Chapter 10 Flashcards
Fundamentals of Cost Management (18 cards)
Approach that uses activity-based costing data to evaluate the cost of value-chain activities and to identify opportunities for improvement.
activity-based cost management
Changing operational processes to improve performance, often after examining activity-based costing data to determine opportunities for improvement.
process reengineering
Approach to production that looks to significantly reduce production costs using solutions such as just-in-time inventory and production, elimination of waste, and tighter quality control.
lean manufacturing
Cost accounting system that provides measures at the work cell or process level and
minimizes wasteful or unnecessary transaction processes.
lean accounting
cost driver rate multiplied by the cost driver volume.
resources used
Expenditures or the amounts spent on a specific activity.
resources supplied
Difference between resources used and resources supplied.
unused resource capacity
Customer’s anticipated level of product or service (including tangible and intangible features).
customer expectations of quality
Degree to which a good or service meets specifications.
conformance to specification
A system that reflects the tension between incurring costs to ensure quality and the costs incurred with quality failures.
cost of quality system
Costs incurred to detect individual units of products that do not conform to specifications.
appraisal costs (also called detection costs)
Costs incurred to prevent defects in the products or services being produced.
prevention costs
Costs incurred when nonconforming products and services are detected before being delivered to customers.
internal failure costs
are incurred when nonconforming products and services are detected after being delivered to customers.
External failure costs
Actual volume for the period.
actual activity
Amount of production possible under ideal conditions with no time for maintenance,
breakdowns, or absenteeism.
theoretical capacity
Amount of production possible assuming only the expected downtime for scheduled
maintenance and normal breaks and vacations.
practical capacity
Long-run expected volume.
normal activity
