Activity based costing/ target costing/ lifecycle costing Flashcards Preview

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Flashcards in Activity based costing/ target costing/ lifecycle costing Deck (13)
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1
Q

definition of ABC

A

a method of costing which involves identifying the costs of the main support activities and the factors that drive the costs of each activity.

2
Q

what is a cost driver

A

a factor that has the most influence on the cost of an activity

3
Q

what is target costing

A

setting a target cost by subtracting a desired profit margin from a target selling.

4
Q

what is value analysis

A

involves examining the factors which affect the cost of a product or service, so as to think of the most economical ways to achieve high standards of quality

5
Q

7 ways to reduce a target cost gap

A

cheaper staff (where it doesnt affect quality)

reducing number of components

using standard components

acquiring more efficient technology

training staff

cutting out non value added activities

using different materials

6
Q

what is life cycle costing

A

the accumulation of costs over a products entire life

7
Q

what are the 5 stages of a product life cycle

A
development 
introduction
growth
maturity
decline
8
Q

what is the sales volume in the development stage like

A

none

9
Q

what is the sales volume in the introduction stage like

A

very low

10
Q

what is the sales volume in the growth stage like

A

rapid increase

11
Q

what is the sales volume in the maturity stage like

A

stable high volume

12
Q

what is the sales volume in the decline stage like

A

falling demand

13
Q

4 advantages of life cycle costing

A

helps management assess profitability over the full life of a product

can help estimate sales volumes and prices with reasonable accuracy

earlier actions generate more revenue or lower costs

encourages long term thinking and forward planning