Activity based management and activity based costing is different from a more conventional costing method because it uses aggregate cost drivers and aggregate overhead pools to assign or apply overhead to products and cost objects.
The main characteristics of ABC and ABM is that the charge the products for use of overhead resources exhausted by charging for activities that are thought to drive costs. The goal is to create awareness that activities drain resources and have the products that use the resources have the costs mapped to their product or division. In this way the divisions and products that use the most resources are charged for those resources. Conventional allotments with one resources to spread overhead often charges products an "average rate" and so crabbed and difficult that products get a break.
Companies that benefit from ABC are those that have important levels of changeable overhead and those with products that use disproportionate share of overhead resources. Companies with small overhead or products that all use overhead in about the same proportion would get about the same overhead allocation under conventional and ABC methods. Since ABC methods are more work, if there isn't a benefit, it is better to stick to a simpler and cheaper method.
This was not a typical manufacturing setting. The university was a service business and the overhead was separated into 12 cost pools and allocated to activities. This was a good example of how ABM can help all organizations, not just manufacturing ones. The execution was successful. It helped the university to understand where the costs were, what drives them, and which costs may not add much value (and therefore be candidates for cutting). This permitted the decision-makers to replace hard data for their intuition-based methods prior to the implementation.
Lean manufacturing has changed into "lean thinking." While lean manufacturing started with automobile...