ABC & ABM
Activity - answeran event, task, or unit of work with a purpose
Activity Based costing - answerrefines a costing system by identifying activities as the
fundamental cost objects
activity based management - answermethod of management decision making that uses
activity-based costing information to improve customer satisfaction and profitability
batch-level costs - answercosts of activities related to a group of units of a product or
service
cost heirarchy - answercategorizes various activity cost pools on the basis of the
different types of cost drivers, or different degrees of difficulty in determining cause-and-
effect relationships
facility-sustaining costs - answercosts of activities that cannot be traced to individual
products or services but that support the organization as a whole
output unit-level costs - answercosts of activities performed on each individual unit of a
product or service
product-cost cross-subsidization - answerif a company undercosts one product, it will
overcost another product, vice versa
common when cost is uniformly spread
product overcosting - answerproduct consumes a low level of resources but is reported
to have a high cost per unit
product/service-sustaining costs - answercosts of activities undertaken to support
individual products or services regardless of the number of units or batches in which the
units are produced
product undercosting - answerproduct consumes a high level of resources but is
reported to have a low cost per unit
refined costing system - answerreduces the use of broad averages for assigning the
cost of resources to cost objects and provides better measurement of costs of indirect
resources used by different cost objects
peanut-butter costing - answercosting approach that uses broad averages for assigning
the cost of resources uniformly to cost objects when individual products or services use
resources in nonuniform ways
Activity - answeran event, task, or unit of work with a purpose
Activity Based costing - answerrefines a costing system by identifying activities as the
fundamental cost objects
activity based management - answermethod of management decision making that uses
activity-based costing information to improve customer satisfaction and profitability
batch-level costs - answercosts of activities related to a group of units of a product or
service
cost heirarchy - answercategorizes various activity cost pools on the basis of the
different types of cost drivers, or different degrees of difficulty in determining cause-and-
effect relationships
facility-sustaining costs - answercosts of activities that cannot be traced to individual
products or services but that support the organization as a whole
output unit-level costs - answercosts of activities performed on each individual unit of a
product or service
product-cost cross-subsidization - answerif a company undercosts one product, it will
overcost another product, vice versa
common when cost is uniformly spread
product overcosting - answerproduct consumes a low level of resources but is reported
to have a high cost per unit
product/service-sustaining costs - answercosts of activities undertaken to support
individual products or services regardless of the number of units or batches in which the
units are produced
product undercosting - answerproduct consumes a high level of resources but is
reported to have a low cost per unit
refined costing system - answerreduces the use of broad averages for assigning the
cost of resources to cost objects and provides better measurement of costs of indirect
resources used by different cost objects
peanut-butter costing - answercosting approach that uses broad averages for assigning
the cost of resources uniformly to cost objects when individual products or services use
resources in nonuniform ways
