Question 1

Value-added activities include:

Accepted Answer

A)  Setting up machinery. 
B)  Storing direct materials. 
C)  Employees' idle time. 
D)  Product design. 
A)  Setting up machinery. 
B)  Storing direct materials. 
C)  Employees' idle time. 
D)  Product design.

Question 2

In a just-in-time manufacturing system, reliable vendor relationships are essential only if the prices they charge are the lowest possible prices.

Accepted Answer

A) True 
 B)False

Question 3

The identification of a target price for a newly designed product or service is focused on:

Accepted Answer

A)  The expected costs of production. 
B)  The required profit margin. 
C)  The prices charged by existing and potential competitors. 
D)  Customers and their functional requirements. 
A)  The expected costs of production. 
B)  The required profit margin. 
C)  The prices charged by existing and potential competitors. 
D)  Customers and their functional requirements.

Question 4

All of the following are components of the value chain except:

Accepted Answer

A)  Research and design activities. 
B)  Obtaining raw materials. 
C)  Supporting the product after it is sold. 
D)  Maintaining large inventories so that orders can be filled promptly. 
A)  Research and design activities. 
B)  Obtaining raw materials. 
C)  Supporting the product after it is sold. 
D)  Maintaining large inventories so that orders can be filled promptly.

Question 5

The primary objective of activity-based management is:

Accepted Answer

A)  To develop more accurate product costs. 
B)  To reduce and eliminate non-value added activities. 
C)  To increase product quality. 
D)  To identify instances of internal failure. 
A)  To develop more accurate product costs. 
B)  To reduce and eliminate non-value added activities. 
C)  To increase product quality. 
D)  To identify instances of internal failure.

Question 6

What are the total external failure 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 7

Activity-based costing systems refer to acquiring materials and manufacturing goods only as needed to fill customers' orders.

Accepted Answer

A) True 
 B)False

Question 8

Consideration of all potential resources that will be consumed by a product from development through disposal. _______________________________

Accepted Answer

The answer of Consideration of all potential resources that will...

Question 9

Activities related to internal failure such as rework, scrap, and engineering change orders are value-added activities since they cannot be eliminated without increasing costs elsewhere in the value chain.

Accepted Answer

A) True 
 B)False

Question 10

To arrive at a target cost, the target selling price and a satisfactory profit margin are added together.

Accepted Answer

A) True 
 B)False

Question 11

What are the total appraisal 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 12

Can be eliminated without affecting the desirability of the product from the perspective of the customer. _______________________________

Accepted Answer

Non-value-

Question 13

Rather than aiming to produce inventory, just-in-time costing attempts to pull production according to customer demand.

Accepted Answer

A) True 
 B)False

Question 14

Target cost equals target price plus profit margin.

Accepted Answer

A) True 
 B)False

Question 15

The target costing process begins with finding a low cost supplier to reduce the overall cost of production.

Accepted Answer

A) True 
 B)False

Question 16

As a percentage of total costs, which quality cost category is the highest?

Accepted Answer

A)  Prevention. 
B)  Internal failure. 
C)  Appraisal. 
D)  External failure. 
A)  Prevention. 
B)  Internal failure. 
C)  Appraisal. 
D)  External failure.

Question 17

Identifying value-added activities
Pomme Farms operates an apple cider press. The production of cider involves the following activities:
(1.) Inspect incoming shipments of apples.
(2.) Store apples in adjacent barn until needed.
(3.) Transport apples from storage barn to the press building.
(4.) Load apples onto the conveyor leading to the press.
(5.) Run press.
(6.) Fill bottles with completed cider.
(7.) Dispose of waste from press.
(8.) Store filled bottles until sale.
Requirements:
(a.) Identify Pomme's value-added activities.
(b.) Identify any non-value added activities performed by Pomme.

Accepted Answer

(a) Value-added activities would include

Question 18

In the target costing process, target price is computed by adding the desired profit margin to the target product cost.

Accepted Answer

A) True 
 B)False

Question 19

An effective just-in-time system will include:

Accepted Answer

A)  Specialized employees. 
B)  An efficient plant layout. 
C)  Sizable inventories of raw materials. 
D)  Many suppliers. 
A)  Specialized employees. 
B)  An efficient plant layout. 
C)  Sizable inventories of raw materials. 
D)  Many suppliers.

Question 20

Accounting terminology
Listed below are eight technical accounting terms introduced or emphasized in this chapter:
$$\begin{array} { | l | l | } 
\hline \text { Activity-based management } & \text { Life-cycle costing } \
\hline \text { Value-added activity } & \text { Non-value-added Sectivity } \
\hline \text { Target costing } & \text { Total quality management } \
\hline \text { Just-in-time manufacturing system } & \text { Value engineering } \
\hline
\end{array}$$
Each of the following statements may (or may not) describe one of these technical terms. In the space provided below each statement, indicate the accounting term described, or answer "None" if the statement does not correctly describe any of the terms.
_______ (a) The process of using activity-based costs to help reduce or eliminate non-value-added activities.
_______ (b) Can be eliminated without affecting the desirability of the product from the perspective of the customer.
_______ (c) The length of time for a product to pass completely through a specific manufacturing process.
_______ (d) If eliminated, the desirability of the product to consumers is decreased.
______ (e) Consideration of all potential resources that will be consumed by a product from development through disposal.
______ (f) A method in which a product's cost is determined by subtracting a fixed profit margin from its selling price.
______ (g) An approach that explicitly monitors quality costs and rewards quality enhancing behavior.

Accepted Answer

(a) Activity-based management

Exam 19: Costing and the Value Chain

Value-added activities include:

In a just-in-time manufacturing system, reliable vendor relationships are essential only if the prices they charge are the lowest possible prices.

The identification of a target price for a newly designed product or service is focused on:

All of the following are components of the value chain except:

The primary objective of activity-based management is:

What are the total external failure costs for the Abrams Corporation?

Activity-based costing systems refer to acquiring materials and manufacturing goods only as needed to fill customers' orders.

Consideration of all potential resources that will be consumed by a product from development through disposal. _______________________________

Activities related to internal failure such as rework, scrap, and engineering change orders are value-added activities since they cannot be eliminated without increasing costs elsewhere in the value chain.

To arrive at a target cost, the target selling price and a satisfactory profit margin are added together.

What are the total appraisal costs for the Abrams Corporation?

Can be eliminated without affecting the desirability of the product from the perspective of the customer. _______________________________

Rather than aiming to produce inventory, just-in-time costing attempts to pull production according to customer demand.

Target cost equals target price plus profit margin.

The target costing process begins with finding a low cost supplier to reduce the overall cost of production.

As a percentage of total costs, which quality cost category is the highest?

In the target costing process, target price is computed by adding the desired profit margin to the target product cost.

An effective just-in-time system will include:

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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