At the end of the last century a notable proliferation of scientific contributions appeared focused on the investigation of new cost models, more in line with the current informational requirements of organizations.
Most of these works coincide in pointing out a spectacular modification of the characteristics of the economic environment and at the same time a growth in the cost management techniques used by companies. In this way, new management models emerged, among which the Activity-based Costs management model stands out.
This work consists of an assessment of the Activity-based Cost System at present, given that even though its indications appear in the 60s, its application in companies is still ephemeral if the application level is compared with other management tools such as They are: Quality Costs, Balanced Scorecard, Management Control, etc.
INTRODUCTION
The world, society, organizations, individuals and the environment tend to change rapidly, which is why all the issues and questions that accompany these systems have to be coupled to the rhythm that the norms of the new social, productive and business order govern..
The allocation of indirect costs to the different cost objectives, especially to the final objective that are the finished products, is without a doubt the most important problem to be solved by any cost system. In addition, it is an unavoidable problem because the organization needs to have reliable, timely and accurate information on the cost of its products, for proper decision-making.
The cost calculation model for companies is of the utmost importance, since these are the ones that determine the viability of the business, those that mainly determine the degree of productivity and efficiency in the use of resources, that is why a cost model it cannot be based solely on assigning costs on a certain factor, which for the business sector may be insignificant or not very representative of what it actually symbolizes.
The Activity-based Cost System, also known as ABC (activity-based costing), emerged in the 60s in an incipient way and its boom moved to the 80s, due to the increases in irrelevancies in traditional accounting methods.
The traditional methods were designed between 1870 - 1920 and at that time the industry depended mainly on the work of man. Indirect costs in companies were generally low compared to today.
Some authors such as: Amat, Armenteros, Balada, Bastidas, Baujín, Bescos, Caldera; Castelló, Garbey, Lizcano, Pérez, Ripoll and Vega, have referred in some way in Congresses and published articles to the improvement of the ABC system in the treatment of indirect costs. In this sense, ABC is treated as one of the most important management systems for decision-making.
The difference between traditional costing and ABC can be summarized in three fundamental aspects:
- In traditional costing, cost objects are assumed to consume resources but in ABC it is assumed that cost objects consume activities. Traditional costing uses base allocation by volume, while ABC uses cost-drivers At different levels. Traditional costing is oriented according to the structure of an organization while ABC is oriented towards processes.
Common sense activity-based costing is a systemic method of planning, control, and management. This method is cause and effect to assign the cost of activities, services, customers or any cost object.
The ABC system assigns costs based on two fundamental principles: a) activities consume resources and, b) products consume activities. This treatment allows better decisions to be made either in terms of: processes, activities and products or services.
Traditional methods allocate costs based on direct labor, material costs, income, or other simple methods, which limits important decision making about those activities that add value to the final product.
As a result, traditional methods tend to pay for high-volume products, services, and customers.
In the development of the work, it will be possible to appreciate some of the issues that today limit the implementation of the ABC system, in addition to pointing out the differences that exist between the ABC system and traditional costing methods.
DEVELOPING
- BACKGROUND OF THE ACTIVITY-BASED COST SYSTEM.
The use of a management system and costs for activities acquires special relevance in a totally competitive environment. The 20th century has been considered by various authors (Lizcano, Ripoll, Tamarit) as a turbulent environment for companies under market conditions. This environment demands that managers need information that allows them to make decisions regarding the combination and design of products and technological processes, elements linked to the profitability of the organization on a global scale.
The main changes that have affected the evolution of the cost calculation and management system are summarized in:
- Technological advances and the increase in competitiveness, cause the need to increase the product catalog simultaneously with the life cycles of the products being shorter and shorter. Technological advances also have an impact on a reduction in the weight of direct labor by increasing direct costs. This behavior is given by the need for organizations to be more flexible and customer-oriented, which leads to: a) a greater weight of costs related to research and development; b) launch of shorter series; c) scheduling of logistics production; d) administration and, e) commercialization. Need to avoid that in the cost centers there are activities that do not generate value, that is, that there are activities that generate waste.
