Chapter12Solutions-Hansen6e - CHAPTER 12 ACTIVITY-BASED...

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CHAPTER 12 ACTIVITY-BASED MANAGEMENT QUESTIONS FOR WRITING AND DISCUSSION 1. The two dimensions are the cost dimension and the process dimension. The cost dimen- sion 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 dimen- sion—the process dimension—provides in- formation about why work is done and how well it is done. It is concerned with cost driver analysis, activity analysis, and per- formance measurement. This dimension of- fers the connection to the continuous im- provement world found in the advanced manufacturing environment. 2. 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. Driver analysis is a part of process value analysis—along with activity analysis and performance measurement. 3 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-added. Selecting and keeping value-added activities bring about cost re- duction and greater operating efficiency, thus providing support for the objective of continuous improvement. 4. 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. 5. Non-value-added activities are unnecessary activities or necessary activities that are in- efficient and improvable. An example is moving goods. Non-value-added costs are those costs caused by non-value-added activities. An example is the cost of materi- als handling. 6. (1) Activity elimination: the identification and elimination of activities that fail to add value. (2) Activity selection: the process of choos- ing among different sets of activities caused by competing strategies. (3) Activity reduc- tion: the process of decreasing the time and resources required by an activity. (4) Activity sharing: increasing the efficiency of neces- sary activities using economies of scale. 7. A kaizen standard is the planned improve- ment for the coming period. The kaizen sub- cycle implements the improvement, checks it, locks it in, and then begins a search for additional improvements. The maintenance subcycle sets a standard based on prior im- provements, executes, and checks the res- ults to make sure that performance con- forms to the new results. If not, then correct- ive action is taken. 8.
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This note was uploaded on 04/08/2010 for the course ACCT 305 taught by Professor Zhou during the Spring '09 term at Binghamton.

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Chapter12Solutions-Hansen6e - CHAPTER 12 ACTIVITY-BASED...

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