Activity Based Costing

Activity-based costing is a method for measuring the cost of business processes and activities, together with the true profitability of products and customers. This approach has its roots in the manufacturing sector, where increasing overhead costs made it increasingly complex to manage profit margins and cost structures with traditional costing methods. This same complexity issue also makes this tool relevant to service sector organizations as well. We assist with the following aspects of this approach:

• Defining a business process framework
• Developing an activity dictionary
• Developing and validating a costing model
• Conducting cost and profitability analysis
• Developing processes to maintain the cost system

Our integrated management services address common challenges that often limit the value of this approach such as:

• Preventing cross functional performance issues in periods of rapid change
• Integrating ABC insights into budgeting, targets setting and measurement processes
• Immediate access to a single view of product and customer margins across business units
• Establishing effective ownership of business process performance and the underlying data
• Different process models (eg. Sarbanes Oxley, Six Sigma) create confusion and underline process ownership