Degree of Detail in ABC

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Degree of Detail in ABC
When planning to build an ABC model it is essential to first make the decision what level of detail ABC is to be captured. This depends on what questions are to be answered:
1. Strategic (about 100-150 Activities). This is the most common application and is used to deliver customer and product profitability and visibility where the costs are incurred.
2. Operational (500+ Activities). At this level, individual tasks are captured and these models are commonly used for process improvement.

This depends on:
1) For one special sector it is very few probable to summarize the information.. I explain: in one sector in South America it is impossible to work with a lot of dates the one activity or reverse position more activities, few and less dates.
2) It is very interesting to applicate the ABC system when the firm has experience and the possibilities to create competitive advantages.

Why ABC?
As a management tool, ABC is useful to certain organizations only. It depends on the type of management style the organization is adopting. The cost of implementation is high and the neccessity of having so much activities are questionable too. An effective and efficient ABC implementation depends highly on how it fits to the organization culture and management methods.
A good ABC implementation should include only adequate activities and ignore immaterial activities - focus on systematic way of generating data from the activities - the costs vs benefits analysis must conducted.

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