Key Terms VIII 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 organisation
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 costs
Activity-based management (ABM)
The use of cost driver data to identify process improvements
Activity cost pool
A ‘bucket’ in which costs are accumulated that relate to a single activity in the 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 activities
Activities that are performed each time a batch of goods is handled or processed, regardless of how many units are in a batch. The amount of resources consumed depends on the number of batches run rather than on the number of units in the batch
Customer-level activities
Activities that are carried out to support customers but are not related to any specific product
Ease of adjustment code
Costs are coded as green, yellow or red - depending on how easily the cost could be adjusted to changes in activity
First-stage allocation
The process by which overhead costs are assigned to activity cost pools in an activity based-costing system
Organisation-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 related to specific product that must be carried out regardless of how many units are produced and sold or batches run
Second-stage activities
The process by which activity rates are used to apply costs to products and customer in activity-based costing
Unit-level activities
Activities that arise as a result of the total volume of goods and services that are produced, and that are performed each time a unit is produced
