ABC Accounting Systems

Now we have a real management tool.

The numbers are still all the same, but they are now reduced to a per unit of output. These outputs are what really drives each activities costs.

**Comparative Income Statement using Activities and selected Activity Drivers**
	20X2	Output Qty	Cost per Output	20X1	Output Qty	Cost per Output
Revenues:
Sales	8,924,000			7,593,200
Other	8,300			12,700
	8,932,300			7,506,900
Cost of Goods Sold	5,505,000			4,528,900
Gross Profit	3,427,300			3,077,000
Marketing Activities:
Direct Mail Program	156,000	143,000 pieces	1.09	212,000	143,000 pieces	1.48
Trade Shows	83,000	6 each	13,833	87,000	7 each	12,428
Networking	65,000	2,200 events	29.55	43,000	2,200 events	19.55
	304,000			342,000
Selling Activities:
Sales Meetings	12,500	543 each	23.02	14,000	543 each	25.78
Contract Development	6,400	125 each	51.20	18,500	125 each	45.19
	18,900			32,500
Operations Support Activities:
Sales Order Processing	65,400	8,500 orders	7.69	63,800	7,900 orders	8.08
Purchasing	765,000	15,000 POs	51.00	723,000	16,000 POs	45.19
	830,400			786,800
Other Support Activities:
Administration	1,224,400			929,800
Business Planning	268,000			240,000
Personnel	126,000			131,000
Accounting	85,000			90,000
	1,703,400			1,390,800
Income before Income Taxes	570,600			524,900
Income Tax	199,300			171,900
Net Income	371,300			353,000

Now who couldn't do a better job at managing this company with this kind of information?

Each of the processes that repeat have cost benchmarks expressed in units of activity. Your management goal becomes clear - produce more output with less inputs in each of these activities. Greater efficiency will fall to the bottom line in the form of higher profits.
The second goal would be to examine the Other Support Activities to see what other repeating processes might exist in these catagories that could be broken out into seperate activities to make them more managable.
The end result is that you are managing processes rather than paperclip usage.

How do you find out more?

Call Jim Payne, CPA in Gainesville, Florida at (352) 376-9401.

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