Installation of an activity-based management/costing system will allow management to

• recognize the cost impact of cross-functional ac¬ tivities in an organization.

• recognize that fixed costs are, in fact, long-run variable costs that change based on an identifi¬ able driver.

• recognize the value of preparing process maps and value charts.

• recognize that the traditional bases (direct labor and machine hours) might not produce the most logical costs of products/services.

• recognize that standard products/services often support premium products/services.

• set prices that are more reflective of the activi¬ ties needed to produce special or premium prod¬ ucts or to decide that such products are not profitable for the company.

• calculate manufacturing cycle efficiency and use it to measure organizational performance.

• recognize that the most effective way to control costs is to minimize or eliminate non-value-added activities.

• engage in simultaneous engineering using multi¬ functional teams to accelerate the time to market of new products and reduce their complexity and costs.

• recognize that all customers should not neces¬ sarily be retained at tire current relationship.

LO.1