Activity based costing/ target costing/ lifecycle costing

Question 1

definition of ABC

Answer 1

a method of costing which involves identifying the costs of the main support activities and the factors that drive the costs of each activity.

Question 2

what is a cost driver

Answer 2

a factor that has the most influence on the cost of an activity

Question 3

what is target costing

Answer 3

setting a target cost by subtracting a desired profit margin from a target selling.

Question 4

what is value analysis

Answer 4

involves examining the factors which affect the cost of a product or service, so as to think of the most economical ways to achieve high standards of quality

Question 5

7 ways to reduce a target cost gap

Answer 5

cheaper staff (where it doesnt affect quality)

reducing number of components

using standard components

acquiring more efficient technology

training staff

cutting out non value added activities

using different materials

Question 6

what is life cycle costing

Answer 6

the accumulation of costs over a products entire life

Question 7

what are the 5 stages of a product life cycle

Answer 7

development 
introduction
growth
maturity
decline

Question 8

what is the sales volume in the development stage like

Answer 8

none

Question 9

what is the sales volume in the introduction stage like

Answer 9

very low

Question 10

what is the sales volume in the growth stage like

Answer 10

rapid increase

Question 11

what is the sales volume in the maturity stage like

Answer 11

stable high volume

Question 12

what is the sales volume in the decline stage like

Answer 12

falling demand

Question 13

4 advantages of life cycle costing

Answer 13

helps management assess profitability over the full life of a product

can help estimate sales volumes and prices with reasonable accuracy

earlier actions generate more revenue or lower costs

encourages long term thinking and forward planning