Page 65 - APM Integrated Workbook STUDENT S18-J19

Approaches to budgets

Activity based management (ABM)

ABM is the use of ABC information for management purposes to
improve:

 operational decisions – activities that don’t add value are
reduced/ eliminated and may result in design improvements

 strategic decisions – uses ABC information to identify most
profitable products/ markets/ customers. Can assist in re-
pricing products/ eliminating unprofitable products and
deciding which strategies to pursue.

 The cost of the extra work needed may be more than the
benefit.

 Some activities have an implicit value that is not reflected in
the financial value, e.g. a low value customer may open up
new leads in the market.

Illustrations and further practice

Now try TYU question 8 from Chapter 3 of the Study Text.

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