A Kaleidoscope View of Costs Part II, XanEdu Flashcards
What two ideas were the cost classifications from the mass production era based on?
Economies of scale and responsibility accounting.
The cost classifications from the mass production era work as long as…
Firms product identical products in large quantities with dedicated, indivisible production equipment and specialized functional departments.
What do the new cost classifications focus on?
Cost drivers, recognizing the horizontal work-flow linkages within and across organizations, taking a long term view of costs and putting customer value at the center of cost analysis.
Six cost classifications of particular importance for modern strategic cost management are…
Cost driver analysis Value-chain costing Activity-based costing Life-cycle costing Feature costing Function costing
What is a cost driver?
Any factor that causes a systematic variation in costs. An example: production volume.
What is the purpose of cost-driver analysis is to…
Classify and analyze costs by common drivers.
What is value-chain costing?
The process of decomposing the cost of a product or service into the various steps involved in providing that product from the most elementary raw material to its disposal.
Value-chain cost analysis shows…
What part of a customer’s price is the converter’s internal cost and profit margin and what part is the cost and margin of other firms in the extended enterprise.
What does activity-based management and costing show?
The linked set of work tasks, within and across an organization, that produce products and services. A micro look at horizontal work flow within an organization.
What is an activity?
A series of work tasks that have a defined input and output. Uses resources.
A set of linked activities is a…
Process.
What is activity based management (ABM)?
The systematic documentation of the major activities in an organization.
Life-style costing can be from the perspective of…
A customer or a producer.
A customer’s life-cycle cost is…
The total amount of outlay over the entire life cycle of a product from its inception to its abandonment. Includes both one-time and recurring costs and the total represents the cost of ownership.
A producer’s life-cycle cost is…
The cost for all activities that occur over the entire life cycle of a product from its inception to its abandonment.
