Kế toán tài chính 2 - Chapter 22: Activity - Based systems: Abm and jit

Activity-Based Systems:ABM and JITMultimedia Slides by: Gail A. Mestas, MAcc, New Mexico State UniversityChapter 22Learning ObjectivesExplain the role of activity-based systems in the management cycle.Define activity-based management (ABM) and discuss its relationship to the supply chain and value chain.Distinguish between value-adding and nonvalue-adding activities, and describe process value analysis.Copyright © Houghton Mifflin Company. All rights reserved.Learning Objectives (cont’d)Define activity-based costing and explain how a cost hierarchy and bill of activities are used.Define the just-in-time (JIT) operating philosophy and identify the elements of a JIT operating environment.Identify the changes in product costing that result when a firm adopts a JIT operating environment.Copyright © Houghton Mifflin Company. All rights reserved.Learning Objectives (cont’d)Define and apply backflush costing, and compare the cost flows in traditional and backflush costing. Compare ABM and JIT as activity-based systems.Copyright © Houghton Mifflin Company. All rights reserved.Activity-Based Systems and ManagementObjective 1Explain the role of activity-based systems in the management cycleCopyright © Houghton Mifflin Company. All rights reserved.Activity-Based Systems and ManagementCompanies measure value as revenueCustomer Value = Revenue GeneratedValue exists when some characteristic of a product or service satisfies customers’ wants or needsCopyright © Houghton Mifflin Company. All rights reserved.Activity-Based Systems and Management (cont’d)Managers create value by satisfying customers’ needs for quality, reasonable price, and timely deliveryWork with suppliers and customersFind ways of improving quality, reducing costs, and shortening delivery timeView the organization as a collection of value-adding activitiesUse resources for value-adding activitiesMatch resources to the operating activities that add value to a product or serviceCopyright © Houghton Mifflin Company. All rights reserved.Activity-Based Systems and Management (cont’d)Managers create value by satisfying customers’ needs for quality, reasonable price, and timely deliveryReduce or eliminate nonvalue-adding activitiesKnow the total cost of creating value for a customerMust know the full product costIncludesCosts of direct materials and direct laborCosts of all production and nonproduction activities required to satisfy the customerCopyright © Houghton Mifflin Company. All rights reserved.Activity-Based Systems are information systems that provide quantitative information about an organization’s activitiesCreate opportunities to provide cost information to managersHelp managers view their organization as a collection of activitiesHelp managers improve operating systems and make better pricing decisionsCopyright © Houghton Mifflin Company. All rights reserved.Activity-Based Systems (cont’d)Traditional systems not designed toCapture data on activitiesTrace the full cost of the productCould not Isolate the cost of unnecessary activitiesPenalize for overproductionQuantify measures that improve quality or reduce throughput timeCopyright © Houghton Mifflin Company. All rights reserved.Activity-Based Systems (cont’d)Two types of activity-based systemsActivity-based management (ABM)Just-in-Time (JIT) operating environmentBoth help organizations manage activities (not costs)Can reduce or eliminate many nonvalue-adding activitiesLeads to reduced costs and increased incomeCopyright © Houghton Mifflin Company. All rights reserved.Using Activity-Based Cost Information in the Management CyclePlanning stageManagers examine their company’s value-adding activities and related costsTo ensure that the company is offering quality products or services at the lowest costCopyright © Houghton Mifflin Company. All rights reserved.Using Activity-Based Cost Information in the Management Cycle (cont’d)Executing stageManagers want to knowWhat activities are being performedHow well they are being performedWhat resources they are consumingNecessary nonvalue-adding activities are monitoredAn ABC systemMeasures actual quantities of activityA quantitative nonfinancial measureAccumulates related activity costsA quantitative financial measureAllows managers the flexibility to create cost pools for different types of cost objectsCopyright © Houghton Mifflin Company. All rights reserved.Using Activity-Based Cost Information in the Management Cycle (cont’d)Reviewing stageManagers measure an activity's performance by reviewing the difference between its actual and budgeted costsInformation used toAnalyze variances in activity levelsIdentify wastes and inefficienciesTake action to improve processes and activitiesCareful review and analysis will increase value for the customer byImproving product qualityReducing costs and cycle timeCopyright © Houghton Mifflin Company. All rights reserved.Using Activity-Based Cost Information in the Management Cycle (cont’d)Reporting stageManagers prepare reports