Question

9) Explain activity-based management and how it differs from activity-based costing.

10) Identify some common activity bases in terms of which the volume of a manufacturing operation might be stated. What general criterion might be used in choosing an activity base?

Answer 1

Here is the answer of the question

Activity Bersed managmert Activity - ment is a system for determining the profiteebility of every aspect of a bussiness. ABM analyzes the costs of employees equipment, facilities, distreibutian, overhead and Other factors in bersinoes to determine and allocate activity Costs. strategic Planning JIT Concopts Activity Accounting Customer value Inalysis & - Life cycle manag ment ABM Targate y Casting Performance - Measeviment Benchmarking y Continuals Apdoument Investment Managment

Differance between ABM and ABC Both the Ano - and ABM are managment tools that help in managing business activities. These two help in imporoving the per- fermanco cof a beisiness firm or an organization. Both ABC and ABM differ it their functicen 8. The activity bersed Coasting relates to the measur- ment of the cost and the performance of the various activities i Cost objects and re so wices. The activity bersed managment focuses on the varian activities and the bussiness processes that the a Customer needs and is willing to pay for. ABM helps in det ermining the contribution of each person. The activity based Coasting can be called as a seebset of activity beised managment o n 10 Activity bersed Costing is most by eised in manufa - cuturing industury since it enhances the reliability of Cost data , honce producing nearly toue costs I and better classifying the costs incurred by the Company during its production the process. Pricing products or services is the one of the difficult decisions that can either make or break your business many lange business particularly in the manufacturing setor use activity beised Costing to help them accurately price their I offering.

Principles for selecting activities: Activity identification first activities must be an identified and guamped together in activity pools. Activity pools are the Supporteng activity Assignment of Costs Cests are assigned to an a activity pool. like hemen Mo sourcos Costs would be assigned to indirect administrativo or indiviect managment Costs. calculate activity Rectos :- tnitial analysis may - include direct labour hours, or indirect support labor. The se activities must be assigned a value in ural currency. Prepare and distributo managment slepo.sts: ance ABC Costing analysis is should be placed in a manner for Cost cabject complete, that Cost data concise and coherent and precoss owners.