activity-based cost management fy 2001 results november 07, 2002
TRANSCRIPT
Activity-Based Cost Management
FY 2001 Results
November 07, 2002
Slide 2November 07, 2002
Agenda
• Introduction & History of PSG ABC Project
• Overview of FY2001 ABC Process
• The Outputs: The Book and the CD
• Using ABC to Make Decisions
Slide 3November 07, 2002
ABC in Mn/DOT PSG
• Why are you using ABC?
• How are you coming up with the information?
• What is the output from the PSG ABC process?
• How can you apply the information?
Slide 4November 07, 2002
PSG Purpose
• Identify Cost, Quality, Timeliness (CQT)
• Manage CQT– Improve Competitiveness– Focus on Continuous Improvement– Deploy Resources Effectively
• Measure CQT
Slide 5November 07, 2002
Process Model Summary
Input OutputActivity
Resource $
DistrictsProducts & Services
CoreActivities
End Cost Objectives
Slide 6November 07, 2002
Activity Based SolutionsQuestion Solution
How much does it really cost?
Activity Based Costing
ActivitiesActivities
Activities Outputs
Resources
Activity Analysis
Inputs
Activity Based ManagementActivity Based Management
How well are we meeting our objectives?
Activity Based Performance
Measures
How can we institutionalize improvements?
Activity Based Budgeting
How do we know what to improve?
Activity Based Continuous
Improvement
How much should we charge?
Activity Based Service
Agreements
Slide 7November 07, 2002
Not Convinced Yet?• ABC Provides PSG decision-
makers with relevant information:– How much are we spending (or
how much do we need next year?) on the various ABB products and services?
– How much are we supporting Duluth vs. Willmar? (or how much will we need to support them next year, based on current assumptions?)
– Are we improving year-to year?– How do we compare to
competitors?– How much should we charge
counties and cities for our services?
Slide 8November 07, 2002
OutputOutput
OutputOutput
HOW is the Information Developed?
ActivityActivity
ActivityActivity
InputInput
InputInput
Slide 9November 07, 2002
What Are the Questions?
Resource $
• First Question: What are “Resources”?• Second Question? What time period?• Third Question: How many resources for
period in question?• Fourth Question: Which activities are the
resources associated with?
Slide 10November 07, 2002
Find the Information
Resource $ • How many resources?
Dollars from Budget Status Reports
People Resources
Non-Payroll Resources
Slide 11November 07, 2002
Trace Resource to Activities
Resource $ • How are resources associatedwith activities?
ABC Activities
Name, hours, bargaining from BSR Detail
Slide 12November 07, 2002
Counting Outputs
Input OutputActivity
Resource $
• How do you know how many units of output you’ve got?
• YOU COUNT THE NUMBER OF COMPLETIONS FOR THE PERIOD OF TIME (eg., FY 2001) (or partial completions if partial completion criteria are defined).
Slide 13November 07, 2002
Counting Normalized Outputs
• How do you know how many units of NORMALIZED output you’ve got?
First, Count them accordingto the defined variation.
Second, calculate the normalized counts.
Slide 14November 07, 2002
Calculating CPO
Activity
Resource $
• Formula to Compute Cost Per Output (CPO):
Activity $$ ÷ # of Outputs = CPO
Activity $ ÷ Number of Outputs = CPO
Slide 15November 07, 2002
Now that you know CPO…
Input OutputActivity
Resource $
Muni’sProducts & Services
CoreActivities
End Cost Objectives
• What do you do with it?• Answer questions, such as “How much should I charge the
muni’s (partnership agreements)?
Say Pete, Can we take a
break?
