Activity-Based Management for Cost Control Research Proposal

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The cost driver for Underwriting costs are "review hours' in the form of labor costs and the cost driver for Technology cost is 'IT hours'" (Kren 2008). In the scenario, some costs involve committed resources that cannot be easily adjusted while others do not. ABM provides guidance as to how to adjust the flexible aspects of the enterprise. For example, the average cost per hour for the Underwriting input at the plan level of activity is $44.13 but when the organization is operating at full capacity, the average cost per hour falls to $38.00, "because the cost of resource that is not needed is being spread over the service that is needed. Thus, one could argue that $38.00 per hour represents the 'true' cost because there is no excess capacity cost to burden the resource that is needed" (Kren 2008). Reducing non-full capacity operations is deemed critical to reducing costs.

The format of the article is somewhat problematic. On one hand, the inclusion of helpful, clear definitions of ABM vs. conventional styles of accounting and cost control are illuminating. But there are no examples drawn from real life to show how ABM is better than conventional methods, although the rhetorical case the article makes is indeed persuasive.

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The inclusion of a single, extended, fictional example, even though it has extensive figures and close, line-by-line analysis is questionable because it is created to prove the author's point. Nor are there any examples of conventional accounting methods to illustrate how they are inferior, and would result in less efficient cuts than ABM.

Presenting examples from real life would have made the author's case more convincing. Using LakeSide as an example of how the technique of ABM works in theory could then be contrasted with how it works in actual fact. Examples of how organizations, especially major organizations, have added value by adopting ABM would make this article genuinely persuasive, rather than a kind of textbook case study of the technique, and might actually sway members of its intended audience to consider and adopt ABM within their own organizations. There is also the final question of why traditional cost accounting methods are used at all, if they are so inferior -- but as the opposing side is never addressed, the contrast between the two styles remains an open question in the reader's mind.

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Latest APA Format (6th edition)

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"Activity-Based Management For Cost Control" (2009, July 16) Retrieved May 5, 2024, from
https://www.aceyourpaper.com/essays/activity-based-management-cost-control-20549

Latest MLA Format (8th edition)

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"Activity-Based Management For Cost Control" 16 July 2009. Web.5 May. 2024. <
https://www.aceyourpaper.com/essays/activity-based-management-cost-control-20549>

Latest Chicago Format (16th edition)

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"Activity-Based Management For Cost Control", 16 July 2009, Accessed.5 May. 2024,
https://www.aceyourpaper.com/essays/activity-based-management-cost-control-20549
   

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