Ch 1 Flashcards
(22 cards)
Cost Driver
A factor influencing the level of cost which links activity resource consumption to product outputs
Product level
Driver is production volume
Batch level
Driver is number of batches
Product Sustaining
Driver is the number and diversity of products
Facility sustaining
Driver is the fact that the business exists
Logistical
Moving or recording of materials, labour, WIP
Balancing
Ensuring that resource are available
Quality
Ensuring goods and services meet quality standards and customer expectations
Change
Responding to change in customer demand, design and products methods
Cost pool
An activity which consumes resources and for which overhead costs are identified and allocated
Strategic ABM
Doing the right things - using activity based principles to identify what products and markets to operate in, price to charge etc
Operational ABM
Doing things right - using activity based principles to help control and reduce cost and become more efficient
Transaction drivers
Number of times an activity is undertaken
Duration drivers
Length of time to perform an activity
Intensity drivers
What resources are used (input)
Cost reduction
A long-term approach to continued lowering cost boundaries (not cost control which is keeping short-term costs within boundaries through variance analysis)
Principles of ABM
- ABB
- Cost reduction
- Customer profitability analysis
- Distribution channel profitability analysis
- Direct product profitability
Customer profitability analysis
The analysis of revenue streams and service costs associated with specific customers or customer groups
Distribution channel profitability
The greater the number of distribution channels, the greater its cost base. Channel costs are often independent of either product or customer-related activity costs.
Direct product profitability
Identifies a net profit for each product by attributing the purchase price and other direct costs to each production line - used primarily in the retail sector
Pareto analysis
80% of the effects come from 20% of the causes
NRV
The value of an asset that can be realised upon its sale, less a reasonable estimate of the costs associated with that sale or the disposal of the asset in question
