A N E X E C U T I V E P R O G R A M

Activity Based Costing

C E N T E R

A Step-by-Step, Proven Path for Rapid Implementation

R E L A T I O N S
I N D U S T R I A L
T E C H N O L O G Y

PROGRAM INCLUDES

● Software models

● Implementation worksheets
O F

● Time Phased PERT Implementation Plan

I N S T I T U T E

Alan G. Dunn

● Activity Based Cost Management: Making it Work

November 12-13, 2001

March 11-12, 2002

C A L I F O R N I A

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 Activity Based Costing
Comments from Past Participants
“Understanding the steps and defini-
tions of activity based costing will
enable me to implement this strategy
at Thompson.”
Annette DiGorga
Controller
Thompson Industries, Incorporated
“The outline of what is needed to
implement activity based costing and
the broader scope of what we think of
as non-value-added costs are very
important concepts that I can apply in
my job.”
Ronald W. Sucy
Manager, Costing and Budgets
The Jackson Laboratory
“Looking at value-added versus non-
value-added brings a new focus on the
implementation plan and the activity
center analysis. The program is well
organized and thorough.”
Jeffrey Haines
Associate Director
SmithKline Beecham Pharmaceutical
Program Background and Purpose
To compete successfully, companies must change the way they
report and manage costs. This means replacing old institutions of
cost accounting and inventory valuation.
Activity Based Costing (ABC) is a managerial accounting system
which determines the cost of activities without distortion and
provides management with relevant and timely information. It does
not represent just a new set of overhead allocation rules or tech-
niques to value inventory. ABC represents a way to look at operating
costs and provides methods to dissect the underlying activities, which
cause costs to exist.
Activity Based Management (ABM) is a natural extension of ABC.
It allows leaders to examine non-value-added activities and make
rational decisions to eliminate them. ABM relies on the Activity
Based Costing system to specify where non-value-added activities
exist and to value the monetary benefits associated with their
elimination.
This extended two-day, intensive executive program provides all you
need to know to begin your ABC implementation project. Participants
learn specific actions needed to effectively implement and use ABC.
While some theory is presented, the bulk of the program is devoted
to demonstrating how ABC can be quickly and economically imple-
mented. Participants should prepare themselves for a unique learn-
ing experience designed to achieve quick and sustainable results.
Program Agenda
Executive Overview of Activity Based Costing (ABC) and
Activity Based Management (ABM)
■ How the need was created for better cost accounting
■ How to compare traditional and activity based cost reports
■ Macro level Activity Based Costing
■ Micro level Activity Based Costing
■ Reasons for cost accounting and ABC
■ Elements of financial costing, competitive costing, and
managerial costing
■ New P&L formats
■ How to use Activity Based Costing to support Activity
Based Management
■ The importance of data integrity
Principles of ABC/ABM
■ Important principles of ABC
■ How not to take a good idea too far
■ ABM: a systematic approach to eliminate waste
How to Implement ABC – A Nine Phase Plan
■ The best way to approach an ABC/ABM implementation
■ The importance of mobilizing employees early in the process
Phase 1 - Preparing the company for ABC/ABM
■ Defining ABC/ABM mission
■ Determining the technical, organizational, cultural and
external impediments to implementing ABC
■ Determining training requirements
■ Developing innovative cost reports including contribution
focused product line P&Ls
■ Identifying accounting rules
■ Identifying regulatory, statutory, FASB and GAAP conflicts
Phase 2 - Organizing to implement ABC
■ Developing a reasonable implementation plan
■ Determining the necessary resources for implementing
ABC/ABM
■ Organizing a cross-functional implementation team
■ Analyzing why some ABC/ABM implementations fail and
how your company can succeed
Phase 3 - Developing a data integrity process
■ Impact of poor data in any cost model
■ How to develop a formal data integrity process
■ Using Missing Data reports
■ Using Cyclic Data Certificate reports
■ Executive data integrity monitoring
■ Leadership benefits from solving the data integrity problem
Phase 4 - Determining the real sources of product cost
■ How to define activity centers
■ How to identify and differentiate Production Activity Centers
(PACs) and Support Activity Centers (SACs)
■ How to segment SACs into Factory Support Activity Centers
(FSACs) and Business Support Activity Centers (BSACs)
■ How to replace cost center, work center, profit center, and
department definitions with new activity center definitions
■ How to create the necessary general ledger accounts and
interfaces
Phase 5 - Describing the activities performed in each activity
center
■ How to determine each activity center’s resources and create
a ‘resource schedule’
■ How to identify and document significant activities performed
in each activity center
■ How to develop activity center specific definitions of ‘value-
adding’ (VA), ‘non-value-adding’ (NVA) and ‘non-value-adding-
required’ (NVAR)
■ How to determine each activity center’s ‘customers’
■ How to determine and document the level of effort required
to support each internal ‘customer’
■ How to use the ‘resource schedule’ and ‘activity analysis’
to immediately begin reducing costs
■ How to rank and select waste elimination projects using the
22 42 matrix
■ How to mobilize employees to eliminate non-value-added
activities themselves
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 Phase 6 - Determining the relationships of cost sources Customized Programs
■ How to describe the relationships between production and
support activity centers
All programs offered by the Caltech Industrial Relations Center
■ How to allocate individual cost partitions (instead of total
can be customized to meet the specific needs of your organiza-
activity center costs)
tion and offered at significant cost savings at your facility.
■ How to develop a cost flow map
Customized programs address important company issues in a
confidential environment, build a team with a common language,
Phase 7 - Developing an ‘Activity Center Performance and
and save travel time and costs for participants. Among the wide
Cost Diagnostic’ (ACP&CD) tool to describe the total costs of
selection of programs which can be customized to your compa-
each activity center
ny’s requirements, are the following:
■ How to develop and use cost diagnostic tools
■ How to define the sequence of activity centers to analyze
■ Activity Based Costing
■ How to link diagnostic tools and invent new allocations rules
■ Manufacturing Cost Strategies
■ How support costs can be automatically allocated via an
■ Measuring Business Performance
activity model
■ Integrated Strategic Planning
■ How to test diagnostic values by performing a ‘slice’ analysis
■ Successful Project Management

