 103-115 ISSN: 01443577
Keyword(s): product planning; work measurement; direct costs; activity based costing
Abstract: This paper justifies the need for moving indirect production planning costing in the book manufacturing
industry toward direct production planning costing. Principles of activity based costing are utilized to accomplish
this feat. This paper develops a methodology to break down the various tasks required in planning a job for
production in the book manufacturing industry and to apply time measurement to these activities. These time
measurements can then be used to individually cost the planning process of any book manufacturing company. The
methodology is tested and justified through extensive data collection and application in a major book manufacturing
firm. Thus, this industry can now effectively apply cost to activities of the planning process for each individual job
as a direct cost, rather than an indirect one.

Title: Justification and implementation of activity based costing in small and medium-sized enterprises
Author(s): A. Gunasekaran A. Gunasekaran is a Lecturer in the Department of Management, University of
Massachusetts, North Dartmouth, Massachusetts, USA. H.B. Marri H.B. Marri Lecturers in the Department of
Manufacturing and Engineering Systems, Brunel University, Uxbridge, Middlesex, UK. R.J. Grieve R.J. Grieve are
Lecturers in the Department of Manufacturing and Engineering Systems, Brunel University, Uxbridge, Middlesex,
UK.
Source: Logistics Information Management, December 6, 1999, Vol. 12, Issue 5, 9 p, pp. 386-394 ISSN: 09576053
Keyword(s): small to medium sized enterprises; activity based costing; cost management; implementation
Abstract: There is a potential to improve the overall performance of SMEs and hence their competitiveness.
Activity based costing (ABC) is gaining importance in organizations that are aiming for a major share in business by
improving productivity and quality. However, ABC has received little attention from SMEs in spite of the fact that it
has an important role to play in improving the competitiveness of SMEs. First, this paper reviews cost management
practices in SMEs. Second, justification criteria for the implementation of ABC in SMEs are discussed. Third, a
framework has been developed in this paper for the implementation of ABC in SMEs. Finally, some future research
directions are presented in the area of ABC in SMEs.

Title: Application of activity-based costing: some case experiences

Author(s): A. Gunasekaran Department of Management, University of Massachusetts, North Dartmouth,
Massachusetts, USA H.B. Marri Department of Manufacturing and Engineering Systems, Brunel University,
Uxbridge, Middlesex, UK Y.Y. Yusuf Department of Mechanical and Manufacturing Engineering, Nottingham
Trent University, Nottingham, UK
Source: Managerial Auditing Journal, October 1, 1999, Vol. 14, Issue 6, 8 p, pp. 286-293 ISSN: 02686902
Keyword(s): implementation; decision making; activity based costing
Abstract: In present day manufacturing organizations, performance measurements play an important role in
providing strategic directions and developing corresponding operational policies and methods. One such method is
the activity-based costing (ABC) method which calculates the cost of activities and helps in making decisions on
product mix and price for improving the utilization of resources and minimizing the cost of production. Even now
some manufacturing organizations employ traditional costing methods depending upon their market forces and
characteristics. One of the most important decisions to be made is about the type of costing system that would be
suitable for an organization. The role of direct labour in current manufacturing environments has diminished, but at
the same time the level of support services has increased. Traditional methods of cost calculation do not take into
account this increased complexity and still allocate overhead costs by their diminishing labour base or even do not
take into account overhead costs. Hence, there is a need for a more accurate product costing method, viz. ABC.
Discusses the application of ABC and some case experiences (for commercial reasons, the original identity of the
companies is concealed) with the objective to provide information on whether the system would be applicable and
under what circumstances it is better suited for improving the overall operational effectiveness of an organization.

