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The Difference Between ABM ABC By R. Steven Player By now most cost accountants can readily tell you what is wrong with traditional cost allocation methods. They can recite and diagram how single pool, single driver systems, while good for the financial view of cost are woefully inadequate for the operational or strategic view (see April 1995 CMIR for a discussion of these three views of cost). Most also have read how activity-based costing (ABC) improves the information needed to look at the strategic and operational views. However they are confused when trying to articulate the differences between activity-based analysis for the strategic view (ABC) and activity-based analysis for the operational view (ABM). This confusion causes many implementation efforts to fail. This article addresses the key distinction between ABC and ABM. It explains that while both use activities as a key, the use of activities is at very different levels. Difference Between ABC and ABM Activity-Based Costing (ABC) focuses on the strategic view of cost. Its often called the cost assignment view. It provides such information as product costing, customer costing, and distribution channel costing. ABC answers the question, what do things cost? ABC can be illustrated as noted below in Exhibit 1 which is taken from the Consortium for Advanced Manufacturing - Internationals (CAM-I) Expanded ABC Model published as part of the CAM-I Glossary of Terms. As noted in the vertical bar, the assignment of costs are achieved by a two-stage driver model going first from resources to activities (Stage 1) and secondly from activities to cost objects (Stage 2). Resource drivers measure the quantity of resources consumed by an activity. Activity drivers measure the frequency and intensity of the demand placed on activities by cost objects. Examples of activity drivers include numbers of part numbers, numbers of customer orders, number of lines purchased, and number of shipments. As a resul