Tool: Determining Activity-Based Costs

Activity-based costing is often counterintuitive for traditional finance managers because neither God nor the devil reside in the details. Being approximately correct is better than precisely inaccurate, as the saying goes. Calculating the cost of an activity is the easy part. The real trick is knowing what activities matter and what tasks comprise them.


Tally Your Tasks
YOUR COSTSEXAMPLE
Labor hours
Time spent by each tech worker

.25
Hourly wages
Worker’s fully burdened wage

37
Application costs
Prorated cost of using admin tool

$$4
Equipment costs
Prorated cost of using admin PC

$$2
Other costs
Network usage

$$0.50
Cost per activity
This shows the total cost to set up a new user
$$15.75