Presented by: Andrew Lim General Manager ABC Technologies Asia

1. Activity-Based Costing/Management Presented by: Andrew Lim General Manager ABC Technologies Asia

2. ABC Technologies Inc. • Leading ABM Software Supplier in the industry • Founded 1989, Singapore office set up 1997 • Over 4,000 installations world-wide • Global sales/support offices world-wide • World-wide HQ in Beaverton, Oregon USA • Over 800 trained Affiliates world-wide ranging from “Big 5” to the private consultants • Over 400 Academic Affiliates world-wide

3. Business Process are made of Activities Customer Needs Product or Service

4. Overview of ABC

5. Definition: Activity-Based Costing “A methodology that measures the cost and performance of activities, resources, and cost objects. Resources are assigned to activities, then activities are assigned to cost objects based on their use.” Adapted from The CAM-I Glossary of Activity-Based Management, Edited by Norm Raffish and Peter B.B. Turney, (Arlington: CAM-I, 1991.)

6. CAM-I Cross Cost Assignment View What things cost... Resources Resource Drivers Process View Resource Cost Why things have cost... Assignment Performance Activities Cost Drivers Measures Activity Cost Assignment Activity Drivers Adapted from The CAM-I Glossary of Activity-Based Management, Edited by Norm Raffish and Peter B.B. Turney, (Arlington: CAM-I, 1991.) Cost Objects

7. Outputs of ABM • Cost of Activities • Cost of Non-Value Added Activities • Performance Measures • Accurate Product/Service Cost • Cost Drivers ABM evaluates the activities critical to your business

8. ABC/M : Main Usage Areas • Product / Service Costing • Performance Improvement • Cost Reduction • Others - make/buy decisions - strategic planning - project management - budgeting

9. TECHNOLOGY ENABLER FOR MEASURING BUSINESS INITIATIVES TQM Performance Measurement ECR ACTIVITY-BASED INFORMATION SYSTEMS EVA initiatives Value Chain BPR Insurance Telcos Banking Medical Industries Utilities Automotive Government Manufacturing

10. Traditional vs ABC HOW DANA DISCOVERS WHAT ITS TRUE COST ARE The material-control department in Plymouth, Minnesota OLD WAY Process sales order $144,846 Source parts $136,320 Expedite supplier orders $72,143 Expedite internal process $49,945 Resolve supplier quality $47,599 Reissue purchase orders $45,235 Expedite customer orders $27,747 Schedule intracompany sales $17,768 Request engineer change $16,704 Resolve problems $16,648 Schedule parts $15,390 Traditional accounting SALARIES $371,917 FRINGES $118,069 SUPPLIES 76,745 FIXED COSTS $23,614 TOTAL $590,345 NEW WAY TOTAL $590,345 Source: Fortune Magazine

11. ABM Benefits • Provides a way to continuously improve processes • Focuses on the important costs • Creates a relationship between business cost and creating value

12. ABM Benefits (Cont’d) • Provides non financial performance measures • Includes all business functions in an organization

13. Summary of Benefits (1) • Better Cost Information : Cost of product/product types Cost of customer/customer types Cost of services / transactions Activity/Process costs Multi-dimensional Profitability • Performance Management : Activity Analysis Benchmarking Identification of Cost Drivers

14. Value Added Activity Example... Raw Material Raw Material RECEIVE RECEIVE INSPECT MACHINE STORE 4 Days ASSEMBLE ISSUE TEST MACHINE PACK INSPECT SHIP STORE ISSUE 4 Weeks ASSEMBLE Minimize Cost Drivers for Non-Value Added Activities Finished Product INSPECT STORE TEST STORE PACK STORE SHIP Finished Product

15. Profitability Profile Profitability profiles are like electrocardiograms of a company’s health. After sales are attached to the ABC costs, this graph reveals that $8 million was made on the most profitable 75% of products—and then $6 million was conceded back! Cumulative Profit (Millions) $8 $6 Net Revenues Minus ABC Product Costs $4 Unrealized profit revealed by ABC $2 $1.8 profit $0 0 100 200 300 400 500 600 700 800 Specific Products and Services Ranked from highest to lowest ABC profit-margin percentage (%).

16. SAMPLE CUSTOMERS IN ASIA • Manufacturing Texas Instruments Compaq Computers Coats/Tootal Samsung Electronics Motorola Nokia Osram-Opto Siemens Delco Electronics Micron Semiconductor TSMC (Taiwan) Likon Electronics AlliedSignal Avionics AlliedSignal Laminates Fujitsu-Quantum Advanced Micro-Devices Astec International Taiwan Synthetic Rubber Everest Textiles Philips Luminaires • Manufacturing Adaptec Manufacturing Philips Lighting National Printers KL Cypress Semiconductors • Telcos / Utilities Taiwan Fixed Network PT Telkom Indonesia PUB Singapore Telecoms Telekom Malaysia Celcom Malaysia LG Telekom Nippon Telegraph & Telecom TOT Dacom Korea Tokyo Gas Globe Telecom (Phil) • Oil & Gas Mobil Exxon

17. SAMPLE CUSTOMERS IN ASIA • Healthcare Singapore General Hospital National Cancer Centre National Heart Centre National Neuroscience Inst. IJN Hospital Pantai Medical Centre Subang Jaya M C Seoul National Univ Hospital • Others Bintulu Port PSA Singapore Sealand Hongkong 7-Eleven Hongkong Asiana Airlines Safra Radio US Naval Logistics Diethlem Holdings Bexcom E-Healthcare • Banking & Finance Hong Kong ECICS Credit Lyonnais CIBC OCBC Bank DBS Bank Fukuoka Bank ChinaTrust Bank Bank of Tokyo-Mitsubishi Sakura Bank UOB Bank • Food & Beverage Cadbury-Schweppes Coca-Cola

18. ABC Wiring Diagrams - Segment the Diversities Salary, Fringe Benefits Direct Material Phone, Travel Supplies Depreciation Rent, Interest, Tax Resources Work Activities People Activities Support Activities “cost-to-serve” paths Equipment Activities Final Cost Objects Products, Services Business Sustaining Suppliers Customers

19. Modeling the Business: Wiring Resource Module General Ledger Work Groups GL Salary, Supplies, Utilities... Activity Module Origination Activities Processing Activities Products Services Balances & Revenue Cost Object Module Reporting/ Executive Information Systems

20. ABC Technologies Thank You Visit the ABC Authority at www.abctech.com