Activity-Based Management (ABM)

Activity-based management (ABM) is a costing method that identifies and assigns costs to activities, then uses those costs to determine the cost of products and services. ABM is used to improve the accuracy of product costing and to make better decisions about pricing, product mix, and resource allocation.

ABM is based on the idea that all costs are incurred to perform activities that create value for customers. By identifying and understanding the activities that drive costs, managers can make better decisions about how to allocate resources and improve the efficiency of their operations.

ABM is a more accurate and comprehensive approach to product costing than traditional cost accounting methods. Traditional cost accounting methods assign costs to products based on a single allocation base, such as direct labor hours or machine hours. This can lead to inaccurate product costs, because it does not take into account the different activities that are required to produce different products.

ABM uses multiple allocation bases to assign costs to activities. This allows for a more accurate allocation of costs to products, because it takes into account the different activities that are required to produce different products.

ABM can also be used to improve the efficiency of operations. By identifying and understanding the activities that drive costs, managers can make better decisions about how to allocate resources and improve the efficiency of their operations.

ABM is a powerful tool that can help managers improve the accuracy of product costing, make better decisions about pricing, product mix, and resource allocation, and improve the efficiency of their operations.

Here are some of the benefits of ABM:

* Improved product costing accuracy
* Better decisions about pricing, product mix, and resource allocation
* Improved efficiency of operations
* Increased profitability