Questions week 6-8 Flashcards
- What are the two dimensions of the activity-based management model? How do they differ?
The two dimensions are the cost dimension and the process dimension. The cost dimension is concerned with accurate assignment of costs to cost objects, such as products and customers. Activity-based costing is the focus of this dimension. The
second dimension—the process dimension—provides information about why work is done and how well it is done. It is concerned with cost driver analysis, activity analysis, and performance measurement. This dimension offers the connection to the continuous improvement world found in the advanced manufacturing environment.
- Identify and define four different ways to manage activities so that costs can be reduced.
(1) Activity elimination: the identification and elimination of activities that fail to add value. (2) Activity selection: the process of choosing among different sets of activities
caused by competing strategies. (3) Activity reduction: the process of decreasing the time and resources required by an activity. (4) Activity sharing: increasing the efficiency of necessary activities using economies of scale.
- Explain how benchmarking can be used to improve activity performance.
Benchmarking identifies the best practices of comparable internal and external units.
For internal units, information can be gathered that reveals how the best unit achieves its results; these procedures can then be adopted by other comparable units.
For external units, the performance standard provides an incentive to find ways to match the performance. (It may sometimes be possible to determine the ways the performance is achieved.)
- In implementing an ABM system, what are some of the planning considerations?
Planning should identify the purposes and objectives of an ABM system, its timeline for implementation, the assigned responsibilities, the resources required, the current and desired future competitive position, the business processes and product mix, and the ability of the organization to implement the new system and learn how to use the new information produced.
- Explain how lack of integration of an ABM system may cause its failure.
A lack of integration often means that ABM is in direct competition or is perceived to be in direct competition with other continuous improvement methods and the official ac-counting system. This state may cause managers to reject the new ABM approaches and rely on continuous improvement methods and accounting information with which they are already familiar.
- Describe an activity-based responsibility accounting system. How does it differ from financial-based responsibility accounting?
In an activity-based responsibility accounting system, the focus of control shifts from responsibility centers to processes and teams. Management is concerned with how work is done, not with where it is done. Process improvement and process innovation are emphasized. Standards tend to be optimal, dynamic, and process oriented. Performance measurement focuses on processes and activities that define the
processes. Finally, there tends to be more emphasis on group rewards rather than on individual rewards.
- Describe a strategic-based responsibility accounting system. How does it differ from activity-based responsibility accounting?
A strategic-based responsibility accounting system converts an organization’s mission and strategy into operational objectives and measures for four perspectives: the financial perspective, the customer perspective, the process perspective, and the
learning and growth perspective. It differs from activity-based responsibility accounting because of the formal linkage to strategy and because it adds two perspectives to the responsibility dimension: the customer perspective and the
learning and growth perspective.
- Identify and explain three methods for achieving strategic alignment.
Communication, incentives, and resource allocation are three methods that promote strategic alignment. To internalize the strategy, employees must be fully informed and aware of how their actions affect the strategy. Rewards must be tied to the strategic
measures, and resources must be allocated to fund the strategic initiatives.
- Identify three objectives of the learning and growth perspective.
Three objectives of the learning and growth perspective are to increase employee capabilities; to increase motivation, empowerment, and alignment; and to increase information systems capabilities.
