acct 360 ch 10

Adding a flat fee for each order in addition to other delivery charges will Blank______.

encourage customers to place larger orders

Costs incurred to make repairs due to a product recall are examples of costs. (Enter only one word per blank.)

external failure

Marketing costs incurred to improve a company's tarnished image is an example of a(n) cost. (Enter only one word per blank.)

external failure

Because of the ways costs are tracked, a cost of quality system is likely to underestimate Blank______ costs.

external failure

Lost future business is an example of a(n) Blank______ cost.

external failure

Lean manufacturing Blank______.

flows naturally from careful activity analysis focuses on the elimination of waste attempts to significantly reduce production costs

Activity-based cost management is an approach that uses activity-based costing data to Blank______.

identify opportunities for improvement evaluate the cost of value-chain activities

How salespeople treat customers and delivery time are both Blank______ features of a product.

intangible

Scrap and rework are examples of costs. (Enter only one word per blank.)

internal failure

Costs incurred when nonconforming products and services are detected before being delivered to customers are Blank______ costs.

internal failure

A cost accounting system designed around the value chain of major products and services is called .

lean accounting

An approach to production that tries to significantly reduce production cost using solutions such as just-in-time inventory and production, elimination of waste, and tighter quality control is called . (Enter only one word per blank.)

lean manufacturing

If customers are not charged based on their cost, Blank______ customers will seek other sellers.

lower cost

Activity-based cost management (ABCM) concepts apply to Blank______.

manufacturing, retail, service, nonprofit, and governmental agencies

Activity-based cost management applies to Blank______.

many different types of organizations, including manufacturing, service, retail, nonprofit, and governmental

If a company records and reports cost increases but does not record and report quality improvements, managers Blank______.

may choose not to improve quality

Long-run expected volume produced is called Blank______ activity.

normal

Allocating the cost of unused capacity to the idle capacity account is Blank______ the excess capacity is for the benefit of customers.

not appropriate if

When excess capacity costs are assigned to customers who do not benefit from those costs, Blank______.

poor pricing decisions may result in the loss of customers

The amount of production possible assuming only the expected downtime for scheduled maintenance and normal breaks and vacations is Blank______ capacity.

practical

When a company has excess capacity due to plans for expansion, the better cost system to report cost would use Blank______.

practical capacity

Inspections (materials, processes, and equipment) are examples of costs. (Enter only one word per blank.)

prevention

Quality training and product design are examples of Blank______ costs.

prevention

Changing operations to improve performance, often after examining activity-based costing data to determine opportunities for improvement, is called . (Enter only one word per blank.)

process reengineering

Changing operations to improve performance, often after examining activity-based costing data to determine opportunities for improvement, is called Blank______.

process reengineering

Lean accounting Blank______.

provides measures at the work cell or process level can refer to applying lean production methods to accounting work often emerges when a company adopts lean manufacturing

If the allocation base for fixed costs does not vary over time and fixed costs remain unchanged, reported unit fixed cost will Blank______.

remain constant from year to year

The expenditures or the amounts spent on an activity are the Blank______.

resources supplied

Because most accounting systems do not collect the cost of lost business, a cost of quality system is likely to Blank______.

result in an underinvestment in appraisal activities underestimate external failure costs

Performance, taste, and functionality are all Blank______ features of a product.

tangible

A total quality management (TQM) system will have little economic benefit unless Blank______.

the cost accounting system is designed to support it

The amount of production possible under ideal conditions with no downtime is called Blank______ capacity.

theoretical

Which of the following is NOT a potential reason for unused capacity?

unexpected demand

The ultimate goal in implementing a quality improvement program is to achieve zero defects Blank______ costs of quality.

while incurring minimal

When a company assigns costs to customers incorrectly, they run the danger of being left Blank______ customers.

with higher cost

Which of the following are true of customers?

A group of customers may be more profitable because it could be less costly to serve. A group of customers may be more profitable because it would buy more product.

Which of the following are true?

Activity-based costing estimates the cost of resources used. Unused resource capacity is the difference between resources used and resources supplied.

Which of the following statements are true?

Allocating all costs to units can be misleading. Decisions that can affect capacity will probably affect all costs in the cost hierarchy.

A firm has two major customers, Betty and Bill. The firm assigns general delivery administrative costs to customers based on the total value of orders placed. Last year, Betty placed 100 orders at a total value of $49,980, and Bill placed 250 orders at a total value of $52,020. Which of the following statements are correct?

Bill and Betty were charged approximately the same amount of general delivery costs during the year. Bill is likely to be satisfied with the costs he is charged for general delivery administrative costs. When customer buying patterns are different, costs need to be charged based on those differences.

Which of the following statements are correct?

Firms must make decisions about customers much like the decisions made about products and services. Some customers cost more money to serve than others.

Which of the following statements are correct?

Managers make trade-offs between the four costs of quality categories. Total costs of quality must be reduced over time.

Abert's uses two suppliers for a component part used in production. Supplier A charges $1.50 per unit and Supplier B charges $1.52 per unit. The cost of late deliveries adds $0.15 to the unit cost. If the probability of a late delivery is 40% for Supplier A and 10% for Supplier B, the effective cost per unit for Supplier A is Blank______.

Reason: $0.15 × 40% = $0.06 per unit cost of late delivery. $1.50 + $0.06 = $1.56 effective cost per unit.

Abert's uses two suppliers for a component part used in production. Supplier A charges $1.75 per unit and Supplier B charges $1.80 per unit. The cost of late deliveries adds $0.20 to the unit cost. If the probability of a late delivery is 50% for Supplier A and 20% for Supplier B, the effective cost per unit for Supplier B is Blank______.

Reason: $0.20 × 20% = $0.04 per unit cost of a late delivery. $1.80 + $0.04 = $1.84 effective cost per unit.

A firm has two major customers, Betty and Bill. The firm assigns general delivery costs to customers based on the total value of orders placed. Last year, Betty placed 100 orders at a total value of $49,980, and Bill placed 250 orders at a total value of $52,020. If total general delivery costs were $20,000, the amount assigned to Betty equals Blank______.

Reason: [$49,980 ÷ ($49,980 + $52,020)] × $20,000 = $9,800

Which of the following statements are correct?

Total costs of quality must be reduced over time. Managers make trade-offs between the four costs of quality categories.

To prevent costs per unit from changing as activity level changes, Blank______.

a measure of capacity may be used as the allocation base variable costing may be used

An approach that uses activity-based costing data to evaluate the cost of value-chain activities and identify opportunities for improvement is Blank______.

activity-based cost management

When unused capacity costs are for the benefit of specific customers, it is best to Blank______.

allocate the costs to the specific customers who are benefited

Costs incurred to detect individual units of product that do not conform to specifications are Blank______ costs.

appraisal

End-of-process sampling and field testing are examples of costs. (Enter only one word per blank.)

appraisal

Capacity level costs Blank______.

are fixed with respect to volume are fixed by management decisions

When a cost system allocates all costs based on expected volume annually, costs per unit will Blank______.

be lower in years with higher volume

Activity analysis includes Blank______.

charting company activities for completing a product identifying customer wants and expectations developing activity-based costing information for each activity

Activity analysis includes Blank______.

comparing activity costs to the value the customer assigns to it classifying activities as value-added or nonvalue-added determining opportunities to improve performance

Activity analysis includes Blank______.

comparing activity costs to the value the customer assigns to it determining opportunities to improve performance classifying activities as value-added or nonvalue-added

Adding a flat fee for each order in addition to other delivery charges will put the trade-off decision between delivery costs and inventory holding costs in the hands of the Blank______.

customer