En la metodología convencional, los costos son asignados a los productos en el ámbito de unidades. Esto supone que todos los costos dependen del volumen de producción mientras que en el ABC, aunque también se asignan costos al nivel de unidades, en muchos casos se realiza la asignación en el ámbito de lote, de productos o de infraestructura, según las clasificaciones tratadas por Kaplan y Cooper (1999) en sus trabajos. Ello significa establecer una diferenciación entre los distintos tipos de actividades que se han desarrollado a lo largo del proceso de fabricación e identificación por la forma en que cada producto ha consumido actividades.
The first development of ABC begins in the early 1960s at General Eléctrica where finance and management control employees were looking for better information to control indirect costs. General Eléctrica's accountants 30 years ago, could have been the first to use the word activity to discover a task that generates cost, but it was really the Spanish academics who used this term for the first time in their research work.
Many researchers have contributed to the subject, among which Mellerrowiicz in the 1950s and Staubus stand out in his book activity costing and input-output accounting in 1971. As well as the works of the 1980s by: Jeffrey G.; Millar and Thomas and, Vollman.
The current disclosure of activity-based costing is due to the book by Jonson and Kaplan (1987): “Relevant losses, emergence and failures of the accounting administration”. This took as a starting point the analysis of the changes that had been taking place in the production and marketing process due to the new programming and control techniques that were being put into practice and the need to seek new techniques for determining and analyzing costs. in tune with the new environment in which businesses develop. Another work of great importance on this subject is undoubtedly "Costs and Effects", published in 1999, by which the parents of ABC / ABM (Robert S. Kaplan and Robin Cooper) are considered by many.
The ABC model allows greater accuracy in the allocation of company costs and allows the vision of them by activity. The concept treated by Solano (1998) defines the activity: It is what a company does, the way in which time is consumed and the outputs of the processes, that is, transforming resources (materials, labor, technology) into Departures".
Another definition of activity, taken from other authors (Amat, Baujín, Castelló, Tamarit, Ripoll, Vega, Garbey, Pérez, Sánchez), indicates it as “the performance or set of actions that are carried out in the company to obtain a good or service ”.
Exposed some of the antecedents that gave rise to the ABC system, we proceed to define or conceptualize the Activity-based Cost System.
- DEFINITIONS OF ABC / ABM COSTING
To understand more easily about the Activity-based Cost system, it is important to start with the definition given to it by its creator (Kaplan, R.).
One way to define the ABC system is as a "direct costing" model. In other words, it constitutes an improvement of “direct costing” to the extent that it modifies the perception of fixed and variable costs.
In its beginnings, the ABC system followed the full cost line to calculate the cost of the product, since it included all the costs related to the process of obtaining it.
At present the calculated costs are numerically the same as those determined with any conventional system, the difference is that the ABC system is based on the classification of activities at different hierarchical levels, reducing distortions in the cost of the product.
The ABC is a methodology that arises in order to improve the allocation of resources to any cost object (product, service, customer, market, supplier dependency, etc.) and aims to measure the performance of the activities that are executed in a company and the adequate allocation of costs to products or services through the consumption of activities; which allows greater accuracy in the allocation of costs. It also allows the company to pay for activities. This system highlights the need to manage activities and resources rather than the calculation of product costs.
This system uses a cost allocation methodology that identifies and uses the resources committed to carry out activities and links them to goods and services or other costing objects for customer satisfaction. In other words, it works according to the client and not the product.
It also enables measurement from different perspectives: a) activities; b) processes; c) areas of responsibility and, d) products. In turn, it provides information about all the resources necessary to provide quality services provided to the client.
Some authors such as: Armenteros, Castelló, Cooper, Garbey, Kaplan, Lizcano, Ripoll, and Vega, state that ABC's philosophy is simple, based on the control of indirect costs through the management of the activities that cause them.
The emphasis is on assigning costs to products based on activities in a two-stage process:
First, the facts and tasks are grouped into activities. This means that the indirect costs of each section are linked to the activities that have caused them.
