Chapter 5 Adaptive Study Plan

three conditions that must be met for a discretionary activity to be considered value-added:

1. the activity produces a change of state 2. the change of state was not achievable by preceding activities 3. the activity enables other activities to be performed

Which of the following cost reduction techniques focuses on nonvalue-added activities as a measure to reduce costs?

Activity elimination

Identify the cost reduction technique that involves choosing among different sets of activities that are caused by competing strategies.

Activity selection

Which of the following is an example of a value-added activity?

Factory supervision The activities that are necessary to remain in business are called value-added activities.

Which of the following stages are a part of activity-based costing? I. Trace costs to activities II. Overhead costs are assigned to cost objects III. Trace costs to cost objects IV. Overhead costs are assigned to a plant or department

I and III

Identify the first step in designing an activity-based system.

Identifying activities involved

Which of the following is true of activity-based costing?

It is used by organizations that manufacture only one product.

Facility-Sustaining

Necessary to operate the plant facility but doesn't vary with units, batches, or product lines

Which of the following is an example of a supplier-driven activity?

Reworking products

Which of the following best describes driver analysis?

The analysis of the factors that cause activity costs

Identify a true statement about activity-based supplier costing.

The costs are tracked by considering quality, reliability, and late deliveries made by a supplier.

Unit-Level

Varies with output volume (e.g., units); traditional variable costs

Batch-Level

Varies with the # of batches produced

Product-Sustaining

Varies with the # of product lines

In an activity-based customer costing system, the cost of the resources consumed is assigned to:

activities.

by which 4 ways does activity management reduce cost?

activity elimination activity reduction activity selection activity sharing

nonvalue-added activities

add costs to your product without enhancing its value

downstream costs

after production, company must still get that product to its customers; the process involved in delivering those products to their customers

A key component of activity-based costing is:

assigning costs and overheads to activities.

activity reduction

decreases the time and resources required by an activity

The effort expended to identify those factors that are the root causes of activity costs is called:

driver analysis.

In activity-based costing hierarchy, costs that do not vary with any factor but are necessary in operating the plant are categorized as:

facility-sustaining costs.

Activity attributes are:

financial and nonfinancial information items that describe individual activities.

activity elimination

focuses on non-value added activities

The whale curve of cumulative customer profitability:

identifies customers to the far right of the curve who severely decrease the firm's profitability and should be terminated.

The purpose of interviewing managers or representatives of functional work areas is to:

identify activities.

activity sharing

increases the efficiency of necessary activities by using economies of scale

upstream costs

incurred at start of production process; can range from raw materials, to Research and Development, to product design

activity selection

involves choosing among different sets of activities that are caused by competing strategies

An important difference between activity-based costing and traditional costing is that under activity-based costing, _____.

multiple overhead rates are calculated

defects, errors, omissions

nonvalue-added activity

over-production, processing, inventory

nonvalue-added activity

preparation/setup, control/inspection

nonvalue-added activity

transporting, motion, waiting, delays

nonvalue-added activity

what are some sources of customer diversity?

order frequency delivery frequency geographic distance sales and promotional support engineering support requirements

Inbound logistics

primary activity

marketing & sales

primary activity

operations

primary activity

outbound logistics

primary activity

service

primary activity

firm infrastructure

support activity

human resources management

support activity

procurement

support activity

technology

support activity