Identifying and using multiple cost drivers and performance measures to manage an activity is called activity-based management (ABM). Essentially, ABM expands the basic activity-based costing (ABC) model by separating the concept of product costing using activity-based relationships (Costs → Activities → Products) from the task of directly managing activities to achieve cost efficiencies and to enhance quality in business processes. Using ABM, opportunities for cost efficiencies are identified by separately tracking multiple cost drivers for each critical activity. Continuous improvement of the organization is then achieved using performance measures based on quality and timelines issues for strategically important activities in the organization. Hence, managing activity cost drivers and performance measures for a particular activity is a management task that is actually exclusive of the processes of tracking a single cost driver that allocates the activity's costs to products.
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Reference
Barfield, Jesse T., Cecilya Raiborn, and Michael R. Kinney (1994). Cost Accounting: Traditions and Innovations, West Publishing Company, St. Paul, Minnesota.
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© 2000 Kluwer Academic Publishers
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(2000). ACTIVITY-BASED MANAGEMENT . In: Swamidass, P.M. (eds) Encyclopedia of Production and Manufacturing Management. Springer, Boston, MA . https://doi.org/10.1007/1-4020-0612-8_19
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DOI: https://doi.org/10.1007/1-4020-0612-8_19
Publisher Name: Springer, Boston, MA
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