Second, as the products consume activities, a link known as a cost driver is sought, which relates cost to cost objective, the latter known as the cause-effect relationship.
Baujín Pérez (2001), assigns costs in three stages, although in its essence it is the determination of the cost of the activities taking as a starting point the company's processes.
The ABC system focuses attention on the measurement, quantification and control of the activities or tasks that the company undertakes to carry out its usual activity, with the center, department or section to which a certain task or activity may be assigned to the background. It should be noted that the latter is not always true, since some methodologies take into account the activity centers.
The mode of alignment of the ABC system is different with respect to the traditional way of operating the management of organizations. The ABC has given a new perspective on indirect costs in achieving the entity's objectives. The ABC system involves a greater proportion of the personnel participating in the processes, including the client, giving rise to a greater link between the activities between the departments.
The activity-based costing methodology emphasizes the entity's systemic approach; by working by processes and not structurally as it was done previously, that is to say, it shows that the entity more than a set of areas of responsibility can be measured by process and these cross the inter-functional barriers that exist in companies.
To better understand the ABC system, some important concepts must be handled. Know, for example, that resources are considered as all the economic elements necessary for the operation of a company. In this sense, those that are defined as costs and expenses are classified. That the activities can be defined as the work carried out by the person with the purpose of fulfilling a specific objective, the objectives are defined as the products or services that ultimately they want to pay for. Finally, the ABC system focuses its attention on assigning indirect costs to resource-consuming activities and, subsequently, assigning them to products in proportion to their consumption of activities using the appropriate cost drivers for each activity.Therefore, the activities will constitute a nucleus of accumulation of resources absorbed in the production process capable of being assigned to products.
- THE MANAGEMENT BASED ON ACTIVITIES (ACTIVITY BASED MANAGEMENT)
During the second half of the 1980s, the investigation of activity costs entered a second phase, which became known as Activity Based Management (ABM).
The combination of ABM-ABC is what some authors (Amat, Castelló, Lizcano, Ripoll and Tamarit) call Activity-based Costs and Management System. In this sense, it should be noted that the ABM seeks to focus the management of indirect activities, at various levels beyond direct production / activity, to improve the value received by the client and the benefit achieved that this value provides. In this way, organizations find value in the information generated by the system for decision-making and consequently consider them in accordance with their objectives and strategies.
The term ABC / ABM appears due to the need to calculate and manage the cost of activities, since all the authors mentioned above consider it a comprehensive and necessary system.
In an initial version of ABC / ABM, Jonhson (1988) and Ostrenga (1990) argued that firms should manage activities and not costs as such. Costs by themselves are not a source of competitive value since only activities have the power to add value. Therefore, management must seek, control and eliminate waste of effort, that is, those activities that do not add value. With this system, the calculation of costs loses relevance to transfer it to the management of the activities.
In fact, the identification of the drivers of waste in the management of operational activities and the design of indicators that reflect the success of a company in eliminating their causes (Johnson 1988).
The important thing in the ABC / ABM system is the identification of the activities. This aspect will be the object of study below.
- ABM IDENTIFICATION OF ACTIVITIES
In the identification process within the ABM model, the activities must first be located appropriately in the production processes that add value, so that when operations start, the organization has the ability to respond efficiently and efficiency to the demands that the client requests. After the activities in the organization have been specified and grouped into the appropriate processes, it is necessary to establish the work units, the cost transmitters and the transformation ratio of the factors to measure the productivity of the inputs and, to rationally transmit the cost of inputs over the cost of outputs.
A study of the sequence of activities and processes, together with their associated costs, allows to offer the organization's managers a vision of the critical points of the value chain, as well as the relative information to carry out a continuous improvement that can be applied in the value-creating process.
Knowing the causal factors that drive the activities, it is easy to apply efficiency inducers. These inducers are those that decisively influence the improvement of some attribute of efficiency of the activity whose refinement will contribute to complete the harmony of the productive combination.
Inductors tend to focus on improving the quality or characteristics of the processes and products to be achieved, reducing deadlines, improving the critical path of core activities and reducing costs.
