Seminar on Management Accounting

Reaction Paper Assignment

Muhammad Agung Zandra (1710533029)

Muhammad Iqbal (1710531024)

Activity-based management (ABM)

Activity Based Management (ABM) is the management of activities to increase the value received
by customers and to increase profits through increased value. With Activity Based Management (ABM), a
company can evaluate the cost and value of a process activity so that there will be an improvement in
competitive position and increased process efficiency. In my opinion, ABM could be very useful for those
companies who implemented ABM, by:

1. Increasing the value received by customers from each activity undertaken.

2. Determining company activities that are value added activities and non-value added activities.
3. Increasing the value added activity and reduce and even eliminate non-value added activity.
4. Improving profits by providing customer value.

Activity Based Management (ABM) itself has several pros and conts: as described in
following descriptions. First, in pro side, ABM could measures the effectiveness of key business
processes and activities and identifies how these processes and activities can be improved to reduce costs
and increase value for customers. in dayly customer usualy want goods that we offer to them more
realational and emotional. Relational relate to qualty and price while the emltional relate to trust and
experience. ABM also able to improves management's focus by allocating resources to add value to key
activities, key customers, key products, and methods to maintain the company's competitive advantage.
Companies that implementing ABM has several reason or view in using ABM, for example, company
wanted to reduce prices and optimizing product designs, company cost, as well as assists in considering
new business opportunities. In the cont side, a company should consider properly before applying ABM.
First, considering the cost, time, and resources required, ABM may not be a best way for some companies.
The implementation of ABM is expensive, it requires many resources of a company, and consume time that
could not be as efficient as it expected. Different activities in ABM also requires different resources.

In the implemetation of ABM the are Activity Base Costing(ABC) and Process Value Added. ABC
will discuss about search on activity that produce cost so that the cost will expense to obyek( customer and
goods)

1. Source of cost
2. Activity cost
3. Obyek cost

PVA will dicuss about (what, why, and how well is it done?) So that in this process will create sustainability
systems in the company

1. Drivers analysis
2. Aktivity analysis
3. Performance analysis

Thus, company with intention to applying ABM in their management, should be aware and conduct
some consultation and training before directly applying ABM. Some adjustment should be made by
company, as they seek consultants with specialization in ABM. ABM also needs informations that could
be collected and gathered by company from ABC, if wrong information derived, it will enhance any issues
related to ABM implementation.There is no standard or parameter in ABM to identify non value
added activity because each business has its uniqueness and different operation. However, ABM
may be a good solution for company with intense price competition, with complex and differentiated
products, than simple one.