I worked on a project in the Department of Health and Rehab Services in
Florida.  Our objective was to determine the true cost of providing services to
the population.  We first had to define the services.  We found over 5000.
Finding the direct costs to that was easy.  The burden added by the 15
districts plus headquarters administration was another story.  That was my job.

I couldn't justify charging overhead for medicare/medicaid audits to day care
slots, especially since we were trying something entirely new to state
government (or federal or local for that matter).  ABC was a logical extension
of what we wanted to do.  I modified it a bit, and came up with Attribute Based
Budgeting.  We were, after all, looking to do budgeting based upon
legislature's request for slots.

In researching, I found a lot of references to Japan.  I know several US
companies using ABC including Harley-Davidson who credits ABC to a good part of
their financial turn-around.  It would be a stretch for universities to use ABC
principles across the board.  But I could see it used in services centers.

xxxxxx@HEALTH.STATE.NY.US wrote:

> Actually ABC is widely used in the USA as well, and AFAIK is generally
> considered a far superior method of cost accounting. Its the opposite of
> the notion of 'overhead' which tends, frankly, to lead to vague and
> possibly bloated admin-type costs. Using overhead-type cost accounting,
> costs can be hidden without anyone really knowing; nothing should be
> managed that way. The point of ABC is to discover the true cost of every
> product so that resources are concentrated on the most profitable ones,
> while unprofitable or less profitable ones are trimmed back, dropped, or
> whatever.  ABC is very good at opening eyes!!!
>
> ---------------------- Forwarded by Daniel J. Egan/SSG/DLO/Wadsworth/DOH on
> 09/13/99 04:19 PM ---------------------------
>
> Greg Schmidt <xxxxxx@FAMU.EDU> on 09/13/99 12:20:18 PM
>
> Please respond to Research Administration Discussion List
>       <xxxxxx@hrinet.org>
>
> To:   xxxxxx@hrinet.org
> cc:    (bcc: Daniel J. Egan/SSG/DLO/Wadsworth/DOH)
> Subject:  Re: Japanese Business Practices
>
> Back in the late 80's and early 90's,  Japanese firms bought into Activity
> Based
> Costing in a big way.  In ABC, all costs are allocated to the products
> according
> to need, or hits, on administration and service centers, and charged to
> each
> unit produced.  In this way, they can determine the exact cost of producing
> a
> specific quantity of a  specific model.  They can also find areas of
> administration that are not productive.  They can also find products or
> styles
> of products that are not cost effective.
>
> If we did this, ancient american history wouldn't be taught because the
> cost per
> student would be so high.  The closest we get to this is in Cost Centers
> for
> things like Computer Centers or Glass Blowing shops.
>
> "Herbert B. Chermside" wrote:
>
> > We are trying to do business with a Japanese firm.  Although I have not
> > yewt met with them, the P.I. has.  They seem to have a problem with F&A,
> > indirect, overhead, or whatever we name the general costs of doing
> > business.  I cannot conceive it possible to operate a business, even in
> > Japan, without using this concept, so we need to describe it in their
> terms.
> > Does anyone out there have some familiarity with the techniques and terms
> > used in Japan for this?  I think if we understand their culture in this
> > regard, we can start singing from the same hymnbook!
> >
> > Thanks!!
> >
> > Chuck
> >
> > Herbert B. Chermside, CRA
> > Director, Sponsored Programs
> > Virginia Commonwealth University
> >
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>
> --
> Greg Schmidt
> Manager, Contract & Grant Accounting
> Florida A&M University
> 201 FHAC
> Tallahassee, FL  32307-3200
>
> DUNS:  623751831
>
> College of the Year - 1997
>
> voice:   850 561-2956
> fax:     850 561-2461
>
> ======================================================================
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>  subscription information and a web-searchable archive, are available
>  via our web site at http://www.hrinet.org (click on "Listserv Lists")
> ======================================================================
>
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>  subscription information and a web-searchable archive, are available
>  via our web site at http://www.hrinet.org (click on "Listserv Lists")
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--
Greg Schmidt
Manager, Contract & Grant Accounting
Florida A&M University
201 FHAC
Tallahassee, FL  32307-3200

DUNS:  623751831

College of the Year - 1997

voice:   850 561-2956
fax:     850 561-2461

======================================================================
 Instructions on how to use the RESADM-L Mailing List, including
 subscription information and a web-searchable archive, are available
 via our web site at http://www.hrinet.org (click on "Listserv Lists")
======================================================================