Activity
Based Costing (ABC) is an accounting technique that allows an
organization to determine the actual cost associated with each product
and service produced by the organization without regard to the
organizational structure. Often business process modeling is used in
conjunction with ABC to enable more effective business process design
decisions.
In order to achieve the major goals of business process improvement,
process simplification and improvement, managers need to fully
understand the cost, time, and quality of activities performed by
employees or machines throughout an entire organization. ABC methods
enable managers to cost out measurements to business simplification and
process improvement.
Starting in the Clinton Administration with Vice President Gore's
National Performance Review (NPR), and carried forward today in
President Bush's President's Management Agenda (PMA), is an underlying
premise that government must be more productive with less resources.
Productivity can be improved when waste is eliminated or reduced and
when information replaces the expenditure of capital. We leverage ABC/M
to enable the measurement of true and comprehensive activity cost data
to make smart decisions powered by cost visibility which in turn
enables measured process improvements. ABC/M illustrates cost drivers
that can be addressed and managed to reduce the overall cost of a
business function. |
