Key Terms-Chapter 7 Flashcards
Action Analysis Report
A report showing what costs have been assigned to a cost object, such as a product or customer, and how difficult it would be to adjust the cost if there is a change in activity.
Activity
An event that causes the consumption of overhead resources in an organization.
Activity-Based Costing (ABC)
A costing method based on activities that is designed to provide managers with cost information for strategic and other decisions that potentially affect capacity and therefore fixed as well as variable costs.
Activity-Based Management (ABM)
A management approach that focuses on managing activities as a way of eliminating waste and reducing delays and defects.
Activity Cost Pool
A “bucket” in which costs are accumulated that relate to a single activity measure in an activity-based costing system.
Activity Measure
An allocation base in an activity-based costing system; ideally, a measure of the amount of activity that drives the costs in an activity cost pool.
Batch-Level Activity
Activities that are performed each time a batch of goods is handled or processed, regardless of how many units are in the batch. The amount of resource consumed depends on the number of batches run rather than on the number of units in the batch.
Benchmarking
A systematic approach to identifying the activities with the greatest potential for improvement.
Customer-Level Activities
Activities that are carried out to support customers, but that are not related to any specific product.
Duration Driver
A measure of the amount of time required to perform an activity.
First-Stage Allocation
The process by which overhead costs are assigned to activity cost pools in an activity-based costing system.
Organization-Sustaining Activities
Activities that are carried out regardless of which customers are served, which products are produced, how many batches are run, or how many units are made.
Product-Level Activities
Activities that relate to specific products that must be carried out regardless of how many units are produced and sold or batches run.
Second-Stage Allocation
The process by which activity rates are used to apply costs to products and customers in activity-based costing.
Transaction Driver
A simple cout of the number of times an activity occurs.
