Exam 12: Activity-Based Management

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 non-value-added costs would be

Salvador Company has developed capacity standards. Information is as follows for a value-added activity: The unused capacity variance is

Bandolero Corporation has developed ideal standards for four activities: labor, materials, inspection, and receiving. Information is as follows: The actual prices paid per unit of each activity driver were equal to the standard prices. The actual costs for Receiving are

Activity-based responsibility accounting assigns responsibility to processes and uses only nonfinancial measures of performance.

Activity­based management focuses management's attention on activities resulting in improving customer value and profits.

The following is(are) awards made when performance is maintained or exceeds a specific measure:

Which of the following is part of the cost and process dimensions of the activity-based management model?

Activity-based management can be viewed as an information system with broad objectives. Which of the following is NOT on of the broad objectives of ABM?

What is process value analysis?

The process of identifying, describing, and evaluating the activities an organization performs is called:

A time-and-motion study revealed that it should take 3 hours to produce a product that currently takes 7.5 hours to produce. Labor is $18 per hour. The non-value-added costs are

Which of the following is a financial measure of activity efficiency?

Driver analysis identifies performance levels.

A firm's warranty costs are $375,000 per year. A competitor's warranty costs are $175,000 per year. The value- added costs are

Process value consists of three elements: .driver analysis, activity analysis, and performance measurement.

Which of the following is NOT true about assigning rewards in activity-based responsibility accounting?

The unused capacity variance is

Salvador Company has developed capacity standards. Information is as follows for a value-added activity: The volume variance is

Livingston Company has developed capacity standards. Information is as follows: Standard cost of the activity capacity acquired $250,000 Standard cost of the activity capacity used 200,000 Standard cost of the actual activity used 220,000 The unused capacity variance is

Buoungiorno Manufacturing has developed the following standards for its activities: Assume the materials usage and purchasing costs correspond to flexible resources that acquired as needed and that inspections use resources that are acquired in blocks of 2,000 hours. The actual prices paid for inputs equal the standard prices. Required: 1. Assume that continuous improvement efforts reduce the demand for inspection by 30 percent during the year, which drops the actual activity usage by 30 percent. Calculate the volume and unused capacity variances for inspection activity, materials usage and purchasing. Explain the meaning of these variances. 2. Prepare a cost report that shows the value- and non-value-added costs. 3. Buoungiorno wants to reduce all non-value added costs by 30 percent. What Kaizen standards would be used to evaluate the company's progress? What would be the savings in resource spending?