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Chapter 3
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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