BCAS - 20 BANGLADESH COST ACCOUNTING STANDARDS Activity Based Management
BACS 20: Activity Based Management 127 BACS 20: Activity Based Management 20.1 Introduction Activity Based Management (ABM) deals with the procedures or phases of implementing ABM system in organization. Each organization requires information to make decisions, set priorities, allocate resources and monitor the actions taken. Activity Based Costing (ABC) covers the accounting perspective to provide the accurate cost information and ABM undertakes a managerial perspective focusing on using information generated by ABC to manage activities and improve the business. The analysis done in ABC provides both financial and non-financial information which is the basis for ABM. It makes the cost and operational information (activity information) useful by providing a value analysis, cost and activity driver analysis, and performance measures to initiate and support various improvement efforts with an ultimate goal of improving the quality of decision. 20.2 Objectives The standard focuses on the procedures of implementing Activity Based Management in organizations for operational growth as well as improved decision making. More specifically, it tries to propose standardized procedures of implementing the ABM for the management accountants and others who want to implement ABM system in their respective organizations. 20.3 Scope 20.3.1 The standard provides general guidelines for implementing ABM system in manufacturing as well as service organizations for improvement of operations and better decision making. 20.3.2 More particularly, the standard may be applied by the management accountants, as well as others who want to implement ABM in their organizations, among others, for the following purposes: a) Attribute analysis: Under attribute analysis costs and performance data are classified and combined into manageable and controllable clusters. ABM system can use different attributes or data tags for a specific cost. These data attributes help management of the companies to perform different dimensions of management problem using the same basic warehouse/ storage of data. Some common forms of attribute analysis are value analysis, time variability analysis, cost of quality analysis etc. b) Strategic analysis: ABM system supports strategic analysis by providing both strategic and operational information. Strategic analysis, using ABM, may include: strategic planning/budgeting, consolidation of operations analysis, acquisition analysis, and analysis of revenue and growth potential. c) Benchmarking: ABM supports different type of benchmarking e.g. internal benchmarking, industry/ competitive benchmarking, best-in-class benchmarking etc. d) Operational analysis: ABM may be used to perform operational analysis, including "what-if" analysis, project management, creation and use of activity based performance measures, capacity management, constraints analysis, process based costing etc.
BACS 20: Activity Based Management 128 e) Profitability/ pricing analysis:
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