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E X E C U T I V E

P R O G R A M

C E N T E R

Activity Based Costing

A Step-by-Step, Proven Path for Rapid Implementation

T E C H N O L O G Y

I N D U S T R I A L

R E L A T I O N S

PROGRAM INCLUDES
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Software models Implementation worksheets Time Phased PERT Implementation Plan Activity Based Cost Management: Making it Work

O F

I N S T I T U T E

Alan G. Dunn

November 12-13, 2001 March 11-12, 2002

C A L I F O R N I A

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Activity Based Costing

Comments from Past Participants Understanding the steps and definitions of activity based costing will enable me to implement this strategy at Thompson. Annette DiGorga Controller Thompson Industries, Incorporated Program Background and Purpose To compete successfully, companies must change the way they report and manage costs. This means replacing old institutions of cost accounting and inventory valuation.

Activity Based Costing (ABC) is a managerial accounting system which determines the cost of activities without distortion and provides management with relevant and timely information. It does not represent just a new set of overhead allocation rules or tech-

The outline of what is needed to implement activity based costing and the broader scope of what we think of as non-value-added costs are very important concepts that I can apply in my job. Ronald W. Sucy Manager, Costing and Budgets The Jackson Laboratory

niques to value inventory. ABC represents a way to look at operating costs and provides methods to dissect the underlying activities, which cause costs to exist.

Activity Based Management (ABM) is a natural extension of ABC. It allows leaders to examine non-value-added activities and make rational decisions to eliminate them. ABM relies on the Activity Based Costing system to specify where non-value-added activities exist and to value the monetary benefits associated with their Looking at value-added versus nonvalue-added brings a new focus on the implementation plan and the activity center analysis. The program is well organized and thorough. Jeffrey Haines Associate Director SmithKline Beecham Pharmaceutical elimination.

This extended two-day, intensive executive program provides all you need to know to begin your ABC implementation project. Participants learn specific actions needed to effectively implement and use ABC. While some theory is presented, the bulk of the program is devoted to demonstrating how ABC can be quickly and economically implemented. Participants should prepare themselves for a unique learning experience designed to achieve quick and sustainable results.

Program Agenda
Executive Overview of Activity Based Costing (ABC) and Activity Based Management (ABM)
s How the need was created for better cost accounting s How to compare traditional and activity based cost reports s Macro level Activity Based Costing s Micro level Activity Based Costing s Reasons for cost accounting and ABC s Elements of financial costing, competitive costing, and

Phase 3 - Developing a data integrity process s Impact of poor data in any cost model s How to develop a formal data integrity process s Using Missing Data reports s Using Cyclic Data Certificate reports s Executive data integrity monitoring s Leadership benefits from solving the data integrity problem Phase 4 - Determining the real sources of product cost s How to define activity centers s How to identify and differentiate Production Activity Centers (PACs) and Support Activity Centers (SACs) s How to segment SACs into Factory Support Activity Centers (FSACs) and Business Support Activity Centers (BSACs) s How to replace cost center, work center, profit center, and department definitions with new activity center definitions s How to create the necessary general ledger accounts and interfaces Phase 5 - Describing the activities performed in each activity center s How to determine each activity centers resources and create a resource schedule s How to identify and document significant activities performed in each activity center s How to develop activity center specific definitions of valueadding (VA), non-value-adding (NVA) and non-value-addingrequired (NVAR) s How to determine each activity centers customers s How to determine and document the level of effort required to support each internal customer s How to use the resource schedule and activity analysis to immediately begin reducing costs s How to rank and select waste elimination projects using the 22 42 matrix s How to mobilize employees to eliminate non-value-added activities themselves

managerial costing s New P&L formats s How to use Activity Based Costing to support Activity Based Management s The importance of data integrity

Principles of ABC/ABM
s Important principles of ABC s How not to take a good idea too far s ABM: a systematic approach to eliminate waste

How to Implement ABC A Nine Phase Plan

s The best way to approach an ABC/ABM implementation s The importance of mobilizing employees early in the process

