Accounting assignment 2(d) To distinguish Between ABC and ABM, the table is used.

ABC
ABC refers to the technique of determining the cost of activities and the cost of output that those activities produce. The aim of ABC is to generate improved cost data for use in managing a companys activities.

ABM
It refers to the management philosophy that focuses on the planning, execution and measurement of activities as the key to competitive advantage. The ABM is a much broader concept. Its aim is to use information generated by ABC, for effective business processes and profitability.

So why might a company adopt ABC? Many textbook has argue that the traditional costing method is inefficient; this is because traditional method have high amount of cost of errors, and most the cost errors contribute to bad strategic decisions which caused by unreliable and distorted cost information. (Cooper 1988b). Cooper also mentioned that ABC will to better decision making; companies that adopt this method will have: a) Higher rate of return b) More accurate and fair estimate of product cost. (especially overhead cost) Other Factors that motivates company to adopt ABC as a new system i) ii) iii) iv) v) Product diversification Process diversification Diversification of support functions Cost allocation Increase in indirect cost