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Product Profitability – ABM/ABC – Flow Diagram

A flow diagram on how we arrived at product cost using ABC:

Product Profitability – ABM/ABC – Part III

Step-7: Calculate rate per unit of cost driver   The rate per unit of cost driver can be calculated using the following formula: Cost of Activities (step 5)/ Volume of activities (Step 6)     Using the above formula the rate per unit of cost driver for each of the identified operating activities is given […]

Product Profitability – ABM/ABC – Part II

Step-5: Allocate/assign support activities costs to operating activities   The support activity costs need to be allocated to operating activities. And later the total cost of operating activities) will be allocated to products (cost objects). Any of the following three methods can be used practically for allocating support activity costs. Here we are showing all […]

Product Profitability in Pharma Industry – ABM/ABC

This article is based on logic that goes behind the product profitability using activity based management/costing in a manufacturing plant that makes medicines. R&D costs will not be shown since this company pays royalties to licencor to utilize the formula/licensed technology. Step-1: Define/ identify line items on the ledgers  Ten major ledger items have been […]