Question 1

A just-in-time philosophy seeks to minimize inventories.

Accepted Answer

A) True 
 B)False

Question 2

The three inventory accounts used in traditional costing are replaced by two inventory accounts in backflush costing.

Accepted Answer

A) True 
 B)False

Question 3

A just-in-time operating environment requires maintenance of large material and finished goods inventories in order to meet customer demand for products.

Accepted Answer

A) True 
 B)False

Question 4

Nonvalue-adding activity costs do not increase a product's cost because they do not add value to the product.

Accepted Answer

A) True 
 B)False

Question 5

A just-in-time environment has smaller inventories than the traditional manufacturing environment. As a result,

Accepted Answer

A)  larger production lot sizes are the rule, in order to realize the cost-effectiveness of long production runs. 
B)  the amount of working capital required for inventory typically increases. 
C)  the just-in-time environment experiences a lower inventory turnover than the traditional environment. 
D)  the just-in-time environment typically experiences a higher inventory turnover than the traditional environment.

Question 6

Traditional costing and backflush costing provide the same ending balances only when there is little or no ending inventory.

Accepted Answer

A) True 
 B)False

Question 7

Shifting to a just-in-time approach in a manufacturing environment usually requires a new approach in evaluating costs.

Accepted Answer

A) True 
 B)False

Question 8

A value-adding activity is one that adds cost to a product or service but does not increase its market value.

Accepted Answer

A) True 
 B)False

Question 9

Both activity-based management (ABM) and just-in-time (JIT) seek to eliminate or reduce nonvalue-adding activities and to improve the allocation of resources.

Accepted Answer

A) True 
 B)False

Question 10

Many indirect costs in a traditional system become direct costs in a JIT system.

Accepted Answer

A) True 
 B)False

Question 11

For a company offering services, which of the following is a value-adding activity?

Accepted Answer

A)  Billing the clients 
B)  Preparing job order forms 
C)  Ordering, receiving, and inspecting supplies 
D)  Designing advertisements

Question 12

The repair of machines is an example of a nonvalue-adding activity.

Accepted Answer

A) True 
 B)False

Question 13

For work done during August, Printing Press Company incurred direct materials costs of $130,000 and conversion costs of $259,000. The company employs a just-in-time operating philosophy and backflush costing. At the end of August, it was determined that the Work in Process Inventory account had been assigned $1,000 of costs, and the ending balance of the Finished Goods Inventory account was $3,000. There were no beginning inventory balances. What is the Cost of Goods Sold account's ending balance for August?

Accepted Answer

A)  $389,000 
B)  $388,000 
C)  $386,000 
D)  $385,000

Question 14

Explain how a just-in-time operating philosophy reduces the time it takes to complete the production of a product. Include in your answer the classifications of time that are affected. How does such a change help to reduce product costs?

Accepted Answer

The answer of Explain how a just-in-time operating philosophy reduces...

Question 15

Customer relations are usually part of

Accepted Answer

A)  the supply chain. 
B)  the value chain. 
C)  both the value chain and the supply chain. 
D)  neither the value chain nor the supply chain.

Question 16

Which of the following statements contradicts the philosophy underlying the just-in-time operating environment?

Accepted Answer

A)  The work force must become multiskilled in order to operate many different machines and perform other tasks in the work cell. 
B)  A customer order triggers the purchase of materials and the activation of the production process. 
C)  Large inventories are maintained in order to fulfill customer orders on a timely basis. 
D)  Flexible work cells are created to increase productivity.

Question 17

Activity-based costing is the tool used in an ABM environment to assign activity costs to cost objects. Balance sheets can be created for any cost object of an organization.

Accepted Answer

A) True 
 B)False

Question 18

Value -based systems are information systems that provide customer- related, activity -based information.

Accepted Answer

A) True 
 B)False

Question 19

Unit level, batch level, and service level are examples of cost drivers.

Accepted Answer

A) True 
 B)False

Question 20

In moving toward the just-in-time continuous work flow concept, a key objective is the elimination of waste.

Accepted Answer

A) True 
 B)False

Exam 22: Activity-Based Systems-Abm and Lean

A just-in-time philosophy seeks to minimize inventories.

The three inventory accounts used in traditional costing are replaced by two inventory accounts in backflush costing.

A just-in-time operating environment requires maintenance of large material and finished goods inventories in order to meet customer demand for products.

Nonvalue-adding activity costs do not increase a product's cost because they do not add value to the product.

A just-in-time environment has smaller inventories than the traditional manufacturing environment. As a result,

Traditional costing and backflush costing provide the same ending balances only when there is little or no ending inventory.

Shifting to a just-in-time approach in a manufacturing environment usually requires a new approach in evaluating costs.

A value-adding activity is one that adds cost to a product or service but does not increase its market value.

Both activity-based management (ABM) and just-in-time (JIT) seek to eliminate or reduce nonvalue-adding activities and to improve the allocation of resources.

Many indirect costs in a traditional system become direct costs in a JIT system.

For a company offering services, which of the following is a value-adding activity?

The repair of machines is an example of a nonvalue-adding activity.

Explain how a just-in-time operating philosophy reduces the time it takes to complete the production of a product. Include in your answer the classifications of time that are affected. How does such a change help to reduce product costs?

Customer relations are usually part of

Which of the following statements contradicts the philosophy underlying the just-in-time operating environment?

Activity-based costing is the tool used in an ABM environment to assign activity costs to cost objects. Balance sheets can be created for any cost object of an organization.

Value -based systems are information systems that provide customer- related, activity -based information.

Unit level, batch level, and service level are examples of cost drivers.

In moving toward the just-in-time continuous work flow concept, a key objective is the elimination of waste.