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What is product undercoating

A product consumes a high level of resources but is reported to have a low cost per unit


What is product overcosting

A product consumes a low level of resources but is reported to have a high cost per unit


Product-cost cross subsidization means?

That if a company undercosts one of its products, it will overcoat at least one of its other products. And vice versa


What's is activity based costing (abc)?

Refines a costing system by identifying individual activities as the fundamental cost objects


What is a cost hierarchy

Categorizes various activity cost pools in the basis of different types of cost drivers, or cost allocation based, or different degrees of difficulty in determining cause-and-effect relationships


What are output unit-level costs

Costs of activities performed on each individual unit of a product or service


What are batch level costs

Costs of activities related to a group of units of a product or service rather than each individual unit of product or service


What are product sustaining costs

Also know as service sustaining costs. Costs of activities u see taken to support individual products or services regardless of the number of units or batches in which the units are produced


What are facility sustaining costs

Costs of activities that cannot be traced to individual products or services but that support the organization s a whole


What is activity based management (ABM)

Using abc info to guide management decisions


What are value added activities

The costs plus some predictable profit will be fully recovered when the output is sold


What are non value added activities

Added costs that fail to improve desirability and for which customers will not pay


What is a budget

A quantitative expression of a proposed plan of action by management for a set time period


Why are budget constraints

The combination of limitations on bonfinancial and financial resources within a company's management control


What is the master budget

It summarizes all the financial and nonfinancial plans into a single document


WhT is a standard

A carefully predetermined price, cost or quantity used for judging performance


What is a benchmark

A type of standard using information from outside of the firm


What are stretch goals

They challenge managers to achieve excellent performance rather than maintain the status quo


What are the advantages of budgets

1. Compel planning and monitoring of the implementation of plans
2. Provide reliable performance assessment criteria
3. Promote communication and coordination within the organization


What is strategic analysis?

The evaluation of how well the organization has matched its own capabilities with the relevant features of the competitive environment to progress toward its future success


What are the approaches to budgeting

1. Traditional incremental/decremental
3. Zero-based
4. Activity based
5. Kaizen


What is traditional incremental/decremental approach

Classic every department gets the same percentage increase or decrease next year


What is the priority approach

Direct contrast to traditional approach. The organization uses its strategic plan to establish the priorities for allocating new resources or areas that need to be protected if resources have to be cut


What is zero based budgeting

Involves all areas of the organization building their budgets from the ground up or from starting point of zero


What is activity based budgeting

(ABB) develops budgets based on the level of the various activities needed to fulfill the organizational goals


What is kaizen budgeting

Concept of continuous improvement and lean manufacturing. Steadily decreases or increases in budget instead of sudden changes


What is a rolling budget

A budget or plan that is always available for a specified future period by adding a month, quarter, or year in the future as the current month, wuarter or year is completed.


Why is the operating budget

It presents the results of operations in many value-chain business functions prior to financing and taxes


What is padding or budgetary slack

Underestimating budgeted revenue or overestimating budgeted costs to make budgeted targets easier to achieve


What is the cash budget

A schedule of expected cash receipts and disbursements, and is essential for forecasting any expected interest expense as a result of borrowing