Introduction to ABCosting / ABManagement
A costing methodology designed to obtain the information Cost Accounting can't provide.
ABCosting was created with a practical approach to cost analysis for internal management. Conventional accounting was created more than 50 years ago. Things have changed quite significantly in the business world since then. If a company wants to survive these days they need much more accurate information than what conventional accounting and gut feelings provide.
Every organization in the world deals with:
Resources & Materials
Cost Objects (Products, services, clients, etc.).
The more profitable the Cost Objects are, and the less Resources, Materials and Activities they use to fulfill those Cost Objects, the better the company does, prolonging its existence and increasing the wealth of those involved. A “Win-Win-Win” as they call it. Costing done from the ACTIVITIES perspective.
But how does a company know if a Product or Service is profitable or not?
How do they know with a high level of accuracy how are Costs being distributed?
How can they perfect their Processes to eliminate or improve Inefficient Activities if they don’t measure them?
To produce a gallon of ice cream (Cost Object or CO) I need milk, flavor, sugar (Materials), but I also will need to make the ice cream (Activities) and by doing so I will incur in other expenses like employees’ salaries, electrici