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CIMA P2 > Chapter 1 - ABC and ABM > Flashcards

Chapter 1 - ABC and ABM Flashcards

1
Q

What is stage 1 activity cost pools in overhead costs?

A

Material Handling
Procurement
Set-up

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2
Q

What is stage 2 cost driver rates in overhead costs?

A

Cost per material movement
Cost per purchase order
Cost per set-up

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3
Q

What is the ABC procedure?

A
  1. Identify major activities
  2. Estimate costs associated with performing each activity
  3. Identify the factors that influence the cost pools
  4. Calculate cost driver rate
  5. Charge the overheads to the products
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4
Q

What are the four levels of the activity based cost hierarchy?

A

Unit-level
Batch-related
Product-sustaining
Facility-sustaining

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5
Q

What is unit-related activities?

A

Performed each time a unit of product is produced

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6
Q

What is batch-related activities?

A

performed each time a batch is produced

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7
Q

What is product sustaining activities?

A

Performed to support different products in the product line

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8
Q

What is facility-sustaining activities?

A

Some costs cannot be related to a particular product line, instead they are related to maintaining buildings and the facilities

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9
Q

What are some benefits of ABC?

A

Non-volume related overheads are significant
Flexible enough to analyse costs by cost objects
Reliable indication of long-run variable product cost
Provides meaningful financial and non-financial measures

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10
Q

What are the limitations of ABC?

A

Little evidence
Lacks direct relevance
Cost driver selections

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11
Q

What is Activity based management?

A

System of management which uses ABC information for a variety of purposes including cost reduction, cost modelling and customer profitability analysis.

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12
Q

What are the 5 basic information outputs of ABM?

A

Cost of activities and business processes
Cost of non-value added activities
Activity-based performance measures
Accurate product/service costs
Cost drivers

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13
Q

What is customer profitability analysis (CPA)?

A

the analysis of revenue streams and service costs associated with specific customers or customer groups

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14
Q

What are distribution channels?

A

Means of transacting with customers

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15
Q

What are some examples of direct distribution channels?

A

Sales teams
Telephone
Shops
Internet

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16
Q

What are some examples of indirect distribution channels?

A

Retailers
Wholesalers
Resellers
Agents

CIMA P2 (19 decks)

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