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33 Cards in this Set

  • Front
  • Back
ABC stands for _____
Activity based costing
What does ABC mean?
ABC is a system that
(1) Accumulates overhead costs for each of the activities
(2) then assigns costs of activities to the products/ services that causes the activities

=> it is a system that generate costing information for overhead
ABC mainly for?
Allocate overhead cost or indirect cost in a more accurate manner.
ABM stands for _____
Activity based management
What does ABM do?
A discipline:

=> analysis the activities in production / performance process

=> use the results to improve values received by customers and hence increase company's profit.
Relationship of ABC & ABM
ABM used ABC costing information to improve values of products/ services to customers
What is ABM umbrella?
Show all overlap displines in the organization with ABM

such as ABC, Strategic planning, performance evaluation, reengineering etc.
How ABM helps managers?
Managers can use ABM to
(i)increase values for customers,
(ii) and hence increase company's profit

b/c ABM can produces much more accurate costing information and improve company's effectiveness and efficiency.
What is labour intensive process?
little overhead
=> very rarely used machines
What is automated process?
heavy overhead
=> use mostly machines
What is activity?
repetitive action that will fulfill a business function
e.g. lift material [verb, noun]
What is a process map?
list all steps that will take us to produce the product / provide service
Process map can help _____
in provide a detail list of activities so that duplicate, waste, and unnecessary work can be identified.
value chart
one kind of process map.
It show detail time spent for all the value added and non-value added activities from the beginning till the end of the process
value added activity
increase worth of the product or service to customers and which they are willing to pay for
Define non-value added activity
increase time spent on production but value received from customers will not be affected
e.g. moving & waiting
What is value added processing times?
time spent to perform a function that is require in production of products
What is value added service time?
time spent to perform all necessary service functions for a customer
Non-value added activity include
transfer time, idle time, inspection time, NVA production/performance time
transfer time
move things from one place to another
idle time
waiting time in production or product storage time
What non-value added activities are hard to remove for most company?
transfer time and idle time
inspection time
time spent on inspecting products
=> this is NVA b/c if we can control a high quality of the products we don't need to spend time on inspection. So, it does not add value on product itself
=> for
business value added activity
activity require to run the business but customers do not want to pay for.
e.g. auditing
cycle time
total time from customer send an order till the product/service delivered
OR under full service approach, the end point is when the product/service delivered to the market
NVA activities usually caused by _____, _____, ____
systemic, physical, and human factors
NVA can or cannot 100% removed?
What is JIT?
Just in time system is a philosophy that perform production, purchasing, and delivery products only when needed
How JIT used at Dell?

*4-points: suppliers, arrange of manufacturing plan, lift-tools, no inspection time or effort.
(1)Arrange manufacturing plan in a smooth and automated way: WIP products will move smoothly from one dept. to another.
(2) Used hydraulic tools to lift in-process materials between production; reduce 50% time contact by human; reduct damaged and reworked rate.
(3) No time or effort spent on inspection; maintain 0-defective rate by regular audit and diagnostic test => reduce cycle time
(4) consolidated with many suppliers to form a single logistics centre which is managed by third party; allow one truck to deliver multiple parts;
What is cost driver?
factors that have direct cause and effect relationships to costs
How cost driver to be selected?
should be easy to understand; directly related to activity perform;
How many cost drivers should be chosen?
More the better; more accurate; but it requires a high cost to accumulate the data so we should choose them at the cost-benefit method
What is a cost pool?
A group of indirect costs using a "single activity"