g it resource utilisation patterns.ABC OBJECTIVES :-Activity based costing has proven itself to be a viable costing methodology for almost any organisation that incurs a substantial amount of indirect resources service organisations, whether for profit or not, have accepted ABC as a viable costing tool for their purposes. No longer is it perceived to be just another manufacturing costing tool. The economic analysis provided by ABC is the foundation on which to build solutions to many of the critical business issues facing service organisations today.It is an accounting system that tires to remove distortion from the distribution of overhead costs between products. It can be a powerful management weapon for instance, a precise break down of costs can become a basis for a stragic pricing decision of a product or for attacking the cost of each of those activities, or for identifying activities that are contributing to costs but not adding value (NVA). While orthodox cost accounting works well under unchanging conditions, it increasingly leads to distortions under complex operations. ABC offers a more accurate picture of product costs.It is flexible we can slice our cost information by customers, by region, by divisions, by functions or by process etc. An "ABC" model will enable us to analyse our product according to different customer segments they are targeted at and compare the costs of each category with the premium the buyer segment allows us to charge. That will immediately reveal just which of customer segment are really generating profit.The basic objectives of ABC are two folds :-h Validate the success of quality drive with ABC h Optimise costs in response to price resistance in market The above objectives are achieved as follows :-A. Gauging the efficiency of different activity. B. Determination of non-value added activities. C. Attacking the area of cost Redundancy. D. Ability to pin down the hidden costs. E. Determination of foc...
