An ABC model for an electric distribution company
Article Abstract:
The use of activity-based costing and management (ABC/ABM) can help utilities shift from a budget system approach to a system that considers revenue, operating costs and investments on a performance level. Coupled with the use of the latest computer technology, this managerial accounting methodology can enable utilities to compute for profitability down to the customer level and focus on the activities in the energy delivery processes that contribute value to the bottom line. Those intending to use ABC/ABM can refocus their accounting to the profitability and cash flow of the cost objects, including single consumers, groups of consumers on an individual circuit, groups of circuits from an individual substation, groups of substations in a region, and groups of regions. An ABC model for electric distribution companies is presented.
Publication Name: Management Accounting (USA)
Subject: Business, general
ISSN: 0025-1690
Year: 1998
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Predicting year-end cash
Article Abstract:
Organizations can accurately predict the amount of cash in their balance sheets at year-end by monitoring sales on a daily or weekly basis. The key is to reduce different activities to their decimal equivalency of an hour and correlate hour-based data from a profit plan to the actual financial statement. Reducing principal but different products to a common base-hours revolves around labor efficiency using a common multiplier for one or more products and generates abbreviated financial statements with the annual cash requirement as the focus. This approach utilizes a productivity formula that takes into account the budgeted hours expected to be paid divided by the units to be sold or produced to come up with the standard earned hour per unit and percent efficiency rate.
Publication Name: Management Accounting (USA)
Subject: Business, general
ISSN: 0025-1690
Year: 1999
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The ABCs of the electric utility industry
Article Abstract:
The gas and electric utility industry should adopt the activity-based costing (ABC) and activity-based management (ABM) approach managerial accounting to ensure their competitiveness in a post-deregulation environment. Current utility cost accounting practices are no longer effective because they assess spending and revenues only at the corporate level and not at the operating level, and accrue substantial overheads as a result of direct costs. By using the ABC/ABM approach, utilities can accurately determine the real value of their businesses. As a result, they can control overhead, determine the costs of utility services, compare revenues and costs for profitability analysis, and conduct strategic planning for the future.
Publication Name: Management Accounting (USA)
Subject: Business, general
ISSN: 0025-1690
Year: 1998
User Contributions:
Comment about this article or add new information about this topic:
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