P2 - C2 - Activity Based Management

Question 1

What is Activity Based Management

Answer 1

A way to calculate the true cost of dealing with customer and employee utilisation

Question 2

Digital Costing Uses

Answer 2

1. Identify profitability of products
2. Accurate costings within digital workplaces

Question 3

Activity Based Budgeting

Answer 3

1. Identify activities driving costs
2. Allocate funds based on level of activity
3. Links fund allocation to cost drivers
4. Allows more accurate budget process

Question 4

Features of Pareto Analysis

Answer 4

1. 80% comes from 20%
2. Create hierarchy of products
3. Small volume can equal high value

Step 1 - Put sales in order
Step 2 - Calculate cumulative %

Question 5

Drawbacks of Pareto Analysis

Answer 5

Cutbacks on other areas to focus on one
Time, effort and cost into other products

Question 6

ABC Analyis (Not an acronym)

Answer 6

1. Group stock into 3 categories:
   A - Most valuable stock
   B - Less important
   C - Least important
2. No strict percentages
3. Based on company objectives

Question 7

Direct Product Profitability Considerations

Answer 7

1. Shelf life
2. Shelf space
3. Storage environment
4. Direct costs (Warehouse, Transport, Labour, Storage)
5. Decision making focus

Question 8

Customer Profitability Analysis

Answer 8

1. Profitable Customer
2. Pools customers based on cost drivers
3. Customer profitability curve

Question 9

Distribution Channel Profitability

Answer 9

Direct - Company to consumer
Indirect - Intermediaries