Garrison and Noreen identify six core steps to ABC costing implementation.*
Step #1: Activity Identification
Step #2: Activity Analysis
Step #3: Assignment of Costs
Step #4: Calculate Activity Rates
Step #5: Assign Costs to Cost Objects
Step #6: Prepare and Distribute Management Reports
ABC costing does nothing for the organization if the information is collected but no action follows. The key to the value of this form of costing is that it is actionable. This analysis allows companies to make decisions about product lines, where to direct sales efforts, and to validate the true value provided by capital equipment.
*Garrison, Ray H., and Eric W. Noreen. Managerial Accounting. 9th ed. Boston: Irwin McGraw-Hill, 1999.
