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1.0 Activity Based Management (ABM)
ABM describes the use of ABC information to improve profitability and customers’ management decisions. ABM information can helps in determine prices, product mix, cost reductions, product or process redesign, process improvement, and planning or managing activities (Bhimani, Horngren, Datar, ; Foster, 2008).

2.0 Cost Dimension and Process Dimension
2.1 Cost dimension
Under the cost view, ABM is a cost accounting system (called activity-based costing). It is a system for more accurately determining the total costs of products and services (Bitner ; Trussel, 1998). Cost dimension provides costs information about activities, resources, and cost objects such as products, suppliers, customers and distribution channels. The goals of cost dimension is to improve the accuracy of cost allocation. As the model shows, the cost of resources is can be traced back to activities, and activity cost are then assigned to cost objects. This activity-based costing dimension is useful for product costs, strategic costing, and tactical analysis (Hansen ; Mowen, 2005).
Thus, ABC uses two-stage process to allocate resource costs to cost objects. At the first stage, resource costs are allocated to activities by resource drivers. Resource drivers are the factors that estimate resource consumption through activities. Each resource tracked to the activity becomes a cost element of the activity cost pool. Therefore, the activity cost pool is the total cost associated with an activity. An activity center is consist of related activities, usually aggregate by process or functions. We can create activity centers based on different information needs. In the second phase, each activity cost pool is allocated to the cost objects by using a sufficient activity driver that used to measure the activity consumption of the cost objects (Turney, 1992). If the cost objects is a products, the total cost of a particular product can be calculated by increasing the costs of the various activities assigned to the product. The unit cost of a product is achieved by dividing the total cost by the number of the products (Tsai, 1998).

2.2 Process dimension
The process dimension provides information about what activities are being executed, why they are put into effect, and how well they are performed. The goal of this dimension is to reduce costs. It is this dimension that provides the ability to participate in and measure continuous improvement (Hansen ; Mowen, 2005). In this dimension, resources are allocated to activities and use appropriate cost drivers rate to absorb products and customers. The process dimension focuses more on the activities involved and how well they work, so the dimension will determine what type of activities can work to reduce costs (Bhimani, Horngren, Datar, ; Foster, 2008).
Process value analysis transfers activity management from a conceptual basis to operation base. Process value analysis involved driver analysis, activity analysis, and performance measurement (Hansen ; Mowen, 2005).
Driver analysis defines the root cause. Managing activities need to know which factors contribute to the execution of the activities and the cause of the change in the cost of the activity. Activities consume resources and produce outputs. For instance, if the activity is to maintain the payroll master file, the resources used will be a payroll clerk, a printer, a computer, computer paper, and disks (Mowen, Hansen, ; Heitger, 2016). The output would be an updated employee file. The activity output measure is the number of times the activity is executed. It is a quantifiable measure of output. For example, the number of employee files maintained is a possible output measure to maintain the paymaster file. The output measure calculates the requirements for an activity and is an activity driver. The purpose of driver analysis is to reveal the root causes. Therefore, the driver analysis is to determining the root causes of the activity costs (Hansen ; Mowen, 2005).
The core of process value analysis is activity analysis. Activity analysis is the process of identifying, describing, and evaluating the activities performed by the organization. Activity analysis should produce four results which is what to performed, how much people perform, the time and resources needed to carry out activities, and assessment activities on the value of the organization, including the choice and the suggestion to keep only those who add value (Jones, Rich, Hansen, Mowen, ; Heitger, 2011).
The purpose of the activity performance measurement is to evaluate the implementation of the activities and the results achieved. The methods for measuring the performance of activities include financial and non-financial and mainly focus on three main dimensions. Efficiency, quality, and time. Efficiency related to relationship between activity outputs and activity inputs. For example, activity efficiency can be improved by using less input to produce the same activity output. The decline in the cost trend indicates that activity efficiency is improving. Quality refers to the activity carried out during the first implementation. If the activity output is defective, it may be necessary to repeat the activity, resulting in unnecessary cost and reduced efficiency. The time required to execute an activity is also critical. Longer times generally mean more resource ingesting and less responsiveness to customer needs. Time measures are often non-financial indicators, while efficiency and quality measures are financial and non-financial (Hansen ; Mowen, 2005).

