Background to Contribution-Based Activity (CBA)
CBA grew out of the need for business to keep the forest in view while working “flat-out” down in the trees.
The accounting section of ABCo finalizes an $8,000 invoice for Job 143. Because the job has taken longer than expected, management discounts the bill 5% before sending an invoice for $7,600 to the customer.
Unknown to management, which considers the business to be running “flat-out,” productivity is running at the rate of 15,000 billable hours and not the planned 20,000 hours required to achieve the output upon which so much depends. The business is heading for a shortfall of $250,000.