al point for continuous improvement. Steps involved in implementing ABC :-1. Identifying the functional areas involved. 2. Identifying the relative Activities involved in each functional Areas. 3. Allocate the common expenditure to various activities in each functional areas. 4. Preparation the statement of expenditure function wise/ activity wise/ account head wise. 5. Identifying the most suitable cost driver in each activity under functional areas. 6. Identifying the share of one cost driver to the product manufactured for absorption of OH. 7. Determine the rate/cost diver for particular activities. 8. Absorb the OH on the basis of rate /cost driver. ABC and Management: -In todays environment of competition and globalisation, when each organisation has to continuously bench mark its activities with the most efficient in the world, one cannot do with out ABC.The very survival of a firm today depends on proper management of the value chain at each stage. Unless one knows the value added at each stage as compared to its costs for that value addition, one cannot decide about cutting the unimportant activities or adding the new ones. Most of the recent approaches being followed for improving overall competitiveness and productivity of the business such as target costing, TQM, BPR and other depend heavily upon accurate cost information for various activities and comparison of these with the value the stake holders attribute to them without exact cost information such exercises are a meaningless.The main benefits of ABC arise from the quality of managerial decisions based on more accurate information. This is the most promising aspect of ABC which is now being called Activity Based Management (ABM). ABM views the activities in a dynamic sense rather then just a step for cost allocation to the end products. It uses the cost information generated by ABC about an activity for controlling the activity is self rather than using the cost informat...