Title: A framework for the design and audit of an activity-based costing system
Author(s): A. Gunasekaran Department of Management, University of Massachusetts, North Dartmouth, MA, USA
Source: Managerial Auditing Journal, May 12, 1999, Vol. 14, Issue 3, 10 p, pp. 118-127 ISSN: 02686902
Keyword(s): activity based costing; implementation; systems design
Abstract: The objective of a cost management system is to provide accurate and useful information to help
companies in utilizing their valuable resources for producing quality goods and services in a competitive
environment. Activity-based costing (ABC) has been found more appropriate for capital intensive manufacturing
environments. However, there is no systemic framework for design and implementation of ABC. Realizing the
importance of ABC, an attempt has been made in this paper to develop a framework for the design of an ABC
system. It is based on the review of literature on the design and implementation of ABC. In ABC, the activities
required to manufacture a product should be identified and then quantified by their consumption of resources. The
cost of each activity that is required to produce the product/parts will be calculated in such a way that the factors
causing or driving the cost (cost drivers) of the activity in question can be determined. The cost driver rate will be
used to allocate the cost of activities to a product/part according to the volume of the cost driver. In addition, the
advantages and limitations of ABC are also discussed.

Title: An integrated framework for activity-based decision making

Author(s): Mike Partridge Principal Lecturer and Head of Management Accounting Subject Group, Finance and
Accountancy Department, University of Brighton, Brighton, UK Lew Perren Principal Lecturer and Head of Small
Business Research Unit, Centre for Management Development, University of Brighton, Brighton, UK
Source: Management Decision, December 10, 1998, Vol. 36, Issue 9, 9 p, pp. 580-588 ISSN: 00251747
Keyword(s): activity based costing; decision making; management; management accounting
Abstract: Activity-based costing (ABC) data have the potential to inform a wide range of management decisions.
Recently the term Activity-based management (ABM) has emerged to describe any application of ABC data, but
there is currently no framework which pulls together the disparate strands of potential uses. We have conducted a
systematic review of internationally reported ABC applications to produce an integrated and comprehensive ABM
framework for management decision making. Traditional methods of costing are critically evaluated as a precursor
to explaining the ABC model. We go on to illustrate our ABM framework with case examples.

Title: Quality cost measurement under activity-based costing

Author(s): Wen-Hsien Tsai National Central University, Chung-Li, Taiwan, Republic of China
Source: International Journal of Quality & Reliability Management, October 9, 1998, Vol. 15, Issue 7, 34 p, pp.
719-752 ISSN: 0265671X
Keyword(s): activity based costing; cost of quality; kaizen; work sampling
Abstract: The purpose of this paper is to present an integrated cost of quality - activity-based costing (COQ-ABC)
framework for measuring quality costs under ABC. The main deficiencies of most COQ systems are: (1) no
consensus method to allocate overhead costs to COQ elements, (2) the failure to trace quality costs to their sources,
and (3) the lack of information about how indirect workers spend their time on various activities. These deficiencies
can be easily overcome under ABC together with work sampling. The cost and nonfinancial information achieved
from the integrated COQ-ABC system can be used to identify the magnitude of the quality improvement
opportunities, to identify where the quality improvement opportunities exist, and to continuously plan the quality
improvement programs and control quality costs. The ultimate goal of the integrated COQ-ABC system will be to
continuously improve processes/activities/quality so that no defects at all are produced and quality cost
measurement ultimately becomes unnecessary.

Title: Strategic cost management: an activity-based management approach

Author(s): John M. Trussel Pennsylvania State University, Harrisburg, Pennsylvania, USA Larry N. Bitner Hood
College, Frederick, Maryland, USA
Source: Management Decision, October 9, 1998, Vol. 36, Issue 7, 7 p, pp. 441-447 ISSN: 00251747
Keyword(s): activity based costing; cost management; strategic management
Abstract: The design and implementation of new strategic management initiatives, such as reengineering, have
been common since the publication of Hammer and Champy's (1993) popular book on reengineering. In the process
of designing and implementing these new initiatives, however, managers have virtually ignored the cost
management system. Activity-based management (ABM) is a system that incorporates many of the concepts of
strategic management reengineering and applies them to cost management. ABM consists of two viewpoints: a cost
view and a process view. ABM is both an accurate cost accounting system (the cost view) and a performance
evaluation tool (the process view). This paper presents the ten steps to design and implement an ABM system and
offers an actual application.