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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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