Mission Costing in Supply Chain

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Questions and Answers

Which step involves the determination of service elements that will directly or indirectly impact the costs of service?

Identify the factors that produce variations in the cost of service (correct)

Identify the specific resources used to support customer segments

Attribute activity costs by customer type or segment

None of the above

What is the basic tenet of activity-based costing (ABC)?

Activities that generate cost should be defined and specific cost drivers identified (correct)

The purpose is to meet customer service requirements in the most cost-effective way

The incremental costs incurred should be attributed to customer types or segments

None of the above

What is the purpose of logistics cost analysis?

To provide managers with reliable information for better resource allocation (correct)

To determine the factors that produce variations in the cost of service

To identify the specific resources used to support customer segments

None of the above

Which step involves identifying the specific resources used to support customer segments?

Identify the specific resources used to support customer segments Signup and view all the answers

What does the principle of 'avoidability' refer to in logistics cost analysis?

Incremental costs incurred should be attributed to customer types or segments Signup and view all the answers

What is the purpose of supply chain management?

To meet customer service requirements in the most cost-effective way Signup and view all the answers

What does the step 'attribute activity costs by customer type or segment' involve?

Attributing activity costs to different customer types or segments Signup and view all the answers

What is the main purpose of identifying the factors that produce variations in the cost of service?

To determine the factors that contribute to cost variations Signup and view all the answers

What is the main purpose of identifying the specific resources used to support customer segments?

To identify the specific resources used to support customer segments Signup and view all the answers

What is the main purpose of attributing activity costs by customer type or segment?

To attribute activity costs to different customer types or segments Signup and view all the answers

What is the estimated total cost of logistics as a proportion of gross domestic product in the USA?

10% Signup and view all the answers

What is the primary focus of traditional accounting systems in relation to costs?

Understanding product costs Signup and view all the answers

In addition to generating costs, what else does logistics activity generate?

Revenue through availability Signup and view all the answers

What type of resources does logistics activity require?

Both fixed capital and working capital Signup and view all the answers

What is the measure of wealth calculated as the net present value of expected future EVAs?

Market value added (MVA) Signup and view all the answers

Which factor is not considered a basic driver of enhanced shareholder value?

Employee satisfaction Signup and view all the answers

How can logistics positively impact sales volume and customer retention?

By enhancing revenue growth Signup and view all the answers

What does a negative EVA indicate?

Profit after tax less than cost of capital employed Signup and view all the answers

How can logistics management impact Return on Investment (ROI)?

By influencing the ratios of profit/sales and sales/capital employed Signup and view all the answers

What does 'capital employed' refer to in financial management?

The total capital used for acquiring profits by a firm or project Signup and view all the answers

How does logistics influence the balance sheet of a business?

By impacting operating income and inventory levels Signup and view all the answers

What aspect of a company's current assets is often affected by logistics?

Inventory levels Signup and view all the answers

Which factor can impact the after-tax free cash flow of global organizations?

Property tax Signup and view all the answers

What is the primary determinant of the value of a business?

Net present value of free cash flow Signup and view all the answers

What is the main challenge faced by integrated logistics and distribution management?

Lack of appropriate cost information Signup and view all the answers

What does inventory holding costs include?

Cost of debt Signup and view all the answers

What is the purpose of direct product profitability (DPP) in logistics and supply chain management?

To identify all costs attached to a product or order as it moves through the distribution channel Signup and view all the answers

What does customer profitability analysis involve in logistics and supply chain management?

Identifying avoidable costs and incremental revenue to accurately measure customer profitability Signup and view all the answers

What is the main purpose of logistics cost analysis in the context of supply chain management?

To provide managers with reliable information for better resource allocation to meet customer service requirements in a cost-effective manner Signup and view all the answers

What does mission costing aim to achieve in logistics and supply chain management?

Determine total systems cost of meeting mission objectives and the costs of various inputs involved Signup and view all the answers

Study Notes

Costing and Profitability Analysis in Logistics and Supply Chain Management

Effective costing system aims to determine total systems cost of meeting mission objectives and the costs of various inputs involved
Mission costing is the reverse of traditional techniques, where functional budget is determined by the demands of the missions it serves
Customer profitability analysis involves identifying avoidable costs and incremental revenue to accurately measure customer profitability
Customer profitability matrix categorizes customers based on their net sales value and cost-to-serve
Different strategies are proposed for customer categories including Build, Danger zone, Cost engineer, and Protect
Direct product profitability (DPP) attempts to identify all costs attached to a product or order as it moves through the distribution channel
Understanding DPP is important for suppliers as their ability to be a low-cost supplier is influenced by the costs incurred in the logistics system
Table 3.3 describes the steps to be followed in moving from a crude gross margin measure to a more precise DPP
Four stages in the implementation of an effective mission costing process are defined: defining customer service elements, identifying factors leading to variations in service, identifying specific resources used to support customer segments, and attributing activity costs by customer type or segment
The basic purpose of logistics cost analysis is to provide managers with reliable information for better resource allocation to meet customer service requirements in the most cost-effective manner

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Test your knowledge on supply chain missions and their impact on activity center/functional area costs. Learn about mission costing and how it differs from traditional budgeting techniques.

Mission Costing in Supply Chain

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Questions and Answers

Which step involves the determination of service elements that will directly or indirectly impact the costs of service?

What is the basic tenet of activity-based costing (ABC)?

What is the purpose of logistics cost analysis?

Which step involves identifying the specific resources used to support customer segments?

What does the principle of 'avoidability' refer to in logistics cost analysis?

What is the purpose of supply chain management?

What does the step 'attribute activity costs by customer type or segment' involve?

What is the main purpose of identifying the factors that produce variations in the cost of service?

What is the main purpose of identifying the specific resources used to support customer segments?

What is the main purpose of attributing activity costs by customer type or segment?

What is the estimated total cost of logistics as a proportion of gross domestic product in the USA?

What is the primary focus of traditional accounting systems in relation to costs?

In addition to generating costs, what else does logistics activity generate?

What type of resources does logistics activity require?

What is the measure of wealth calculated as the net present value of expected future EVAs?

Which factor is not considered a basic driver of enhanced shareholder value?

How can logistics positively impact sales volume and customer retention?

What does a negative EVA indicate?

How can logistics management impact Return on Investment (ROI)?

What does 'capital employed' refer to in financial management?

How does logistics influence the balance sheet of a business?

What aspect of a company's current assets is often affected by logistics?

Which factor can impact the after-tax free cash flow of global organizations?

What is the primary determinant of the value of a business?

What is the main challenge faced by integrated logistics and distribution management?

What does inventory holding costs include?

What is the purpose of direct product profitability (DPP) in logistics and supply chain management?

What does customer profitability analysis involve in logistics and supply chain management?

What is the main purpose of logistics cost analysis in the context of supply chain management?

What does mission costing aim to achieve in logistics and supply chain management?

Study Notes

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