Activity Based Costing

Activity Based Costing (ABC) is a method of allocating costs to products & services. It is generally used as a tool for planning and control. It was developed as an approach to address problems associated with traditional cost management systems, which are not able to accurately determine actual production and service costs, or provide useful information for operating decisions. Managers therefore risk making decisions based on misleading information.

ABC allows managers to attribute costs to activities and then to products & services more precisely than traditional methods. The activities responsible for the costs are identified and passed on to users only when the product or service uses the activity. Some of the advantages ABC offers are: an improved means of identifying high overhead costs per unit, finding ways to reduce the costs, improved decision making on product pricing and product range rationalisation.

In the Mondelio CPM solution, Activity Based Management (ABM) incorporates ABC into a flexible scenario-based solution where users can analyse 'what-if' outcomes in a single integrated bottom up model of the business.

Australian Communication Exchange (ACE), needed to approach the budget from an activities perspective. Mr Peter Jones, ACE Financial Controller said “We needed our divisional managers to be able to build plans that defined specific activities so they could be recorded in the modelling system and we could match actuals against them,” Mr Jones said.

Peter Jones, Financial Controller

Australian Communication Exchange

Mondelio Activity Based Costing

This is the ideal solution for implementing a complete and accurate ABC & ABM. The application integrates directly with ERP and Cost Management systems to extract required data to carry out the necessary allocations of overheads, calculate all direct and indirect unit costs and produce comprehensive ABC & ABM reports for pricing and resource allocation decisions.  The solution not only analyses historic ABC & ABM, but also incorporates projected outcomes.

Mondelio's professional services team has many years in-depth experience in the application of ABC and ABM.