Activity Based Costing (ABC)

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Activity Based Costing (ABC) is a multi-dimensional costing system. It replaces the traditional costing systems and provides more accurate and relevant costs of business processes, particularly for product pricing/profitability purposes.

In ABC, costs are assigned from General Ledger accounts to activities by activity drivers and activity performance is measured by cost drivers. An activity may have multiple cost drivers and business processes can be made up of multiple activities.

The two dimensional nature of spreadsheets is not suited for ABC and it is generally necessary to buy expensive database software applications that have limited user-definability.

Because Quantrix is a very powerful multi-dimensional modeling tool, it is very suited to the multi-dimensional nature of ABC.

I was therefore wondering if anybody has developed an ABC model in Quantrix and whether or not they have a Quantrix ABC template or beta model that they could email to me.

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Steve B.

My email address is [email:1ddypter]frank.wade@imparja.com.au[/email:1ddypter]

I am very interested in developing an ABC model using Quantrix.

Quantrix is ideal for this type of modelling because each ABC implementation is unique. No two companies have the same activities and cost drivers etc. ABC is also a multi-dimensional costing system.

With the natural language formula editor in Quantrix it is a lot easier to maintain and audit the model.

However, the secret is to develop a model that is simple in design yet is very powerful. I recently evaluated an ABC software application, but, it was too complex, with process flow diagrams etc. and “black box” magic to calculate activity costs.

Steve, I will be pleased to receive your model and work with you to develop a commercial model. I will do the same for you and will develop an ABC model for you to review.

If you are interested I will be happy to discuss a commercial business venture with you regarding implementing ABC in the USA.

I currently have a similar business venture in Australia to implement ABC in the new fiscal year.

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Frank, I haven’t heard from you. Are you still interested in the model?

Steve

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Just email it to [email:2zh98ksp]bailey8@maine.rr.com[/email:2zh98ksp]

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[quote:ej5o8dz3][i:ej5o8dz3]Originally posted by Steven B. [/i:ej5o8dz3]
[b:ej5o8dz3]Frank, if you have a specific need for an ABC model, I would be willing to help you with it’s design. I think it is an interesting model and could be a nice template to build using some of the latest features of Quantrix. What can be really powerful is to run scenarios in Quantrix such as changing some overhead rates and drivers to quickly determine which variable will be best.

Steve [/b:ej5o8dz3][/quote:ej5o8dz3]

Steve,

I will start developing an ABC model and will email a copy of it to you.

What is your email address?

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Frank, if you have a specific need for an ABC model, I would be willing to help you with it’s design. I think it is an interesting model and could be a nice template to build using some of the latest features of Quantrix. What can be really powerful is to run scenarios in Quantrix such as changing some overhead rates and drivers to quickly determine which variable will be best.

Steve

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Frank,

Agreed – Quantrix could be an ideal tool for preparing an Activity Based Costing model: activities aggregated into business processes cutting across general ledger accounts and time… linked matrices to define drivers, etc…

So far, though, we do not know of anyone who is specifically doing this or who has prepared any templates for this purpose.

It would be great if you decide to develop something of this nature and would like to share it with other Quantrix users through the forum or other means. In the mean time, if anything comes up in this area, we’ll let you know.

Regards,

Chris Houle