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ACTIVITY-BASED MANAGEMENT
Putu Agus Ardiana
Faculty of Economics Udayana University
Activities What?
Cost Objects
Activity-Based Management (ABM) is a systematic, integrated approach that focuses managements attention on activities with the objectives of improving customer value and increasing the profit achieved by providing this value Activity-Based Costing (ABC) is the major source of information for ABM
Pours the molten metal into the resulting cavity (after the wax is removed), then the shell is broken to reveal the desired metal component
Activity Driver
Purchasing hours Molding hours Inspection hours Number of units
SQ
20,000 30,000 0 0
AQ
23,000 34,000 6,000 5,000
SP
$20 $12 $15 $6
SQ = the value added output level for an activity SP = the standard price per unit of activity output measure AQ = the actual quantity used of flexible resources or the practical activity capacity acquired for committed resources
Reducing purchasing costs: redesigning the products and reducing the number of parts required. Reducing molding, inspecting, and grinding costs: improving the molding process and labor skill
Grinding
TOTAL
$30,000
$228,000
$15,000
$100,000
$15,000
$128,000
Do
Act
Do
Act
Lock-In Establish
Benchmarking
Benchmarking can be internal benchmarking or external benchmarking External benchmarking can be competitive benchmarking, functional benchmarking, generic benchmarking
Fixed
Direct Materials Direct Labor $20,000 $15,000 $120,000 $50,000 $220,000
Variable
$10 $8 $3 $1 -
10,000
$100,000 $80,000 $50,000 $25,000 $120,000 $50,000 $220,000
20,000
$200,000 $160,000 $80,000 $35,000 $120,000 $50,000 $220,000
Maintenance
Machining Inspections Setups Purchasing
Direct Labor
Subtotals
Budgeted Costs
$100,000 $80,000
Budged Variance
$1,000 U -
Maintenance
Machining Inspections Setups Purchasing TOTALS
$55,000
$29,000 $125,500 $46,500 $220,000 $657,000
$64,000
$31,000 $132,500 $45,000 $226,000 $678,500
$9,000 F
$2,000 F $7,000 F $1,500 U $6,000 F $21,500 F