Process value analysis

- Component of ABC Mgmt, first step of implementing ABC system

- Links PRODUCT COSTING and CONTINUOUS IMPROVEMENT
- Determination of value-adding vs non-value adding components (and how eliminated)

ABC Costing
- Suited for multiple product companies w/ different cost drivers
- Inc number of cost pools, cost drivers
- Homogenizes cost pools, minimizes broad averaging of costs that have different drivers
o Within each cost pool, same cause-effect relationship between costs and drivers
- Product costs NOT cross-subsidized
o Traditional  Low costs are assigned LOWER than should-be. ABC corrects this by
properly assigning HIGHER than traditional costs to should-be cost.

JIT
- Can be used by wholesalers, retailers, manufacturers
- Inc conversion costs  CREDIT cogs
- Dec conversion costs  DEBIT cogs
- Uses PULL manufacturing approach  work initiated nly in response to customer orders placed
- If high velocity  Backflush
- Throughput time = Production time / Units produced
- *Note – use STANDARD / APPLIED