Activity-based costing analysi

Level II (process planning and control) is where business process owners current business processes are planned and controlled, with methods for scheduling and capacity and (activity-based) cost analysis also available. Process monitoring lets process managers keep an eye on the states of the various processes. 

The TAP board was impressed by the presentation, and some members beheve that the proposed new machine wfil add to the profitabihty of the midsize line. As a result, Henry HanMnson asks Bradley Bartlett to run the numbers, factor in other relevant considerations, and make a recommendation. Bartlett wonders if his new data, using activity-based cost analysis, wfil have any impact on his eventual recommendation. 

For these reasons, Activity-Based Costing (ABC), the most accurate method of cost analysis, is particularly helpful in identifying all of the individual costs of an operating practice or an event, such as a chemical spill. In analyzing a spill, for example, the audit team can attach a dollar value to waste of materials and labor, system changes, unused capacity, and the spill s myriad overhead costs, as well as corporate legal, PR, and other administrative support costs, all of which need to be carefully understood in considering process improvements. 

Metrics may also be indexed with respect to a manufacturing output, input, throughput, or batch size, as discussed in AUen and Rosselot (1997). Product-based environmental impact analysis requires activity-based inventory assessment (Stuart et al. 1998). Similar to activity-based costing (see Chapter 89), activity-based environmental inventory assessment recognizes the hieiarchy of impacts tmd assigns them proportionately to an activity such as a product or service. 

Reengineering tools include benchmarking, modeling and analysis tools, simulation, and activity-based costing. 

Cost allocation learning and, 1405 time/job determination for, 1392 Cost-benefit analysis activity-based costing (ABC) for, 1704 IS systems, 98-99... 

Many readers will be familiar with the ABC inventory analysis tool. In this application, which is not related to activity-based costing, managers... 

This analysis demonstrates the relationship between fixed costs, variable costs, and revenue. For each product, there is a variable cost, and when deducted from the sales value, this generates a contribution. The volume level of sales at which the sum of unit product contribution equals the fixed and variable costs constitutes the break-even point. Construction of the appropriate chart (Figure 2.1) enables management to identify which expenses are controllable, which cost items contribute most to total expenditure, and how much these might possibly be reduced. Care must be taken in the allocation of fixed costs. Some that were previously considered fixed could be made variable by adopting techniques such as re-engineering and activity-based costing. 

Activity-based costing (ABC) analysis is an adaptation of Pareto analysis. Wilfredo Pareto was a 19th century economist who determined that 80 per cent of the wealth was held by 20 per cent of the population. This axiom can be adapted to most circumstances, for example 80 per cent of car accidents are caused by 20 per cent of the drivers (young men between the ages of 17 and 25). 

Thus, it is useful to carry out an activity-based costing (ABC) analysis (Pareto chart) to identify the top customers as shown in Figure 9.4. The Pareto theory is that 20 per cent of the customers wiU account for roughly 80 per cent of the business. ABC analysis takes this a step further by dividing customers into three groupings as shown Figure 9.4. Normally the division will be the top 5 per cent, the next 15 per cent and the balance of customers 80 per cent. 

Although we did not discuss this, you should be able to readily identify commercial adsorbents that can compete with activated carbon in water treatment applications. What are they, what are their properties, and how do unit costs compare In performing the cost analysis, take into consideration the volumes of adsorbents needed to achieve comparable degrees of water treatment. To do this, you should develop a base case scenario. 

Based on a cost analysis performed at the U.S. Department of Energy s Hanford site, in Richland, Washington, PSVE was found to be a cost-effective method for remediation of soils containing lower concentrations of volatile contaminants. PSVE used on wells that average 10 standard cubic feet per minute (scfm) airflow rates was found to be more cost-effective than active soil vapor extraction for concentrations below 500 parts per million (ppm) by volume of carbon tetrachloride. For wells that average 5 scfm, PSVE is more cost effective below 100 ppm (D14489S, p. iii). For further details of this analysis, refer to Table 1. 

When used judiciously, the advantages of QRA can outweigh the associated problems and costs. Companies that prudently commission QRAs and conscientiously act on the resulting recommendations are better off for two reasons (1) they have a better base of information to make decisions and (2) their judicious use of QRA technology represents another demonstration of responsible concern for the health and safety of workers and the public. However, companies should resist the indiscriminate use of QRA as a means to solve all problems since this strategy could waste safety improvement resources, diverting attention from other essential safety activities. Once executives are able to interpret and use QRA results, they will appreciate that the quality of their decisions rests largely on their ability to understand the salient analysis assumptions and the limitations of the results. 

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