ABC and ABM (LO 12-1)
A systemwide integrated approach that focuses management's attention on activities with the objectives of improving customer value and the profit achieved by providing this value.
What is activity-based management?
Activities necessary to remain in business.
What are value-added activities?
This reveals where cost reductions have been achieved, allows managers to assess the effectiveness of improvement measures undertaken, and shows how much improvement potential still remains.
What is trend reporting of non-value-added costs?
Two common steps of ABM implementation.
What are systems planning and activity identification, definition, and classification?
Four elements of responsibility accounting.
What are assigning responsibility, establishing performance measures or benchmarks, evaluating performance, and assigning rewards?
The objective of the process dimension of ABM.
What is cost reduction?
An analysis that defines activity-based responsibility accounting, focuses on accountability for activities rather than costs, and emphasizes the maximization of systemwide performance instead of individual performance.
What is process value analysis?
The use of best practices found within and outside the organization as the standard for evaluating and improving activity performance.
What is benchmarking?
The issues addressed by systems planning.
What are purpose and objectives of ABM system, organization's current and desired competitive position, organization's business processes and product mix, timeline, assigned responsibilities, and resources required for implementation, and ability of organization to implement, learn, and use new information?
Four financial-based performance evaluation items.
What are financial efficiency, controllable costs, actual versus standard, and financial measures?
Two dimensions of the ABM model.
What are the cost dimension and the process dimension?
Five activities considered to be non-value-added activities.
What are scheduling, moving, waiting, inspecting, and storing?
Formula for non-value added costs.
What is Non-value-added costs = (AQ - SQ)SP?
The major reason why ABM implementation fail.
What is lack of support of higher-level management?
Three methods that can change the way things are done.
What are process improvement, process innovation, and process creation?
The relentless pursuit of improvement in the delivery of value to customers; searching for ways to increase overall efficiency by reducing waste, improving quality, and reducing costs.
What is continuous improvement?
Three concerns of PVA.
What are driver analysis, activity analysis, and performance measurement?
Sequence of the kaizen subcycle.
What is Plan-Do-Check-Act?
Broad objectives of ABM.
What are improving decision making by providing accurate cost information and reducing costs by encouraging and supporting continuous improvement efforts?
Performance of a process in a radically new way with the objective of achieving dramatic improvements in response time, quality, and efficiency.
What is process innovation (business engineering)?
The objective of the cost dimension of ABM.
What is improving the accuracy of cost assignments?
Four ways activity management reduces costs.
What are activity elimination, activity selection, activity reduction, and activity sharing?
Six financial measures of activity efficiency.
What are value-added and non-value-added activity costs, trends in activity costs, kaizen standard setting, benchmarking, activity flexible budgeting, and activity capacity management?
10 steps of ABM implementation.
What are systems planning; identify, define, and classify activities; assess value content of activities; define root causes of each activity; establish activity performance measures; search for improvement opportunities; assign resource cost to activities; identify cost objects and activity drivers; calculate activity rates; and assign costs to cost objects?
Four activity-based performance measures.
What are process-oriented standards, value-added standards, dynamic standards, and optimal standards?