Activity-Based Costing (ABC) is the method for discerning the true costs of products and services. It strives to account not just for materials and parts costs, but also the attendant overhead and direct and indirect costs that are embodied in specific products and services, up to each point in an operating process, value chain or life-cycle. As you might imagine, ABC can be very useful during a wide variety of business considerations – any time it would be helpful to know the fully-loaded costs of something, which in our opinion, is every time.
• Done properly, ABC is a data-intensive undertaking that demands very close attention to detail – which is right up our alley.
• When we undertake an ABC initiative, we use Microsoft Excel to run the numbers. This provides a tremendous degree of transparency to our calculations, and it also opens the door for your staff to move forward with the effort after we have moved on.
• By undertaking ABC, an organization can arrive at rational answers for such pivotal questions as whether to; ‘make or buy’, ‘bid or pass’, ‘do or stop’, and even figure out ‘when’ and ‘why or why not’. The business applications for ABC are virtually limitless.