Cost & Effect

"When activity-based costing is used proactively in the budgeting process, it blows away conventional thinking about fixed and variable costs."

"Managers can view the development of their integrated cost and performance measurement systems as a journey through four sequential stages."

"Inadequacies arise from poor internal controls for recording transactions so that transactions are either not recorded or are recorded incorrectly."

"Most service companies do not suffer from distorted cost numbers since they do not measure the costs of producing their individual products, delivering their individual services, and serving their individual customers."

"Activity-Based Cost systems are not useful for short-term operational decisions and control."

"No fundamental conflict exists between the product costs calculated by an Activity-Based Cost system and the external requirements for objective, consistent valuations of inventory and cost-of-goods sold."

"For kaizen costing to be effective, work teams are provided with detailed cost information on a continual basis."

"Profit is a more comprehensive financial signal than cost, and profit enhancement is proving to be a more powerful motivator for improvement than cost reduction."

"Classifying resource expenses by activities performed accomplishes a 90 degree shift in thinking about expenses."

"If we had to reintroduce ABC, perhaps we would not include the word "costing" in its title."

"What makes a resource cost variable in a downward direction is not inherent in the nature of the resource; it is a function of management decisions."

"The failure to capture benefits from operational or strategic decisions is not because costs are intrinsically fixed. Rather, the failure occurs because managers are unwilling to exploit the unused capacity they have created."

"The cost of unused capacity should not be ignored; it remains someone's or some department's responsibility."

"Reengineering cannot deliver on its promise for breakthrough improvements in cost and performance without substantial front-end investment."

"If none of these actions is feasible or economically justified, managers may have to confront the final solution?kill unprofitable products."

"The only downside of having a low cost-to-serve customer comes when the customer itself realizes that its behavior reduces costs to its supplier, and demands low prices in exchange."

"At the heart of target costing is a very simple syllogism."

"Service companies in general are ideal candidates for activity-based costing, even more than manufacturing companies."

"For service companies, even the basic operating costs of a standard product are determined by customer behavior."

"This narrow concept of a variable cost encompasses very few organizational resources."

"Costs flow on a conventional diagram from north to south. In activity-based budgeting, the analysis flows from the south to north."