Activity-Based Management (ABM) Method

The ABM method is used to analyze the cost of an ______ in relation to the value added by the activity.

Identification refers to finding and listing a company’s significant business ______ and its cost drivers.

The information analyzed and collected through ______ costing can be used to identify and implement processes that can improve the company’s operations and strategies.

Operational ABM involves studying the cost of each ______ and increasing operational efficiency.

Strategic ABM uses ______ costing to analyze the profitability of an activity.

The goal of cost-driven ABM is to reduce ______ without compromising the quality of the product or service.

The goal of value-driven ABM is to increase ______ satisfaction and loyalty.

ABM can help to ______ the experience of a customer.

One of the disadvantages of ABM is that it can be ______.

ABM can help to ______ and determine crucial financial information for future.

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.

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.