Activity Based Costing



Wikipedia defines Activity Based Costing as:

Activity-based costing (ABC) is a costing methodology that identifies activities in an organization and assigns the cost of each activity with resources to all products and services according to the actual consumption by each. This model assigns more indirect costs (overhead) into direct costs compared to conventional costing.

CIMA (Chartered Institute of Management Accountants) defines ABC as an approach to the costing and monitoring of activities which involves tracing resource consumption and costing final outputs. Resources are assigned to activities, and activities to cost objects based on consumption estimates. The latter utilize cost drivers to attach activity costs to outputs.[1]

How does Activity Based Costing Apply to sales?  Often companies don’t realize how much they are paying “per activity”.  When you add up the costs of labor, office space, technology, management overhead and the like, most companies invest about $10 per dial, email or social media outreach (for SDRs and BDRs).  For Account Executives and Sales Directors, it gets worse.  When a Director does just 10 – 20 “sales activities” per day and they make $250,000/year, you are spending around $65 per sales activity.

What is your cost per sales activity?

Watch this video to learn more:

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