3.0 Value-Added and Non-Value-Added Activities
3.1 Value-Added Activities
Value-added activities are necessary to maintain the business operations. Value-added activities help customer value and/or help meet the needs of the organization. Activities that meet the legal order are value-added as they exist to meet the needs of the organization. In addition, customer value is increased by allowing the business to continue to run, thereby gaining the products and services the customer needs (Hansen ; Mowen, 2005). When analysing the incremental value of an activities, these conditions must be satisfied. First, the function of activity is clear and definite; the activity can increase the value of the final products or services; and the activity cannot be removed, merged, or replaced. If one of the conditions is not suitable, this activity is not a value-added activity (Chen, Qiao, ; He, 2013).
Examples of value-added activities in a manufacturing include engineering design, processing, painting, assembly, and packaging. Some examples of service companies’ activities are surgery, provide legal research for legal services, or delivering packages by a delivery service (Kieso, Weygandt, & Kimmel, 2010).
Inspecting production worker, management activity are designed to manage other value-added activities to make sure that they are implemented in an efficient and timely manner. Supervision positively satisfies the enabling condition. Is there a change in state? There are two ways of saying yes. First, monitoring can be seen as a resource that can be consumed by running activities, which can produce a change in state. Therefore, supervision is a secondary activity that can be used as an input to help achieve the expected state of value-added activities. Secondly, it can be said that the supervision brings order by transforming the state from uncoordinated activities into coordinated activities (Hansen & Mowen, 2005).

3.2 Non-Value-Added Activities
Some activities increase the value of a product or services, while others do not. Non-value added activity are activity that are considered not to contributing to customer value or organisational needs. This is defined as waste. The recognition of waste is valuable for management (CIMA, 2001). Non-value-added activities are activities that do not meet with 3 conditions. Non-value-added activities are operations that are either unnecessary and replaceable or necessary but improvable and inefficient. There are three standards for identifying non-value-added activities. Is the activity necessary? If it is repetitive or non-essential, it is a non-value-added activity. Is the activity implemented effectively? Look at the goals, budget and benchmarks. These activities are sometimes value-added, sometime without added value. For example, it may be necessary to move work-in-process units between production processes, but it is not necessary to move raw materials during storage (Bhimani, Horngren, Datar, & Foster, 2008).
From the analysis of the activity of insurance business, safety inspection is a non-value-added activity. Safety inspection is an important activity in the prevention of disaster. Disaster prevention is an unavoidable work for insurance companies. It aims to reduce the risk of operating costs, and through the holder and the insurer’s great effort to reduce or eliminate the influence of risk factors, thus reducing risk of operation costs and increase economic profits. The safety inspection of important policy-holders is a way to prevent disaster. This is a non-value-added activity, if all holders are responsible and consciously prevent disasters, this will become unnecessary. On the other hand, security inspection do not add value to the final products. This is also a preventive measure for insurance business, which increases the consumption of resource, labor, and wealth. However, this activity cannot be eliminated in short term, but can reduce its cost though extensive publicity, propagandizing, and so on (Chen, Qiao, ; He, 2013).
Non-value-added activity of policy check. The assessors will examine the policy and relevant materials at the end of the case. They must go over it carefully and sign the letter of indemnity. Just like examining activities in manufacturing companies, this is non-value-added activity, because quality comes from the production, not examination. Checking policy and related materials is only a negative precaution. It does not increase value to the final products. However, the implementation of TQC (Total Quality Control) will effectively reduce the inspection cost and improve the insurance company’s activity management (Chen, Qiao, & He, 2013).
Waiting Time, waiting for the next step in the process is one of the most obvious wastes, and obviously not adding value. For example, if a machine operator is wasting time waiting for the next batch of components to arrive, it is possible to eliminate waste by better scheduling. However, not all waiting time are a waste of time. Let’s say a worker’s job is to load off chunks of wood from a pallet and place them into the hopper of a finishing machine. He unloads the cargo as fast as possible so that the stacking machine can do other tasks, and then waits about ten minutes before the next pallet to land. This is not necessarily a waste of time. In some jobs “waiting time” may be a valuable break for workers as they are going to continue their job well. However, there are many of things can be improve to eliminate waste. For instance, why a person need to physically move large piece of wood. It is better use a machine to do. Waiting time also known as idle time, as which a person can do something does nothing. Eliminating or decreasing this idle time is reducing waste and improving value-added activities (Staff, not dated).
Excess Motion refers to the movement of materials, equipment, and supplies. In the above example, why does a stacking machine carry woods from one place to another? If the wood is cut into peace, then moved to warehouse for storage, then moved on pallets to the place where worker loads the wood blocks into the finishing machine. If the sawing operation is near with finishing machine, then the extra movement can be eliminated. The wood is then cut into the proper size and send to finishing machine immediately so that do not need to move it to warehouse. The redundant movement has been eliminated (Staff, not dated).
Overproduction means producing more product than what is needed immediately. If they produce more wood then they sell, it will be stored in warehouse. If most of the board are sold in the four weeks before Christmas, the supply needs to be built up before the holiday season. In most cases, overproduction lead to waste of inventory (Staff, not dated). As for these non-value-added activities, the company should fully consider the quality and costs in designing products. New products and derivatives should be redesigned to eliminate or reduce non-value-added activities. At the same time, companies can use backward induction to determine related activities products according to market demand. Then determine the cost and consumption of activities, and perform cost driver management and activity-based management. So that can improve company’s efficiency and competitiveness (Chen, Qiao, ; He, 2013).

