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32 Cards in this Set
- Front
- Back
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Predetermined MOH rate - plantwide |
-using one predetermined manufacturing overhead rate to allocate MOH to units total est. MOH costs / total est. allocation base |
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Predetermined MOH rate - Departmental |
-separate predetermined manufacturing overhead rates for each department -use when departments incur different amounts and types of MOH and jobs or products use the department resources to a different extent |
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Activity-based costing |
-allocated indirect costs to production -focuses on activities and costs of activities -separate allocation rate for each activity |
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Examples of Cost Drivers |
-Material purchasing = # of purchase orders -Material handling = # of parts -Production scheduling = # of batches -Quality inspections = # of inspections -photocopying - # of pages copied -Warranty service = # of service calls |
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cost hierarchy |
helps managers understand the nature of each activity cost pool and what drives it 4 categories : unit-level, batch-level, product-level, facility-level |
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Unit-Level activities |
activities and costs incurred for every unit. EX. inspecting and packaging each unit, direct materials, direct labor, |
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Batch-level activities |
activities and costs incurred for every batch, regardless of the number of units in the batch EX. machine setup, |
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Product-level |
activities and costs incurred for a particular product, regardless of the number of units or batches of the product produced EX. cost to research, develop, design, and market |
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Facility-level activities |
activities and costs incurred no matter how many units, batches, or products are produced in a plant EX. cost of depreciation, insurance, property tax, maintenance of the plant |
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Activity-based management (ABM) |
using ABC to make decisions that increase profits while satisfying customers needs |
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Value-added activities |
activities for which the customer is willing to pay, because these activities add value to the final product or service |
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Non-value added activities |
also referred to as waste activities activities that neither enhance the customers image of the product of service nor provide a competitive advantage |
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Cutting costs |
analyze costs in value chain |
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planning and control decisions |
-uses the costs of activities to create budgets -compare with actual activities to see if goals are being met |
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Signs the old system ay be distorting costs |
-managers don't understand costs and profits -bids are lost when expected to win -win bids expected to lose -competitor prices similar products much higher or much lower |
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Using ABC outside of the manufacturing process |
-Manufacturing: find the most profitable product or service -Manufacturers: allocate operating activites |
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traditional manufacturing system |
push systems - problems: large inventories, |
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8 wastes of traditional operations - DOWNTIME |
D - DEFECTS
O - OVERPRODUCTION W - WAITING N - NOT UTILIZING PEOPOLE TO FULL POTENTIAL T - TRANSPORTATION I - INVENTORY M - MOVEMENT E - EXCESS PROCESSING |
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Lean thinking |
management philosophy and strategy focused on creating value for the customers by eliminating waste -common characteristics: value system mapping, broad employee roles, point of use storage, continuous flow, pull system, smaller batches, emphasis on quality |
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customer response time |
the time that elapses between receipt of a customer order and delivery of the product or service |
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5 S work place - lean production |
Sort - keep tools use frequently Set in order - put in order as used, color coated Shine - machines, floors, tools, workstations are cleaned thoroughly Standardize - procedures used to organize the work place Sustain - daily upkeep of workstations |
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point of use storage |
storage system used to reduce the waste of transportation and movement |
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continuous flow |
takt time: critical concept in lean manufacturing smooth flow of production |
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Black flush costing |
the production costs are not assigned to the units until they are finished, or sold, thereby saving bookkeeping steps of moving the product though the various accounts |
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Total Quality Management |
- goals is to provide customers with superior products and service -continuous improvement -more investment up front to generate savings in the back end of the value chain |
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prevention costs |
avoid poor quality goods or services -employee training -improved materials -preventive maintenance |
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appraisal costs |
detect poor quality goods or services -inspection of final production -inspection of final product -product testing |
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internal failure costs
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avoid poor quality goods or services before delivery to customers -production loss caused by downtime -rejected product costs |
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external failure costs |
incurred after defective product is delivered -lost profits from lost customers -warranty costs -service costs at customer sites -sales returns due to quality problems |
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Non-Manufacturing costs of quality |
-service firms and merchandising companies also incur costs of quality -prevention ~professional training to their staff ~develop standardized service checklists -appraisal costs ~review work continuously -inspect before releasing |
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Cost quality report |
-identifies, categorizes, and quantifies all of the costs it incurs relating to quality -calculate the percentage of total costs of quality that are incurred in each cost category -use as a framework for decisions |
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pricing and product mix decisions
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-change the prices for products after identifying the different total cost -decide to market the higher profitability product -shift the product mix away from less-profitable products |