The deepening of the elements discussed so far allows those aspects that deal with the objective pursued by the ABC / ABM System and the advantages that the system provides to companies to be treated with precision.
- FUNDAMENTAL OBJECTIVES OF ACTIVITY-BASED COSTING
The most common objectives of an activity-based costing system are summarized as: 1) measure resource costs when developing activities in a business or entity; 2) describe and apply its conceptual development showing its scope in managerial accounting; 3) be a performance measure that allows to improve satisfaction objectives and eliminate waste in operational activities and, 4) provide tools for business planning, profit determination, cost control and reduction, and strategic decision-making.
To the above objectives it is important to highlight that its main objective is to manage the costs of the activities and for this it relies on the methodology for the definition of the total cost of a product or service, where the primary identification of the direct costs of the same in the analysis of the activities and in the quantification of the costs of the support or service processes is very important to assign them to each one of the products - economic object of the company.
Previously, it was said that the ABC / ABM system is a "comprehensive" management system that allows knowing the flow of activities carried out in the organization, which are consuming the available resources and, therefore, incorporating or allocating costs to the processes. These attributes make it have specific advantages over traditional systems.
- ADVANTAGES OF THE ABC / ABM COST SYSTEM
The advantages provided by the ABC / ABM system will be analyzed by different authors in different contexts, hence the degree of subjectivity that may be had in this regard, therefore it is necessary to treat them in this section
Following the criteria of Smith (1995), the advantages for companies that implement the ABC system are the following: a) organizations with multiple products can observe a totally different ordering of the costs of their products; b) a better knowledge of the activities that generate costs structurally can improve the control that is executed on the incurred costs of this nature; c) can create an information base that facilitates the implementation of a total quality management process, to overcome the problems that limit current results; d) the use of non-financial indicators to value cost drivers and, e) facilitates management measures, in addition to measures to value production costs.
These measures are essential to eliminate waste and non-value-added activities, and cost driver analysis provides a new perspective for examining cost behavior and the subsequent analysis required for planning and budgeting purposes. In this sense, the ABC system increases the credibility and usefulness of cost information in the decision-making process and makes it possible to compare operations between plants and divisions.
According to Amat and Soldevila (1997), the advantages of the ABC model are: a) it is applicable to all types of companies; b) identifies customers, products, services or other unprofitable cost targets; c) allows to calculate costs more precisely, fundamentally determined indirect costs of production, marketing and administration and, d) provides more information about the activities carried out by the company, allowing to know which ones provide added value and which ones do not, giving the possibility of be able to reduce or eliminate the latter.
ABC costing helps organizations obtain better information about their processes and activities, continuously improving the efficiency of operations. With this system we work on the rationalization and optimization of the development of its personnel, its capital and its other assets.
The new activity-based organization becomes more agile and market-oriented, allowing it to face a more competitive market. In turn, it enables the organization's information to be aligned with its mission and business operations, rather than with financial transactions. Also, it destroys the barriers that separate financial information from the rest of the data, thus facilitating the flow of information for decision-making.
In another sense, the ABC system allows the organization to manage its overall cost structure without losing sight of the details of daily operation. Additionally, organizations can extend cost management to reflect the activities that are being performed.
Unlike traditional systems, the ABC / ABM system is a comprehensive business management system and not just an accounting system. This system can also be used for budget control (activity based budgeting), extensively discussed by Castelló (1996).
Franco (1995), in an article after exposing the criteria of several authors, concludes that the main advantages of the ABC system are: a) a better control and reduction of indirect costs is achieved, due to the suppression of activities that do not add value and especially because of its link with the technique of total cost management; b) ABC is very useful in the planning stage, as it provides a wealth of information that serves as a guide for various strategic decisions such as: pricing; search for sources and, c) introduction of new products and adoption of new designs or manufacturing processes.
After analyzing the advantages of the system, we proceed to express some limitations addressed by these same authors.
