ABSTRACT
This chapter aims to explain the way Activity Based Management (ABM) handles costs and the characteristics of activities compared to conventional approaches, as well as introducing the language of ABM. ABM challenges the traditional approaches to product costing, gross margins, profitability, functions and hierarchies, value-added and non-value-added, and budgeting. In ABM, the indirect and overhead costs are determined for each product. The ABM Contributions are the revenue minus the uplifted frontline costs, either at customer or product level. However, trying to get accurate costs to the place in the organization where the budget for the funds is held can also create absurd situations. The tracking of costs to a budgetary account is often combined with cost centre accounting. To make the costs visible, 'true' cost accounting systems were established to capture and distribute costs to the outputs, such as goods or services.
