Lincoln-Lancaster County Health Department
Environmental Public Health
"Activity-based accounting (ABC) is an accounting method that assigns all of a company's costs to the individual activities that generate them" (Bartlett, Lester, and Pojasek, 1995). These costs include materials costs, labor costs, disposal costs, and all other related costs. For example, costs related to labor costs would be workers' insurance or medical bills in case of job-related illness or injury. A cost related to disposal would be a fee paid to a waste hauler.
Once a business owner knows which process costs the most money, the owner can set priorities for P2 changes. Simply target the processes with the highest costs. Even modest changes in some of these areas can reap tremendous financial results.
To implement ABC, break a process into its component steps or elements: such as parts, washes, rinses, cleaning, storing, and disposal. Measure all the inputs and outputs of each step. List all the materials that go into a step and cross reference each with all of the costs associated with each of the activities (such as purchasing, handling, reporting, storing, and disposing) involving that material. The sum of these costs represents the cost associated with each step.
|Steps Materials||Strip Solvent||Rinse Sludge||Paint Vapors||Wash Water||2nd Rinse Sludge||Activity Costs||(S)||(RS1)||(PV)||(W)||(RS2)|
Next, draw a Pareto chart by listing all the materials left to right from the most expensive to the least expensive along the bottom. By identifying the most expensive materials, you can determine where you need to focus your P2 activities. If you find, as most businesses do, that your largest costs in your most expensive materials come from waste treatment or disposal, you know that you need to reduce your wastes in this area. Often, "70 or 80 percent of the environmental costs associated with an operation are caused by only about 20 percent of the losses" (Bartlett, Lester, and Pojasek, 1995).
(For more information read: Bartlett, Lester, and Pojasek; "Prioritizing P2 Opportunities with Activity-Based Costing" in
Pollution Prevention Review; Vol. 5, No. 4, Autumn, 1995; pages 17-26.)
City of Lincoln