- LIMITATIONS OF THE ABC / ABM COST SYSTEM
Any management system, no matter how tackled it has been or no matter how perfected it may be, is not without limitations and this is the case with the ABC / ABM system. Some of these limitations are summarized in: 1) there is little evidence that their implementation improves corporate profitability; 2) there are no known consequences regarding human and organizational behavior; 3) the information obtained is historical; 4) the selection of cost-drivers and costs common to various activities are not satisfactorily resolved; 5) ABC is not a purpose and generic system whose results (outputs) are adequate without qualitative judgments and, 6) in the areas of control and measurement, its implications are still uncertain.
It should also be taken into account that the activity-based cost system is established as a business management philosophy, in which all the individuals that make up the company must participate, from workers and plant workers to senior management, as that by having all the productive sectors covered, the company is led to achieve competitive and comparative advantages over the entities that carry out the same activity. In other words, advantages can be achieved over companies in the same sector or productive or service branch.
Malcom Smith (1995), in the article cited above, raises the following limitations: a) an ABC system is still essentially a system of historical costs. In certain circumstances, its usefulness is doubtful, especially if there are future cost aspects that become more important; b) with an ABC system there is a risk of increasing arbitrary imputations, if decision criteria are not required regarding the combination and distribution of structures common to the different activities, through various cost funds and common cost drivers;c) It is often ignored by ABC systems that input data must have the ability to measure nonfinancial activities as cost drivers and to appreciate the importance of accuracy and reliability to ensure complete system accounting and, d) little thought is given to cost drivers related to trade-offs affecting product design and plant layout. Second, more emphasis is placed on cost generation. Activities for which data are not available or unreliable, such as marketing and distribution, are also often ignored.Second, more emphasis is placed on cost generation. Activities for which no data are available or are not reliable, such as marketing and distribution, are also often ignored.Second, more emphasis is placed on cost generation. Activities for which data are not available or unreliable, such as marketing and distribution, are also often ignored.
According to Gutiérrez Ponce (1993), the most important limitations are: a) there is a great lack of knowledge about the economic and organizational consequences after its adoption and, b) the selection of cost drivers can be a difficult and complex process.
According to Amat yl Soldevila in their book “Contabilidad y Gestión de Costes (1997). The main drawbacks that arise when trying to implement or implement the ABC model are the following: a) certain indirect costs of administration, marketing and management are difficult to attribute to activities; b) it can cause the appropriateness of traditional cost systems to be discarded and, c) if many activities are selected it can complicate and make the cost calculation system more expensive.
According to Sáez Torrecilla (1994), it raises the following limitations: a) the implementation of ABC is usually very expensive, since all the activities and cost generators require more information than other systems and, b) the calculations required by the model ABC are complex to understand.
Capasso, Granda and Smolie (1994) expose the following limitations: a) abandon cost analysis by areas of responsibility; b) is based on historical information; c) it lacks the support provided by double entry and, d) it does not segregate costs by type of variability.
As can be seen, the referred authors do not contribute great limitations to the system, which solves many of the limitations that traditional systems had.
An advantage that deserves to be discussed in a section is the simplicity of the ABC / ABM system.
- THE SIMPLICITY OF THE ABC MODEL
Another of the false truths that has traditionally been attributed to cost-per-activity systems is the complexity of the calculations involved in the model and the difficult understanding of them. As Sáez (1995) points out, complexity should not be confused with ease of understanding since the ABC model is perhaps less operationally simple, but ultimately it is easier to understand because its key elements (activities and drivers) constitute a closer reality. and intuitive than other employees in other models.
In any case, the complexity of the model will be proportional to the complexity of the organization where it is to be implemented and to the desired accuracy in determining the cost of the resources consumed. It is possible to synthesize to the maximum the prevailing cost system in the company with the ABC model, especially in those small or medium-sized companies with a cost system by homogeneous sections. In these cases, a correct definition of the activity centers from the existing sections could eliminate the drawbacks of using traditional systems, constituting a model very similar to the activity system and easy to apply.
The most important change in this line will be to move from sections or activity centers to a single level, to the design of activities at different levels (batches, product lines, etc.) and the subsequent identification of the corresponding inducers that can no longer be defined from the old work units.
