The ABC (ACTIVITY BASED COSTING) of Rocket Ship accounting - Russell Colbourne
Russell Colbourne - "Your Money Machine"
Your business is Your Money Machine. In this Episode we take a look under the hood of your business engine and show you how to fine tune your operations. Get ready for lift off as we add rocket fuel to your engine.
ABC or Activity Based Costing is simply a way or assigning overheads or fixed period costs to either production costs or servicing costs. ABC divides production or services into core activities, defines costs for those activities, and allocates those costs to products or services based on consumption of the activities.
ABC allows business managers to better understand product, service and customer profitability. This provides the business with better information to make value-based and therefore more effective decisions.
Have a great business week.
Very seldom does all of this tedious but necessary process improvement work provide such a clear benefit. One of the most important decisions you will make in Stage III is accurate pricing. You still have the dance of what price the market will allow but now you can work backwards to identify ways to decrease costs (time, non-value added steps, waste, etc.) and make a profit. Also you can look at the amount of work required for each account and determine whom to replicate and whom to replace.
Key Issues - Owner Perspective:
What You Need to Know
What You Need to Do
One assumption we make when starting on this topic is the major or core processes related to production (or service delivery) have been mapped. Make sure you break down your processes down into stages before undertaking ABC.
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