TABLE OF CONTENTS Chapter 5 provided the foundation for activity-based costing and management. It describes the basics and how they fit into our new accounting and measurement model. Like all methodologies and tools, it does not represent a panacea for every situation and it does not solve every business problem. There is not one right answer and there is not one right tool. Activity-based costing helps to bring clarity to cost management in areas where traditional cost management failed. Analyzing activities and processes in conjunction with the other profit-focused accounting tools is a necessity for organizations to meet today s business challenges. We will now gain greater understanding of where and how to effectively use activity-based analysis. Unless you know where to apply the tools and how they can be most effectively utilized, they will not be of any benefit.
The real key to activity-based costing and management is process and activity analysis. Once organizations go beyond their traditional functions and departments, real improvement becomes a possibility. When the business processes are identified, together with the activities and tasks that make them flow, it is then possible to know what changes to make and where and how to make them. This section is intended to direct attention toward continued improvement and ongoing optimization of operational effectiveness.
The real meat of activity-based analysis lies in using it to achieve continuous improvement in conjunction with lean and Six Sigma programs, balanced scorecards, and throughput accounting. While activity analysis can be conducted in manufacturing...
