Question 1

What are the total prevention costs for the Abrams Corporation?

Accepted Answer

A)  $38,300. 
B)  $34,500. 
C)  $19,700. 
D)  $35,250. 
A)  $38,300. 
B)  $34,500. 
C)  $19,700. 
D)  $35,250.

Question 2

The following are all characteristics of target costing except:

Accepted Answer

A)  Understanding the pricing process in order to increase selling prices. 
B)  Driving costs down while satisfying customer needs. 
C)  Emphasizing the product's functional characteristics and their importance to the customer. 
D)  Reducing development time. 
A)  Understanding the pricing process in order to increase selling prices. 
B)  Driving costs down while satisfying customer needs. 
C)  Emphasizing the product's functional characteristics and their importance to the customer. 
D)  Reducing development time.

Question 3

A method in which a product's selling price is determined by adding a fixed profit margin to its production cost. _______________________________

Accepted Answer

The answer of A method in which a product's selling...

Question 4

A primary objective of target costing is to reduce development time.

Accepted Answer

A) True 
 B)False

Question 5

Pool-Glow, Inc. has developed a new light for lighting swimming pools. After doing market research, it has determined that customers would be willing to pay $140 for this light. Pool-Glow seeks to earn 25% profit on the light. At present, Pool-Glow makes an old style light for $101.25, which sells for $130.
(1.) What must the target cost be in order to earn the 25% profit that the company demands?
(2.) If Pool-Glow can adjust its costs to the target cost, the company estimates that it can sell 50,000 lights. What would Pool-Glow's profit be at this point?
(3.) How many of the old style lights would have to be sold to reach the same profit?

Accepted Answer

(1) $140 x .25 = $35 = profit; Cost = $1

Question 6

An approach that explicitly monitors quality costs and rewards quality enhancing behavior. ________________________________

Accepted Answer

Total qual

Question 7

Which of the following is not a prevention cost?

Accepted Answer

A)  Training costs. 
B)  Warranty costs. 
C)  Maintenance costs. 
D)  Quality planning costs. 
A)  Training costs. 
B)  Warranty costs. 
C)  Maintenance costs. 
D)  Quality planning costs.

Question 8

A quality cost report would be comprised of prevention costs only.

Accepted Answer

A) True 
 B)False

Question 9

The development of activity-based cost information is a necessary prerequisite to activity-based management.

Accepted Answer

A) True 
 B)False

Question 10

Quality costs do not include:

Accepted Answer

A)  Costs to prevent poor quality from occurring. 
B)  Costs of appraising and inspecting the product. 
C)  Costs to correct problems before the customer receives the goods. 
D)  Advertising costs. 
A)  Costs to prevent poor quality from occurring. 
B)  Costs of appraising and inspecting the product. 
C)  Costs to correct problems before the customer receives the goods. 
D)  Advertising costs.

Question 11

The process of using activity-based costs to help reduce or eliminate non-value-added activities. _______________________________

Accepted Answer

Activity-b

Question 12

JIT systems' manufacturing efficiency ratio
Methodical Corporation is considering the implementation of a JIT inventory system. The company recently analyzed its cycle time to determine the average number of days spent in each activity of its production process. A summary of the analysis is shown below:
$$\begin{array} { | l | c | } 
\hline \text { Production Activity } & \text { Number of Days } \
\hline \text { Receiving materials } & 1 \
\hline \text { Inspecting materials } & 2 \
\hline \text { Storing materials } & 5 \
\hline \text { Moving materials into production } & 3 \
\hline \text { Setting-up production equipment } & 4 \
\hline \text { Cutting materials } & 3 \
\hline \text { Assembling materials } & 4 \
\hline \text { Painting finished products } & 2 \
\hline \text { Packaging finished products } & 1 \
\hline & \
\hline
\end{array}$$
(a) Methodical 's value-added production activities include: ________________________.
(b) Methodical 's total cycle time is __________ days.
(c) Methodical's manufacturing efficiency ratio is ___________%.
(d) Which activities might be reduced or eliminated should Methodical implement a JIT system?

Accepted Answer

(a) Cutting, Assembling, Painting, and P

Question 13

Which of the following is an example of the cost of quality?

