ABC/M with Activity Analyzer at Initial Friswit

At Initial Friswit the ABC/M solution found was built based on and around Activity Analyzer. Initial Friswit is a leading company specialized in renting and maintaining a broad range of linen and company garments, of material appropriate for sanitary rooms and special anti-dirt and anti-dust mats.

As many others, we also were confronted with the tension between the calculation of decision support and the management of the organization at Initial Friswit. Because of the coherence and uniformity in communication, we wished to start from an equal base for both objectives.

In this view it was more than obvious we chose for ABC and ABM. Performance objectives inspired on features of company activities such as cost, timeliness and quality are strongly motivating for the management. Activity-based cost calculation and profitability analysis give an input for short and long term decisions in the field of acquisition and retention of products, clients and specific orders. Thanks to the internal build-up of Activity Analyzer and its openness to exploitation via ODBC compatible instruments such as Microsoft Excel and Access.

Three basic elements of Activity Analyzer form a strong platform:

• Overhead cost types
  
• Direct and support cost
  
• Actual versus capacity calculations
  
  

Via overhead cost types each resource is characterized by one of four user-defined types. Initial Friswit chose  processing costs, costs linked to persons, fixed costs and others. These four types appear throughout the whole model. It is therefore possible to split up the costs of an activity, a product, a client ranged by the different specified types.

These costs are split up automatically to direct and support costs. Directs costs are forthcoming from resources which immediately relate to an activity. Support costs are placed under an activity via other activities with a supporting role. By dealing with overhead cost types as well as with direct and support costs during the building of the activity-based model, the base of a contributive approach is made. Long ago ABC was positioned as a tool for strategic objectives. By using the possibility to split up the costs to fixed and variable components, and to direct and indirect components, ABC is an appropriate instrument as well for analysis of short term decisions, such as in the short run to accept or to reject orders. In terms of performance control the available data allow contribution analysis at the business unit level.

Actual and capacity calculations, also known as spending and usage calculations, offer the possibility to bring cost price calculation to its real context: the monetary counter-value of the used means, which is not necessarily equivalent to the spent means. More important it allows capacity modeling and capacity management. Overcapacity becomes clear, and can be allocated to the person responsible, to the cost prices and sharper selling prices can be stipulated.

Thanks to the openness of Activity Analyzer, the exploitation possibilities are legion. Without extra costs and investments it is perfectly possible to spread the data from Activity Analyzer on a large scale. At Initial Friswit, via Excel and Access, profitability, investment and capacity models are at disposal of commercial and production managers.

Activity Analyzer is a technical important tool that surpasses strategic cost calculation to the controller. At Initial Friswit it proves his value as turntable for management accounting support of decision making and management.

Lead Software, Inc. One Tiffany Pointe, Suite 100 Bloomingdale, Illinois 60108
Tel. 630-351-5155  Fax. 630-351-2526    Email. sales@leadsoftware.com