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Corporate management based on activity based costing

apc – advanced profit control stands for corporate management on the basis of activity based costing.

The activity based costing is connected with planning, management and settlement of overhead costs such as purchasing, warehouse or sales.

The aim is to offset the costs of service in the area of administration and sales as accurately as possible according to the principle of “what costs incurred” for the individual products and services. The result is the true cost of product A, product B, etc.

The name “activity based costing” comes from the fact that all activities along the workflow up to the sold product are based on e.g. unit, hours, patients, etc.

How does activity based costing work?

In activity based costing, main processes (cost centers) are broken down into subprocesses. And these sub-processes are then translated into the individual work steps. The work steps are objectively related and allocated across the cost centers.

Example:

  • Main process: accounting
  • Subprocess: debtor management
  • Work steps: solvency check, creating new customers, invoicing, dunning, debt collection

In the next step, the work steps are recorded according to the reference quantities (for example, hours for the solvency check, number of duns) that are assigned to individual products, orders or markets.

The planning of the work steps is the prerequisite for specifications – as in the production. And the basis for productivity measurement. This gives each cost center manager a handy tool to manage its own area.

What does the activity based costing bring?

The unrecognized fixed costs (structural costs) can now be determined what makes the allocations of the variable costs to the individual products and services possible.

The amount of the costs of the individual processes and the number of the executions enhance the financial transparency. The cost center manager recognizes possibilities for rationalization or for increasing of the productivity. As a result, the manager is enabled to organize the processes better and more efficiently.

Your advantages:

  • Each work step (ranging from administration and sales) receives a price tag
  • The employees receive clear instructions about their work steps
  • The cost awareness rises among the employees
  • Unproductiveness and inefficiencies are detected
  • Entrepreneurial decisions based on marginal costing become possible
  • Targeted measures to increase productivity can now be taken by the management
  • Instead of the unclear overhead subcharges, honest prices can be determined
  • Deviations between the calculated cost and the actual cost rate are detected quickly