A Systematic Approach in Analysing the Product and Process Design

question 38

Multiple Choice

A systematic approach in analysing the product and process design, with the aim of eliminating any non-value-added elements, to achieve the target cost is known as:

• A) component level target costs.
• B) value engineering.
• C) strategic cost reduction.
• D) cost reduction objective.

Comprehend the definitions and calculations of marginal cost (MC) and average total cost (ATC).

Recognize the relationship between output level and various costs (fixed, variable, total, MC, ATC, AVC).

Identify the conditions under which costs (fixed, variable, average, marginal) change and their impact on production decisions.

Analyze the effects of changing output levels on marginal and average costs and their interrelationships.

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Definitions:

Activity Measure

A metric or index used to gauge the extent or level of activity undertaken in a particular process or operation.

Activity-based Costing

A method of allocating overhead and indirect costs to products or services based on the activities that generate those costs.

Overhead Costs

General business expenses that are not directly attributable to a specific product or service but are necessary for the business to operate.

Direct Labor-hours

The total hours worked by employees directly involved in the manufacturing process, used in assigning costs to products.