Deck 22: Activity-Based Systems-Abm and Lean

Question 1

The value chain is the sequence of business activities in which usefulness is added to the products or the services within an organization.

Answer 1

True

Question 2

A value chain involves a sequence of value-creating activities within an organization.

Answer 2

True

Question 3

The customer's perspective governs whether an activity adds value to a product or service.

Answer 3

True

Question 4

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

Question 5

Full product cost is relevant for companies providing services as well as those providing products.

Question 6

For a manufacturer, materials storage is a value-adding activity.

Question 7

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

Question 8

Nonproduction costs are not included in full product cost.

Question 9

A company's value chain includes the value chains of its suppliers but not its customers.

Question 10

For a manufacturer, the final customer is part of the supply chain and customer service is part of the value chain.

Question 11

For service organizations, customer relations are part of the supply chain and customers are part of the value chain.

Question 12

Activity-based management is useful for both strategic planning and operational decision making.

Question 13

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

Question 14

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

Question 15

Activity-based management focuses on identifying product costs as either value-adding or nonvalue-adding activities.

Question 16

To minimize costs, managers continuously seek to improve processes and activities.

Question 17

The value chain is also called the supply network.

Question 18

A nonvalue-adding activity is one that increases the cost of a product but does not add to the product's market value.

Question 19

A supply chain is a related sequence of value-creating activities within an organization.

Question 20

Activity-based management is an extension of activity-based costing.

Question 21

Activity-based management and lean operations can be used either together or separately to eliminate waste and manage activities.

Question 22

A cost hierarchy and a bill of activities are tools for the implementation of activity-based costing.

Question 23

Traditional environments emphasize functional departments that tend to group similar activities together.

Question 24

Only value-adding activities are included in the cost hierarchy.

Question 25

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.

Question 26

A bill of activities is used to compute both the costs assigned to activities and the product unit cost.

Question 27

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

Question 28

For a bank, a credit check of a loan applicant is an example of a batch-level activity.

Question 29

Just-in-time operating environments encourage continuous improvement of the work environment.

Question 30

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

Question 31

In a just-in-time environment, a manager is interested in trends in inventory turnover.

Question 32

Many of the reports and analyses prepared in traditional management settings need to be changed to satisfy managers' needs in the new manufacturing environment.

Question 33

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

Question 34

Activity costs per unit equal total activity costs divided by total volume.

Question 35

A bill of activities is useful for estimating a company's profits.

Question 36

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

Question 37

Typically, there are seven levels in the cost hierarchy.

Question 38

One element of a just-in-time operating environment is pull-through production, which means that a firm starts production of a product only after an order is received.

Question 39

When managing inventory in a just-in-time environment, there is less need to control personnel.

Question 40

In a just-in-time environment, more quality control inspectors are needed because of the high speed of production.

Question 41

In a just-in-time environment, costs associated with product movement and storage typically decrease, whereas costs of inspection and queue time typically increase.

Question 42

A just-in-time operation seeks to eliminate all product support functions.

Question 43

A just-in-time operation would attempt to eliminate inspection time.

Question 44

In just-in-time manufacturing, the basic cost classifications used in product costing are materials and conversion costs.

Question 45

Product throughput time refers to the amount of time that a product spends in a production cell.

Question 46

When managing the production process in a just-in-time environment, the manager's focus is on throughput time.

Question 47

The JIT operating philosophy must be adopted by everyone in a company before its total benefits can be realized.

Question 48

The use of computer monitoring allows product costs to be traced directly to work cells.

Question 49

A work cell is an autonomous production line that can perform only one required operation efficiently at a time.

Question 50

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

Question 51

In a just-in-time manufacturing environment, both push-through and pull-through methods trigger scheduling of production.

Question 52

The JIT operating philosophy requires pull-through production system.

Question 53

The time a product spends waiting to be worked on is called storage time.

Question 54

The just-in-time operating environment typically is characterized by the positioning of all similar machines together on the factory floor.

Question 55

In the JIT environment, direct materials and conversion costs should be nearly uniform for each product in a work cell.

Question 56

In order for a manager to reduce throughput time, it is necessary for the accounting system to focus on calculating units produced per direct labor hour.

Question 57

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

Question 58

Backflush costing eliminates the need for a Cost of Goods Sold account.

Question 59

Storage time is the time a product spends waiting to be worked on once it arrives at the next operation.

Question 60

Cost traceability is decreased in a just-in-time operating environment.

Question 61

Lean uses JIT and reorganizes many activities so that they are performed within the work cells.

Question 62

Process value analysis (PVA) identifies all activities of a production and/or assembly operation for the purpose of

A) preparing budgets based on activity centers.
B) determining the value of the process.
C) replacing cost drivers used in cost assignment analyses with activities.
D) relating cost assignment to the activities that caused the cost to be incurred.

Question 63

Backflush costing aims at decreasing waste in the production process.

Question 64

Full product cost includes

A) all direct labor and direct material costs and all production and nonproduction costs.
B) only nonproduction costs.
C) only the costs of direct material.
D) only the costs of direct labor.

Question 65

In a traditional environment, costs are tracked through the various production departments as products or services move through the production process.

Question 66

Departments 4. Value-adding activities

A) 1 and 3
B) 2 and 4
C) 1 and 4
D) 1 and 2

Question 67

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

Question 68

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.

Question 69

Which of the following statements is true?

A) A company's value chain is not part of its supply chain.
B) A manufacturer's supply chain typically includes research and development and customer service.
C) A company's supply chain includes the value chains of its suppliers.
D) Your supplier's suppliers are part of your value chain.

Question 70

Nonvalue-adding activities are

A) unnecessary activities.
B) included in the value chain of activities.
C) all wasteful and targeted for elimination.
D) is one that adds cost to a product or service but does not increase its market value.

Question 71

The Cost of Goods Sold account will have the same ending balance whether using traditional or backflush costing.

Question 72

Activity-based management includes all of the following except identifying

A) customer satisfaction with a product or service.
B) the resources that are consumed by each activity.
C) activities as value-adding.
D) how resources are consumed by each activity.

Question 73

Lean's primary goal is to eliminate waste in business processes.

Question 74

Which of the following activities would be part of the value chain of a manufacturer?

A) Inventory control
B) Product engineering
C) Cost accounting
D) Materials storage

Question 75

Backflush costing eliminates the need to make journal entries during the period to track cost flows through the production process as the product is made.

Question 76

Customer relations are usually part of

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 77

Activity-based costing applies only to production-related activities.

Question 78

Both the number of entries and the number of ledger accounts decrease when you change to a backflush costing system.

Question 79

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

Question 80

Which of the following activities would be part of the supply chain of a manufacturer?

A) Shipping
B) Customer service
C) Parts manufacturing
D) Research and development