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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?
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 basic tenet of activity-based costing (ABC)?
What is the purpose of logistics cost analysis?
What is the purpose of logistics cost analysis?
Which step involves identifying the specific resources used to support customer segments?
Which step involves identifying the specific resources used to support customer segments?
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What does the principle of 'avoidability' refer to in logistics cost analysis?
What does the principle of 'avoidability' refer to in logistics cost analysis?
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What is the purpose of supply chain management?
What is the purpose of supply chain management?
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What does the step 'attribute activity costs by customer type or segment' involve?
What does the step 'attribute activity costs by customer type or segment' involve?
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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 factors that produce variations in the cost of service?
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What is the main purpose of identifying the specific resources used to support customer segments?
What is the main purpose of identifying the specific resources used to support customer segments?
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What is the main purpose of attributing activity costs by customer type or segment?
What is the main purpose of attributing activity costs by customer type or segment?
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What is the estimated total cost of logistics as a proportion of gross domestic product in the USA?
What is the estimated total cost of logistics as a proportion of gross domestic product in the USA?
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What is the primary focus of traditional accounting systems in relation to costs?
What is the primary focus of traditional accounting systems in relation to costs?
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In addition to generating costs, what else does logistics activity generate?
In addition to generating costs, what else does logistics activity generate?
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What type of resources does logistics activity require?
What type of resources does logistics activity require?
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What is the measure of wealth calculated as the net present value of expected future EVAs?
What is the measure of wealth calculated as the net present value of expected future EVAs?
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Which factor is not considered a basic driver of enhanced shareholder value?
Which factor is not considered a basic driver of enhanced shareholder value?
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How can logistics positively impact sales volume and customer retention?
How can logistics positively impact sales volume and customer retention?
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What does a negative EVA indicate?
What does a negative EVA indicate?
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How can logistics management impact Return on Investment (ROI)?
How can logistics management impact Return on Investment (ROI)?
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What does 'capital employed' refer to in financial management?
What does 'capital employed' refer to in financial management?
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How does logistics influence the balance sheet of a business?
How does logistics influence the balance sheet of a business?
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What aspect of a company's current assets is often affected by logistics?
What aspect of a company's current assets is often affected by logistics?
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Which factor can impact the after-tax free cash flow of global organizations?
Which factor can impact the after-tax free cash flow of global organizations?
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What is the primary determinant of the value of a business?
What is the primary determinant of the value of a business?
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What is the main challenge faced by integrated logistics and distribution management?
What is the main challenge faced by integrated logistics and distribution management?
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What does inventory holding costs include?
What does inventory holding costs include?
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What is the purpose of direct product profitability (DPP) in logistics and supply chain management?
What is the purpose of direct product profitability (DPP) in logistics and supply chain management?
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What does customer profitability analysis involve in logistics and supply chain management?
What does customer profitability analysis involve in logistics and supply chain management?
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What is the main purpose of logistics cost analysis in the context of supply chain management?
What is the main purpose of logistics cost analysis in the context of supply chain management?
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What does mission costing aim to achieve in logistics and supply chain management?
What does mission costing aim to achieve in logistics and supply chain management?
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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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Description
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.
