Activity-Based Cost Management: An Executive's Guide / Edition 1

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Back when Henry Ford was producing Model Ts in one black, all-purpose model, traditional cost allocation gave a fairly accurate picture of a company's expenses. But today, the very nature of doing business has radically changed. Overhead expenses are displacing direct costs. And the complexity of most organizations has increased dramatically. Companies produce more products in greater variation and diversity than ever before, and they service more, and different, types of customers. Add to that the sea change created as the Internet spawns more e-trading market exchanges with auctions and bidding, and it becomes apparent that we need a method that replaces the fuzzy answers of traditional methods with credible assumptions based on valid data.

The answer is Activity-Based Cost Management, and this crystal-clear, persuasive, and authoritative book will help you understand and implement ABC/M quickly and easily.

Managerial accounting is now transitioning into managerial economics, reveals author Gary Cokins, a worldwide expert on activity-based cost management. With the technology we have at our disposal, ABC/M will provide you not only with a more accurate picture of your company's costs but also with the critical information you need to make better decisions and perform better and more in alignment with your company's defined strategy.

Cokins explains exactly why ABC/M is far superior than traditional costing for your needs in today's business environment, and how it will help you manage costs, increase profits, and make better decisions. You'll learn to use ABC/M to:

• Map the preferences of your prospects and customers back to your organization's business processes and cost structure

• Adopt an effective and more reliable method of estimating and budgeting for costs, price quotations, investment alternatives, and decisions

• Construct a fair "chargeback" billing system that reflects the true consumption of costs by your end users and service recipients

• Remove waste, redundancy, and unused capacity

• Develop a "lean" accounting system to match your new lean operations practices

• Finally measure the hidden costs of "non-quality" that is the focus of Six Sigma and other quality management philosophies

Now you can stop allocating resources and begin tracing and assigning them based on the real, measurable cause-and-effect relationships within your organization. Written in language as entertaining as it is accessible, Activity-Based Cost Management: An Executive's Guide gives you the tools you need to construct an efficient ABC/M model and use it to ensure your company's success.

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Editorial Reviews

From the Publisher
"IIE member and seminar instructor Gray Cokins adds a new book to his list of accomplishments." (IEE Solutions - Book of the Month 1/02)
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Product Details

  • ISBN-13: 9780471443285
  • Publisher: Wiley
  • Publication date: 9/24/2001
  • Series: Wiley Cost Management Series, #8
  • Edition number: 1
  • Pages: 384
  • Product dimensions: 6.30 (w) x 9.20 (h) x 3.90 (d)

Meet the Author

Gary Cokins is an internationally recognized expert, speaker, and author in advanced cost management and performance improvement systems. He is the founder of Analytics-Based Performance Management, an advisory firm located in Cary, North Carolina. . Gary received a BS degree with honors (Tau Beta Pi) in Industrial Engineering/Operations Research from Cornell University in 1971. He was two year varsity football letterman. He received his MBA with honors (Beta Gamma Sigma) from Northwestern University’s Kellogg School of Management in 1974.

Gary began his career as a strategic planner with FMC’s Link-Belt Division and then served as Financial Controller and Operations Manager. In 1981 Gary began his management consulting career first with Deloitte Consulting Next with KPMG, Gary was trained on activity-based costing (ABC) by Harvard Business School Professors Robert S. Kaplan and Robin Cooper. With KPMG working with Dr. David Norton, Gary was also involved with initial research that led to the development of the Balanced Scorecard. Prior to joining SAS, Gary headed the National Cost Management Consulting Services for Electronic Data Systems (EDS), now part of HP. From 1997 until recently Gary was in business development with SAS, a leading provider of enterprise performance management and business analytics and intelligence software.

Gary resides with his wife Pam in Cary, North Carolina.

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Table of Contents


1. Removing the Blindfold with ABC/M.

2. A Management Accounting Framework: A Taxonomy.

3. Are All Your Trading Partners "Worth It" to You?

4. The Internet, E-Commerce, Supply Chain Management, and Digital Economies: Where Does ABC/M Fit In?

5. The Holy Grail: Performance Measure Systems.

That Produce the Correct Behavior.

6. Popular Uses of ABC/M.

7. ABC/M Integrates with Other Software Tools.

8. Predictive Costing, Predictive Accounting.

9. Implementing ABC/M Through Rapid Prototyping.

10. Common Misconceptions about ABC/M and Employee Buy-In.

11. Stage Five Cost Systems: The Future of ABC/M.



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  • Anonymous

    Posted December 20, 2002

    Hit's the mark

    This book is an excellent resource for learning and understanding ABC accounting. Unlike many web articles and white papers, Gary's book is a practical not academic approach from someone who has been there, done that, and has the t-shirt. It's filled with lots of explanatory diagrams which help to visualize the concepts presented and are useful when presenting on a high-level to executives under time constraints for reading. Chapter 1 clearly presents ABC basic concepts while Chapter 2 is a direct follow-on expanding the depth and breath of those basic concepts. Chapter 3 addresses the question that all senior management wants to know: Are all your trading partners worth it to you? Subsequent chapters focus on typical ABC modeling applications most relevant to organizations. Chapter 6 gives a very good cross-comparison of project/work order costing vs. ABC that is very helpful to project-centric organizations in understanding how ABC differentiates itself. Chapter 7 succinctly places ABC software in the reengineering software spectrum without getting lost in a technological morass. Chapter 9 addresses rapid prototyping for getting initial results from the methodology that can be tweaked iteratively to grow a more sophisticated ABC model. In conclusion, I highly recommend this book and look forward to Gary's "ABC Management - Making it Work" which is next on my ABC must-read list.

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  • Anonymous

    Posted October 17, 2002

    A Must Have Guide . . .

    I originally bought this book because of its title and because I am familiar with other published articles, white papers and books by Gary Cokins on activity-based cost/management. I thought this recently written Executive¿s Guide would be something I could give the senior management group in my organization to bring them up to date on the latest ABC/M thinking. While the book didn¿t turn out to be the condensed version that covers ABC/M in five minutes, it has a compelling Chapter One that will grab the attention of senior executives interested in survival of their organization. Cokins¿ book is rich with examples of how activity-based thinking, methodology and tools can influence and support smart decision making. The book presents an excellent case for why activity-based information is so critical. It also covers the pitfalls, misconceptions, critical success factors and the how-to¿s, from designing a model to using the model results for advanced applications such as budgeting and predictive costing. It is an excellent ¿nuts and bolts¿ reference book. The difference in this book from Cokin¿s earlier books is that it is written with a maturing perspective on ABC/M gained from the abundant successes and failures of ABC implementations over the past few years.

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