From the course: Activity-Based Costing
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Analyzing the outputs
- Okay, let's say you've completed the design and development of your ABC model. Let's also assume that you've produced some rather impressive-looking reports. But aside from looking pretty, what is the model actually telling you? What observations have you made that will be of interest to your stakeholders? Well, how about we spend some time analyzing our outputs? Remember, ABC is a strategic costing process that's designed to provide business insights. In particular, insights on what drives the business's overheads. Let's start with our cost pools. This pie chart shows the percentage breakdown of our cost pools. Why does this matter, you might be wondering? Well, remember, what you have produced using ABC is likely providing views of the business that have never been seen before. And straightaway, by looking at our cost pools, we can see that the largest one is, in fact, compliance, at 19% of total expenditure. Perhaps management will be interested to know this. The other thing this…
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