![]() ![]() This approach also overcomes a serious technical problem associated with employee surveys: the fact that, when asked to estimate time spent on activities, employees invariably report percentages that add up to 100. This method is simpler since it requires, for each group of resources, estimates of only two parameters: how much it costs per time unit to supply resources to the business’s activities (the total overhead expenditure of a department divided by the total number of minutes of employee time available) and how much time it takes to carry out one unit of each kind of activity (as estimated or observed by the manager). In the revised model, managers estimate the resource demands imposed by each transaction, product, or customer, rather than relying on time-consuming and costly employee surveys. They should try again, because a new approach sidesteps the difficulties associated with large-scale ABC implementation. But executives who have tried to implement ABC in their organizations on any significant scale have often abandoned the attempt in the face of rising costs and employee irritation. In the classroom, activity-based costing (ABC) looks like a great way to manage a company’s limited resources.
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