Supply Chain Glossary - C

Supply Chain Glossary - C

cost pool

In activity-based cost accounting, an aggregation of resources assigned to activities or activities assigned to cost objects. Items may be aggregated or disaggregated depending on how the data are to be used.

A variation of the weighted-point plan of supplier evaluation and selection. The cost ratio is obtained by dividing the bid price by the weighted scores determined by the weighted-point plan. This procedure determines the true costs by taking into account compensating factors. Suppliers are selected and/or evaluated based on the lowest cost ratio.

The act of lowering the cost of goods or services by securing a lower price, reducing labor costs, etc. In cost reduction, the item usually is not changed, but the circumstances around which the item is secured are changed, as opposed to value analysis, in which the item itself is actually changed to produce a lower cost.


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