Activity-Based Cost in the Department of Defense

Paper Summary:

This paper explains that the Department of Defense (DoD), with more than $1 trillion in assets and a budget that accounts for about half of the federal government's discretionary funding, has a need for accurate accounting processes. The author points out that ABC captures quantified cost and time data and translates it into information for making decisions by measuring process and activity performance, by determining the cost of business process outputs, and by identifying opportunities to improve process efficiency and effectiveness. The paper concludes that the ultimate decision will be based on a blended action that minimizes cost and time, while creating a better outcome.

Table of Contents
Big Need for Accurate Accounting
ABC in the Military
Process Decision Example
Success Stories
NASA
Fleet and Industrial Supply Center (FISC)
Military Resistance to ABC?
Who Might Benefit in the DoD?

From the Paper:

"In the 1990s, the RAND Corporation, including its defense-oriented federally funded research and development organizations, offered a better way for the DoD to pay for its purchases, one it thought would improve the interactions; after all, if a unit overspent in one year, then the next year it would be looking for lower prices. That meant that the organization it purchased from would experience a loss, or potentially could, which in turn could affect the service or product quality or delivery. However, the WCF arrangement bore the stamp of approval of the DoD Comptroller's office, which suggested that the WCF approach has saved "billions of dollars by providing managers with greater visibility into the costs of DoD support operations.""

More papers on Activity-Based Cost in the Department of Defense:

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• Research Paper # 115632 : "Telecommuting in the Department of Defense"
• Analytical Essay # 63381 : "Code of Ethics in the Department of Justice"

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