Glossary

Activity Based Management Cost System

Activity Based Cost System gives us better visibility than the G/L into product cost and customer costs, but does not address improvement activities. Activity Based Cost System and Activity Based Management Cost System are both based on the concept that the work of an organization can be described as a set of related activities or processes. Costs of goods or services can be measured as the costs of the activities performed to provide the good or service. Activity Based Management Cost System goes another major step by analyzing activities for their degree of customer value-added. After identifying activities that add little or no customer value, Activity Based Management Cost System looks for ways to reduce or eliminate them by redesigning activities and processes. Activity Based Management Cost System looks for ways to improve processes by eliminating non-value-added activities.