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?

    <p>Identify the specific resources used to support customer segments</p> Signup and view all the answers

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

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

    What is the purpose of supply chain management?

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

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

    <p>Attributing activity costs to different customer types or segments</p> Signup and view all the answers

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

    <p>To determine the factors that contribute to cost variations</p> Signup and view all the answers

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

    <p>To identify the specific resources used to support customer segments</p> Signup and view all the answers

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

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

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

    <p>10%</p> Signup and view all the answers

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

    <p>Understanding product costs</p> Signup and view all the answers

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

    <p>Revenue through availability</p> Signup and view all the answers

    What type of resources does logistics activity require?

    <p>Both fixed capital and working capital</p> Signup and view all the answers

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

    <p>Market value added (MVA)</p> Signup and view all the answers

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

    <p>Employee satisfaction</p> Signup and view all the answers

    How can logistics positively impact sales volume and customer retention?

    <p>By enhancing revenue growth</p> Signup and view all the answers

    What does a negative EVA indicate?

    <p>Profit after tax less than cost of capital employed</p> Signup and view all the answers

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

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

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

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

    How does logistics influence the balance sheet of a business?

    <p>By impacting operating income and inventory levels</p> Signup and view all the answers

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

    <p>Inventory levels</p> Signup and view all the answers

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

    <p>Property tax</p> Signup and view all the answers

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

    <p>Net present value of free cash flow</p> Signup and view all the answers

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

    <p>Lack of appropriate cost information</p> Signup and view all the answers

    What does inventory holding costs include?

    <p>Cost of debt</p> Signup and view all the answers

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

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

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

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

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

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

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

    <p>Determine total systems cost of meeting mission objectives and the costs of various inputs involved</p> 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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    Related Documents

    Chapter 3: Measuring Logistics Costs & Performance PDF

    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.

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