Exam 16: Managing Costs and Quality

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 prevention cost was:

If the target selling price is $120 and the target profit margin is a 40 per cent mark-up on cost, what is the target cost?

Carwell has introduced a new product with a target price of $150 and a target cost of $90. What is the target percentage margin on sales?

Lazy Linda Ltd manufactures small kitchen appliances. One of the non-value added activities identified by the production manager is 'reworking the electrical component in a toaster'. Which of the following is a likely root cause cost driver?

Which of the following statements is/are true in relation to activity-based management (ABM)? i. ABM is primarily concerned with customer value. ii. Activity-based costing is the primary source of data for ABM. iii. ABM is primarily concerned with the control of inputs.

When management uses financial measures to determine the effect of bottlenecks and operational decisions, they are likely to be using:

The removal of bottlenecks has which of the following benefits? i. Increased customer value ii. Reduced costs iii. Improved quality iv. Increased profitability

What management approaches might be used to overcome the problem of poorly structured production processes? i. Value analysis to identify and remove non-value-added activities. ii. Implement continuous improvement processes. iii. Process re-engineering.

Which of the following statements is not specifically related to product life cycle costing?

Cost drivers and a process perspective, are two of the main differences between modern and traditional approaches to cost management.

One way to manage throughput efficiently is to use a theory of constraints approach in an attempt to identify and remove bottlenecks in the system of production.

Which of the following is a possible cause of a firm's reluctance to implement activity-based management (ABM)? I Employee resistance to change. Ii) Lack of understanding of the benefits of ABM. Iii) Significant resources required. Iv) Focus is on value-added activities.