ACTG 12 Chp 7

batch-level activities

Activities that are performed each time a batch of goods is handled or processed, regardless of how many units are in the batch. The amount of resource consumed depends on the number of batches run rather than on the number of units in the batch.

product-level activities

Activities that relate to specific products that must be carried out regardless of how many units are produced and sold or batches run.

Customer-level activities

relate to specific customers and include activities such as sales calls, catalog mailings, and general technical support that are not tied to any specific product

transaction drivers

simple counts of the number of times an activity occurs, such as the number of bills sent out to customers

first stage allocation

the process of assigning functionally organized overhead costs derived from a company's general ledger to the activity cost pools

5 levels of activity

unit level, batch level, product level, customer level, organization sustaining

activity-based management

involves focusing on activities to eliminate waste, decrease processing time, and reduce defects

activity cost pool

A "bucket" in which costs are accumulated that relate to a single activity measure in an activity-based costing system.

activity measure

An allocation base in an activity-based costing system; ideally, a measure of the amount of activity that drives the costs in an activity cost pool.

Activity-based costing (ABC)

a costing method designed to provide managers with cost information for strategic and other decisions that potentially affect capacity and therefore "fixed" as well as variable costs

duration drivers

a measure of the amount of time required to perform an activity

benchmarking

a systematic approach to identifying the activities with the greatest potential for improvement

Organization-sustaining activities

activities that are carried out regardless of which customers are served, which products are produced, how many batches are run, or how many units are made

unit-level activities

activities that are performed each time a unit is produced

second stage allocation

activity rates are used to apply overhead costs to products and customers

activity

any event that causes the consumption of overhead resources