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Additional info for ACCA - F5 Performance Management: Study Text

Example text

Customer requirements for quality, cost and time are incorporated into product and process decisions. The value of product features to the customers must be greater than the cost of providing them. Design. Cost control is emphasised at the design stage so any engineering changes must happen before production starts. Faster time to market. The early external focus enables the business to get the process right first time and avoids the need to go back and change aspects of the design and/or production process.

To be effective, cost management must be based on a sound knowledge of an organisation's cost structure, the proportion of its overheads, the degree of competition, its information needs within the organisation, an appreciation of how costs are determined and how they may be influenced. ' Evaluating the Potential of Activity-Based Costing, Mike Tayles, ACCA Students' Newsletter Chapter Roundup x An alternative to absorption costing is activity based costing (ABC). ABC involves the identification of the factors (cost drivers) which cause the costs of an organisation's major activities.

Faster time to market. The early external focus enables the business to get the process right first time and avoids the need to go back and change aspects of the design and/or production process. This then reduces the time taken to get a product to the market. (c) (d) 5 Closing a target cost gap 12/07 The target cost gap is the estimated cost less the target cost. When a product is first manufactured, its target cost may well be much lower than its currently-attainable cost, which is determined by current technology and processes.

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