In activity-based costing (ABC) systems, an activity refers to any operation performed within an organization that causes costs to be incurred. Examples include processing an order, writing a letter, designing a product, and visiting a customer. This concept is integral to accurately allocating costs based on actual activities.
Activity-Based Management (ABM) involves using insights gained from Activity-Based Costing (ABC) to improve the overall management and efficiency of an organization. It focuses on identifying activities, understanding cost drivers, and analyzing how resources are consumed based on activity levels.
Allocation involves distributing resources for specific uses or spreading costs over multiple products, customers, people, or time periods.
Batch processing is a method of production where similar individual units are grouped together as a batch to streamline the production process and improve cost-efficiency. Often used when the goods produced are small or homogeneous, batch processing helps organizations manage resources more effectively.
Capacity planning is a long-term strategic process that determines the production capacity needed by an organization to meet changing demands for its products.
Efficiency variances measure the difference between the actual amount of resources used in production and the standard amount that should have been used, focusing particularly on labor and overhead costs.
Environmental Accounting (EA) is a subset of accounting that focuses on the efficient use, management, and reporting of resources used by businesses to reduce environmental impacts. EA includes identifying, measuring, and communicating the costs of a company's economic activities associated with the environment.
Financial adaptability refers to the ability of an accounting entity to take effective action to alter the amounts and timing of cash flows so that it can respond to unexpected needs or opportunities.
Idle capacity refers to the portion of an organization’s budgeted capacity that is not utilized, resulting in unused hours. It is often measured in hours and indicates the gap between actual hours worked and budgeted available hours.
An investment centre is a unit or division within an organization where capital expenditures are made under the specific oversight of management responsible for that centre. This focus allows for detailed accountability and efficient resource management.
Employees in senior positions within an organization who have the authority to direct or control its major activities and resources, crucial for strategic decision-making and governance.
Managed costs are specific expenses that a company can control or influence through internal decisions, strategic planning, and efficient resource management. Careful handling of managed costs can significantly impact a company's operational efficiency and overall profitability.
The planning, coordination, and controlling of an organization's resources to efficiently facilitate the production process, encompassing key issues such as location, labor, transportation costs, and production forecasting.
Project Management (PM) is an organizational management system that assigns employees to specific project teams when special projects are contracted and then reassigns them back to the organization when the project is completed. PM also involves coordinating project activities with organizational divisions and departments to achieve objectives.
Resource allocation refers to the process of distributing available resources to various projects, departments, or business units to achieve organizational objectives efficiently.
A stockpile is a reserve supply of raw materials or goods accumulated to meet continuous or future demands and overcome potential shortages. Businesses often maintain stockpiles to ensure smooth operations during unforeseen disruptions in supply chains.
Usage rate refers to the speed at which a commodity, raw material, or other resource is used up. It measures consumption over a specific period and is crucial for managing inventory, production schedules, and financial planning.
The period during which the operators of a machine or the machinery itself are idle or waiting for work, materials, or repairs. This is a key concept in manufacturing, logistics, and service industries.