Accepted Answer

A)  Prevention costs. 
B)  Internal failure costs. 
C)  External failure costs. 
D)  All three are components of the cost of quality. 
A)  Prevention costs. 
B)  Internal failure costs. 
C)  External failure costs. 
D)  All three are components of the cost of quality.

Question 14

Just-in-time costing considers all potential resources used by the product over its entire life.

Accepted Answer

A) True 
 B)False

Question 15

For a furniture manufacturer, which of the following activities could not be eliminated without changing the customer's perception of the product's desirability?

Accepted Answer

A)  Inspection of incoming shipments of wood and fabrics. 
B)  Movement of work-in-process from one work station to another. 
C)  Set-up of machinery to produce different pieces of furniture. 
D)  Reducing the product's distribution network. 
A)  Inspection of incoming shipments of wood and fabrics. 
B)  Movement of work-in-process from one work station to another. 
C)  Set-up of machinery to produce different pieces of furniture. 
D)  Reducing the product's distribution network.

Question 16

Techniques to manage costs in the value chain include all of the following except:

Accepted Answer

A)  Activity based management. 
B)  Target costing. 
C)  Process costing. 
D)  Total quality management. 
A)  Activity based management. 
B)  Target costing. 
C)  Process costing. 
D)  Total quality management.

Question 17

The process of using ABC to help reduce and eliminate non-value-added activities is activity-based management.

Accepted Answer

A) True 
 B)False

Question 18

Non-value-added activities are those that add to a product's desirability.

Accepted Answer

A) True 
 B)False

Question 19

Activity-based management is a subset of activity-based costing.

Accepted Answer

A) True 
 B)False

Question 20

Target costing is directed toward:

Accepted Answer

A)  Increasing the activity costs associated with existing products. 
B)  Identifying the amount by which the costs of existing products must be reduced to achieve a target profit margin. 
C)  The creation and design of products that will provide adequate profits. 
D)  The improvement of existing production processes by eliminating non-value adding activities. 
A)  Increasing the activity costs associated with existing products. 
B)  Identifying the amount by which the costs of existing products must be reduced to achieve a target profit margin. 
C)  The creation and design of products that will provide adequate profits. 
D)  The improvement of existing production processes by eliminating non-value adding activities.

Exam 19: Costing and the Value Chain

What are the total prevention costs for the Abrams Corporation?

The following are all characteristics of target costing except:

A method in which a product's selling price is determined by adding a fixed profit margin to its production cost. _______________________________

A primary objective of target costing is to reduce development time.

An approach that explicitly monitors quality costs and rewards quality enhancing behavior. ________________________________

Which of the following is not a prevention cost?

A quality cost report would be comprised of prevention costs only.

The development of activity-based cost information is a necessary prerequisite to activity-based management.

Quality costs do not include:

The process of using activity-based costs to help reduce or eliminate non-value-added activities. _______________________________

Which of the following is an example of the cost of quality?

Just-in-time costing considers all potential resources used by the product over its entire life.

For a furniture manufacturer, which of the following activities could not be eliminated without changing the customer's perception of the product's desirability?

Techniques to manage costs in the value chain include all of the following except:

The process of using ABC to help reduce and eliminate non-value-added activities is activity-based management.

Non-value-added activities are those that add to a product's desirability.

Activity-based management is a subset of activity-based costing.

Target costing is directed toward:

Accounting: Information for Decision Making

Basic Financial Statements

The Accounting Cycle: Capturing Economic Events

The Accounting Cycle: Accruals and Deferrals

The Accounting Cycle: Reporting Financial Results

Merchandising Activities

Financial Assets

Inventories and the Cost of Goods Sold

Plant and Intangible Assets

Liabilities

Stockholders Equity: Paid-In Capital

Income and Changes in Retained Earnings

Statement of Cash Flows

Financial Statement Analysis

Global Business and Accounting

Management Accounting: a Business Partner

Job Order Cost Systems and Overhead Allocations

Process Costing

Cost-Volume-Profit Analysis

Incremental Analysis

Responsibility Accounting and Transfer Pricing

Operational Budgeting

Standard Cost Systems

Rewarding Business Performance

Capital Budgeting

Forms of Business Organization

The Time Value of Money: Future Amounts and Present Values Answer Key

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