ABC Focus is a fully integrated activity based costing system. It utilises your budgets, ledger chart of accounts and activities to cost an unlimited number of products and services.
ABC Focus guides you through the process of costing products, services, customers and markets avoiding the inherent risks of manual systems.
ABC Focus provides management with a clear picture of the cost of providing their products and services to customers and markets. Once the cost components are known the supporting activities and relationships can be analysed and re-engineered to eliminate or minimise wastage and excess capacity. Only by identifying and managing excess capacity is it possible to increase margins without altering price.
ABC Focus solves seven key management problems.
- How to manage the entire costing process without becoming bogged down in the detail
- How to quantify the effect of key decisions such as changing production levels or outsourcing key processes
- How to quantify the impact of new activities, products / services and customers
- How to determine a standard cost for all product sold or a mix of products sold per customer
- How to identify what the significant cost components are and in order to be able to manage them
- How to identify and quantify the make-up of excess capacity to be able to manage it
- What should the budget be for a given (what if) level of production?
ABC Focus is designed to facilitate the implementation of activity based costing methodology in any type of business or organisation. It can cost any products made or sold, services provided, internal processes, customers and markets. ABC Focus can cost current operations as well as future products or budgeted activities. ABC Focus is 3 dimensional, because it costs processes and works in reverse – i.e. it can calculate a revised budget from planned or what if levels of production and activities
ABC Focus provides all organisations with a better appreciation of their costs and underlying activities compared to manual systems by guiding you through the set up and cost analysis processes. ABC Focus identifies value-adding (and value-destroying) products and activities on an EVA basis including a risk adjusted return on capital invested which is important for shareholders and business owners. All results include a verifiable cost drill down and many self-checking audit trail reports.
ABC Terminology Direct costs include labour, materials and expenses which are assigned directly to the products and services, or cost objects that consume them based on volume drivers
Indirect costs include other costs such as those incurred by administration, IT, personnel, sales & marketing, repairs & maintenance etc. These are assigned to activities (“Cost Pools”).
Cost Pools are the supporting activities within the organisation. In smaller organisations one or two people may carry out several activities; where as in large organisations there may be several departments or divisions that are responsible for similar activities. ABC methodology requires that the key activities or “cost pools” be allocated in a meaningful way that relates to the products or services being costed using resource drivers and cost drivers.
Example: consider the delivery cost pool. The costs in the delivery pool include the truck drivers’ wages, fuel, depreciation of the truck, insurance, etc. A cost driver is designed to allocate the delivery cost pool to the cost objects. In this case the cost driver could be on the basis of sales amount per cost object. Or it may be more appropriate to use the number of deliveries as the cost driver. The software has the facility to enter and change the cost drivers as better information becomes available.
Resource Drivers are the key to allocating budgets to the activity (or cost pools), the costs in the cost pools to other cost pools. Resource Drivers are the organisations best estimate of the way the activities consume the budgeted resources.
Excess Capacity is a cost object that comprises the cost of holding underutilised or nonperforming assets. Print PDF.
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