Describe the Three Broad Tasks of the AFI Strategy Framework

question 99

Essay

Describe the three broad tasks of the AFI strategy framework and provide examples of the topics and questions that managers address in relation to each task.

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Definitions:

Prime Cost

The combined direct costs of raw material and labor that are directly associated with the production of a product.

Discretionary Fixed Costs

Those fixed costs that arise from annual decisions by management to spend on certain fixed cost items, such as advertising and research.

Committed Fixed Costs

Expenses that a company has to pay regardless of its level of production or sales, such as leases and long-term contracts, which cannot be easily changed in the short term.

Unit Fixed Cost

The fixed cost associated with producing one unit of a product, which does not vary with the level of production output.