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Questions and Answers
The ABM method is used to analyze the cost of an ______ in relation to the value added by the activity.
activity
Identification refers to finding and listing a company’s significant business ______ and its cost drivers.
activities
The information analyzed and collected through ______ costing can be used to identify and implement processes that can improve the company’s operations and strategies.
activity-based
Operational ABM involves studying the cost of each ______ and increasing operational efficiency.
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Strategic ABM uses ______ costing to analyze the profitability of an activity.
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The goal of cost-driven ABM is to reduce ______ without compromising the quality of the product or service.
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The goal of value-driven ABM is to increase ______ satisfaction and loyalty.
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ABM can help to ______ the experience of a customer.
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One of the disadvantages of ABM is that it can be ______.
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ABM can help to ______ and determine crucial financial information for future.
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Study Notes
What is Activity-Based Management?
- Activity-Based Management (ABM) analyzes the cost of an activity in relation to the value added by the activity to achieve operational and/or strategic improvement.
How it Works?
- Identification involves finding and listing a company's significant business activities and their cost drivers.
- Evaluation and Value-Chain Analysis quantify the value generated by each activity to compare it to the cost and evaluate the activity.
Steps in ABM
- Identification and Analysis: find and list significant business activities and their cost drivers.
- Evaluation and Value-Chain Analysis: quantify the value generated by each activity to compare it to the cost.
- Identifying Opportunities to Improve: use analyzed information to identify and implement process improvements.
Types of ABM
Operational ABM
- Studies the cost of each activity to increase operational efficiency by enhancing value-generating activities and eliminating unnecessary costs and non-value-generating activities.
Strategic ABM
- Analyzes the profitability of an activity, such as launching a new product or acquiring a new customer.
Types of ABM (continued)
- Cost-Driven ABM: aims to reduce costs without compromising product or service quality.
- Value-Driven ABM: aims to increase customer satisfaction and loyalty, leading to increased sales and profits.
Advantages of ABM
- Improves customer experience.
- Increases profitability.
- Provides crucial financial information for future forecasting.
Disadvantages of ABM
- Time-Consuming.
- Costly.
- Complex.
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Description
Learn about Activity-Based Management, a method to analyze the cost of an activity in relation to its added value, aiming for operational and strategic improvement. Understand how it works through identification, analysis, evaluation, and value-chain analysis.
