By Gary Cokins, Founder Analyics-Based Performance Management LLC; email@example.com www.garycokins.com
This article is an excerpt from Gary Cokins’ book, Activity-Based Cost Management: An executive Guide (ISBN 0-471-44328-X) John Wiley & Sons (2001). Permission to publish granted.
“Failing to prepare is preparing to fail.” – Vince Lombardi, famous coach of the Green Bay Packers, US National Football League
Implementing ABC/M Through Rapid Prototyping
How Does an Organization Get Started with ABC/M?
Many organizations that are initially applying activity-based cost management (ABC/M) are unsure whether they should solve operational or strategic problems with the new data. The data can be used for both! This section describes the options and suggests that one of those choices may ensure greater longterm sustained success for ABC/M than the other. When an organization is initially approaching an activity based project, which kind of ABC/M pilot should come first, tops-down activity-based costing or bottoms-up activity-based management? Which should follow the other? Activity-based management (ABM) and then activity based costing, or vice versa? One problem these questions create is a deeper question: What is the difference between ABM and activitybased costing? You have probably noticed that I have separated ABC/M into its components, activity-based costing and ABM. I begin this chapter by addressing the definitions of these terms.
What Is the Difference Between Activity-Based Costing and Activity-Based Management?
If you ask five cost management experts to differentiate activity-based management from activitybased costing, you will probably get five different answers. Achieving a consensus on the definitions of these terms is a thankless task. I defined ABC/M in Chapter 1. It ultimately becomes a semantics game, so my preference is to suspend this debate and simply refer to activity-based costing as...