A cost model must be as simple as possible, so the definition of an excessive number of activities and drivers that would make it more complicated and more expensive should be avoided. In our opinion, it makes no sense to address questions about the optimal number of activities to identify or inducers to handle, since there is obviously no prudent guideline in this regard.
The design of the cost system should be carried out without losing the perspective of the simplicity and operability that the company is capable of assuming.
The simplicity discussed can be easily identified in the main differences between the ABC system and traditional systems.
- TRADITIONAL COSTING VERSUS ABC COSTING
THE TRADITIONAL COSTING
The traditional costing is accepted by financial accounting, it considers that the resource of direct labor and direct materials are the predominant factors of production. Under this costing approach, indirect manufacturing costs are assigned to products using a rate, which for its calculation considers a measure of production.
The steps used to value products in traditional costing are the following: 1) identify the cost objective; 2) allocation of direct raw material and direct labor costs consumed by products; 3) choice of the base or bases for calculating the rate of application of indirect manufacturing costs; 4) calculation of the rate or rates of application of manufacturing overhead costs; 5) assigning indirect costs to products, multiplying the base or bases by the consumption that the products make of the base itself; 6) calculate the total cost of the products, which results from the sum of the costs of direct raw materials, direct labor and indirect manufacturing costs applied to the products.
The criterion used for the traditional model to assign indirect costs considering all the items that make up this cost element, using a volume measure as a basis, is justified when the fact that these expense items taken individually does not have Such significance, as the cost of direct labor generally has, however it is necessary to emphasize that the basis to be used to explain the indirect manufacturing costs may not be only one since there may be groups of indirect cost items that due to its significance
justify the fact of using more than one base, for example: machine hours to distribute the cost of energy to the products that consume this resource.
The logical sequence of traditional costing is as follows:
"Cost centers are the consumers or drivers of costs, which are assigned to products or services, directly or using an application rate (s)."
ABC COST SYSTEM.
However, the ABC System, indirect manufacturing costs are assigned to the activities that consume resources, to later assign them to the products, in proportion to the consumption that they make of the activities, for which the appropriate cost drivers must be sought (cost-driver). Then, the activities will constitute a nucleus of accumulation of resources absorbed in the production process, capable of being assigned to the products.
Cost-drivers is understood as a unit of measurement and control to establish the relationship between activities and products.
For a correct allocation of costs to products, it is essential that the activities should be designed in such a way that they only include the direct costs with respect to them.
An important aspect to be clear about the ABC is to understand the tasks that make up an activity. An activity is composed of homogeneous tasks that correspond to the susceptibility of being quantifiable.
The logical sequence of the ABC model is as follows:
The logical sequence of ABC costing is as follows:
"The activities are the cause of the costs, which are assigned to the products or services, in proportion to the consumption that they make of themselves."
The costs resulting from the application of the traditional system and the activity-based cost system are different and the variations correspond to operating activities not properly quantified in the traditional cost systems and whose lack of proportionality is defined by one of the following aspects: a) diversity by product size; b) diversity by complexity, in the sense that complex products can consume more labor; c) diversity in production volume.
The concepts of Traditional Costing and ABC Costing are distinguished in different aspects. A summary of these differences is presented in Table 1.
| TRADITIONAL COSTING | ABC COSTING |
| Products consume costs | Activities consume costs, products consume activities. |
| Assign manufacturing overhead based on a volume measure. One of the most used is that of men's hours | Assignment of indirect manufacturing costs based on resources consumed by activities |
| It is concerned mainly with valuing production processes | He cares about valuing all areas of the organization |
| Functional valuation | Cross-sectional valorization and improvement of processes |
Table 1. Differences between the ABC system and the Traditional Costing Systems. Source: Taken from Pérez Barral (2003)
After analyzing the differences, we proceed to know the phases that a company must go through for the implementation of an ABC system.
