Exam 12: Activity-Based Management

Suburbia, Inc., sells one of its products for $150 each. Sales volume averages 800 units per year. Recently, its main competitor reduced the price of its product to $130. Suburbia expects sales to drop dramatically unless it matches the competitor's price. In addition, the current profit per unit must be maintained. Information about the product (for production of 800) is as follows: Required: a. Calculate the target cost for maintaining current market share and profitability. b. Calculate the non-value-added cost per unit. c. If non-value-added costs can be reduced to zero, can the target cost be achieved?

Setup time for a product is 12 hours. A firm that uses JIT and produces the same product has reduced setup time to 1 hour. Setup labor is $6 per hour. The non-value-added costs are

Which of the following is NOT an objective of activity-based management?

Metropolitan, Inc., sells one of its products for $40 each. Sales volume averages 2,000 units per year. Recently, its main competitor reduced the price of its product to $28. Metropolitan expects sales to drop dramatically unless it matches the competitor's price. In addition, the current profit per unit must be maintained. Information about the product (for production of 2,000) is as follows: Required: a. Calculate the target cost for maintaining current market share and profitability. b. Calculate the non-value-added cost per unit. c. If non-value-added costs can be reduced to zero, can the target cost be achieved?

Performance measurement is concerned with how well activities are performed.

Controlling the cost reduction process using Kaizen costing is accomplished