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Consulting Firm Spreads The Good Word About ActivityBased Costing

May 4, 2005 -- Dallas strategic management consulting firm RWSMC keeps spreading the good word about activity-based costing (or ABC). The firm recently made a presentation on ABC at the Moldmaking 2005 Expo in Chicago. Robert Kinsler and Robert Scroggins are the ABC consultants for the firm.



Kinsler says, "Of all the management tools out there, ABC is the one we see that provides the most benefits for the cost. It is a common sense way of determining the cost of the activities conducted by businesses and other organizations in fulfilling their missions and objectives. The activity analysis that is at the heart of ABC results in the calculation of the real cost of providing products or services and provides a better understanding of an organization. This opens the door to a variety of additional benefits, including realistic pricing, better budgeting, more accurate estimates, the analysis of customers, product lines, and sales areas, business improvement, and business reengineering. The list of benefits goes on and on. Many businesses can implement ABC in-house with some training or after working on a pilot project with an ABC consultant."



Kinsler goes on, "The large CPA and consulting firms that were formerly active in ABC went on to implement 'customer relationship management' and are now concentrating upon 'performance management.' They cashed in on the interest in ABC in the 1990s and "pushed" it for high level consulting engagements. They did some substandard work, used some poor quality personnel, and tried to "shoehorn" a large scale ABC installation for General Motors onto much smaller clients. Now that they've essentially left ABC consulting, dedicated ABC practitioners can repair some of the damage done and help businesses make more strategic use of the technique."



On an ABC engagement, RWSMC personnel initially perform an activity analysis of a business. According to Kinsler, "We perform the activity analysis in the amount of detail required by the size and complexity of the business and the purpose of the ABC engagement. This is very cost-effective because it allows us to limit the time spent on small to mid-sized firms, while performing an in-depth analysis for larger firms. After the activity analysis is completed, we build the ABC model and prepare any related analysis required for the specific engagement. We also limit our fees by using Excel spreadsheets instead of complicated and expensive software that needs to be installed, configured, and maintained."



Kinsler concludes by saying, "We think that in 25 years, activity-based costing will be widely recognized as the best method for calculating the real cost of doing business and one of the best tools for decision support. Until then, we'll continue spreading the good word about ABC."

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