COST ACCOUNTING
ACTIVITY BASED MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Identify the major opportunities for cost reduction
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Determine the root cause costs drivers of these non-valued added costs
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Develop a program to eliminate these causes and costs
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All of the above
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Detailed explanation-1: -Step 1: Identify the products that are the chosen cost objects. Step 2: Identify the direct costs of the products Step 2: Identify the direct costs of the products. Step 3: Select the activities and cost-allocation bases to use for allocating indirect costs to the products for allocating indirect costs to the products.
Detailed explanation-2: -The four steps in ABC are identifying activities, estimating their amount and allocation base, computing predetermined rate, and allocating overhead costs.
Detailed explanation-3: -4ABC uses four different levels of activity cost driver to allocate the cost from resource to product. These cost drivers are Resource-to-Department Cost Driver, Department-to-Function Cost Driver, Function-to-Activity Cost Drivers and Activity-to-Product Cost Driver.
Detailed explanation-4: -Activity-based management (ABM) is a means of analyzing a company’s profitability by looking at each aspect of its business to determine strengths and weaknesses. ABM is used to help management find out which areas of the business are losing money so that they can be improved or cut altogether.