Chapter Seven

a. activity outputs. b. activity output measures. c. resource drivers. d. activity inputs. e. root causes.

A forklift and its driver used for moving materials are examples of:

a. a batch of products is produced. b. a purchase order is issued. c. a unit is produced. d. a customer complains. e. none of these choices.

A unit-level driver is consumed by a product each and every time that:

a. maintaining pollution equipment. b. recycling scrap. c. disposing of toxic materials. d. medical care due to polluted air. e. all of these choices.

An example of a societal cost is:

a. cleaning up oil spills. b. damaging ecosystems from solid waste disposal. c. verifying supplier environmental performance. d. measuring levels of contamination. e. none of these choices.

An example of an environmental internal failure cost is:

a. restoring land to its natural state. b. developing environmental management systems. c. licensing facilities for producing contaminants. d. auditing environmental activities. e. treating toxic materials.

An example of an environmental prevention cost is:

a. $4 per move. b. $1.33 per hour-move. c. $4 per hour. d. $2 per move. e. none of these choices.

Assume that the moving activity has an expected cost of $80,000. Expected direct labor hours are 20,000, and expected number of moves is 40,000. The best activity rate for moving is:

a. what activities are being performed. b. who performs the activities. c. the relative amount of time spent on each activity by individual workers. d. possible activity drivers for assigning costs to products. e. all of these choices.

Interview questions are asked to determine:

a. Components purchased from Deming cost $200,000 more than their purchase price. b. Components purchased from Leming cost $1,800,000 more than their purchase price. c. Components from Deming appear to be of higher quality. d. All of these choices. e. None of these choices.

Lambert Company has two suppliers: Deming and Leming. The cost of warranty work due to defective components is $2,000,000. The total units repaired under warranty average 100,000, of which 90,000 have components from Deming and 10,000 have components from Leming. Select the item below that represent a true statement.

a. Quality b. Time c. Activity sharing d. Efficiency

Striving to produce the same activity output with lower costs for the input used is concerned with which of the following dimensions of activity performance?

a. $110,000. b. $50,000. c. $60,000. d. $90,000. e. $100,000.

Suppose that a company is spending $50,000 per year for inspecting, $40,000 for purchasing, and $60,000 for reworking products. A good estimate of nonvalue-added costs would be:

a. activity sharing. b. activity selection. c. activity reduction. d. activity elimination. e. none of these choices.

The cost of inspecting incoming parts is most likely to be reduced by:

a. resource costs to departments. b. activity costs to products or customers. c. resource costs to a plantwide pool. d. resource costs to individual activities. e. resource costs to distribution channels.

The first stage of activity-based costing entails the assignment of:

a. $34,000. b. $40,000. c. $10,000. d. $30,000. e. none of these choices.

The receiving department employs one worker, who spends 75 percent of his time on the receiving activity and 25 percent of his time on inspecting products. His salary is $40,000. The amount of cost assigned to the receiving activity is:

a. resource costs to departments. b. activity costs to products or customers. c. resource costs to a plantwide pool. d. resource costs to individual activities. e. resource costs to distribution channels.

The second stage of activity-based costing entails the assignment of:

a. cannot be determined. b. $24,000 (2 percent of the shipping cost). c. $8,000 ($0.80 per pound shipped). d. $12,000 (1 percent of the shipping cost). e. none of these choices.

This year, Lambert Company will ship 1,500,000 pounds of goods to customers at a cost of $1,200,000. If an individual customer orders 10,000 pounds and produces $200,000 of revenue (total revenue is $20 million), the amount of shipping cost assigned to the customer using ABC would be:

a. 20 units per hour. b. 5 hours per unit. c. 3 minutes per unit. d. 1 hour per 20 units. e. Cannot be calculated.

Thom Company produces 100 units in 5 hours. The cycle time for Thom is:

a. 20 units per hour. b. 5 hours per unit. c. 3 minutes per unit. d. 1 hour per 20 units. e. Cannot be calculated.

Thom Company produces 100 units in 5 hours. The velocity for Thom is:

a. Developing environmental performance measures b. Recycling products c. Disposing of toxic materials d. Carrying out contamination tests e. None of these choices

Which item represents environmental detection costs?

a. Moving goods b. Storing goods c. Inspecting finished goods d. Reworking a defective product e. All of these choices

Which of the following are nonvalue-added activities?

a. Direct labor hours b. Machine hours c. Setup hours d. Direct materials e. Assembly hours

Which of the following is a nonunit-level driver?

a. Quality planning b. Supplier evaluation and selection c. Quality audits d. Field trials e. All of these choices

Which of the following is a quality prevention cost?

a. Customer diversity requires multiple drivers to trace costs accurately to customers. b. Customers can consume customer-driven activities in different proportions. c. It often produces changes in the company's customer mix. d. It often improves profitability. e. All of these choices.

Which of the following is a true statement about activity-based customer costing?

a. The cost of a supplier is the purchase price of the components or materials acquired. b. Suppliers can affect many internal activities of a firm and significantly increase the cost of purchasing. c. It encourages managers to evaluate suppliers based on purchase cost. d. It encourages managers to increase the number of suppliers. e. All of these choices.

Which of the following is a true statement about activity-based supplier costing?

a. Design reviews b. Quality reporting c. Manager of an inspection team d. Warranties e. Retesting

Which of the following is an appraisal cost (quality)?

a. Lost market share b. Retesting c. Rework d. Design reviews e. All of these choices.

Which of the following is an external failure cost (quality)?

a. Supplier evaluation and selection b. Scrapped units c. Packaging inspection d. Product liability e. Complaint adjustment

Which of the following is an internal failure cost (quality)?