Activity Based Management Chapter Five Definition Activity Based

Activity Based Management Chapter Five

Definition Activity Based Activities plus Value Added or How to submit a successful and profitable BID

ABC Steps 1. Identify and Classify Activities ◦ Unit, Batch, Product, Customer, Facility ◦ Exercise 4. 33 pg 168 and 4. 35 pg 169 2. Estimate Cost of Activity 3. Determine cost driver and calculate rate Estimated Cost/ Estimated driver = rate ◦ Exercise 4. 31 and 4. 32 pg 168 Assign or apply rate to actual driver

Activity Based Management Steps 1. Identify Value Added vs non value added activity 2. Score as high or low 3. Identify opportunities that enhance value added and decrease non value added.

Target Costing Company Needs = Company profit goals Revenue X Return on Sales (ROS) GM% no S&A = Target Cost 3 elements of Target Costing # of units sold, Sales price, ROS % Exercises 5. 34, 5. 35, 5. 36

Non Value Added Examples Pg 190 Build up of Inventory Queque Time Production Moving Time Worker Moving Time Poor Quality

What Makes a Value Added Activity 1. How do you measure value added Acitivities 2. Who would be responsible for the activity Customer wants more of the activity Reach the company’s goal by performing the activity

Example On - time delivery adds value Rework and rewrite – non value added

Costing our each activitity 1. Identify major activity 2. Identify Subactivity and cost – usually just DL 3. Assign Order- Value from 1 -5 highest value 4. Cost the activity 5. Cost each level of value – How much would you save Exercise 5. 25, 5. 26, 5. 27 and 5. 28 pg 205 206

By doing Activity Based Management analysis for one customer your efforts will affect the production of other products.

Chapter 5 Homework 5. 41 (60 Min) 5. 47 ( 40 min) 5. 54 ( 45 min) Can you get the homework done faster.

Strategic Planning Part II Submit online with excel spreadsheets Due ? ? ? ?