1. Activity Based Management
Chapter Five

2. Definition Activity Based Activities plus Value Added or
How to submit a successful and profitable BID

3. ABC Steps 1. Identify and Classify Activities
Unit, Batch, Product, Customer, Facility
Exercise 4.33 pg 168 and 4.35 pg 169
2. Estimate Cost of Activity
3. Determine cost driver and calculate rate
Estimated Cost/ Estimated driver = rate
Exercise 4.31 and 4.32 pg 168
Assign or apply rate to actual driver

4. Activity Based Management Steps
1. Identify Value Added vs non value added activity
2. Score as high or low
3. Identify opportunities that enhance value added and decrease non value added.

5. Target Costing Company Needs = Company profit goals Revenue
X Return on Sales (ROS) GM% no S&A
= Target Cost
3 elements of Target Costing
# of units sold, Sales price, ROS %
Exercises 5.34, 5.35, 5.36

6. Non Value Added Examples
Pg 190
Build up of Inventory
Queque Time
Production Moving Time
Worker Moving Time
Poor Quality

7. What Makes a Value Added Activity
1. How do you measure value added Acitivities
2. Who would be responsible for the activity
Customer wants more of the activity
Reach the company’s goal by performing the activity

8. Example On - time delivery adds value
Rework and rewrite – non value added

9. Costing our each activitity
1. Identify major activity
2.Identify Subactivity and cost – usually just DL
3. Assign Order- Value from 1-5 highest value
4. Cost the activity
5. Cost each level of value – How much would you save
Exercise 5.25, 5.26, 5.27and 5.28 pg

10. By doing Activity Based Management analysis for one customer your efforts will affect the production of other products.

11. Chapter 5 Homework 5.41 (60 Min) 5.47 ( 40 min) 5.54 ( 45 min)
Can you get the homework done faster.

12. Strategic Planning Part II
Submit online with excel spreadsheets
Due ???????