SECTION 1 I. Value-based systems A. Create opportunities to improve performance measures and cost information supplied to managers. B. Help managers view their organization as a collection of I. Understanding chains and chains gives managers a better grasp of their company's operations and chain is a sequence of activities that adds value to a company's product or service. chain is the path that leads from the suppliers of the materials from which a product is made to the final customer: it includes both suppliers and suppliers' suppliers, and customers and customers' customers. Ill. Process value analysis helps managers reduce costs by identifying and eliminating value-adding activities. IIV. Compare value-adding and non-value-adding activities. -adding activity adds market value to a product or service. -adding activity adds cost to a product or service but does not increase its market value. SECTION 2 management (ABM): A. Provides and information at key operational activity B. Eliminates and IIV. Activity-based (ABC) calculates a more accurate product cost than traditional methods. hierarchy is a framework for classifying activities according to the level at which their costs are incurred in a manufacturing organization, the cost hierarchy typically has four levels: level level VIV. A of activities is used to compute the following: A. Costs assigned to B. Product cost operations philosophies. A. Simple is of product or service critical. C. Work environment emphasizes improvement. inventories waste resources and might hide poor work. or activities or functions that do not add E. Reduce F. Goods should be produced only when G. Workers must be and help eliminate waste. H. Long-term relationships with suppliers through 6 principles vvi. (JIT) operating environment eliminates waste