ABCM: Challenging Tradition

Activity based cost management (ABCM) aligns the management information and reporting processes with the way in which managers in Australia think about their business. The content, accuracy, timing, and frequency of reporting will be determined by the managers' information requirements, not by...

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Bibliographic Details
Published in:Intheblack 1991-04, Vol.61 (3), p.25
Main Author: Dale, Danny
Format: Magazinearticle
Language:English
Subjects:
Accountants
Accounting
Accounting procedures
Advantages
Business metrics
Cost allocation
Costs
Implementations
Management accounting
Objectives
Performance management
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Summary:Activity based cost management (ABCM) aligns the management information and reporting processes with the way in which managers in Australia think about their business. The content, accuracy, timing, and frequency of reporting will be determined by the managers' information requirements, not by the accounting principles and policies. The first step in implementing ABCM is to break the old accounting paradigm, to shift from managing conformity to precise standards to managing a dynamic tool in an uncertain environment. Although every ABCM system will be different, some basic steps useful for setting up any ABCM system include: 1. knowing the business, 2. defining activities, and 3. defining cost drivers and allocating costs. An example applied to the manufacturing sector shows that ABCM can provide more relevant and more accurate costing to managers. ABCM also provides more detailed information on the activities, processes, and cost driving factors that cause costs to be increased.
ISSN:1832-0899