Impact of Banking Institutions

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Running head: RESEARCH PAPER Brenda Thomas LeTourneau University Research Paper In partial fulfillment of MBAC5213 Dr. Fred Carlson August 26, 2012 Abstract Activity-based management is a technique used by companies to identify and evaluate activities using activity-based costing and value analysis. Activity-based management focuses on managing activities to reduce costs and improve customer value. This paper focuses on the techniques and processes a company uses to remain competitive in the twenty-first century. The History Behind ABC and ABM In Peter B.B. Turney’s book Activity-Based Costing, the techniques of activity-based costing and activity-based management can be traced back over thirty years. These two…show more content…
According to Mowen, “activity-based management draws on activity-based costing as a major source of information” (Mowen 731). Activity-based management can be favorable to an entire company. It does not have to only go through high level management. It can affect managers who are not at the very top of the company. This makes information more understandable to team members and can build morale because they feel more involved. Because of the increased morale individual activities can increase and also affect the organization as a whole. Activity-Based Costing Activity-based costing, or ABC, is defined as “a total quality management tool for cost and performance measurement of activities, resources, and cost object” (Narong 12). Activity-based costing allows business to accumulate information and data about operating costs of the company. Three things made this popular in the 1980s. First, it “eliminated the product cross subsidies inherent in cost accounting. Then, it revealed the sources of loss that were responsible for the decline in profitability. Third, it acted as a catalyst for decisions affecting profitability” (Turney 4). Activity-based costing allows firms activities to be identified. After the activities are identified, products are then assigned different indirect costs. Activity-based costing is sometimes referred to as horizontal or cross functional cost view. It provides
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