- IMPLEMENTATION OF AN ACTIVITY-BASED COST SYSTEM
The implementation of the activity-based cost system has been a common phenomenon in the most developed countries of the world. The highest adoption of this model is noted in the United States, Australia and Canada (Bescos, 2002)
STAGES TO IMPLEMENT THE ABC
- Definition of processes and activities (so and so, 1998):
The ABC costing model focuses its efforts on the reasoning to adequately manage the activities that cause costs and are related through their consumption to the cost of the products. The most important thing is to know the generation of costs to obtain the greatest possible benefit from them, minimizing all the factors that do not add value.
The processes are defined as "the entire rational organization of machinery, labor, raw material, energy and procedures facilities to achieve the final result." In ABC studies, activities and processes are separated or described.
Some processes carried out in companies are: a) purchases; b) sales; c) finance; d) personnel and, e) planning.
Some activities that are carried out in some companies are: a) homologate products; b) negotiate prices: c) classify suppliers: d) receive materials; e) Issue orders; i) invoice and j) invoice.
The activities and processes to be operational and efficient need to be homogeneous to measure them in operational functions of the products.
- Identification of activities
In the identification process within the ABC model, the activities must first be appropriately located in the production processes that add value, so that when operations start, the organization has the ability to respond efficiently and effectively to the demands that the market imposes on it. After the activities in the company have been specified and grouped into the appropriate processes, it is necessary to establish the work units, the cost transmitters and the transformation ratio of the factors to measure the productivity of the inputs and to transmit rationally the cost of inputs over the cost of outputs.
A study of the sequence of activities and processes, together with their associated costs, will be able to offer the organization's directives a vision of the critical points of the value chain, as well as the relative information to carry out a continuous improvement that can be applied in the value-creating process. By knowing the causal factors that trigger the activities, it is easy to apply efficiency drivers (Perfomance drivers) which are those factors that decisively influence the improvement of some attribute of efficiency of the activity whose refinement will contribute to complete the harmony of the productive combination. These inducers tend to focus on improving the quality or characteristics of processes and products, to reduce deadlines,to improve the critical path of core activities and to reduce costs.
Finally, it is necessary to establish a system of control indicators that continuously show how the activities and processes are working and the progress of the efficiency drivers. This control consists of comparing the real state of the action against the proposed objective, establishing the appropriate correctors to take them to the proposed value chain.
- Types of companies to implement the ABC
The ABC system can be applied in some types of companies. The application of the ABC system depends mainly on the particularities of the different companies. However, the following are the characteristics of the companies in which an activity-based system can be implemented: a) those in which indirect manufacturing costs make up an important part of total costs.
- Companies in which there is a growth, year after year in their indirect costs Companies with high volume in their fixed costs Companies in which indirect costs have been allocated to products on an arbitrary basis Companies in which the allocation of indirect costs to individual products is not really proportional to the volume of production of products Companies immersed in an environment of strong competition Companies in which there is a wide variety of products and production processes, in which Furthermore, production volumes vary significantly. Companies with a great diversity of support structures, given to the products. Companies with a high level of coincidence of processes or activities between the products.Companies in which there are a large number of distribution channels and buyers that cause the need to undertake highly differentiated sales activities Companies in which it is shown that there are dissatisfactions with the existing cost system Companies in which it has been chosen as a way to compete for "cost leadership"
Once the list of companies that can apply an ABC system has concluded, the way is left open to continue investigating the advances and applications of the Activity-based Cost and Management System in other works.
