Costing, Chargeback, and Pricing
There’s no business like show business, but there are several businesses like accounting.
—David Letterman


Begin with the end in mind. The first step in implementing an ABC/ ABM project is to determine the customers of the process and the final objectives of these customers. The SIPOC model is an excellent tool for determining how the customers’ objectives will be fulfilled. SIPOC represents information and resource flow from suppliers to process inputs, converted in the process to output for the suppliers.
SIPOC: Suppliers → Input → Process → Output → Customers
To design the ABC/M system, start with the customers and work SIPOC right-to-left (COPIS). Who are the customers of your ABC system? You probably have three types of customers:
1. Lines of Business (LOBs) Consumers such as Product Managers, Market and Executive Management, and the LOB Chief Financial Officers (CFOs)
2. Shared Services Providers such as IT and HR
3. Cost Accounting Advisors, Implementers, Caretakers, Analysts
What are your customers’ objectives? These objectives will drive the scope of your ABC model and become customer requirements.

Objectives (Use) of ABC/M

There are several common objectives that drive ABC/M implementations. All of these objectives have different design implications. Some of the most common objectives include:
Provide accurate product and customer costs based on true consumption of resources. This is the primary reason ...

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