activity based cost management
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Joint CMG/PCMGLenhardt & Colton, LLC
Activity Based Cost ManagementActivity Based Cost Management
Joint CMG/PCMG Meeting
October 17, 2000
Joint CMG/PCMG Lenhardt & Colton, LLC Slide 2
October 17, 2000
AgendaAgenda
– Background of ABC Mary Prescott
– ABC in Program Support Pete Lenhardt
– Moving from ABC to ABM Pete Lenhardt
– Q&A All
Joint CMG/PCMG Lenhardt & Colton, LLC Slide 3
October 17, 2000
Joint CMG/PCMG Lenhardt & Colton, LLC Slide 4
October 17, 2000
Current StatusCurrent Status
Joint CMG/PCMG Lenhardt & Colton, LLC Slide 5
October 17, 2000
Status, cont.Status, cont.
Joint CMG/PCMG Lenhardt & Colton, LLC Slide 6
October 17, 2000
Perceived Cost
Actual CostActual Cost
Joint CMG/PCMG Lenhardt & Colton, LLC Slide 7
October 17, 2000
Activity Based Cost ManagementActivity Based Cost Management
“Activity-Based”Activity Based CostingActivity Based Management
Joint CMG/PCMG Lenhardt & Colton, LLC Slide 8
October 17, 2000
Input OutputActivity
Resource $
End Cost Objectives
ProjectsOfferings Customers
Demands
An Activity-Based ApproachAn Activity-Based Approach
Exploit the “Process Model” of Work
Joint CMG/PCMG Lenhardt & Colton, LLC Slide 9
October 17, 2000
What does “it” cost?– What is the annual
cost of Construction Management?
– What is the cost of a “typical” bridge design?
– How much does it cost to prepare a “complex” PS&E package?
Activity Based ManagementActivity Based Management
How well are we meeting our objectives?
Activity Based Performance
Measures
How can we institutionalize improvements?
Activity Based Budgeting
How do we know what to improve?
Activity Based Continuous
Improvement
How can we better manage
capital projects?
Activity Based Project/Resource
Management
Activity Based SolutionsActivity Based SolutionsProblem? Solution!
How much does it really cost?
Activity Based Costing
ActivitiesActivities
Activities Outputs
Resources
Activity Analysis
Inputs
Joint CMG/PCMG Lenhardt & Colton, LLC Slide 10
October 17, 2000
Master Activity ListActivity # Activity Name P/S Output
Output VolumeMeasure
OutputCount
Total Orig.Dollars
OTS-01 Produce a PS&EPackage.
P A PSE Package # of (n) PSEPackages
Seenormalization
workbookOTS-02 Provide OTS expertise to
non-OTS projects andprograms.
P An OTSresponse.
Level of effort (#of OTS hours)
LOE
OTS-03 Prepare municipal &utilityagreements/permits.
P ExecutedDocuments
# of (n) ExecutedDocuments
Seenormalization
workbookOTS-04 Manage consultant
contract process.P A managed
consultantcontract process.
# of (n) activeconsultantcontracts
Seenormalization
workbookOTS-05 Develop customized
software and systems.P Supported
ApplicationPackages
# of (n)SupportedApplicationPackages
Seenormalization
workbook
OTS-06 Develop/design finalproject plans & aestheticdesign guides.
P A final projectplan or aestheticdesign guide
# of (n) finalproject plans/aesthetic guides
Seenormalization
workbookOTS-07 Design and deliver OTS
Training Events.P Training # of (n) training
events.See
normalizationworkbook
OTS-08 Prepare and distributeprogram support reports.
P An authoredreport
# of (n) OTSreports
Seenormalization
workbookOTS-10 Publish and update
standards andspecifications.
P Published/updated standards andspecifications
# of (n)published/updatedstandards &specifications.
Seenormalization
workbook
OTS-98 Manage and administerOTS activities.
S NA NA NA
Grand Total
Partial Activity List—OTSPartial Activity List—OTS
Joint CMG/PCMG Lenhardt & Colton, LLC Slide 11
October 17, 2000
How much does it cost?
On which activity do we spend the greatest amount of resources?
Activity Cost Pareto ReportActivity Cost Pareto Report
Joint CMG/PCMG Lenhardt & Colton, LLC Slide 12
October 17, 2000
How much does it cost to… manage and administer
our primary (core) activities?
Secondary ActivitiesSecondary Activities
Joint CMG/PCMG Lenhardt & Colton, LLC Slide 13
October 17, 2000
How much does it cost… to complete one unit of output?
Dollars Per Output SummaryDollars Per Output Summary
Joint CMG/PCMG Lenhardt & Colton, LLC Slide 14
October 17, 2000
Activity Dictionary EntryActivity Dictionary Entry
Joint CMG/PCMG Lenhardt & Colton, LLC Slide 15
October 17, 2000
TS1—Produce a PS&E PackageTS1—Produce a PS&E Package
Normalization Criteria
Joint CMG/PCMG Lenhardt & Colton, LLC Slide 16
October 17, 2000
TS1—Produce a PS&E PackageTS1—Produce a PS&E Package
Normalization Factors
Joint CMG/PCMG Lenhardt & Colton, LLC Slide 17
October 17, 2000
TS1—Produce a PS&E PackageTS1—Produce a PS&E Package
Hours Per Output Type
Joint CMG/PCMG Lenhardt & Colton, LLC Slide 18
October 17, 2000
TS1—Produce a PS&E PackageTS1—Produce a PS&E Package
Dollars Per Output Type
1.0X
Joint CMG/PCMG Lenhardt & Colton, LLC Slide 19
October 17, 2000
TS1—Kinds of Resources per OutputTS1—Kinds of Resources per Output
Joint CMG/PCMG Lenhardt & Colton, LLC Slide 20
October 17, 2000
From ABC to ABMFrom ABC to ABM
Identify improvement opportunities
Reduce NVA Improve VA
Develop process controls
Non-financial process reports
Process Controls
Current ABC Project
Identify Resources
Develop ABC Information
Identify outputs and CPO
Identify Activities
ABC info for strategic decisions
Strategic Information
Develop action plans
Improvement Project Status Reports
Process Improvements
Incorporate in new budgets
Activity Based Planning & Analysis
Resource Controls
Cost, Quality, Time (CQT)
Performance Measures
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