Slide 17November 07, 2002
The OUTPUT of the ABC Process
• The Reference Information– (Three Ring Binder)
• The CD– Contains the
electronic files
Mn/DOT PSGABC/M FY 2001
1.a File Organization/Map1.b File Summary
Selected Highlights
2.1 Activity Dictionary2.2 Average FTE’s by Activity2.3 Output Summary2.4 Normalization Information
• Criteria• Factors• Raw Output Counts• Normalized Output
Counts• Hours per Normalized
Output (By Variety)• Aggregate Hours per
Normalization Criteria• Dollars per Normalized
Output (By Variety)• Aggregate Dollars per
Normalized Criteria
3.1 Budget Status Report3.2 Equipment, Inventory,
Building Crosswalks (if any)
Selected Highlights
4.1 Primary Activity Summary• Aggregate Primary
Activity Costs• Aggregate Activity
Direct Labor Hours4.2 Cost & Hours per Output
Analysis by Activity
5. Primary Activity Report & Graph• Pareto Analysis
Selected Highlights
7.1 Service Agreement Template• Map ABC Activity
Outputs to Customers7.2 ABB Template
• Map ABC Activity Outputs to ABB Products, Services, and Core Activities
Slide 21November 07, 2002
The Electronic File Summary
• These are the Current Files• They are contained in the CD• They are organized in Folders (Directories) as
shown on the next slide.
Slide 22November 07, 2002
The CD Organization
Slide 23November 07, 2002
FTE’s by Activity
• This report is in Tab 2 of the three-ring binder.
• The electronic file is located in the CD, file name:“OEC PeopleTrace”, on the worksheet called “FTE Analysis”.
Slide 24November 07, 2002
Normalization File
• The Normalization Excel File Contains:
Output Summary for ALLthe Activities.
A specific worksheet for EACHactivity that has been normalized.
Slide 25November 07, 2002
Normalization File: Output Summary
This Report is in Tab 2 of the three-ring binder.
Slide 26November 07, 2002
Normalization Worksheets
• Each worksheet contains the following tables:– Normalization criteria– Calculated factors (in most cases. Some skipped this
step.)– Raw (actual) output counts– Calculation of normalized output counts– Analysis: Hours per Normalized Output– Analysis: Aggregate Hours per Criteria– Analysis: Dollars per Normalized Output– Analysis: Aggregate Dollars per Criteria
• The printed copies of these reports are in Tab 2
Slide 27November 07, 2002
Normalization: Criteria
Slide 28November 07, 2002
Normalization: Factors
Slide 29November 07, 2002
Normalization: Raw Count
Slide 30November 07, 2002
Normalization: Normalized Count
Slide 31November 07, 2002
Normalization: Hours per ONE
Slide 32November 07, 2002
Normalization: Aggregate Hours
Slide 33November 07, 2002
Normalization: Dollars per ONE
Slide 34November 07, 2002
Normalization: Aggregate Dollars
Slide 35November 07, 2002
The ABC Model File
• The ABC Model Excel File Contains:
We’ll look at these three worksheets.
• The printed copies of these worksheets are in Tab 4 and Tab 5.
Slide 36November 07, 2002
Aggregate Primary Activity Cost
Slide 37November 07, 2002
Aggregate Activity Direct Hours
Slide 38November 07, 2002
Cost per Unit Analysis
Slide 39November 07, 2002
Hours per Unit Analysis
Slide 40November 07, 2002
Primary Activity Pareto Report
Slide 41November 07, 2002
The ABC Extras File
Service Agreement/Partnership Agreement TemplateActivity Based Budgeting
(ABB) Template
Make copies of these files, and use them tohelp develop information for service agreements, partnership agreements, and budget planning by ABBproduct/service codes.
• The printed copies of these worksheets are in Tab 7.
Slide 42November 07, 2002
Service Agreement Template
Slide 43November 07, 2002
Service Agreement Template
Slide 44November 07, 2002
ABB Template
Slide 45November 07, 2002
ABB Template
Slide 46November 07, 2002
Agenda
• Introduction & History of PSG ABC Project
• Overview of FY2001 ABC Process
• The Outputs: The Book and the CD
• Using ABC to Make Decisions
Slide 47November 07, 2002
USE the ABC Information
• Templates Provided– Service Agreements/Partnership
Agreements– Activity-based Budgeting
• Other Ideas– Resource Management– Process Improvement
Slide 48November 07, 2002
Discussion Topic 1
• What is ONE way you will use ABC in your Office/Section?
Slide 49November 07, 2002
Discussion Topic 2
• What is ONE barrier to achieving optimum success with ABC in your Office or Section?