Final Flashcards
(56 cards)
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
- Compel planning and monitoring of the implementation of plans
- Provide reliable performance assessment criteria
- 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
- Traditional incremental/decremental
- priority
- Zero-based
- Activity based
- 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