Phase 8 - Calculating other allocation values

For complete details regarding customized programs, please
■ How to develop a Material Acquisition Burden (MAB)
call 626 395-4042 or email cstprg@caltech.edu.
diagnostic tool
■ How to develop a Product Line Support Overhead (PLSO)
diagnostic tool
Special Features
■ How to develop an Unmodeled Overhead (UO) diagnostic tool

Phase 9 - Using Activity Based Costing to make decisions
■ How to ‘roll up’ material, labor, burden and overhead into an
activity based product line P&L
■ How to use ABC within the confines of an existing database
■ How to flow cost data into segmented P&Ls
■ How to develop a Product Cost Portfolio Report
■ How to replace financial reporting with causal metrics
Beyond ABC... Extending ABC into Predictive Cost
Modeling
■ Defining Predictive Cost Modeling (PCM)
■ Understanding the comprehensive cost management data-
base
■ Using ABC to predict product line costs
■ Using ABC to understand all sides of any business decision
■ Extending the Product Cost Portfolio Report into PCM...
turning ABC into a powerful decision tool
■ Creating a simulation tool for predicting cost changes which
result from multiple and concurrent cost parameter changes
Participants are invited to attend a dinner the first evening of
the program, which provides an opportunity to share informa-
tion and ideas with the instructor and other participants.
Participants receive:
Tools necessary to successfully and immediately implement
ABC in your organization
■ Activity-Based Cost Management: Making it Work by
Gary Cokins
■ Time Phased PERT Implementation Plan
■ ABC software models
■ ABC implementation worksheets
During the program, participants operate a simulation model,
which demonstrates how product costs can change as multiple
operating parameters are changed elsewhere in the organiza-
tion.
Internet Access
www.irc.caltech.edu

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Program Leader

Alan Dunn is president of GDI, a consulting and training company,

and chairman of GDI’s business investment firm. He specializes in
manufacturing management, cost management, and business finance.
Previously, Mr. Dunn was a partner at Coopers & Lybrand and was a
vice president at Gemini Consulting.
Mr. Dunn’s clients include: Allied Signal, American Cyanamid,
Amgen, AT&T, Baxter, Boeing, Chiron-Cetus, General Instrument,
General Motors, Hughes Aircraft, Hyland Labs, Intel, Johnson &
Johnson, Loral, Pacific Telesis, SmithKline Beecham, Tellabs,
Toshiba, the United States Departments of Defense, Energy, and
Justice, and United Technologies.
Mr. Dunn is an international educator, speaker, and author in
manufacturing systems, information systems management, cost
management, value engineering, business transformation, and busi-
ness finance. He has addressed the American Production and
Inventory Control Society (APICS), the Council of Logistics
Management (CLM), the Society of Manufacturing Engineers (SME),
and the National Association of Accountants (NAA).

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His articles have appeared in The Los Angeles Times, Journal of
Manufacturing Systems, Material Handling Engineering, Automation,
Production and Inventory Review, Managing Automation, Warehouse
Cost Digest, Transformation Magazine, and Industrial Engineering
Management.
Mr. Dunn holds a bachelor’s degree in business management
from California State University, Fullerton.