Strategic Cost Management

Life Cycle Costing plays a crucial role in budgeting as it involves analyzing all costs associated with a product over its entire lifecycle. It is not limited to the initial production costs or the end of the product lifecycle. By considering expected costs/revenue and trade-offs between R&D and production costs, businesses can make informed budgeting decisions.

The correct steps of ABM are Identification, Analysis, Implementation, and Performance Measures.

Target costing is a strategic cost management tool used to determine the cost at which a product should be manufactured in order to meet a desired profit margin. It involves understanding customer needs, pricing strategies, and cost control measures to achieve profitability.

Quality is typically measured in terms of design and conformance to ensure that products meet the specified standards and requirements.

When considering quality, it is important to evaluate how it is measured and how much it costs to achieve. The other incorrect answers do not directly relate to the aspects of quality assessment and cost considerations.

When analyzing activities for ABM, it is important to consider both value-add and non-value add activities, as well as the cost/benefit analysis of changing these activities. Simply looking at the cost of activities alone, the frequency of activities, or the size of the company employing ABM may not provide a comprehensive understanding of how to improve and optimize processes.

The correct answer includes the concept of prevention, appraisal, internal and external tradeoffs for analyzing the cost of quality. Prevention focuses on avoiding errors, appraisal involves evaluating processes, and internal/external tradeoffs involve balancing investments. The incorrect answers misinterpret or do not include the essential steps for cost of quality analysis.

Joseph M. Juran is often referred to as the father of quality costs for his extensive work on the subject and development of the Juran Trilogy, which includes the concept of Quality Costs.

Activity-Based Management (ABM) focuses on optimizing costs and improving profitability by analyzing activities and their impact on costs and performance.

Root Cause cost drivers are specifically related to factors that directly influence the cost of performing an activity, not just any general factors or financial responsibilities.

Cost driver analysis involves identifying the root cause of cost drivers, which are the factors that directly impact the cost of activities within a company. It goes beyond simply calculating costs and focuses on understanding the reasons behind them.

Lean thinking focuses on delivering value efficiently by eliminating waste and optimizing processes.

Lean thinking helps businesses streamline processes, eliminate waste, and enhance customer service, leading to cost savings and improved efficiency.

Critical success factors are key areas of performance that are essential for the success of an organization. In this case, quality, delivery time, and cost are commonly used factors to measure performance as they directly impact the outcome of projects, operations, and overall business success.

Managing spare capacity efficiently is crucial for cost reduction and optimization. The correct approach involves either removing the excess capacity or utilizing it for productive activities to add value, thus avoiding unnecessary costs.

Business Process Reengineering (BPR) involves understanding and improving business processes to increase efficiency and effectiveness. The correct steps include mapping current processes, setting goals based on customer value, reorganizing workflows, and implementing changes while considering employee input to minimize resistance.

Business Process Reengineering often results in the reorganization of a company's structure around processes to improve efficiency and effectiveness.

The new approaches to managing cost and quality involve understanding the drivers of cost, strategic focus on customer value, and promoting process orientation and collaboration among all employees.

BPR stands for Business Process Re-Engineering, which involves the analysis and redesign of workflows within and between enterprises to optimize end-to-end processes and improve efficiency.

Traditional Costing, Six Sigma, and Lean Manufacturing are all modern approaches to managing costs and quality, but they are not included in the specified list of 5 contemporary approaches.

Activity-Based Management (ABM) focuses on cost management and allocation. Therefore, increasing production efficiency, reducing employee turnover, and improving customer satisfaction are not specific functions of ABM.

Account-Based Marketing (ABM) involves targeting specific accounts, expanding within those accounts, engaging with personalized content, and measuring the results to improve future campaigns.

When evaluating activities using Activity-Based Management (ABM), it is important to differentiate between value add activities that directly contribute to customer value and non-value add activities that do not. This approach helps in making informed decisions to optimize costs and improve overall efficiency.

ABM and BPR are two distinct methodologies used in business management. ABM aims at improving processes gradually, while BPR involves rethinking and redesigning processes from scratch for significant changes.

ABM and BPR both aim at identifying processes, analyzing activities, mapping goals, implementing improvements, and reviewing the outcomes in order to achieve cost reduction and enhance efficiency.

Life cycle costing involves the stages of planning, design and development, production, and delivery & distribution with a focus on customer support and logistics for budgeting purposes.

Life Cycle Costing involves considering all costs associated with a product or project throughout its entire life cycle, including acquisition, operation, maintenance, and disposal costs.