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Industy veterans make a case for activity-based costing

Jun 18, 2002 12:00 AM


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Veteran graphic arts industry advisors, G. David Dodd, William K. Lavelle, and Stuart W. Margolis are launching an activity-based costing initiative.

As the first step of their initiative, they have released a white paper: "Driving Improved Profitability With Activity-Based Costing." In this study, the authors describe the profitability gap that separates "profit leading" printing companies from the rest of the industry. They use a detailed analysis of information contained in the annual ratio studies produced by Printing Industries of America (PIA) to identify one of the primary causes of this profitability gap.

Their analysis reveals that high performance printing companies incur much lower levels of "support expenses" for each dollar of earnings produced that average firms of the same size. The white paper then demonstrates why traditional budgeted hourly rate cost systems fail to provide the information that printing company managers need to better manage and control support expenses. Finally, the authors show that well-designed activity-based costing systems can provide printing company managers with information that is critical to making profit-enhancing decisions.

This white paper may be downloaded for no charge at either www.pointbalance.com or www.hrmargolis.com.

In the second phase of their initiative, Dodd, Lavelle, and Margolis plan to publish a detailed implementation guide that will lead printers through the process of designing and implementing an activity-based costing system. The trio also plans to conduct a series of workshops in selected cities to further explain the benefits of activity-based costing and provide an overview of implementation steps.