Q6RQ - Horngren'S Financial And Managerial Accounting

Question

Question: What is activity-based management? How is it different from activity-based costing?

Step-by-Step Solution

Answer

Answer

Activity-based costing points to acknowledge and limit cost drivers by amplifying assets, while activity-based management concentrates on trade forms and administrative exercises driving authoritative business objectives.

Step 1: Meaning of Activity-based management

Activity-based cost data is employed to influence administration choices in activity-based management (ABM), a systematic, coordinated methodology that increases productivity and fulfils customers. ABM generally includes options on estimation and product mix, cost reduction and preparation improvement, and product planning.

Step 2: Different between activity-based costing and activity-based management.

Activity-based management makes decisions that boost customer happiness while raising profitability using activity-based cost data. Activities are the direct cost items in activity-based costing. The costs of the activities then serve as the cornerstones for dividing overhead expenses among goods and services.