about the company’s performance forInternal usersShow the application of costs of activities to cost objectsResults in better measurement of profitabilityExternal usersSummarize past performanceCopyright © Houghton Mifflin Company. All rights reserved.DiscussionName two types of activity-based systemsActivity-based management (ABM) and a just-in-time (JIT) operating environmentCopyright © Houghton Mifflin Company. All rights reserved.Activity-Base ManagementObjective 2Define activity-based management (ABM) and discuss its relationship to the supply chain and value chainCopyright © Houghton Mifflin Company. All rights reserved.Activity-Base ManagementApproach to managing an organizationIdentifies all major operating activitiesDetermines the resources consumed by each activity and the cause of the resource usageCategorizes the activities as either adding value to a product or service or not adding valueFocuses on reducing or eliminating nonvalue-adding activitiesCopyright © Houghton Mifflin Company. All rights reserved.Activity-Base Management (cont’d)Provides both financial and performance information at the activity levelUseful forStrategic planningMaking operational decisions about business segmentsProduct linesMarket segmentsCustomer groupsCopyright © Houghton Mifflin Company. All rights reserved.Activity-Base Management (cont’d)Helps managers Eliminate waste and inefficienciesRedirect resources to activities that add valueEmploys activity-based costing (ABC) to assign activity costs to cost objectsCopyright © Houghton Mifflin Company. All rights reserved.Value Chains and Supply ChainsValue chainA sequence of activities (primary processes) that add value to a company’s product or serviceIncludes support services that facilitate the primary processesManagement accountingSupply chainThe path that leads from the suppliers of the materials from which a product is made to the final customerEach link in the supply chain has its own value chainAlso called supply networkCopyright © Houghton Mifflin Company. All rights reserved.Supply Chain and Value Chain for a Manufacturing CompanyCopyright © Houghton Mifflin Company. All rights reserved.Value Chains and Supply ChainsGive managers a better grasp of their company’s internal and external operationsHow their company’s value-adding activities fit into the their suppliers’ and customers’ value chainsWhat their company’s role is in the overall process of creating and delivering products or servicesBy working with suppliers and customers across the entire supply chain, may be able to reduce the cost of making a productCopyright © Houghton Mifflin Company. All rights reserved.ABM in a Service OrganizationWestern Data Services, Inc. (WDSI) offers database marketing strategies to help companies increase their salesDesigning a mailing pieceCreation and maintenance of marketing databasesProduction process that prints a promotional piece and prepares it for mailingCopyright © Houghton Mifflin Company. All rights reserved.ABM in a Service Organization (cont’d)Each organization in the supply chain has its own value chainSupply chainCopyright © Houghton Mifflin Company. All rights reserved.ABM in a Service Organization (cont’d)Supply chain Value chainMarketingPrepare MarketingDatabasesPurchase SuppliesProcess OrdersMail PromotionalPiecesCustomer RelationsCopyright © Houghton Mifflin Company. All rights reserved.DiscussionHow are a supply chain and a value chain related?The supply chain is a system of organizations and customers that each have their own value chain The supply chain identifies the suppliers and customers involved in manufacturing a product or delivering a service to the final customer The value chain identifies the major operating activities for each organization in the supply chainCopyright © Houghton Mifflin Company. All rights reserved.Value-Adding and Nonvalue-Adding Activities and Process Value AnalysisObjective 3Distinguish between value-adding and nonvalue-adding activities, and describe process value analysisCopyright © Houghton Mifflin Company. All rights reserved.Value-Adding and Nonvalue-Adding Activities and Process Value AnalysisValue-adding activityAdds value to a product or service as perceived by the customerDesigning a carBuilding the carPainting the carInstalling seats and airbagsCopyright © Houghton Mifflin Company. All rights reserved.Value-Adding and Nonvalue-Adding Activities and Process Value Analysis (cont’d)Nonvalue-adding activityAdds cost to a product or service but does not increase its market valueGoal of ABMEssential nonvalue-adding activitiesReduce costsNonessential Nonvalue-adding activitiesEliminateEssential nonvalue-adding activities include legal services, management accounting, machine repair, materials handling, and building maintenanceCopyright © Houghton Mifflin Company. All rights reserved.Value-Adding and Nonvalue-Adding Activities and Process Value Analysis (cont’d)To reduce costs, managersImprove processes and activitiesReduce an activity’s frequencyEliminate an activityOutsourceCopyright © Houghton Mifflin Company. All rights reserved.Value-Adding and Nonvalue-Adding Activities in a Service OrganizationCarl Marcus, the owner and manager of WDSI, has examined the activities related to the design, processing, and mailing of the company’s Classic Letters Value-adding activitiesThese are the activities customers pay for when they ask for database marketing servicesCopyright © Houghton Mifflin Company. All rights reserved.Copyright © Houghton Mifflin Company. All rights reserved.Value-Adding and Nonvalue-Adding Activities in a Service OrganizationNonvalue-adding activitiesPrepare job forms and schedule jobsOrder, receive, inspect, and store paper, envelopes, and other suppliesSet up machinesLog total number of items processed in a batchBill clients and record and deposit payments from clientsCopyright © Houghton Mifflin Company. All rights reserved.Value-Adding and Nonvalue-Adding Activities in a Service OrganizationMarcus was able to reduce some of these costs byHaving paper, envelopes, and other supplies delivered the day a job is performedReduces storage costsPurchasing computer software that verifies addresses, determines postage, and automatically sorts lettersReduces cost of laborCopyright © Houghton Mifflin Company. All rights reserved.Process Value Analysis (PVA) is a technique that managers use to identify and link all the activities involved in the value chainCopyright © Houghton Mifflin Company. All rights reserved.Process Value Analysis (cont’d)Relates activities to the events that prompt them and to the resources that they consumeEffective way of reducing nonvalue-adding activities and their costsImproves cost traceability and results in more accurate product costsImproves management decisions and profitabilityCopyright © Houghton Mifflin Company. All rights reserved.DiscussionIs management accounting a value-adding or nonvalue-adding activity?It is a nonvalue-adding activity because it adds cost to a product or service, but does not increase its market value. However, it is an essential activity and managers should strive to reduce the costs associated with itCopyright © Houghton Mifflin Company. All rights reserved.Activity-Based CostingObjective 4Define activity-based costing and explain how a cost hierarchy and bill of activities are usedCopyright © Houghton Mifflin Company. All rights reserved.Activity-Based CostingCalculates a more accurate product cost than traditional methodsCategorizes all indirect costs by activityTraces the indirect costs to those activitiesAssigns those costs to productsUses a cost driver related to the cause of the costABC improves the allocation of activity-driven costs to cost objectsCopyright © Houghton Mifflin Company. All rights reserved.Activity-Based Costing (cont’d)Steps to implement ABCIdentify and classify each activityEstimate the cost of resources for each activityIdentify a cost driver for each activity and estimate the quantity of each cost driverCalculate an activity cost rate for each activityAssign costs to products based on the level of activity required to make the product or provide the serviceCopyright © Houghton Mifflin Company. All rights reserved.Cost Hierarchy and the Bill of ActivitiesTwo tools help in the implementation of ABCCost hierarchyBill of activitiesCopyright © Houghton Mifflin Company. All rights reserved.The Cost Hierarchy is a framework for classifying activities according to the level at which their costs are incurredCopyright © Houghton Mifflin Company. All rights reserved.The Cost Hierarchy (cont’d)Typically has four levels in a manufacturing companyUnit-level activitiesPerformed each time a unit is producedBatch-level activitiesPerformed each time a batch of goods is producedProduct-level activitiesPerformed to support the diversity of products in a manufacturing plantFacility-level activitiesPerformed to support a facility’s general manufacturing processCopyright © Houghton Mifflin Company. All rights reserved.The Cost Hierarchy (cont’d)The frequency of activities varies across levelsIncludes both value-adding and nonvalue-adding activitiesLevels in service organizationsUnit levelBatch levelService levelOperations levelCopyright © Houghton Mifflin Company. All rights reserved.Copyright © Houghton Mifflin Company. All rights reserved.The Bill of Activities is a list of activities and related costs that is used to compute the costs assigned to activities and the product unit costPrepared once managers have created the cost hierarchyCopyright © Houghton Mifflin Company. All rights reserved.The Bill of Activities (cont’d)More complex bills of activities group activities into activity poolsInclude Activity cost ratesCost driver levels used to assign costs to cost objectsCopyright © Houghton Mifflin Company. All rights reserved.The Bill of Activities (cont’d)May be usedAs the primary document or as a supporting schedule to calculate product unit costIn both job order and process costing systemsIn both manufacturing and service organizationsCopyright © Houghton Mifflin Company. All rights reserved.Bill