Activity based management - part 2
Taught by Nick Drape · AI tutor support included
You'll learn how to apply Activity-Based Costing principles to analyse customer profitability, identifying which customers truly generate profit after accounting for the full range of activities required to serve them.
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In this lesson
- 0:00 Customer profitability analysis and ABC principles
- 2:01 Why different customers place unequal demands
- 4:12 Using CPA to make better business decisions
- 6:48 Gross profit versus net profit by customer
- 10:00 Pareto analysis and customer profitability statements
- 12:00 Strategic responses to unprofitable customer segments
About this lesson
This video explores how businesses often discover that their most demanding customers aren't always their most profitable, and introduces the Pareto principle (the 80/20 rule) as a common pattern in customer bases. You'll see how to calculate net profit margins by customer and understand practical strategies—like adjusting pricing, improving efficiency, or introducing wholesalers—to make unprofitable customer segments viable. This technique is essential for PM and management accounting roles, helping you make data-driven decisions about which customers to prioritise and how to serve them more effectively.
Duration: 15m
Transcript
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