Profit Priorities from Activity - PETER SEDK F2 Profit...

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PETER ŠEDÍK F2 Profit Priorities from Activity-Based Costing What is ABC and what is its purpose ABC serves not only as a better way to calculate product costs, but also as the way to increase profits ABC shows links between performance of particular activities and demands those activities make on company’s resources => it gives a clear picture how each product, brand, customer, distribution channel etc. generates revenue and consumes resources and therefore managers can focus their attention on improving those activities, which will have the greatest impact on the bottom line How to use ABC effectively To fully use a potential of ABC, managers must at first stop allocating all expenses to individual units. They should separate them and match them to activity that consumes resources instead. Firstly, managers should look for a ways to reduce resources needed to perform various activities and then, either reduce spending on those resources or increase output those resources produce in order to turn these reductions into profits. ABC shows that management cannot control expenses at the macro level because different products, brands, customers or distribution channels make different demand on company’s resources.
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This note was uploaded on 05/10/2010 for the course BUSINESS A Business taught by Professor Stevens during the Spring '10 term at Anna University Chennai - Regional Office, Coimbatore.

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Profit Priorities from Activity - PETER SEDK F2 Profit...

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