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Locating a Value Creation Activity in the Optimal Location for That

question 89

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Locating a value creation activity in the optimal location for that activity can have one or two effects.First,it can lower the costs of value creation and help the firm to achieve a low-cost position,and/or:


Definitions:

Activity Cost Pool

A way to group all the costs related to a specific activity or process, used in activity-based costing.

Direct Labor Rate

The cost per hour that a company pays for direct labor, typically related to the production of goods.

Direct Materials Cost

The cost of raw materials directly used in the production of a product, easily identifiable and assignable to the product.

Activity-Based Costing System

A costing method that assigns costs to products or services based on the resources they consume and the activities they require.

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