Know your real costs then price and budget accordingly
Products services customers etc consume activities that use resources which incur costs. With a good understanding of the underlying costs planning to achieve satisfactory margins and satisfied customers is easier to accomplish.
A realistic estimate of the cost of products, services, customers and unused capacity is vital to successful business performance. ABC Focus software is a dynamic implementation of activity based costing used to cost products, services or customers.
The software includes ground-breaking tools for viewing costs and analyzing activities. Thus you can see if your efficiencies are within expected range. If not you can establish what needs to be changed to improve future financial performance. Thereby both professional costing and intelligence are provided.
It is a tool which makes activity based costing concepts simple to understand and use. It is a very attractive package because its flexible costing model, consolidated reporting and a very competitive pricing regime make it suitable for large and small business in virtually any industry.
ABC Focus costs any aspect of the business
ABC Focus costs
- manufactured products
- good bought in and sold
- services provided
in fact any aspect of the business or organization.
Both direct and indirect costs are examined whilst you are guided through the costing and margin evaluation process.
Costs are assigned to products based on their usage of materials, expenses, facilities and people.
Direct costs include direct labour, materials and expenses and these are assigned directly to the products and services, or cost objects, which consume them.
Indirect costs (sometimes called “overheads”) include
- service-related costs such as administration, computer and personnel department
- customer related costs such as the sales department, maintenance and deliveries, etc.
Management of cost pool activities
The program refers to these activities as activity cost pools. In smaller organisations one or two people may carry out the activities; in large organisations there may be several departments or divisions that are responsible for services.
To properly cost and manage costs the cost pools or overheads must be allocated in a meaningful way to the products or services (cost objects) of the organisation.
By using ABC Focus an organisation will have a better appreciation of its costs and activities.
The program acts as a guide through the analysis process and assists with the management of costs and activities. It will identify value-adding (and value-destroying) activities and products and aids with cost management and control.
ABC Focus also provides a structured approach to re-engineering the activities carried out in the business: resource consumption should be minimized while outputs are maximized.
Activity based costing budget / output budget
The conventional approach to budgeting increments current amounts. For variable costs where there is a clear connection between production and sales volume this approach is feasible. However it doesn't work well for allocating cost of vital support activities to the end product. This is where costing the activities that makeup the product/service and budgeting based on the cost of activities is a better approach.
Why ABC Focus?
Know your costs
Determine total costs (direct and indirect) for products, services, processes, activities and unused capacity
Identify expensive activities
Examine contributors to costs and draw attention to inefficiencies so managers can allocate resources to where they are most beneficial.
Know your most profitable and least profitable products and customers.
Audit trails and integrity checks for data entry are built-in.
Composite objects can be created from the cost objects in a model.
Virtually any transaction is possible with extended capabilities of user journals
Reporting is extensive.
Who needs this software?
Products services customers etc consume Activities that use Resources which incur Costs. Any entity involved in the sale of goods or services in a price sensitive market benefits from assurance that their prices reflect ALL their costs. Activity based costing methodology provides a more accurate basis for pricing and activity based future planning including budgets and forecasts. If the following apply to your business this software provides a great solution
- Are the overhead costs of your business a sizable portion of total operating costs?
- Would you gain a competitive advantage from product, service, process and customer profitability analysis?
- Would Activity based budgeting improve your budget quality
What ABC Focus can help you with:
- Useful for obtaining costing information
- Answers the question – what do things cost. Once the cost has been determined the software can be used to help focus the entity on implementing steps to reduce costs where practical and do the activities in a more practical way
- It is based around the activities of an organization: “The activities an organization does determines its nature”
- A business does what it does because of the activities that it does. Those activities consume resources. ABC Focus helps to cost the activities and hence cost the output of the organization
- The outputs can be products, services, customers
- ABC Focus allows the user to get a good approximation of the total real costs of products, services and unused capacity
- ABC Focus can include capital costs
- ABC Focus can provide all the benefits of output based budgeting
- Can be used to monitor costs every month and compare costs month to month
- Can cost processes