Learn Your Accounting ABCs --Dickeson
ABM (Activity-Based Measuring) would, however, work nicely in print production centers supported by Direct Machine Interfacing. With DMI in place, the computer logs time and events from the equipment directly to the computer. ABM would measure time of job activities that did not result in deliverable output. Call it ABM—Activity-Based "Measurement"—not Activity-Based "Cost." Keep the deliverable time and non-deliverable time by jobs in hours. Forget trying to convert time into dollars with a Budgeted Hourly Rate. We're delivering value added paper and ink over time.
Non-deliverable time (NDT) in production centers doesn't add value to raw materials. NDT constrains production throughput. NDT is a waste of capacity. It is the enemy of efficiency and effectiveness. By collecting and reporting hours spent in makereadies, stops, maintenance, holidays, weekends, waiting, re-work, we're measuring lost activity time—wasted time—NDT.
To illustrate Activity-Based Measurement, here's a rolling quarter table for a press production center. Note that there are 2,184 hours reported—the total time available in 13 weeks.
|Hours||Capacity Usage (%)|
But this isn't what's intended by typical Activity-Based Costing. It isn't "cost." It's hours. It isn't support. It's production. The "drivers" are grouped as either deliverables or non-deliverables. Production activities either add value or they don't. Black or white. On or off. Simple. Evocative reporting.
This is useful, credible, zero balancing information that will support decisions directed to adding value, not just piling on the cost fictions. Half the capacity is being wasted on this press. What shall we do about it?
At this point in time I'm not certain that typical Activity-Based Costing of printing support actions is either feasible or useful. The jury's still out. On the other hand, Activity-Based Measurement of production is very helpful for improving capacity utilization—for adding economic value—to increase profits.