Andrew Buxbaum
17 February 2011
Professor Braun, Accounting 202
ABC Assignment
Key Points from Indianapolis Speeds Away
The public portion of government is not often associated with groundbreaking or cutting
edge business practices. However, Indianapolis has begun to implement activity based costing
and other techniques to make Indianapolis one of the most productive cities in the country.
Many aspects of their economy have improved, such as the decline in the amount of city debt
and the constant lowering of property tax. By using activity based costing, the city was able to
get a clearer idea of its cost drivers and able to figure out where they were spending too much
money and effort. For example, ABC helped determine that eight man pothole crews could be
cut down to five people, cutting the cost by twenty five percent. Also, accountants determined
that the city spent 252,000 dollars repairing a garbage vehicle which was worth 92,000 dollars
new. This mistake was caught by ABC. By being able to clearly evaluate jobs and cost objects,
Indianapolis has been thriving and profiting. In addition to making the government more
efficient, ABC can also help bring in contractors and other talent inside a city or an organization.
Since the costing systems in Indianapolis were so strong, outside executives and company’s
were willing to work with the city. While ABC has many positive aspects, it also has a few
negatives. ABC can be costly to implement and start up. The employees must be trained on how
to use such a system and new IT technologies must be developed to fit the new initiative.
These drawbacks can sometimes persuade some managers to leave their system unchanged.
