Logistics Cost Management & Financial Analysis Flashcards
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Read the first 7 Logistics Cost Management & Financial Analysis flashcards as text
Which costing method assigns overhead costs to products or services based on the activities that drive those costs in a logistics operation?
Answer: Activity-based costing (ABC)
Activity-based costing (ABC) assigns costs by tracing them to the specific activities (e.g., receiving, picking, shipping) that consume resources, giving a more accurate picture of true logistics costs.
Total Cost of Ownership (TCO) in logistics procurement includes which of the following beyond the purchase price?
Answer: Acquisition, operating, maintenance, and disposal costs
TCO encompasses all costs incurred over the life of an asset or relationship, including acquisition, operating, maintenance, and disposal costs, not just the purchase price.
A company's logistics cost as a percentage of sales is 8%. If annual sales are $50 million, what are the total logistics costs?
Answer: $4 million
8% of $50 million = 0.08 × $50,000,000 = $4,000,000 in total logistics costs.
Which financial metric measures the profit generated per dollar of logistics assets employed?
Answer: Return on logistics assets (ROLA)
Return on logistics assets (ROLA) measures how efficiently logistics assets (warehouses, vehicles, equipment) generate profit, guiding capital investment decisions.
In freight auditing, what is the primary purpose of conducting a pre-audit before paying carrier invoices?
Answer: To verify charges are accurate and match agreed rates before payment
Pre-auditing freight invoices checks that billed amounts match contracted rates and shipment details, preventing overpayments and billing errors before funds are disbursed.
Which cost behavior pattern remains constant in total regardless of changes in logistics volume within a relevant range?
Answer: Fixed costs
Fixed costs, such as warehouse lease payments or salaried staff, do not change in total as volume fluctuates within a relevant range, though cost per unit decreases as volume rises.
A logistics manager uses a 'make-or-buy' analysis. Which factor most favors outsourcing a distribution function?
Answer: Lower total cost with third-party providers
When a third-party provider can perform the distribution function at a lower total cost than in-house operations, the financial case for outsourcing is strongest.