This chapter shows how ABC and ABM rest on the premise that: Products require activities and activities consume resources. For products to be competitive, managers must know: Activities for producing goods, services, cost of activities. | Activity-Based Management CHAPTER 3 © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. PowerPoint Presentation by LuAnn Bean Professor of Accounting Florida Institute of Technology Managerial Accounting 11E Maher/Stickney/Weil Chapter 3: Activity-Based Management CHAPTER GOAL This chapter shows how ABC and ABM rest on the premise that: Products require activities and activities consume resources. For products to be competitive, managers must know Activities for producing goods, services Cost of activities ABC analyses ways to allocate indirect costs while ABM uses analysis to manage costs. ☼ ☼ This chapter deals with activity-based costing and management. Activity-based costing (ABC) and activity-based management (ABM) rest on this premise: Products require activities; . | Activity-Based Management CHAPTER 3 © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. PowerPoint Presentation by LuAnn Bean Professor of Accounting Florida Institute of Technology Managerial Accounting 11E Maher/Stickney/Weil Chapter 3: Activity-Based Management CHAPTER GOAL This chapter shows how ABC and ABM rest on the premise that: Products require activities and activities consume resources. For products to be competitive, managers must know Activities for producing goods, services Cost of activities ABC analyses ways to allocate indirect costs while ABM uses analysis to manage costs. ☼ ☼ This chapter deals with activity-based costing and management. Activity-based costing (ABC) and activity-based management (ABM) rest on this premise: Products require activities; activities consume resources. Activities involve action, such as purchasing raw materials. Purchasing raw materials requires resources—for example, a purchasing agent’s time. ABC deals with learning about the cost of activities; ABM deals with how management uses that cost information. ABC analysis treats mostly indirect costs. Indirect costs include overhead costs incurred to manufacture a good or provide a service, indirect costs to market a product, and indirect costs incurred to manage the company. How do ABC and ABM work? ABC provides information about profitability in mix of activities, products ABM encourages managers to use information to become low-cost producer or seller. LO 1 Strategic activity-based costing and management work in two ways. First, managers use activity-based information to shift the mix of activities and products away from less profitable to more profitable applications. For example, activity-based costing might reveal that particular customers are more .
