Question 1

Discuss how life cycle budgeting can provide useful information for managing and reducing costs. Provide and explain a graph to support your discussion.

Accepted Answer

The life cycle budget provides useful in

Question 2

Describe how target costing assists management in determining the life cycle cost of a product and the approach management would take if the planned level of sales could not be achieved at the cost-plus price.

Accepted Answer

The key features of target costing are t

Question 3

To reduce cost and improve quality in the service industry it is important to have a quality culture.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following statements is/are correct?

Accepted Answer

A)  Quality of design and quality of conformance are both important concepts in the measurement of excellence. 
B)  Quality of design is the degree to which a product meets design specifications. 
C)  Quality of conformance is the degree to which a product conforms to customer expectations. 
D)  All of the given answers 
A)  Quality of design and quality of conformance are both important concepts in the measurement of excellence. 
B)  Quality of design is the degree to which a product meets design specifications. 
C)  Quality of conformance is the degree to which a product conforms to customer expectations. 
D)  All of the given answers

Question 5

Given the current design and resources, the cost that a new product could be manufactured for, including upstream and downstream costs, is known as:

Accepted Answer

A)  target cost. 
B)  allowable cost. 
C)  current cost. 
D)  strategic cost. 
A)  target cost. 
B)  allowable cost. 
C)  current cost. 
D)  strategic cost.

Question 6

Appraisal costs in quality programs are incurred:

Accepted Answer

A)  to value the fixed assets of the firm. 
B)  to detect which production units do not conform to specifications. 
C)  to value ending work in process. 
D)  by external appraisers to value the costs of external failures. 
A)  to value the fixed assets of the firm. 
B)  to detect which production units do not conform to specifications. 
C)  to value ending work in process. 
D)  by external appraisers to value the costs of external failures.

Question 7

When inventory decreases with no change in throughput or operating expenses, then:

Accepted Answer

A)  profit will increase and return on investment and cash flow will decrease. 
B)  profit, return on investment and cash flow will increase. 
C)  profit and cash flow will increase and return on investment will decrease. 
D)  profit, return on investment and cash flow will decrease. 
A)  profit will increase and return on investment and cash flow will decrease. 
B)  profit, return on investment and cash flow will increase. 
C)  profit and cash flow will increase and return on investment will decrease. 
D)  profit, return on investment and cash flow will decrease.

Question 8

Lazy Linda Kitchen Appliances manufactures small kitchen appliances such as toasters and blenders. Last month Lazy Linda recorded the following quality costs:  
Lazy Linda's total appraisal cost was:

Accepted Answer

A)  $5000. 
B)  $9500. 
C)  $12 000. 
D)  $18 000. 
A)  $5000. 
B)  $9500. 
C)  $12 000. 
D)  $18 000.

Question 9

Which of the following do traditional costing systems ignore?
i. Production costs
ii. Design costs
iii. Development costs
iv. Marketing and customer service costs

Accepted Answer

A)  i, ii and iii 
B)  i, ii and iv 
C)  ii, iii and iv 
D)  i, iii and iv 
A)  i, ii and iii 
B)  i, ii and iv 
C)  ii, iii and iv 
D)  i, iii and iv

Question 10

There are certain features of traditional management accounting. Which of the following is/are not a focus of life cycle costing?

Accepted Answer

A)  Annual profit calculations 
B)  Focus on production costs only 
C)  Calculation of cost variances 
D)  Annual profit calculations AND focus on production costs only 
A)  Annual profit calculations 
B)  Focus on production costs only 
C)  Calculation of cost variances 
D)  Annual profit calculations AND focus on production costs only

Question 11

Lazy Linda Kitchen Appliances manufactures small kitchen appliances such as toasters and blenders. Last month Lazy Linda recorded the following quality costs:  
Lazy Linda's total internal failure cost was:

Accepted Answer

A)  $9500. 
B)  $7500. 
C)  $5000. 
D)  $2000. 
A)  $9500. 
B)  $7500. 
C)  $5000. 
D)  $2000.

Question 12

Appraisal costs refer to costs incurred:

Accepted Answer

A)  in preventing defects. 
B)  in determining whether defects exist. 
C)  because defective products or services are delivered to customers. 
D)  in determining customer demand. 
A)  in preventing defects. 
B)  in determining whether defects exist. 
C)  because defective products or services are delivered to customers. 
D)  in determining customer demand.

Question 13

Which of the following activities are non-value-added activities?
i. Inspect work in process
ii. Process sales orders
iii. Repair drilling machine
iv. Move raw material to the work station

Accepted Answer

A)  i, iii and iv 
B)  i, ii and iv 
C)  i, ii and iii 
D)  ii, iii and iv 
A)  i, iii and iv 
B)  i, ii and iv 
C)  i, ii and iii 
D)  ii, iii and iv

Question 14

Which of the following activities are value-added activities?
i. Preventive maintenance
ii. Repairs to machinery
iii. Move work-in-process inventory between machines
iv. Process receivables

Accepted Answer

A)  i and ii 
B)  iii and iv 
C)  i and iv 
D)  ii and iv 
A)  i and ii 
B)  iii and iv 
C)  i and iv 
D)  ii and iv

Question 15

Prevention costs refer to costs incurred:

Accepted Answer

A)  in preventing defects. 
B)  because defective products or services are delivered to customers. 
C)  in determining customer demand. 
D)  when defective products or services are detected before leaving the business. 
A)  in preventing defects. 
B)  because defective products or services are delivered to customers. 
C)  in determining customer demand. 
D)  when defective products or services are detected before leaving the business.

