Term
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Definition
| A costing technique that assigns costs to cost objects, such as products or customers, based on the activities those cost objects require |
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Definition
| an event that consumes resources; any repetitive event that serves as a measure of output or usage, such as sales, production, phone calls made, or miles driven. |
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Definition
| The practice of using activity-based costing information and knowledge about activities and resource consumption to prepare an organization's budget. |
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Term
| Activity-based management |
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Definition
| the process of using ABC info to manage a business's activities |
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Term
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Definition
| a group of costs combined based on their activity cost drivers and the resources to be consumed |
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Definition
| rate calculated by dividing the total activity cost by the total activity driver volume |
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Definition
| an activity performed all at once on groups, or batches, of products |
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Term
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Definition
| an activity relating to specific customers (not to specific products) |
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Term
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Definition
| an abc process in which costs are assigned first to activity cost pools before being assigned to cost objectives |
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Definition
| an activity that consumes resources but does not contribute to the value of the final product or service. |
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Term
| organizational-level activity |
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Definition
| an activity required to provide productive capacity and to keep the business in operation |
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Term
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Definition
| the examination of business processes to identify incremental changes that may reduce operating costs |
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Definition
| an activity that supports the product lines or services a company provides. |
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Term
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Definition
| an activity that benefits individual units of prduction |
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Term
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Definition
| an activity that helps create the product the customer wants to buy |
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Term
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Definition
| a cost incurred under all alternatives under consideration |
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Term
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Definition
| sales revenue minus direct materials cost |
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Term
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Definition
| theory developed to maximize the performance of a value chain by focusing on constraints that limit an organization's output. |
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Term
| Five Steps to implement ABC |
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Definition
1. Identify activities
2. Develop activity cost pools
3. Calculate activity cost pool rates
4. Allocate costs to products or services
5. Calculate unit product costs |
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Term
| under traditional-costing systems |
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Definition
-small volume jobs are typically under-costed
-large volume jobs are typically over-costed |
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Term
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Definition
| batch-related and product-level costs are allocated using appropriate batch and product cost dirvers |
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Term
| The key is activity management |
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Definition
look at activities that use labor resources....
-Inefficient production processes
-Poor facilities layout
-Non-value added activities
-Untrained workforce |
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Term
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Definition
| cost associated with a particular alternative that will be eliminated if alternative is eliminated |
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Term
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Definition
| cost that will continue regardless of the alt selected |
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Term
| Relevant cost decision model |
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Definition
*identify the decision
*identify the alternatives
*identify the relevant revenues and costs
*identify the qualitative issues to consider
*identify the alternative with the greatest benefit or least cost |
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Term
| why accept special order pricing |
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Definition
-for products made to consumer specs
-for unusual order (q,p,d)
-for one-time job
-to utilize idle production facilities |
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Term
| qualitative issues to consider |
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Definition
-what precedent does this special order set for future jobs
-how will customers react
-is there enough capacity to produce the order w/o reducing normal production |
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Term
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Definition
-price we have to pay to buy the component
-all avoidable costs we would incur to make the component
-watch out for fixed oh per unit;it may or may not be avoidable |
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Term
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Definition
-opportunity costs of using our facilities may be relevant
-what alternative uses of the capacity exist?
-can we generate additional income by using the freed up facilities in some way |
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Term
| qualitative factors to consider |
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Definition
-relative net advantage given uncertainty of estimates (costs, risks, etc.)
-reliability and # of sources of supply
-ability to assure quality
-future bargaining position with suppliers
-perceptions regarding possible future price changes |
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Term
| constrained resource allocation decision |
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Definition
-Decision: How should we allocate a scarce resource across all products
-Factors: scarce resource, CM per unit of scarce resource, demand for products
-Qualitative factors: customer preferences for products, customer service issues
-watch put: CM per unit of product
-decision rule: make the product with the highest contribution margin per unit of scarce resource |
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Term
keeping/eliminating operations...
what is relevant |
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Definition
-all direct costs associated with the segment
*variable costs
*direct avoidable fixed costs
-calculate the segment margin
*revenues -VC- Avoidable FC
-watch out for allocated common FC |
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