Question 1

Quality training programs are

Accepted Answer

A) prevention costs. 
B) appraisal costs. 
C) internal failure costs. 
D) external failure costs. 
A) prevention costs. 
B) appraisal costs. 
C) internal failure costs. 
D) external failure costs. A

Question 2

Lower sales due to poor product performance is an example of

Accepted Answer

A) external failure costs. 
B) an internal failure cost. 
C) an appraisal cost. 
D) a prevention cost. 
A) external failure costs. 
B) an internal failure cost. 
C) an appraisal cost. 
D) a prevention cost. A

Question 3

The Kanban system controls inventory through the use of

Accepted Answer

A) electronic data interchange. 
B) markers or cards. 
C) rigid control of safety stock. 
D) reengineering the production process. 
A) electronic data interchange. 
B) markers or cards. 
C) rigid control of safety stock. 
D) reengineering the production process. B

Question 4

Cell workers have responsibility over

Accepted Answer

A) multiple tasks within the cell. 
B) providing input for continuous improvement. 
C) support activities within the cell. 
D) all of the above. 
A) multiple tasks within the cell. 
B) providing input for continuous improvement. 
C) support activities within the cell. 
D) all of the above.

Question 5

Figure 21-4
Rollo Company has developed cost formulas for the drivers of the following production activities: $\begin{array}{llcc}
\text { Driver } & \text { Activity } & \text { Fixed } & \text { Variable } \
\text { Labour hours } & \text { Materials } & -0- & 20 \
\text { Labour hours } & \text { Labour } & -0- & 10\
\text { Machine hours } & \text { Maintenance } & 10,000 & 8 \
\text { Machine hours } & \text { Machining } & 50,000 & 2 \
\text { Number of setups } & \text { Inspections } & 30,000 & 200 \
\text { Number of setups } & \text { Setups } & -0- & 300 \
\text { Number of purchase orders } & \text { Purchasing } & 75,000 & 3
\end{array}$
-Refer to Figure 21-4. The budgeted inspection cost for 20 setups is

Accepted Answer

A) £175,860. 
B) £40,000. 
C) £34,000. 
D) £30,000. 
A) £175,860. 
B) £40,000. 
C) £34,000. 
D) £30,000.

Question 6

At the beginning of the year, Grant Company initiated a quality improvement program. The program was successful in reducing scrap and rework costs. To help assess the impact of the quality improvement program, the following data were collected for the current and preceding years:
$\begin{array}{lrr}&\text { Preceding Year }&\text { Current Year }\
\text { Sales } & £ 3,000,000 & £ 3,000,000 \
\text { Quality training } & 3,000 & 4,500 \
\text { Material inspections } & 7,500 & 12,000 \
\text { Scrap } & 60,000 & 45,000 \
\text { Rework } & 120,000 & 75,000 \
\text { Product inspection } & 15,000 & 30,000 \
\text { Product warranty } & 105,000 & 82,500
\end{array}$
-Refer to Figure 21-8. For the current year, prevention costs are what percentage of sales?

Accepted Answer

A) 1.50% 
B) 0.65% 
C) 0.15% 
D) 0.05% 
A) 1.50% 
B) 0.65% 
C) 0.15% 
D) 0.05%

Question 7

____ are those activities necessary to remain in business.

Accepted Answer

A) Activity inputs 
B) Activity outputs 
C) Activity drivers 
D) Value-added activities 
A) Activity inputs 
B) Activity outputs 
C) Activity drivers 
D) Value-added activities

Question 8

Which of the following focuses on the relationship of activity inputs to activity outputs?

Accepted Answer

A) activity reduction 
B) quality 
C) time 
D) efficiency 
A) activity reduction 
B) quality 
C) time 
D) efficiency

Question 9

Inspection labour costs are

Accepted Answer

A) prevention costs. 
B) appraisal costs. 
C) internal failure costs. 
D) external failure costs. 
A) prevention costs. 
B) appraisal costs. 
C) internal failure costs. 
D) external failure costs.

Question 10

JIT reduces lead times to meet delivery dates by

Accepted Answer

A) reducing setup times. 
B) expediting delivery to customers. 
C) having more inventory available. 
D) working overtime to fill orders. 
A) reducing setup times. 
B) expediting delivery to customers. 
C) having more inventory available. 
D) working overtime to fill orders.

Question 11

Which of the following is a reason for managerial activity to be considered a value-added activity?

Accepted Answer

A) It is an enabling resource for operational activities that bring about a change of state. 
B) Managing activities brings order by changing the state from uncoordinated activities to coordinated activities. 
C) Both are reasons for classifying managerial activities as value-added activity. 
D) Neither is a reason for classifying managerial activities as value-added activity. 
A) It is an enabling resource for operational activities that bring about a change of state. 
B) Managing activities brings order by changing the state from uncoordinated activities to coordinated activities. 
C) Both are reasons for classifying managerial activities as value-added activity. 
D) Neither is a reason for classifying managerial activities as value-added activity.