Question 16

Quality of conformance refers to:

Accepted Answer

A)  the degree to which the product meets its design specifications. 
B)  the extent to which the actual product is designed for its intended use. 
C)  an ideal that can never be attained. 
D)  a cost control that is achievable. 
A)  the degree to which the product meets its design specifications. 
B)  the extent to which the actual product is designed for its intended use. 
C)  an ideal that can never be attained. 
D)  a cost control that is achievable.

Question 17

Identify and describe the major differences between the traditional approach to cost control and modern cost management.

Accepted Answer

The major differences between traditiona

Question 18

Which of the following are modern approaches to managing costs?

Accepted Answer

A)  Life cycle costing 
B)  Target costing 
C)  Both life cycle costing and target costing 
D)  Neither life cycle costing nor target costing 
A)  Life cycle costing 
B)  Target costing 
C)  Both life cycle costing and target costing 
D)  Neither life cycle costing nor target costing

Question 19

The following are the expected quality costs for a firm for a selected period.

Accepted Answer

A)  $10 500 
B)  $9000 
C)  $11 000 
D)  $8500 
A)  $10 500 
B)  $9000 
C)  $11 000 
D)  $8500

Question 20

Which of the following methods may be used to overcome bottlenecks?
i. Increase staff training
ii. Increase overtime
iii. Reduce work in process
iv. Acquire additional plant and equipment

Accepted Answer

A)  i, ii and iii 
B)  ii, iii and iv 
C)  i, iii and iv 
D)  i, ii and iv 
A)  i, ii and iii 
B)  ii, iii and iv 
C)  i, iii and iv 
D)  i, ii and iv

Exam 16: Managing Costs and Quality

Discuss how life cycle budgeting can provide useful information for managing and reducing costs. Provide and explain a graph to support your discussion.

Describe how target costing assists management in determining the life cycle cost of a product and the approach management would take if the planned level of sales could not be achieved at the cost-plus price.

To reduce cost and improve quality in the service industry it is important to have a quality culture.

Which of the following statements is/are correct?

Given the current design and resources, the cost that a new product could be manufactured for, including upstream and downstream costs, is known as:

Appraisal costs in quality programs are incurred:

When inventory decreases with no change in throughput or operating expenses, then:

Lazy Linda Kitchen Appliances manufactures small kitchen appliances such as toasters and blenders. Last month Lazy Linda recorded the following quality costs: Lazy Linda's total appraisal cost was:

Which of the following do traditional costing systems ignore? i. Production costs ii. Design costs iii. Development costs iv. Marketing and customer service costs

There are certain features of traditional management accounting. Which of the following is/are not a focus of life cycle costing?

Lazy Linda Kitchen Appliances manufactures small kitchen appliances such as toasters and blenders. Last month Lazy Linda recorded the following quality costs: Lazy Linda's total internal failure cost was:

Appraisal costs refer to costs incurred:

Which of the following activities are non-value-added activities? i. Inspect work in process ii. Process sales orders iii. Repair drilling machine iv. Move raw material to the work station

Which of the following activities are value-added activities? i. Preventive maintenance ii. Repairs to machinery iii. Move work-in-process inventory between machines iv. Process receivables

Prevention costs refer to costs incurred:

Quality of conformance refers to:

Identify and describe the major differences between the traditional approach to cost control and modern cost management.

Which of the following are modern approaches to managing costs?

The following are the expected quality costs for a firm for a selected period.

Which of the following methods may be used to overcome bottlenecks? i. Increase staff training ii. Increase overtime iii. Reduce work in process iv. Acquire additional plant and equipment

Management Accounting: Information for Creating Value and Managing Resources

Management Accounting: Cost Terms and Concepts

Cost Behaviour, Cost Drivers and Cost Estimation

Product Costing Systems

Process Costing and Operation Costing

Service Costing

A Closer Look at Overhead Costs

Activity-Based Costing

Budgeting Systems

Standard Costs for Control: Direct Material and Direct Labour

Standard Costs for Control: Flexible Budgets and Manufacturing Overhead

Managing and Reporting Performance

Financial Performance Measures and Incentive Schemes

Strategic Performance Measurement Systems

Managing Suppliers and Customers

Sustainability and Management Accounting

Cost Volume Profit Analysis

Information for Decisions: Relevant Costs and Benefits

Pricing and Product Mix Decisions

Information for Capital Expenditure Decisions

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