Exam 12: Activity-Based Management

Process improvement can be defined as

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

Livingston Company has developed capacity standards. Information about a non-value-added activity is as follows: Standard cost of the activity capacity acquired \6 0,000 Standard cost of the activity capacity used 0 Standard cost of the actual activity used 50,000 The volume variance is

Goodyear, Inc., has developed ideal standards for four activities: labor, materials, inspection, and receiving. Information is as follows: Activity Activity Driver Labor Hours 30,000 38,000 Materials Pounds 110,000 160,000 Inspection Inspection hours 0 50,000 Receiving Orders 600 700 The actual prices paid per unit of each activity driver were equal to the standard prices. Required: Complete the following cost report: Activity Value-Added Non-value-Added Actual Labor \_ \_ \_ Materials Inspection Receiving Totals \_ \_ \_

Which of the following is a value-added activity?

What is process value analysis?

Which of the following is NOT a reason for ABM implementation failure?

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

Which of the following is NOT a common step in an ABM implementation model?

Mattison Company has developed cost formulas for the drivers of the following production activities: Driver Activity Fixed Variable Labor hours Materials \ 0 \2 0 Labor hours Labor 0 10 Machine hours Maintenance 10,000 8 Machine hours Machining 50,000 2 Number of setups Inspections 30,000 200 Number of setups Setups 0 300 Number of purchase orders Purchasing 75,000 3 The activity levels are projected to be as follows: Labor hours 1,000 Machine hours 5,000 Setups 100 Purchase orders 50 What is budgeted for this projected activity level?

Mattison Company has developed cost formulas for the drivers of the following production activities: Driver Activity Fixed Variable Labor hours Materials \ 0 \2 0 Labor hours Labor 0 10 Machine hours Maintenance 10,000 8 Machine hours Machining 50,000 2 Number of setups Inspections 30,000 200 Number of setups Setups 0 300 Number of purchase orders Purchasing 75,000 3 The budgeted inspection cost for 20 setups is

Value-added costs equal standard quantity times

Your company keeps 15 days of materials inventory on hand to avoid shutdowns due to materials shortages. Carrying costs average $5,000 per day. A competitor keeps 12 days of inventory on hand, and the competitor's carrying costs average $3,000 per day. The value-added costs are

A technique for improving performance of activities and processes that compares the number of times an activity can be performed to the number actually performed is called

Aquamarine Company sells one of its products, Product X, for $50 each. Sales volume averages 5,000 units per year. Recently, its main competitor reduced the price of its product to $30. Aquamarine expects sales to drop dramatically unless it matches the price offered by its competitor. In addition, the current profit per unit must be maintained. Information about Product X (for production of 5,000 units) follows: Standard Quantity Actual Quantity Actual Cost Materials (pounds) 8,500 10,000 25,000 Labor (hours) 2,000 2,500 12,000 Setups (hours) 0 2,000 4,000 Material handling (moves) 0 1,000 2,500 Warranties (number repaired) 0 500 8,000 The non-value-added cost per unit is (Round answer to two decimal places.):

Identifying, defining, and classifying activities require more attention for ABC than ABM.

Non-value added costs are caused by:

What is Kaizen costing? How does activity analysis help reduce costs?

Bandolero Corporation has developed ideal standards for four activities: labor, materials, inspection, and receiving. Information is as follows: Activity Activity Driver SQ AQ SP Inspection Inspection hours 0 40,000 \ 12 Labor Hours 50,000 56,000 18 Materials Pounds 100,000 105,000 15 Receiving Orders 150 190 450 The actual prices paid per unit of each activity driver were equal to the standard prices. The non-value-added costs for inspection are

Process improvement refers to incremental and erratic increases in the efficiency of an existing process.