Costs Report-Rabanal Vargas Joseluis Enrique
Costs Report-Rabanal Vargas Joseluis Enrique
Costs Report-Rabanal Vargas Joseluis Enrique
ACCOUNTING SCHOOL
ACADEMIC REPORT
“ACTIVITY BASED MANAGEMENT”
COURSE:
AUTHOR:
TEACHER:
Chepén- Perú
(2023)
I. INTRODUCTION..........................................................................................................................
II. DEVELOPMENT.........................................................................................................................
II.1. CONCEPT...........................................................................................................................
II.2. DIFFERENCES AND RELATIONSHIP WITH ABC.............................................................
II.3. ELEMENTS.........................................................................................................................
II.4. PROCEDURE & STEPS.....................................................................................................
III. BIBLIOGRAPHICAL REFERENCES........................................................................................
I. INTRODUCTION
Regularly it's well known the fact that all sorts of entities must be aware of
correct management processes for their optimal performance over the
years and decades. Such efforts must be expressed, according to Charaf
(2022) in precise techniques and guides to maintain its longevity and
relevance. For the upcoming pages, the reader will get a glimpse to one of
the most recent and effective management techniques ever created, the
activity-based one. Please do not confuse such term as “ACTIVITY-BASED
COSTS” (ABC) as their respective differences, & more, will be discussed in
this precise document.
II. DEVELOPMENT
II.1. CONCEPT
We should define Activity Based Management, according to Widodo (2020),
as a systematic planification method which focuses on the improvement
and control of the labor present in the Indirect Fabrication Costs. Therefore,
it should be made clear that it emphasizes the role of the work itself in the
production processes, rather than the workers in question. Apart from that,
it’s considered to be a discipline whose main focus is the efficiency of
activities as the ideal path for continuous improvement of the value offered
to the customers.
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variables to make sure the costs occur while taking advantage of the data
left by the ABC in order to redirect and improve the way all resources are
used.
In other words, there are certain features that should help us get a better
glance of the main differences between ABC and ABM. Starting off with the
objectives in questions, while one calculates costs, the other one helps to
manage all kinds of actions. With that said, it’s fair to add that while one
focuses on costs, the other focuses on giving value. When it comes to the
tools, the ABC tends to apply more the presence of cost drivers, while its
counterpart focuses on efficiency drivers.
Finally, when it comes to results, ABC looks for getting more precision in
costs and profitability offered per each client, as well as helping to get a
more precise budgeting and perform a better cost simulation. On the other
side, ABM looks for continuous improvement while encountering the main
factors that drive our entity to success, as well as simulating scenarios and
giving more emphasis to the reengineering of different processes and
competitive advantages.
II.3. ELEMENTS
Now, of course, according to Jiao (2023) this approach is built on several
key elements:
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the organization's value. This implies a strategic focus on resource
management, where each resource is aligned with the company’s activities
to ensure optimal use and contribution to the overall goals.
Lastly, ABM aims to assign indirect costs to processes based on their actual
consumption, with these costs absorbed by each product or service
according to their use of the processes. This involves linking the costs of
activities and processes to products and services. Such linkage allows for a
better understanding of profitability and the costs associated with each
product or service. By doing so, ABM provides a more accurate picture of
product and service cost structures, enabling more informed pricing and
investment decisions.
Firstly, key and strategic activities are evaluated. This involves a thorough
assessment of the activities that are crucial to the organization's success.
This step is essential for identifying which activities contribute significantly
to achieving strategic goals and which may need re-evaluation or
improvement.
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activity, management can make more informed decisions about resource
allocation, cost reduction, and process improvement. This analysis helps in
determining the financial efficiency of each activity.
Thirdly, activities are identified and decisions are made regarding those that
add value and those that do not add value to customers and the company.
This step involves distinguishing between value-adding and non-value-
adding activities. The aim is to enhance or expand activities that add value
to customers and the company, while minimizing or eliminating non-value-
adding activities.
Furthermore, the causal factors of the cost of an activity are analyzed. This
involves understanding the underlying reasons for the costs associated with
each activity. By identifying these causal factors, management can address
inefficiencies and optimize the cost structure.
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III. BIBLIOGRAPHICAL REFERENCES