Activity-Based

Management
Jasmine F. P (C1L014001)
Yonita pratiwi (C1L014002)
Sofha munaya (C1L014006)

L0 1 : key-step of an
activity based management
Step 1 : identify & classify the activities related to the company
product
Step 2 : estimate the cost of activities identified
Step 3 : calculate a cost driver rate for the activity.
Step 4 : assign activity cost to products

ABM takes ABC a step further to include these

step :
1. Identifies value-added and non- value- added activities.
2. Identifies the customer perceived value of each activity
3. Identifies opportunities to enhance value-added activities and
reduce or
eliminate non-value-added activities

LO 2 : how to use activity based

costing for target costing
Combination of ABC And Target Costing :

Megaburger Promotional Toys

Expected contract price per unit
Less required return on sales
Target cost per unit
Multiplied by monthly sales of 20,000 units
Target cost for one month

20%

$17.00
3.40
$13.60
20,000
$272,000

Megaburger Promotional Toys

L0 3 : cost of activities that add

value or do not add value in
organization
Non-value added activity :
1. producing to build up inventory
2. waiting for processing
3. spending time and effort to move products from place to place
4. transporting worker to work sites
5. producing defective products

Identifying Value-Added
Activities The test for
The test for
valuevalue- added
added
activities
activities

Would an external
customer encourage
the organization to do
more of the activity?

YES
YES

NO
NO

Would the organization

be more likely to
reach its goal by
performing that activity?
If the answer is
yes to both it
is value-added.

If the answer is
no, it is nonvalue-added.

YES
YES

NO
NO

LO 4 : use the element of an

activity based management
system to help identify
opportunities for process
Using value added analysis the production team can eliminate nonimprovements.
value added activities then make a ranking that can clearly identify
opportunities for improvements.
Customer value

Sum of activity
cost

precentage

5 ( highest value )

$100

3.3 %

0.0%

1200

40,0%

700

23.3%

1 ( lowest value )

1000

33.3 %

Total

$ 3.000

100 %

Before process
improvements
Sub-activity

After process
improvements

Elapse time (100 unit )

Elapse time ( 100 unit )

Time excess plastic

83 min

Place its mings in recycle

bags

60 min

Place good piece in bin/box

25min

25 min

Log out completed order

30 min

15.1 min

Move completed order to

warehouse

60 min

30 min

Register completed order in

inventory

28 min

12.1 min

286 min

82.2 min

Total elapse time

LO 5 : evaluate capacity utilitazition by

identifying resources supplied and
resources used
1. resources supplied refers to the capacity that the organization
makes available for use ,their cost is measured by totaling the cost
of all resources provided , whether used or not.
2. resources used are the resources actually used by the production
processes.
3. unused capacity is the difference between the resources supplied
and the resources used

To demonstrate this idea of resources used, resources supplied and

anused capacity, imagine that you have rented a storage unit for $
100 per month. your possesions take up 60 percent of the space in
the storage unit. Resources supplied for total $ 100 / month, but the
resources used are only 60 % of the space . Therefore , we assign
the cost of resources used to storage as $ 600 per month . We
assign $ 40 ($ 100 - $ 60 ) so unused capacity.

LO 6 : understand method of and

problems related to implementing
activity based costing and
management.

Not all organization might need improved product or service cost,

most could benefit from process. Improvements some ABC critics
have fauled it for generating , in some cases , product cost that are
not significantly different from traditional , functional cost, they
argue, therefore that ABC is too expensive for the benefits it offers.
These same critics, how ever , usualy do not consider the benefit of
taking ABC and ABM and making significant process improvement.
Some ABC adrocates argue that ABC product cost are merely by
product of ABM and process improvements efforts,which can be
much more important to the organiztion long term success than
knowing current product. Cost accurately activity-based techniques
are conceptually appealling.