Published by:
Harvard Business Publishing
Length: 2 pages
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Abstract
Unlike traditional accounting methods, activity-based costing, or ABC, counts the actual activities that go into making a specific product (or delivering a specific service), and attempts to figure the costs of those activities. ABC also focuses on "cost drivers" that can guide allocations. Activity-based management, or ABM, takes the concept further, using cost information to evaluate an entire operation. The goal is to distinguish between value-added costs (necessary) and non-value added costs (unnecessary) and minimize the latter. This article discusses ABC and ABM in a Q & A format. Includes an annotated "If you want to learn more" section.
About
Abstract
Unlike traditional accounting methods, activity-based costing, or ABC, counts the actual activities that go into making a specific product (or delivering a specific service), and attempts to figure the costs of those activities. ABC also focuses on "cost drivers" that can guide allocations. Activity-based management, or ABM, takes the concept further, using cost information to evaluate an entire operation. The goal is to distinguish between value-added costs (necessary) and non-value added costs (unnecessary) and minimize the latter. This article discusses ABC and ABM in a Q & A format. Includes an annotated "If you want to learn more" section.