4.0 Best Practices of ABM
4.1 Build customer profitability
In an increasingly mature and complex market, Taipei Fubon Bank need customers and customer group to accurately determine profit and loss data in order to maintain the service quality, reduce operating costs while increase profits. The bank has developed a customer profit management system that provides in-depth information on cardholder consumption patterns and profitability to build highly targeted marketing and retention plans. The system reduces costs by providing timely profit and loss management reports, thereby accelerating the adjustment of marketing strategies (Sadovy, 2010).
Taipei Fubon Bank, a subsidiary of Fubon Financial Holding Co., has highlighted the profitability of its customers since it emerged from the consumer finance credit and debit card crisis in 2006. Its Consumer Finance Division is the first in the company to implement customer profit management (CPM) system. The system extracts personal credit card transactions from a large database of complex customer transactions. The system then investigates each credit card transaction and analyses the actual costs and profits of customer or customer groups (Sadovy, 2010). After using the system, Taipei Fubon Bank has greatly improved its profitability and now they can make faster and more accurate decisions (Eng, 2016).

4.2 Pricing decisions
Even if the decision to trade in a particular market, it is difficult not to consider the unit price, and the determination of selling prices can rarely be effected. There is considerable evidence that ABC unit costs often reveal alarming profit variations between products as a result of prices developed from traditional costing systems. For example, Volkswagen Canada has applied ABC to its pricing process (Gurowka, 1996). A detailed list of activity costs highlights areas where product cost are increased and costs are reduced. The costing table has found uses to pricing current products, as well as future business pricing (Partridge ; Perren, 1998).
Volkswagen (VW) Canada’s plant in Ontario offers a number of integrated framework features for activity-based management. Just as VW Canada former senior finance officer Jim Gurowka (1996) stated, “ABM information will help VW achieve its goal of becoming the ultimate, cost conscious, world-class, customer-focused supplier”. The factory produces aluminium wheels, catalytic converters and die cast engine parts for public and third party customers around the world. As a captured customer, the parent company is encouraged to buy product from the cheapest producers, not just sister companies. This has led to a 25-30 per cent price fall in VW Canada, and it is necessary to find new third party customers to make up for the shortfall left by parent company’s orders (Partridge ; Perren, 1998).
In 1991, an ABC pilot project revealed that 80 per cent of products in the die casting areas were either loss making money or were had only marginally profit. Profitability is supported by some high income, which is a classic Pareto effect which had been cover up by old costing system. At this point, management’s attention is focused on growth and new information on ABC. The ABC project, without a champion, “went to sleep”. By 1993, however, the dramatic changes in technology and competition had led to the company’s aggressive action to maintain profitability. ABC was reactivated and helped management make difficult decisions based on reliable information. For instance, ABC information is critical to a decision to reengineer major business processes (Partridge ; Perren, 1998).
Many factors are considered important in the process of evaluating a successful ABC implementation. For example, joint project managers have a backgrounds in procurement, production, as well as finance. In addition, they made a strong commitment not only to share the ABC performance with managers but to share with all staff of entire plant (Partridge ; Perren, 1998).

4.3 achieve strategic goals.
Robertson et al. (1998, p.15) argued that service organizations such as universities need cost accounting systems to perform three major functions: “financial reporting for management and statutory purposes; understand the costs of activities, products, services and customers; and give response and insights to management on what causes costs. They further point out that ABC seem to be the only tool that currently available to provide information to service organization that meet the last two of the main functions. Like other public sector, public universities have a tradition of managing operations through budget control at cost centres (Granof et al., 2000). Financial performance is measured by comparing actual and budgeted results, where most of the costs of a particular cost centre come from pre-committed resources. This simple financial practice lead to a lack of accurate understanding of the cost of product or services provided by university management or the cost of different student enrolled. With ABC, university can measure the amount of resources consumed by individual cost centres and customers as well as the activities and processes that deliver products to customers (Ismail, 2010).