ctivities in much the same way that activities consume resources consequently, we can measure how much of an activity such as "purchase supplies is required by an organisations service output such as "engineering training course". The measurement of consumption is called an activity- cost driver. Of significant note here is that different cost objects do consume activities " in different proportions and that different customers do consume activities indifferent proportions. Traditional allocation modes hide this variation in activity utilisation by allocating these indirect costs based on some common denominator, such as percent of budget allocation, or percent of revenue and hence often provide quite misleading information.The level at which activities are analysed can vary widely from the very aggregate to the very detailed. The level of detail should be matched to the level of analysis required to improve the decision-making within the organisation. Even within a single organisation, the level of detail can very from one part of the analysis to another, excessive detail will bog down the project and not provide any material benefit to the analysis. Too little detail will obscure the meaningful results that could be achieved.The usefulness of an ABC analysis can be further enhanced by including a value analysis of every activity.When constructing an ABC model, activity costs can be either traced directly to a cost objects. Examples of enabling activities include " paying employees" and "supporting PC users". We can then generate reports for these activities in various formats that show both the direct resources as well as those supports activities that form part of the total cost. Reports generally list the activities from highest cost to lowest cost. Management can then evaluate these activity costs in terms of whether they are too high, too low, or in the expected range. This is again a focusing mechanism for management in evaluatin...
