Activity Based Costing (ABC): Real Estate

How does Activity Based Costing Work with Real Estate Sales?

Activity-Based Costing (ABC)

This occurs a lot in real estate sales. Some Real Estate Agents are not paid on salary or wage, they are paid based on their commission or points they charge. So if the business is not generating any sales, ABC could be applied to re-evaluate the costs of activity based sales for profit improvement. This in turn could affect the points or commission structure. Although the points they charge are regulated by their respective states' real estate regulator (in my state, the max is 6 points), ABC is applied by the many factors the Broker defines and calculates from previous and current sales activity; whereas they can charge any amount of commission of up to 6 points.

Does ABC apply to those who are sales people of (a) product/s?

In my humble opinion, ABC can be applied in any type of business and can be reflective on/of personnel. Even conducting your own business from home would generate some type of cost to the business owner; for example, your personal labor, shipping charges, materials to ship, power & electricity, etc. Although e-commerce has made this process relatively simple, e.g. online services/businesses and sourcing choices, and even though the home business entity could basically place any product price on the product they sell from home, home business owners must still factor in the fees and charges of e-commerce services relative to the labor, shipping, etc to eventually calculate a competitive cost for product. Overall determining the cost of each product could determine the break-even point and the possible profits the owner would project from sales.

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