Phase 1 - Preparing the company for ABC/ABM s Defining ABC/ABM mission s Determining the technical, organizational, cultural and external impediments to implementing ABC s Determining training requirements s Developing innovative cost reports including contribution focused product line P&Ls s Identifying accounting rules s Identifying regulatory, statutory, FASB and GAAP conflicts Phase 2 - Organizing to implement ABC s Developing a reasonable implementation plan s Determining the necessary resources for implementing ABC/ABM s Organizing a cross-functional implementation team s Analyzing why some ABC/ABM implementations fail and how your company can succeed

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Phase 6 - Determining the relationships of cost sources

s How to describe the relationships between production and

Customized Programs All programs offered by the Caltech Industrial Relations Center can be customized to meet the specific needs of your organization and offered at significant cost savings at your facility. Customized programs address important company issues in a confidential environment, build a team with a common language, and save travel time and costs for participants. Among the wide selection of programs which can be customized to your companys requirements, are the following:
s Activity Based Costing s Manufacturing Cost Strategies s Measuring Business Performance s Integrated Strategic Planning s Successful Project Management

support activity centers

s How to allocate individual cost partitions (instead of total

activity center costs)

s How to develop a cost flow map

Phase 7 - Developing an Activity Center Performance and Cost Diagnostic (ACP&CD) tool to describe the total costs of each activity center s How to develop and use cost diagnostic tools s How to define the sequence of activity centers to analyze s How to link diagnostic tools and invent new allocations rules s How support costs can be automatically allocated via an activity model s How to test diagnostic values by performing a slice analysis Phase 8 - Calculating other allocation values s How to develop a Material Acquisition Burden (MAB) diagnostic tool s How to develop a Product Line Support Overhead (PLSO) diagnostic tool s How to develop an Unmodeled Overhead (UO) diagnostic tool Phase 9 - Using Activity Based Costing to make decisions s How to roll up material, labor, burden and overhead into an activity based product line P&L s How to use ABC within the confines of an existing database s How to flow cost data into segmented P&Ls s How to develop a Product Cost Portfolio Report s How to replace financial reporting with causal metrics

For complete details regarding customized programs, please call 626 395-4042 or email cstprg@caltech.edu.

Special Features Participants are invited to attend a dinner the first evening of the program, which provides an opportunity to share information and ideas with the instructor and other participants. Participants receive: Tools necessary to successfully and immediately implement ABC in your organization s Activity-Based Cost Management: Making it Work by Gary Cokins s Time Phased PERT Implementation Plan s ABC software models s ABC implementation worksheets During the program, participants operate a simulation model, which demonstrates how product costs can change as multiple operating parameters are changed elsewhere in the organization.

Beyond ABC... Extending ABC into Predictive Cost Modeling

s Defining Predictive Cost Modeling (PCM) s Understanding the comprehensive cost management data-

base s Using ABC to predict product line costs s Using ABC to understand all sides of any business decision s Extending the Product Cost Portfolio Report into PCM... turning ABC into a powerful decision tool s Creating a simulation tool for predicting cost changes which result from multiple and concurrent cost parameter changes

Internet Access www.irc.caltech.edu

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Program Leader

Alan Dunn is president of GDI, a consulting and training company, and chairman of GDIs business investment firm. He specializes in manufacturing management, cost management, and business finance. Previously, Mr. Dunn was a partner at Coopers & Lybrand and was a vice president at Gemini Consulting. Mr. Dunns clients include: Allied Signal, American Cyanamid, Amgen, AT&T, Baxter, Boeing, Chiron-Cetus, General Instrument, General Motors, Hughes Aircraft, Hyland Labs, Intel, Johnson & Johnson, Loral, Pacific Telesis, SmithKline Beecham, Tellabs, Toshiba, the United States Departments of Defense, Energy, and Justice, and United Technologies. Mr. Dunn is an international educator, speaker, and author in manufacturing systems, information systems management, cost management, value engineering, business transformation, and business finance. He has addressed the American Production and Inventory Control Society (APICS), the Council of Logistics Management (CLM), the Society of Manufacturing Engineers (SME), and the National Association of Accountants (NAA). His articles have appeared in The Los Angeles Times, Journal of Manufacturing Systems, Material Handling Engineering, Automation, Production and Inventory Review, Managing Automation, Warehouse Cost Digest, Transformation Magazine, and Industrial Engineering Management. Mr. Dunn holds a bachelors degree in business management from California State University, Fullerton.
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