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Activity-Based Management Is A Discipline That Focuses On The Management of Activities As The Route

Activity-based management (ABM) focuses on managing activities to improve customer value and profit by providing that value. ABM combines activity-based costing analysis with value-added analysis to identify opportunities to improve efficiency by reducing wasted resources. Both financial and non-financial measures are used to assess performance in ABM, which emphasizes maximizing overall system performance rather than individual subunit efficiency. ABM also distinguishes between high and low-value added activities.

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41 views3 pages

Activity-Based Management Is A Discipline That Focuses On The Management of Activities As The Route

Activity-based management (ABM) focuses on managing activities to improve customer value and profit by providing that value. ABM combines activity-based costing analysis with value-added analysis to identify opportunities to improve efficiency by reducing wasted resources. Both financial and non-financial measures are used to assess performance in ABM, which emphasizes maximizing overall system performance rather than individual subunit efficiency. ABM also distinguishes between high and low-value added activities.

Uploaded by

Soni Kavitha
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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In ABM, an attempt is made to know whether customers perceive an equitable

relationship between selling price and value received by customers.

Activity-based costing is defined as a methodology that measures the cost and performance of
activities, resources and cost objects. Specially, resources are assigned to activities-based upon
consumption rates and activities are assigned to cost objects, again based on consumption. ABC
recognises
the causal relationships of cost driver to activities.
Activity-based management is a discipline that focuses on the management of activities as the route
to improving the value received by the customer and the profit achieved by providing this value. This
discipline includes cost driver analysis, activity analysis, and performance measurement. Activity-
based
management draws on ABC as its major source of information.
Hilton, Maher and Selto1 define ABM as follows:
“Activity-based management (ABM) is used by management to evaluate the costs and values of
process activities to identify opportunities for improved efficiency.

ABM combines activity-based costing


analysis and value-added analysis to make process improvements that improve customer value and
reduce wasted resources. ABM uses and builds on basic ABC analysis.”

ABM focuses on accountability for activities rather than costs and emphasises the maximisation of
system wide performance instead of individual performance. ABM control recognizes that
maximizing
the efficiency of individual subunits does not necessarily lead to maximum efficiency for the system
as
a whole

In ABM, both financial and non-financial measures of performance are important


High and low-value added activities
Amazing!

https://www.accaglobal.com/in/en/student/exam-support-resources/professional-exams-study-
resources/p5/technical-articles/activity-based-management.html

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