What Kind of Activity‐based Information Does Your Purpose Require? : Two Case Studies

Activity‐based approaches, often referred to as activity‐based costing or activity‐based management, have recently gained attention as being useful tools for a better understanding of cost behaviour and cost control. Such approaches aim at providing accurate cost information in order to keep track of costs and to yield continuous improvement. Presents two case studies where activity‐based projects were run. The two firms studied represent two different objectives with the activity analysis, namely product costing and activity control. The characteristics of the activity information affect its usefulness, and in this article, activity information is subdivided into quantitative and qualitative information. Argues that it is important to have a clear objective with an activity‐based approach in order to gather the appropriate type of activity information and thereby exploit the potential improvement opportunities. Only quantitative activity information suffices for approaches aiming at costing, whereas approaches aiming at activity control require also qualitative activity information. The two case studies illustrate the significance of using the type of activity information that fits the purpose.