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Many organizations are designing and implementing new strategic management initiatives, such as reengineering (Hammer and Stanton, 1994). Reengineering and other strategic management initiatives have become popular since the publication of Hammer and Champy's (1993) Reengineering the Corporation: A Manifesto for Business Revolution. However, the cost management system has been almost completely ignored from the discussion. Activity-based management (ABM) is a modern cost accounting and management model that is consistent with the concepts of strategic management and reengineering. ABM is both an accurate cost accounting system and a performance improvement tool (Turney, 1991). Like reengineering, ABM focuses on business processes, which are collections of activities or work that result in valuable output. The purpose of this paper is to describe the design and implementation of an ABM system. The design and implementation steps are applied to an actual organization.

Overview of acti...