Question 1

____ is an effort to reduce costs of existing products and processes.

Accepted Answer

A)  Kaizen costing 
B)  Activity elimination 
C)  Activity selection 
D)  Activity reduction 
A)  Kaizen costing 
B)  Activity elimination 
C)  Activity selection 
D)  Activity reduction

Question 2

____ are costs of activities performed because contaminants and waste have been produced but not discharged into the environment.

Accepted Answer

A)  Environmental prevention costs 
B)  Environmental detection costs 
C)  Environmental internal failure costs 
D)  Environmental external costs 
A)  Environmental prevention costs 
B)  Environmental detection costs 
C)  Environmental internal failure costs 
D)  Environmental external costs

Question 3

The majority of the product cost is "locked in" during which of the following life-cycle stages?

Accepted Answer

A)  Introduction 
B)  Growth 
C)  Development 
D)  Decline 
A)  Introduction 
B)  Growth 
C)  Development 
D)  Decline

Question 4

A withdrawal Kanban specifies

Accepted Answer

A)  how much should be produced to replace inventory. 
B)  the quantity that a subsequent process should withdraw from the preceding process. 
C)  when customers should be notified to pick up orders. 
D)  when suppliers should be notified to deliver more parts. 
A)  how much should be produced to replace inventory. 
B)  the quantity that a subsequent process should withdraw from the preceding process. 
C)  when customers should be notified to pick up orders. 
D)  when suppliers should be notified to deliver more parts.

Question 5

Figure 21-1
A company keeps 20 days of materials inventory on hand to avoid shutdowns due to materials shortages. Carrying costs average £4,000 per day. A competitor keeps 10 days of inventory on hand, and the competitor's carrying costs average £2,000 per day.
-Refer to Figure 21-1. The value-added costs are

Accepted Answer

A)  £80,000. 
B)  £40,000. 
C)  £20,000. 
D)  £-0-. 
A)  £80,000. 
B)  £40,000. 
C)  £20,000. 
D)  £-0-.

Question 6

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 7

Costs incurred to determine whether products and services are conforming to requirements 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 8

Figure 21-5
At the beginning of this year, Sammie Company installed a JIT purchasing and manufacturing system. The following information has been gathered about one of the company's products:  
-Refer to Figure 21-5. Sammie's defective units as a percentage of total units produced would be

Accepted Answer

A)  3.16%. 
B)  3.00%. 
C)  1.67%. 
D)  1.50%. 
A)  3.16%. 
B)  3.00%. 
C)  1.67%. 
D)  1.50%.

Question 9

Downtime attributed to quality problems is a(n)

Accepted Answer

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

Question 10

Which of the following is not an objective of activity-based management?

Accepted Answer

A)  to improve decision making through better cost information 
B)  to increase the activity it takes to perform processes 
C)  to encourage cost reduction through continuous improvement 
D)  to increase profitability 
A)  to improve decision making through better cost information 
B)  to increase the activity it takes to perform processes 
C)  to encourage cost reduction through continuous improvement 
D)  to increase profitability

Question 11

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

Accepted Answer

A)  supervision of production workers 
B)  inspection of products 
C)  scheduling of production 
D)  All are value-added activities. 
A)  supervision of production workers 
B)  inspection of products 
C)  scheduling of production 
D)  All are value-added activities.

Question 12

____ 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

Question 13

A target cost is

Accepted Answer

A)  the standard cost. 
B)  the difference between the sales price needed to capture a predetermined market share and the desired per-unit profit. 
C)  the long-run average cost over the life cycle of the product. 
D)  none of the above. 
A)  the standard cost. 
B)  the difference between the sales price needed to capture a predetermined market share and the desired per-unit profit. 
C)  the long-run average cost over the life cycle of the product. 
D)  none of the above.

Question 14

Which of the following is NOT a prevention activity?

Accepted Answer

A)  evaluating and selecting supplies 
B)  evaluating and selecting pollution control equipment 
C)  auditing environmental activities 
D)  designing processes 
A)  evaluating and selecting supplies 
B)  evaluating and selecting pollution control equipment 
C)  auditing environmental activities 
D)  designing processes

Question 15

Benchmarking

Accepted Answer

A)  is an approach to standard setting that is used to identify opportunities for activity improvement. 
B)  uses best practices as the standard for evaluating activity performance. 
C)  Both a and b are correct. 
D)  Neither a nor b is correct. 
A)  is an approach to standard setting that is used to identify opportunities for activity improvement. 
B)  uses best practices as the standard for evaluating activity performance. 
C)  Both a and b are correct. 
D)  Neither a nor b is correct.

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

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 18

Figure 21-1
A company keeps 20 days of materials inventory on hand to avoid shutdowns due to materials shortages. Carrying costs average £4,000 per day. A competitor keeps 10 days of inventory on hand, and the competitor's carrying costs average £2,000 per day.
-Refer to Figure 21-2. The value-added costs would be

Accepted Answer

A)  £100,000. 
B)  £10,000. 
C)  £5,000. 
D)  £-0-. 
A)  £100,000. 
B)  £10,000. 
C)  £5,000. 
D)  £-0-.

Question 19

____ are the costs of activities performed after discharging contaminants and waste into the environment.

Accepted Answer

A)  Environmental prevention costs 
B)  Environmental detection costs 
C)  Environmental internal failure costs 
D)  Environmental external failure costs 
A)  Environmental prevention costs 
B)  Environmental detection costs 
C)  Environmental internal failure costs 
D)  Environmental external failure costs

Question 20

Figure 21-8
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:  
-Palms, SA., sells one of its products for £80 each. Sales volume averages 2,000 units per year. Recently, its main competitor reduced the price of its product to £56. Palms expects its sales to drop dramatically unless it matches the competitor's price. In addition, the current profit per unit must be maintained.
Information about the product (for production of 2,000) is as follows:   Required: 
a.
Calculate the target cost for maintaining current market share and profitability.
b.
Calculate the nonvalue-added cost per unit.
c.
If nonvalue-added costs can be reduced to zero, can the target cost be achieved?

Accepted Answer

The answer of Figure 21-8
At the beginning of the year,...

Exam 21: Cost Management

____ is an effort to reduce costs of existing products and processes.

____ are costs of activities performed because contaminants and waste have been produced but not discharged into the environment.

The majority of the product cost is "locked in" during which of the following life-cycle stages?

A withdrawal Kanban specifies

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

Costs incurred to determine whether products and services are conforming to requirements are called

Figure 21-5 At the beginning of this year, Sammie Company installed a JIT purchasing and manufacturing system. The following information has been gathered about one of the company's products: -Refer to Figure 21-5. Sammie's defective units as a percentage of total units produced would be

Downtime attributed to quality problems is a(n)

Which of the following is not an objective of activity-based management?

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

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

A target cost is

Which of the following is NOT a prevention activity?

Benchmarking

In a continuous improvement environment, waste includes

Inspection labour costs are

____ are the costs of activities performed after discharging contaminants and waste into the environment.

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

Pricing Decisions and Profitability Analysis

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 Management Accounting

Cost Estimation and Cost Behaviour

Quantitative Models for the Planning and Control of Stocks

The Application of Linear Programming to Management Accounting

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