CONCLUSIONS
- The work is interesting because it deals with a concept that many companies have not put into practice. In addition to being a modern technique of allocating costs to products, it also serves as a management tool. The ABC concept involves more personnel in the processes, giving rise to a greater linkage of activities between departments. This is favorable to have a flexible flow of information between the different processes. Although it should be noted that all company employees must know the system, whether they are accountants or not. The subject is of great interest to the management of many companies because it links two important concepts: Activity-Based Management and Activity-Based Costing.that are of great informative benefit for the company because it directly relates the accounting department with the rest of the entity. The subject is applicable to all types of companies (production and services). Allows you to more accurately calculate costs. Fundamentally it helps to deduce the necessary information on the indirect costs of production, commercialization and administration. ABC Costing serves in the organization as an efficient way to obtain better information about its processes and activities, improving the efficiency of operations. In addition, ABC facilitates the flow of information for decision-making. This work is of great importance for the future Study Plan D of the Discipline of Costs, where basic elements of the ABC / ABM system will begin to be introduced.The subject is applicable to all types of companies (productive and services). It allows you to more accurately calculate costs. Fundamentally it helps to deduce the necessary information on the indirect costs of production, commercialization and administration. ABC Costing serves in the organization as an efficient way to obtain better information about its processes and activities, improving the efficiency of operations. In addition, ABC facilitates the flow of information for decision-making. This work is of great importance for the future Study Plan D of the Discipline of Costs, where basic elements of the ABC / ABM system will begin to be introduced.The subject is applicable to all types of companies (productive and services). It allows you to more accurately calculate costs. Fundamentally it helps to deduce the necessary information on the indirect costs of production, commercialization and administration. ABC Costing serves in the organization as an efficient way to obtain better information about its processes and activities, improving the efficiency of operations. In addition, ABC facilitates the flow of information for decision-making. This work is of great importance for the future Study Plan D of the Discipline of Costs, where basic elements of the ABC / ABM system will begin to be introduced.Fundamentally it helps to deduce the necessary information on the indirect costs of production, commercialization and administration. ABC Costing serves in the organization as an efficient way to obtain better information about its processes and activities, improving the efficiency of operations. In addition, ABC facilitates the flow of information for decision-making. This work is of great importance for the future Study Plan D of the Discipline of Costs, where basic elements of the ABC / ABM system will begin to be introduced.Fundamentally it helps to deduce the necessary information on the indirect costs of production, commercialization and administration. ABC Costing serves in the organization as an efficient way to obtain better information about its processes and activities, improving the efficiency of operations. In addition, ABC facilitates the flow of information for decision-making. This work is of great importance for the future Study Plan D of the Discipline of Costs, where basic elements of the ABC / ABM system will begin to be introduced.This work is of great importance for the future Cost Discipline Study Plan D, where basic elements of the ABC / ABM system will begin to be introduced.This work is of great importance for the future Cost Discipline Study Plan D, where basic elements of the ABC / ABM system will begin to be introduced.
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The differences between traditional systems and the ABC system have been discussed by the creators of ABC. The authors Kaplan and Cooper in their book Costs and Effects, capture the fundamental differences between traditional cost systems and the ABC system. These differences have also been discussed by other authors mentioned in the work.
This cause-effect relationship was discussed by Baujín Pérez. P. "Design and application of a Cost System based on Activities for hotel facilities". Work presented as an option to the title of Master in Tourism Management, 2001.
It refers to changes in the business environment and technological changes.
Waste refers to activities that are unnecessary and can be eliminated without affecting the provision of a service, In works presented by Carlos Mallo the term of activity appears, even though it was Kaplan and Cooper who developed the ABC system for the first time.
Baujín Pérez. P. "Design and application of a Cost System based on Activities for hotel facilities". Work presented as an option to the title of Master in Tourism Management, 2001.
Taken from Pérez Barral, O. "Proposal of Management Tools for a Get Varadero service company". Work presented as an option to the title of Master in Tourism Management, 2003.
Baujín Pérez. P. "Design and application of a Cost System based on Activities for hotel facilities". Work presented as an option to the title of Master in Tourism Management, 2001.
Taken from Pérez Barral, O. "Proposal of Management Tools for a Get Varadero service company". Work presented as an option to the title of Master in Tourism Management, 2003.
Taken from Smith, Malcolm. "How to run your ABC system". Australia: Murdoch University, 1995.
Taken from Pérez Barral, O. "Proposal of Management Tools for a Get Varadero service company". Work presented as an option to the title of Master in Tourism Management, 2003.
Pérez Barral, O. "Proposal of Management Tools for Get Varadero service company". Paper presented as an option to the title of Master in Tourism Management, 2003. It addresses the limitations of traditional costing systems.
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