of Activities for a Service OrganizationCopyright © Houghton Mifflin Company. All rights reserved.The Bill of ActivitiesWDSI provides two types of mailing piecesClassic LetterSelf-MailerActivities are grouped byUnit levelBatch levelService levelOperations levelCopyright © Houghton Mifflin Company. All rights reserved.The Bill of Activities (cont’d)Bill of activities for WDSI providesCost information for each activityIncluding activity cost rate and cost driver levelTotal activity costsActivity cost per unitCost summaryUnit cost for each type of mailing pieceTotal cost divided by number of units mailedCopyright © Houghton Mifflin Company. All rights reserved.The Bill of Activities (cont’d)Classic LetterGenerating a positive gross marginSelf-MailerGenerating a negative gross marginMust find ways toIncrease fee revenueReduce costsIncrease volumeCopyright © Houghton Mifflin Company. All rights reserved.Activity-Based Costing for Selling and Administrative ActivitiesCosts of these activities includeSalariesBenefitsDepreciation on buildings and equipmentSales commissionsUtilitiesCopyright © Houghton Mifflin Company. All rights reserved.Activity-Based Costing for Selling and Administrative Activities (cont’d)Costs are grouped into activity poolsAssigned to cost objects using cost driversCost objectsProducts, services, customers, or sales territoriesMany companies treat similar customers as one group because it is difficult to assign costs to individual customersCost driversNumber of sales calls, sales orders, invoices, or billingsCopyright © Houghton Mifflin Company. All rights reserved.Income Statement for a Cost ObjectCopyright © Houghton Mifflin Company. All rights reserved.DiscussionWhat is the purpose of a bill of activities?It is used to compute (1) the costs assigned to activities and (2) the product unit costCopyright © Houghton Mifflin Company. All rights reserved.The New Manufacturing Environment and JIT OperationsObjective 5Define the just-in-time (JIT) operating philosophy and identify the elements of a JIT operating environmentCopyright © Houghton Mifflin Company. All rights reserved.The New Manufacturing Environment and JIT OperationsJust-in-time (JIT) operating philosophyRequires that all resources be acquired and used only as neededMaterials, personnel, and facilitiesDevised in response to the competitive business environmentCopyright © Houghton Mifflin Company. All rights reserved.The New Manufacturing Environment and JIT Operations (cont’d)Traditional operationsLarge amounts of inventoryMaterials purchased infrequently in large amountsLong production runs with infrequent setupsLarge batches of product manufacturedWorkers trained to perform a limited number of tasksCopyright © Houghton Mifflin Company. All rights reserved.The New Manufacturing Environment and JIT Operations (cont’d)Change was needed becauseLarge amounts of space and money were tied upSource of poor-quality materials, products, or services difficult to pinpointNumber of nonvalue-adding activities was growingAccounting for the manufacturing process becoming more complexCopyright © Houghton Mifflin Company. All rights reserved.The New Manufacturing Environment and JIT Operations (cont’d)Basic concepts for achieving JIT’s objectivesSimple is betterWork environment must emphasize continuous improvementLarge inventories waste resources and may hide poor workNonvalue-adding activities must be eliminated or reducedProduce goods only when neededWorkers must be multiskilledApplication of these concepts creates a JIT operating environmentCopyright © Houghton Mifflin Company. All rights reserved.Minimum Inventory LevelsFundamental to the JIT operating environmentMaterials and parts are purchased and received only when neededLowers costs by reducing theSpace needed for storageAmount of materials handlingAmount of inventory obsolescenceNeed for inventory control facilitiesAmount of work in process inventoryAmount of capital tied up in inventoriesIncreases the risk of stock depletion and downtimeMust plan for such risksCopyright © Houghton Mifflin Company. All rights reserved.Pull-Through ProductionA system in which a customer’s order triggersThe purchase of materialsScheduling of productionLowers costs by keeping inventory levels lowMachines must be set up more frequentlyResults in more work stoppagesCopyright © Houghton Mifflin Company. All rights reserved.Quick Setup and Flexible Work CellsBy placing machines in more efficient locations, setup time can be minimizedWhen workers perform frequent setups, they become more efficient at itTraditional layoutSimilar machines grouped togetherFunctional departmentsJIT layoutMachines needed for sequential processing grouped togetherWork cellCopyright © Houghton Mifflin Company. All rights reserved.Quick Setup and Flexible Work CellsWork cellAutonomous production lineCan perform all required operations efficiently and continuouslyIs flexibleCan handle a “family of products”Similar shape or sizeRequire minimum setup changesThe more flexible the work cell, the greater the