ACTG 6100 exam 3_chapter 19

True or false: Target costing focuses on activities associated with well-established processes.

False *** Reason: Target costing focuses on activities associated with the earliest stages of product development.

Activity-based cost information is important for controlling the production chain's production costs as well as many other costs, such as customer service, that are matched to time

periods

Across the value chain, _____-_____-_____ activities do not contribute to the desirability of a product or service in the eyes of the customer.

non-value-added

Total quality management processes includes:

providing good quality measures for decision making rewarding quality performance assigning responsibility for managing quality

In a quality cost report, TQM is an abbreviation for costs associated with _____ _____ _____ throughout the value chain.

total quality management

Companies that compete globally on quality and cost should have a well-developed

total quality management process

Which of the following statements about target costing is/are true?

An understanding of production processes is a critical element of the target costing process. Target costing requires an emphasis on a product's functionality. The target costing process requires a cross-functional team approach. Target costing involves the entire value chain.

Which of the following tasks is/are associated with a company that uses activity-based costing but does not engage in activity-based management?

Identifying and creating multiple cost pools.

Which of the following accurately depicts the target costing formula?

Target Cost = Target Price - Profit Margin

Which of the following is an example of a prevention cost?

Target costing processes for new products.

McNamer Corporation has a manufacturing efficiency ratio of 40%, based on its cycle time of 30 minutes. The company's value-added time is

12 minutes *** 30*.4

Michaels Manufacturing has a cycle time of 25 minutes, of which value-added time is 15 minutes. The company's manufacturing efficiency ratio is

60% *** 15/25

Which of the following is an example of an external failure cost?

Experiencing lost sales.

Which of the following statements is/are true regarding reporting differences between U.S. GAAP and IFRS?

International reporting differences can impact the value chain by influencing investments in research and development. Reconciling international reporting differences may add costs to the value chain.

Which of the following is an example of an internal failure cost?

Performing engineering change orders

Which of the following are generally included among life-cycle costs?

Product development expenditures Disposal costs Warranty costs

Which of the following statements is/are true about accounting for research and development activities (R&D) under U.S. GAAP and IFRS?

R&D activities are expensed under U.S. GAAP but are often capitalized under IFRS.

Which of the following are generally considered non-value-added activities associated with period costs?

R&D activities that satisfy engineering specifications but do not meet customer needs accounting and financial reporting activities

True or false: The understanding of production processes is the cornerstone of target costing.

True *** Reason: A clear understanding of how processes drive costs is critical to effective value engineering efforts.

True or false: Quality is a multidimensional concept.

True *** Reason: Multiple dimensions are necessary to capture the varied aspects of quality.

Which of the following are expressions of productivity?

Value-added time expressed as a percentage of cycle time. Resources consumed by quality-related activities expressed as a percentage of sales dollars.

The practice of assigning costs to products using multiple cost-driving activities is referred to as

activity-based costing

The process of using activity-based costing to reduce or eliminate non-value-added activities in the value chain is referred to as

activity-based management. *** Reason: The process of using activity-based costing to reduce or eliminate non-value-added activities in the value chain is referred to as activity-based management.

Value-added activities

add desirability to products and services in the eyes of the customer. enhance a company's value chain.

Conducting industry studies and engaging in competitive bidding activities are examples of how companies that use activity-based management collect external ____ information for comparative purposes.

benchmark

IFRS requires that some research and development expenditures be _____, whereas U.S. GAAP requires these activities to be _____.

capitalized expensed

Which of the following are generally considered value-added activities associated with period costs?

clear and truthful marketing activities timely and competent customer service activities

Which of the following are components of the target costing process?

concept development production design and value engineering planning and market analysis production and continuous improvement

Concerns of the ____ ultimately drive value and non-value-added activities.

customer

Consuming resources to support or to train customers subsequent to a sale is an example of a

customer service activity.

The length of time required to pass completely through a manufacturing process is referred to as the

cycle time

Just-in-time systems are sometimes referred to a ______ ______ manufacturing because production activity is totally driven by customer demand.

demand pull

The largest and most difficult costs of quality to measure are

external failure costs.

A production environment in which workers are highly skilled, able to perform multiple tasks, and capable of shifting from producing one product to another is sometimes referred to as

flexible manufacturing

The design of a just-in-time system is often associated with

high equipment reliability. preventive maintenance. well-organized sequential production processes.

Productivity is usually measured by comparing

input resources used for a given level of output achieved.

The consideration of all potential resources potentially consumed over a product's entire existence is often referred to as

life-cycle costing

In addition to performing the tasks associated with operating an activity-based costing system, activity-based management also involves

managing activities to reduce or eliminate those that are non-value-added. analyzing cost drivers to identify those that are non-value-added activities. collecting external benchmark information.

A widely used measure of efficiency in a just-in-time environment is the

manufacturing efficiency ratio

Providing information to potential customers and making products or services accessible to existing customers are examples of

marketing and distribution activities.

Cost of quality reports typically include 4 sections of TQM costs: (1) ______ costs (such as training and maintenance); (2)______ costs (such as materials and equipment inspections); (3)______ failure costs (such as downtime and scrap); (4)______ failure costs (such as warranties and lost sales).

prevention appraisal internal external

Target costing begins by analyzing customer desires and needs as they relate to a product's

price. functionality. quality.

Paying slightly higher costs for quality materials often results in

reductions in time devoted to inspecting materials. quality improvement. cost savings.

Which of the following are components of the value chain for most organizations?

research and development and design activities suppliers and production-related activities customer service activities marketing and distribution activities

The creation of ideas and the development of prototypes are examples of

research and development and design activities.

Just-in-time inventory systems are characterized by

small inventories of materials, work-in-process, and finished goods. reduced non-value-added costs associated with storing inventory. demand pull manufacturing.

The procurement of materials and the activities needed to convert them into finished products are examples of

suppliers and production-related activities.

In contrast to just-in-time systems, manufacturing environments have historically been _____ _____ systems in which companies simply produced as many goods as possible.

supply push

Examples of activity-based management initiatives to reduce or eliminate non-value-added activities may include

using higher-quality direct materials to eliminate scrap and waste. redesigning production processes. outsourcing the maintenance and repair of production equipment.

In target costing, the entire ____ ____ is involved in driving down costs without sacrificing customer needs.

value chain

As part of the target costing process, design engineers often use _____ ____ to determine the least costly combination of resources required to create products desired by customers.

value engineering

Across the value chain, ______-_____ _______ add to a product's or service's desirability in the eyes of the consumer.

value-added activities