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When did it originate and what does it do to help the organization?
- The concept first originated in 1980’s for accurate analyzing of the different processes of a business
- It is used to identify the strengths and weaknesses of a company
- Activity based management tends to identify the areas where the company is losing its money or its shares.
- It then tries to eliminate those areas of weaknesses for the sake of company’s benefits
- They also tries to figure out how the condition of the business can be improved in order to increase its profit
- It also analyzes the following:
- Cost of equipment
- Cost of facilities
- Cost of employees
- Cost of distribution
- Various other factors responsible for determining and allocating the costs
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Where can this activity based management are applied?
- It can be applied to a number of different companies which includes
- Service providers
- Non- profits
- Different types of schools and government agencies
- In any kind of area in business, activity based management is able to provide cost information
- Besides, enhancing the profit factor the ABM analysis is able to provide a better precise and accurate budgets
- It is also able forecast the financial condition in an accurate manner
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What are the main stages in ABM?
- First you need to identify the activities that the organization is supposed to perform
- Secondly, calculate all the cost of that activity
- Thirdly, identifying the activity cost driver for each and every activity
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