potential to minimize production timeCopyright © Houghton Mifflin Company. All rights reserved.A Multiskilled Task ForceOne worker is required to operate several types of machines simultaneouslyMay have to Set up and retool machinesPerform routine maintenance Contributes to high levels of efficiencyCopyright © Houghton Mifflin Company. All rights reserved.High Levels of Product QualityResult ofHigh-quality direct materialsInspections made throughout the production processInspection as a separate step does not add value, so inspection is incorporated into ongoing operationsIf the operator detects a flawWork cell is shut downOperator fixes problem or helps engineer or quality control person to find a way to correct itCopyright © Houghton Mifflin Company. All rights reserved.Effective Preventative MaintenanceIn a flexible work cell, each machine becomes an integral part of its cellIf one machine breaks down, the entire cell stops functioningThis means an effective preventative maintenance system is requiredCopyright © Houghton Mifflin Company. All rights reserved.Effective Preventative Maintenance (cont’d)Preventing machine breakdowns is considered more important and more cost-effective than keeping machines running continuouslyMachines are serviced regularlyOperators are trained to perform minor repairsRoutine maintenance is conducted during periods of downtime or between ordersCopyright © Houghton Mifflin Company. All rights reserved.Continuous Improvement of the Work EnvironmentJIT environment fosters loyalty among workersSee themselves as part of a teamAre deeply involved in the production processSkillsRun several types of machinesDetect defective productsSuggest measures to correct problemsMaintain machinery within work cellEncouraged to make suggestions for improving the production processAre rewarded for suggestions that improve processesCopyright © Houghton Mifflin Company. All rights reserved.DiscussionIs a goal of JIT to keep machines running continuously?No. Preventing machine breakdowns is considered more important and more cost-effective than keeping machines running continuously A goal of JIT is to reduce or eliminate nonvalue-adding activities Copyright © Houghton Mifflin Company. All rights reserved.Accounting for Product Costs in the New Manufacturing EnvironmentObjective 6Identify the changes in product costing that result when a firm adopts a JIT operating environmentCopyright © Houghton Mifflin Company. All rights reserved.Accounting for Product Costs in the New Manufacturing EnvironmentWhen a company adopts JITChanges will affect How costs are determinedWhat measures are used to monitor performanceThe work cells and goal of reducing or eliminating nonvalue-adding activities change the way costs are classified and assignedCopyright © Houghton Mifflin Company. All rights reserved.Classifying CostsTraditional production processes can be divided into five time framesProcessing timeActual amount of time spent working on a productInspection timeTime spent looking for product flaws or reworking defective unitsCopyright © Houghton Mifflin Company. All rights reserved.Classifying Costs (cont’d)Moving timeTime spent moving a product from one operation or department to anotherQueue timeTime a product spends waiting to be worked on once it arrives at the next operationStorage timeTime a product spends in materials storage, work in process inventory, or finished goods inventoryCopyright © Houghton Mifflin Company. All rights reserved.Classifying Costs (cont’d)In product costing under JITCosts associated with processing time are classified as either Direct materials costsConversion costs The sum of direct labor costs and manufacturing overhead costs incurred by a department, work cell, or other work centerCosts associated with inspection, moving, queue, and storage time should be reduced or eliminatedThey do not add value to the productCopyright © Houghton Mifflin Company. All rights reserved.Assigning CostsIn a JIT environment, managers focus on throughput timeThe time it takes to move a product through the entire production processMeasures of movement are used to apply conversion costs to productsSuch as machine timeCopyright © Houghton Mifflin Company. All rights reserved.Copyright © Houghton Mifflin Company. All rights reserved.Assigning CostsSeveral costs treated as indirect costs in a traditional environment are treated as direct costs in a JIT environmentSophisticated computer monitoring allows many costs to be traced directly to work cellsCopyright © Houghton Mifflin Company. All rights reserved.DiscussionWould utilities costs be considered a direct or indirect cost in a traditional environment? In a JIT environment?Traditional environmentIndirect JIT environmentDirect to the work cellCopyright © Houghton Mifflin Company. All rights reserved.Backflush CostingObjective 7Define and apply backflush costing, and compare the cost flows in traditional and backflush costing Copyright © Houghton Mifflin Company. All rights reserved.Backflush CostingAll costs first accumulated in