Activity-Based Costing (ABC) Financial Model Template

One of the most accurate ways to determine what it costs a company to produce a given product or service is using an activity-based costing model. The below Excel template is a great starting framework for businesses to use in order to better understand their cost per unit. I had to delve back into my cost accounting days on this one.

$45.00 USD

After purchase, the template will be immediately available to download. It is also included in the accounting templates bundle and The Super Smart Bundle.

ABC model

Template Features:

  • Gives insight on costs and potential price adjustments needed / margins expected.
  • Define up to 23 activities and up to 20 different costs that can go into each activity.
  • Define total cost driver units for each activity in the related period.
  • Define units used for up to 39 products.
  • Easily expandable.
  • Calculates the total cost to produce a product or service.
  • Analysis of results (cost per unit, target margin, existing margin, revenue, cost, gross profit target vs. current).
  • 3 input sheets, 1 output sheet, 1 instruction sheet.
  • Fully editable and unlocked.
You can also use this template to analyze how much it costs to service customers (mainly used for large customers, or customer cohort types). Simply replace the product slots with customers and define how many units a customer uses of each activity. You would then define all the activities that go into services a given customer and how much they cost. This is a great way to get better insights into how much you should charge a customer based on gross profit margin targets.

Benefits of Building an ABC Model

Enhanced Cost Accuracy

  • Precise Overhead Allocation: ABC allocates overhead costs based on actual activities that drive costs, rather than using arbitrary allocation bases like direct labor hours or machine hours.
  • True Cost Reflection: Provides a more accurate picture of the true cost of producing a product or delivering a service.

Improved Pricing Decisions

  • Cost-Based Pricing: With accurate cost information, companies can set prices that reflect the true cost of production plus desired margins.
  • Competitive Advantage: Enables competitive pricing without sacrificing profitability.

Identification of Unprofitable Products or Services

  • Profitability Analysis: Helps identify products, services, or customers that are less profitable or even loss-making due to high consumption of costly activities.
  • Informed Product Mix Decisions: Facilitates decisions on whether to discontinue, reprice, or improve certain offerings.

Better Resource Allocation

  • Optimal Use of Resources: By understanding which activities consume the most resources, management can allocate resources more effectively.
  • Cost Reduction Opportunities: Identifies areas where costs can be reduced without compromising quality.

Process Improvement

  • Activity Analysis: Encourages examination of business processes to identify inefficiencies or non-value-added activities.
  • Operational Efficiency: Supports lean management and continuous improvement initiatives.

Enhanced Strategic Decision-Making

  • Make or Buy Decisions: Provides detailed cost information necessary for outsourcing decisions.
  • Capacity Management: Helps in planning for capacity utilization and expansion.

Customer Profitability Analysis

  • Tailored Services: Identifies the true cost of serving different customers, enabling customized service levels.
  • Customer Segmentation: Allows for strategic focus on the most profitable customer segments.

Supports Performance Measurement

  • Activity-Based Management (ABM): Integrates with performance measurement systems to assess efficiency and effectiveness.
  • Benchmarking: Facilitates internal and external benchmarking of activities.

Improved Cost Control

  • Transparency: Provides visibility into overhead costs and how they are incurred.
  • Budgeting and Forecasting: Enhances the accuracy of budgeting processes by linking costs to activities.

Facilitates Compliance and Reporting

  • Regulatory Compliance: Assists in meeting costing requirements for government contracts or regulated industries.
  • Detailed Reporting: Enables detailed internal reporting for management purposes.
More Accounting Spreadsheet Tools: