Deck 11: Strategic Cost Management

Question 1

In a job-order setting using JIT, repetitive business is separated from unique orders.

Answer 1

True

Question 2

Exploiting customer linkages is not important since customers do not affect profitability.

Answer 2

False

Question 3

There are two general cost management strategies: cost leadership and focusing.

Answer 3

False

Question 4

Accounting is simplified in the JIT system by the use of backflush costing.

Question 5

JIT manufacturing eliminates waste by producing products only when, and in the quantities needed.

Question 6

The structure for a JIT environment is a vastly complicated process costing system.

Question 7

Life-cycle cost management involves two types of life-cycle viewpoints: the marketing viewpoint and the production viewpoint.

Question 8

Exploiting supplier linkages is the exploitation of a firm's internal activities.

Question 9

Exploiting internal linkages involves the assessment of management reliability.

Question 10

In JIT purchasing, materials are usually at warehouse long before they are needed.

Question 11

Strategic cost management emphasizes the importance of an external focus and the need to recognize and exploit internal and external linkages.

Question 12

Strategic decision making is important to achieve good inventory control.

Question 13

Life-cycle costs are all costs associated with a product during the production viewpoint.

Question 14

A major difference between traditional and JIT environments is the degree of responsibility given to workers in the organization.

Question 15

Target costing provides a method for reducing costs by exploiting customer and supplier linkages.

Question 16

Strategic cost management is the identification of strategies to develop a competitive advantage.

Question 17

The objective of strategic cost management is to reduce costs while strengthening strategic positions.

Question 18

Acceptable quality level (AQL) allows defects to occur within predetermined parameters.

Question 19

In a JIT environment, many overhead costs are directly traceable to products.

Question 20

Value-chain analysis is identifying and exploiting internal and external linkages to achieve strong strategic positions.

Question 21

the difference between what the customer receives and gives up is the .

Question 22

In traditional and JIT environments using direct tracing, the manufacturing costs assigned to products are the direct materials costs and the costs.

Question 23

The creation of customer value for same or lower cost than competitors is called advantage.

Question 24

Choosing alternative strategies that provide long-term growth involves decision making.

Question 25

The difference between what a customer receives and what the customer gives up is called:

A) Customer value
B) Strategic cost management
C) Competitive advantage
D) Strategic decision making

Question 26

The manufacturing system focused on reducing inventory levels and waste is called manufacturing.

Question 27

analysis relies on identifying and exploiting internal and external linkages.

Question 28

The strategy which involves choosing among alternative strategies with the goal of selecting a strategy or strategies that provides a company with reasonable assurance of long-term growth and survival is called:

A) Competitive advantage
B) Strategic cost management
C) Strategic decision making
D) Customer value

Question 29

The total product, the complete range of benefits that a customer receives from a purchased product include(s):

A) intangible benefits
B) activity
C) tangible benefits
D) both a and c

Question 30

The relationships among activities that are performed with a firm's portion of the value chain is(are) called:

A) Internal linkages
B) External linkages
C) Industrial value chain
D) Both a and b

Question 31

When a computer company increases the internal storage space for the same price, it is following a

A) focusing strategy.
B) low-cost strategy.
C) differentiation strategy.
D) strategic positioning strategy.

Question 32

The use of cost data to develop and identify superior strategies that will produce a sustainable competitive advantage is called:

A) Strategic decision making
B) Competitive advantage
C) Strategic cost management
D) Customer value

Question 33

The assignments to suppliers and customers that provide the best cost information needed are called assignments.

Question 34

When a computer company maintains the internal storage space for a lower price, it is following a

A) focusing strategy.
B) cost leadership strategy.
C) differentiation strategy.
D) strategic positioning strategy.

Question 35

The length of time a product serves the needs of customers is called the life.

Question 36

The strategy to create better customer value for the same or lower cost than competitors or creating equivalent value for lower cost than offered by competitors is called:

A) Strategic decision making
B) Competitive advantage
C) Strategic cost management
D) Total product

Question 37

The stage during which a product loses market acceptance is called the stage.

Question 38

Accounting for the cost accounting cycle in a JIT environment is simplified by using costing.

Question 39

When a computer company targets customers in the South, it is following a

A) focusing strategy.
B) low-cost strategy.
C) differentiation strategy.
D) strategic allocation strategy.

Question 40

When a computer company selects a mix of strategies in order to create sustainable competitive advantage, it is following a

A) focusing strategy.
B) low-cost strategy.
C) differentiation strategy.
D) strategic positioning strategy.

Question 41

Figure 11-1
Ambrosia Corp. is a manufacturer of equipment used in manufacturing. It currently produces a product with 30 parts but through redesign has reduced the number of parts to 9. Then current activity capacity and demand for the 30 unit configuration and expected activity demand for the 9 part configuration are provided below:
Materials usage has a rate of $6 per part and no fixed costs. Assembly has a rate of $20 per labor hour with no fixed component. Purchasing requires clerks that can process 5,000 purchase orders. Each clerk earns $40,000 per year. There is also a $1 per order processing cost.
Refer to Figure 11-1. What is the total cost reduction of the new design?

A) $2,208,000
B) $2,194,000
C) $1,628,000
D) $1,624,000

Question 42

The last link of the internal value chain is

A) design.
B) service.
C) market.
D) distribute.

Question 43

Figure 11-1
Ambrosia Corp. is a manufacturer of equipment used in manufacturing. It currently produces a product with 30 parts but through redesign has reduced the number of parts to 9. Then current activity capacity and demand for the 30 unit configuration and expected activity demand for the 9 part configuration are provided below:
Materials usage has a rate of $6 per part and no fixed costs. Assembly has a rate of $20 per labor hour with no fixed component. Purchasing requires clerks that can process 5,000 purchase orders. Each clerk earns $40,000 per year. There is also a $1 per order processing cost.
Refer to Figure 11-1. What is the savings in materials usage cost with the new design changes?

A) $252,000
B) $480,000
C) $1,260,000
D) $1,800,000

Question 44

The first link of the internal value chain is

A) design.
B) develop.
C) market.
D) distribute.

Question 45

Identifying profitable and unprofitable customers is an example of exploiting

A) supplier linkages.
B) the product life cycle.
C) consumable life.
D) Customer linkages.

Question 46

The operational activity of redesigning products is classified as a

A) unit-level activity.
B) batch-level activity.
C) product-level activity.
D) facility-level activity.

Question 47

The factor(s) that describe the relationships of a firm's value chain activities that are performed with its suppliers and customers is(are) called:

A) Internal linkages
B) External linkages
C) Industrial value chain
D) Both a and b

Question 48

Figure 11-1
Ambrosia Corp. is a manufacturer of equipment used in manufacturing. It currently produces a product with 30 parts but through redesign has reduced the number of parts to 9. Then current activity capacity and demand for the 30 unit configuration and expected activity demand for the 9 part configuration are provided below:
Materials usage has a rate of $6 per part and no fixed costs. Assembly has a rate of $20 per labor hour with no fixed component. Purchasing requires clerks that can process 5,000 purchase orders. Each clerk earns $40,000 per year. There is also a $1 per order processing cost.
Refer to Figure 11-1. If 10,000 units are being produced and the sales price is $500, what is the new sales price if the cost savings are passed on to the consumer?

A) $129.80
B) $317.40
C) $237.00
D) $337.20

Question 49

Figure 11-1
Ambrosia Corp. is a manufacturer of equipment used in manufacturing. It currently produces a product with 30 parts but through redesign has reduced the number of parts to 9. Then current activity capacity and demand for the 30 unit configuration and expected activity demand for the 9 part configuration are provided below:
Materials usage has a rate of $6 per part and no fixed costs. Assembly has a rate of $20 per labor hour with no fixed component. Purchasing requires clerks that can process 5,000 purchase orders. Each clerk earns $40,000 per year. There is also a $1 per order processing cost.
Refer to Figure 11-1. What is the cost savings from purchasing parts?

A) $80,000
B) $88,000
C) $48,000
D) $40,000

Question 50

The operational activity of moving inventory is classified as a

A) unit-level activity.
B) batch-level activity.
C) product-level activity.
D) facility-level activity.

Question 51

The factors that drive the cost of day-to-day activities performed as a result of the structure and processes selected by the organization are called:

A) Organizational activities
B) Organizational cost drivers
C) Operational cost drivers
D) Operational activities

Question 52

The operational activity of setting up equipment is classified as a

A) unit-level activity.
B) batch-level activity.
C) product-level activity.
D) facility-level activity.

Question 53

The industry value chain includes

A) shareholder value chain activities as well as firm activities.
B) buyer and supplier value chain activities as well as firm activities.
C) only firm activities.
D) only firm production activities.

Question 54

Analyzing how costs and other financial factors vary as different bundles of activities are considered to strengthen a firm's strategic position is the process of

A) exploiting linkages.
B) design.
C) cost driver analysis.
D) distribution.

Question 55

When a computer manufacturing company addresses supplier production problems, it is focusing on

A) external linkages.
B) internal linkages.
C) a differentiation strategy.
D) a cost leadership strategy.

Question 56

The operational activity of assembling parts is an example of a

A) unit-level activity.
B) batch-level activity.
C) product-level activity.
D) facility-level activity.

Question 57

The operational activity of inspecting is classified as a

A) unit-level activity.
B) batch-level activity.
C) product-level activity.
D) facility-level activity.

Question 58

The industrial value-chain analysis

A) recognizes only complex linkages within the firm.
B) is not compatible with differentiation strategies.
C) determines a linked set of value-creating activities.
D) requires a firm to operate across the entire value chain.

Question 59

The structural and executional factors that determine the long-term cost structure of an organization are called:

A) Organizational activities
B) Operational cost drivers
C) Operational activities
D) Organizational cost drivers

Question 60

Activities required to design, develop, produce, market, distribute, and service a product are known as

A) whole life activities.
B) value-chain activities.
C) target activities.
D) overhead.

Question 61

Which of the following is NOT a stage of the consumable life-cycle viewpoint?

A) disposal
B) maintaining
C) logistics
D) purchasing

Question 62

Which of the following are true about total quality control?

A) Total quality control is an approach to differentiate and reduce overall quality costs.
B) Total quality control demands production of defect-free products.
C) Total quality control links suppliers closely with the firm.
D) All of these statements are true about total quality control.

Question 63

The stage during which the product loses market acceptance is called the:

A) decline stage
B) growth stage
C) maturity stage
D) introduction stage

Question 64

The time a product exists-from conception to abandonment is called the:

A) Revenue producing life
B) Product life cycle
C) Consumable life
D) Introduction stage

Question 65

In activity-based costing, supplier costs

A) must be narrower, including only the purchase price.
B) are allocated to products arbitrarily.
C) include costs of quality, reliability and timeliness and are assigned to products on a causal basis.
D) all of these statements are true.

Question 66

Which stage in the marketing viewpoint is characterized by preproduction and startup activities?

A) decline
B) introduction
C) growth
D) maturity

Question 67

The period of time when sales increase at an increasing rate is called the:

A) introduction stage
B) maturity stage
C) growth stage
D) decline stage

Question 68

The length of time that a product serves the needs of customers is called the:

A) Product life cycle
B) Revenue producing life
C) Introduction stage
D) Consumable life

Question 69

The viewpoint that describes the general sales pattern of a product as it passes through the introduction, growth, maturity, and decline stages is called the:

A) Marketing viewpoint
B) Customer viewpoint
C) Production viewpoint
D) Accounting viewpoint

Question 70

Figure 11-2
Blue Vibrance Company sells a product used in many manufacturing processes. The sales activity involves three activity areas:
Activity Area Cost Driver and Rate
Order taking $100 per purchase order
Sales visits $50 per visit
Delivery vehicles $1 per delivery mile
The following customer information is given:

Refer to Figure 11-2. What is the profitability of customer BY?

A) $4,000,000
B) $3,840,000
C) $3,837,670
D) $2,330,000

Question 71

Figure 11-2
Blue Vibrance Company sells a product used in many manufacturing processes. The sales activity involves three activity areas:
Activity Area Cost Driver and Rate
Order taking $100 per purchase order
Sales visits $50 per visit
Delivery vehicles $1 per delivery mile
The following customer information is given:

Refer to Figure 11-2. Which customer has the least activity costs?

A) AX
B) BY
C) DZ
D) They are the same.

Question 72

Figure 11-3
Awesome Products Company manufactures a product sold to retailers. It is considering suppliers for its process. The supplier quality involves four activity areas:
Activity Area Cost Driver and Rate
Order cost $120 per purchase order
Defective units $200 per unit internal failure costs
Delivery trips $5 per delivery mile
Carrying cost $1 per order
The following supplier information is given:

Refer to Figure 11-3. What is the cost of supplier Z1?

A) $503,358
B) $503,268
C) $501,000
D) $499,000

Question 73

The viewpoint which defines stages of the life cycle by changes in the type of activities performed is called the:

A) Accounting viewpoint
B) Production viewpoint
C) Customer viewpoint
D) Marketing viewpoint

Question 74

Figure 11-3
Awesome Products Company manufactures a product sold to retailers. It is considering suppliers for its process. The supplier quality involves four activity areas:
Activity Area Cost Driver and Rate
Order cost $120 per purchase order
Defective units $200 per unit internal failure costs
Delivery trips $5 per delivery mile
Carrying cost $1 per order
The following supplier information is given:

Refer to Figure 11-3. Which supplier has the most defective units?

A) X3
B) Y2
C) Z1
D) They are equal.

Question 75

Figure 11-3
Awesome Products Company manufactures a product sold to retailers. It is considering suppliers for its process. The supplier quality involves four activity areas:
Activity Area Cost Driver and Rate
Order cost $120 per purchase order
Defective units $200 per unit internal failure costs
Delivery trips $5 per delivery mile
Carrying cost $1 per order
The following supplier information is given:

Refer to Figure 11-3. Which supplier is least costly?

A) X3
B) Y2
C) Z1
D) They are equally costly.

Question 76

Which of the following is NOT a stage of the marketing viewpoint of the product life cycle?

A) decline
B) growth
C) maturity
D) production

Question 77

The period of time when sales increase at a decreasing rate is called the:

A) introduction stage
B) growth stage
C) decline stage
D) maturity stage

Question 78

Life-cycle cost management consists of

A) actions taken to enable a product to be designed, developed, produced, marketed, distributed, operated, maintained, serviced, and disposed of in order to maximize profits.
B) actions to extend the life of a product through design, development, production, and maintenance.
C) actions that focus on minimizing the cost of developing, designing, producing, distributing, operating, servicing, and disposal of a product.
D) actions taken to design, develop, test, market, distribute, maintain, service, and dispose of a product to maximize revenues.

Question 79

The stage characterized by preproduction and startup activities is called the:

A) maturity stage
B) growth stage
C) introduction stage
D) decline stage

Question 80

Figure 11-2
Blue Vibrance Company sells a product used in many manufacturing processes. The sales activity involves three activity areas:
Activity Area Cost Driver and Rate
Order taking $100 per purchase order
Sales visits $50 per visit
Delivery vehicles $1 per delivery mile
The following customer information is given:

Refer to Figure 11-2. Which customer is most profitable?

A) AX
B) BY
C) DZ
D) They are equally profitable.