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ABC and ABM : Together or separate - Case Study Example

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ABC and ABM : Together or separate

The technological improvement in the different countries has made the world a bigger platform for competition. These changes can be noticed in the world of information in the financial as well as the non financial fields. Most of the organisations in the present day rely on the data and subsequently the information about the various performance metrics of the different functions, employees as well as the demands of the markets and the end users. Most of the organisations at the present day depend on the costs systems in various areas of their businesses like the designing of the product offerings which would meet the needs of both the customers and the enterprises. The businesses would be able to reap their desirable amount of profits and the expectations of the customers would be fulfilled. The cost systems would also act as a signalling parameter that would indicate any kind of discrepancy in the production quality as well as efficiency in the production processes. The employees would also be assisted in their day to day activities which would help in their process of learning. This method would also help the suppliers and the distributors on the negotiation of the prices and the quality as well as to reach to the target customer segments. Therefore the management of the cost systems through the implementation of the new technology has become an essential part of a business to survive the competition in the world platform. Thus the three main functions that these cost systems help the managers with are the valuation of the cost of the goods sold and inventory, which is mainly needed in case of financial reporting, the evaluation of the various costs that the company may incur in the future endeavours and how to reduce them, as well as to make available the right information at the right time to the managers in order to help them in the decision making process. ABC and ABM are the two major managerial systems that help the managers in their decision making process. The various aspects of these two methods have been analysed in this report and the convergence has been assessed from the various aspects of a business, especially the accounting procedure. Activity Based Costing Activity Based Costing (ABC) is a method in which a thorough analysis is done on the production process in a company in order to understand the costs that emerge, the services that the customers are offered with and the optimal usage of the resources. In most cases it is seen that the indirect costs are accounted in the inappropriate way which result in the wrong pricing of the products1. The ABC technique makes takes the cost effective path which remove the chances of improper allocation of the indirect cost in the process of production. The direct cost and the indirect cost are separated in the various actions that take place in a firm. The method mainly considers that the costs are variable for each of the activities and the component of fixed cost can be accounted for only for a very short span of time. The concept of activity is extremely in case of this costing technique and it considers the various functional department and their uses of the resources. This method also entails the different techniques of calculation of the costs involved with the production, distribution as well as on the customers. Any enterprise that applies this method on the decision making process of their managers would witness the increase in their level of profitability from the initial stages of implementation of the processes. The distinctive features like the reduction in the cost and the profit loss reduction make the technique acceptable to most of the managers of businesses. The information relating to each step of the production pr ...Show more


Globalisation has brought along radical changes in the ways in which businesses are carries out.The technological improvement in the different countries has made the world a bigger platform for competition. …
Author : macey85
ABC and ABM : Together or separate essay example
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