the Cost of Goods Sold accountAt the end of the accounting period, they are worked backward, or flushed back, into the appropriate inventory accountsSaves timeEliminates the need to record several transactionsCopyright © Houghton Mifflin Company. All rights reserved.Backflush Costing Traditional Costing Backflush Costing (cont’d)MaterialsInventoryManufacturingOverheadDirectLaborDirect MaterialsWork in ProcessInventoryFinished GoodsInventoryCost ofGoods SoldConversionCosts (DirectLabor &ManufacturingOverhead)Direct MaterialsWork in ProcessInventoryFinished GoodsInventoryCost ofGoods SoldCopyright © Houghton Mifflin Company. All rights reserved.Cost Flows Through T Accounts in Traditional CostingCopyright © Houghton Mifflin Company. All rights reserved.Cost Flows Through T Accounts in Backflush CostingCopyright © Houghton Mifflin Company. All rights reserved.Backflush CostingDirect materials costs are charged directly to the Cost of Goods Sold accountDirect labor and manufacturing overhead costs are combined in the Conversion Costs account and transferred to the Cost of Goods Sold accountOnce all product costs for the period have been entered into the Cost of Goods Sold account, calculate the amounts to transfer back to the inventory accountsCopyright © Houghton Mifflin Company. All rights reserved.Backflush Costing (cont’d)Calculating amounts transferred back to inventory accountsFinished Goods Inventory accountDifference between the cost of units sold and the cost of completed unitsWork in Process Inventory accountAmount charged to the Cost of Goods Sold account during the period less the actual cost of goods finished during the periodCopyright © Houghton Mifflin Company. All rights reserved.DiscussionIn backflush costing, how is the amount to be transferred to the Finished Goods Inventory account from the Cost of Goods Sold account determined?The amount transferred is the difference between the cost of units sold and the cost of completed unitsCopyright © Houghton Mifflin Company. All rights reserved.Comparison of ABM and JITObjective 8Compare ABM and JIT as activity-based systemsCopyright © Houghton Mifflin Company. All rights reserved.Comparison of ABM and JITThings in commonActivity-based systemsAnalyze processesIdentify value-adding and nonvalue-adding activitiesTo improve product or service quality, reduce costs, and improve an organization's efficiency and productivity, both seek toEliminate wasteReduce nonvalue-adding activitiesCopyright © Houghton Mifflin Company. All rights reserved.Comparison of ABM and JIT (cont’d)DifferencesMethods of costing and cost assignmentABMUses ABC to calculate product cost using cost drivers to assign the indirect costs of production to cost objectsAffects only assignment of manufacturing overheadDirect materials and direct labor are traced directly to productsFairly complex methodCan also be used to examine nonproduction-related activitiesMay use job order costing or process costingCopyright © Houghton Mifflin Company. All rights reserved.Comparison of ABM and JIT (cont’d)DifferencesMethods of costing and cost assignmentJITOrganizes activities so they are performed in work cellsThe costs of these activities become direct costs to the work cell and of the products made in that cellTotal costs are assigned using simple cost driversMay use job order costing, process costing, or backflush costingCopyright © Houghton Mifflin Company. All rights reserved.Comparison of ABM and JIT (cont’d)Companies can use both ABM and JITABM and ABCImprove accuracy of product or service costingHelp reduce or eliminate nonvalue-adding activitiesJITSimplifies processesHelps use resources effectively and eliminate wasteCopyright © Houghton Mifflin Company. All rights reserved.DiscussionWhat do ABM and JIT have in common?They are activity-based systems that analyze processes and identify value-adding and nonvalue-adding activities Both seek to improve product or service quality, reduce costs, and improve an organization's efficiency and productivity by eliminating waste and reducing nonvalue-adding activities Copyright © Houghton Mifflin Company. All rights reserved.Time for ReviewExplain the role of activity-based systems in the management cycleDefine activity-based management (ABM) and discuss its relationship to the supply chain and value chainDistinguish between value-adding and nonvalue-adding activities, and describe process value analysisCopyright © Houghton Mifflin Company. All rights reserved.More ReviewDefine activity-based costing and explain how a cost hierarchy and bill of activities are usedDefine the just-in-time (JIT) operating philosophy and identify the elements of a JIT operating environmentIdentify the changes in product costing that result when a firm adopts a JIT operating environmentCopyright © Houghton Mifflin Company. All rights reserved.And FinallyDefine and apply backflush costing, and compare the cost flows in traditional and backflush costingCompare ABM and JIT as activity-based systemsCopyright © Houghton Mifflin Company. All rights reserved.