Professional Documents
Culture Documents
Activity-Based Costing
And Activity-Based
Management
Simple Methods
Unrealistic
Complex Methods
Realistic
Cost distortions
Overcosting Product consumes few resources
but is allocated high costs per unit
Undercosting Product consumes many
resources but is allocated low costs per unit
Product cross-subsidization
Overcosting one product while undercosting
another
Overcosted
Cost allocated to product is more than actual cost
Products actual profit is higher than calculated profit
Undercosted
Cost allocated to product is less than actual cost
Products actual profit is lower than calculated profit
mathematically correct
is acceptable
yields different cost figures
yields different Gross Margin figures
affects overhead only
Total Costs for the entire firm are unchanged
Unit-level (output-level)
Batch-level
Product-sustaining-level
Facility-sustaining-level
Activity-Based Management
Use of ABC in critical decisions
Health Care
Banking
Telecommunications
Retailing
Transportation