Ch. 5 HW Solutions - CHAPTER 5 ACTIVITY- BASED MANAGEMENT...

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CHAPTER 5 ACTIVITY- BASED MANAGEMENT QUESTIONS FOR WRITING AND DISCUSSION 3. In an activity-based responsibility account- ing 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. Pro- cess improvement and process innovation are emphasized. Standards tend to be op- timal, dynamic, and process oriented. Per- formance measurement focuses on pro- cesses and activities that define the pro- cesses. Finally, there tends to be more em- phasis on group rewards than on individual rewards. 4. Driver analysis is concerned with identifying the root causes of activity costs. Knowing the root causes of activity costs is the key to improvement and innovation. Once a man- ager understands why costs are being in- curred, then efforts can be taken to improve cost efficiency. 5. Activity inputs are the resources consumed by an activity in producing its output. Activity output is the result or product of an activity. Activity output measurement simply means the number of times the activity is per- formed. 6. Activity analysis is concerned with identify- ing activities performed by an organization, assessing their value to the organization, and selecting and keeping only those that are value adding. Selecting and keeping value-adding activities brings about cost re- duction and greater operating efficiency, thus providing support for the objective of continuous improvement. 7. Value-added activities are necessary activit- ies. Activities are necessary if they are man- dated or if they are not mandated and satis- fy three conditions: (1) they cause a change of state, (2) the change of state is not achievable by preceding activities, and (3) they enable other activities to be performed. Value-added costs are costs caused by activities that are necessary and efficiently executed. 8. Nonvalue-added activities are unnecessary activities or those that are necessary but in- efficient and improvable. An example is moving goods. Nonvalue-added costs are those costs caused by nonvalue-added activities. An example is the cost of materi- als handling. 9. (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 effi- ciency of necessary activities using econom- ies of scale. 13. 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 stand-
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Ch. 5 HW Solutions - CHAPTER 5 ACTIVITY- BASED MANAGEMENT...

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