Question 12

Grayson, SA., has developed ideal standards for four activities: labour, materials, inspection, and receiving.
Information is as follows: $\begin{array}{llccc}
\text { Activity } & \text { Activity Driver } & \text { SQ } & \text { AQ } & \text { SP } \
\text { Labour } & \text { Hours } & 1,000 & 1,100 & £ 16 \
\text { Materials } & \text { kgs } & 4,000 & 5,000 & £ 24\
\text { Inspection } & \text { Inspection hours } & -0- & 750 & £ 11 \
\text { Receiving } & \text { Orders } & 60 & 75 & £ 400
\end{array}$ The actual prices paid per unit of each activity driver were equal to the standard prices.
Required:

Complete the following cost report:

$$\begin{array} { l c c c } 
\text { Activity } &{ \text { Value-Added } } &\text { Nonvalue-Added }& { \text { Actual } } \
\text { Labour } & £ ? & £ ? & £ ? \
\text { Materials } & ? & ? & ? \
\text { Inspection } & ? & ? & ? \
\text { Receiving } & \underline{ ?}&  \underline{?} & \underline{ ?} \
\text { Totals } & £ ? & £ ?& £ ?
\end{array}$$

Accepted Answer

None

Question 13

Costs incurred because products or services fail to meet requirements after delivery to customers are called

Accepted Answer

A) external failure costs. 
B) internal failure costs. 
C) appraisal costs. 
D) prevention costs. 
A) external failure costs. 
B) internal failure costs. 
C) appraisal costs. 
D) prevention costs.

Question 14

Product life-cycle costs do NOT include which of the following?

Accepted Answer

A) development costs 
B) production costs 
C) costs of logistics support 
D) All of the above are life-cycle costs. 
A) development costs 
B) production costs 
C) costs of logistics support 
D) All of the above are life-cycle costs.

Question 15

At the beginning of the year, Grant Company initiated a quality improvement program. The program was successful in reducing scrap and rework costs. To help assess the impact of the quality improvement program, the following data were collected for the current and preceding years:
$\begin{array}{lrr}&\text { Preceding Year }&\text { Current Year }\
\text { Sales } & £ 3,000,000 & £ 3,000,000 \
\text { Quality training } & 3,000 & 4,500 \
\text { Material inspections } & 7,500 & 12,000 \
\text { Scrap } & 60,000 & 45,000 \
\text { Rework } & 120,000 & 75,000 \
\text { Product inspection } & 15,000 & 30,000 \
\text { Product warranty } & 105,000 & 82,500
\end{array}$
-Refer to Figure 21-8. For the current year, appraisal costs are what percentage of sales?

Accepted Answer

A) 1.40% 
B) 1.00% 
C) 0.14% 
D) 0.40% 
A) 1.40% 
B) 1.00% 
C) 0.14% 
D) 0.40%

Question 16

In a continuous improvement environment, waste includes

Accepted Answer

A) inventories. 
B) rework. 
C) setup time. 
D) all of the above. 
A) inventories. 
B) rework. 
C) setup time. 
D) all of the above.

Question 17

Which of the following is an example of a nonvalue-added manufacturing activity?

Accepted Answer

A) assembly 
B) scheduling 
C) finishing 
D) All are value-added activities. 
A) assembly 
B) scheduling 
C) finishing 
D) All are value-added activities.

Question 18

Which of the following process dimensions of the activity-based management model deals with "why"?

Accepted Answer

A) resources 
B) cost driver analysis 
C) activities 
D) performance measures 
A) resources 
B) cost driver analysis 
C) activities 
D) performance measures

Question 19

Kaizen costing is

Accepted Answer

A) continuous improvement with the objective of cost reduction. 
B) characterized by constant improvements to existing processes and products. 
C) characterized by incremental improvement to existing processes and products. 
D) all of the above. 
A) continuous improvement with the objective of cost reduction. 
B) characterized by constant improvements to existing processes and products. 
C) characterized by incremental improvement to existing processes and products. 
D) all of the above.

Question 20

____ is the process of identifying, describing, and evaluating the activities an organization performs.

Accepted Answer

A) Activity inputs 
B) Activity analysis 
C) Cost driver analysis 
D) Value-added activities 
A) Activity inputs 
B) Activity analysis 
C) Cost driver analysis 
D) Value-added activities

Exam 21: Strategic Cost Management

Quality training programs are

Lower sales due to poor product performance is an example of

The Kanban system controls inventory through the use of

Cell workers have responsibility over

____ are those activities necessary to remain in business.

Which of the following focuses on the relationship of activity inputs to activity outputs?

Inspection labour costs are

JIT reduces lead times to meet delivery dates by

Which of the following is a reason for managerial activity to be considered a value-added activity?

Costs incurred because products or services fail to meet requirements after delivery to customers are called

Product life-cycle costs do NOT include which of the following?

In a continuous improvement environment, waste includes

Which of the following is an example of a nonvalue-added manufacturing activity?

Which of the following process dimensions of the activity-based management model deals with "why"?

Kaizen costing is

____ is the process of identifying, describing, and evaluating the activities an organization performs.

Introduction to Management Accounting

An Introduction to Cost Terms and Concepts

Cost Assignment

Accounting Entries for a Job Costing System

Process Costing

Joint and By-Product Costing

Income Effects of Alternative Cost Accumulation Systems

Cost-Volume-Profit Analysis

Measuring Relevant Costs and Revenues for Decision-Making

Activity-Based Costing

Activity-Based Costing

Decision-Making Under Conditions of Risk and Uncertainty

Capital Investment Decisions: Appraisal Methods

Capital Investment Decisions: the Impact of Capital Rationing, Taxation, Inflation and Risk

The Budgeting Process

Management Control Systems

Standard Costing and Variance Analysis 1

Standard Costing and Variance Analysis 2: Further Aspects

Divisional Financial Performance Measures

Transfer Pricing in Divisionalized Companies

Strategic Performance Management

Cost Estimation and Cost Behaviour

Quantitative Models for the Planning and Control of Inventories

The Application of Linear Programming to Management Accounting

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