Ch 12 - Assessment Test
The activity-based management model has two dimensions: a cost dimension and a process dimension.
True
Which of the following is part of the cost and process dimensions of the activity-based management model?
activities
The process which increases the efficiency of necessary activities by using economies of scale is called
activity sharing
Activity-based costing does not provide good information for activity-based management.
false
Activity-based costing is very concerned with waste issues.
false
Value-added costs are standard costs based on
ideal usage standards
Which of the following is NOT a reason for ABM implementation fuilure?
implementation is performed in a timely fashion
The objective of the cost dimension of activity-based management is:
improving the accuracy of cost assignments
When different units that perform the same types of activities within the same organization are compared to the unit with the best performance, this practice is called
internal benchmarking
Value-added costs equal standard quantity times
standard price
An activity output measure is
the number of times an activity is performed
For non-value-added activities that are unnecessary, the standard quantity is
zero
A company has 19 days of finished goods inventory on hand to avoid stockouts. The carrying costs of the inventory average $6,000 per day. The value-added costs would be
$0
A company has 5 days of finished goods inventory on hand to avoid stockouts. The carrying costs of the inventory average $5,000 per day. The value-added costs are
$0
A firm's warranty costs are $125,000 per year. A competitor's warranty costs are $25,000 per year. The value-added costs are
$0
A firm's warranty costs are $375,000 per year. A competitor's warranty costs are $175,000 per year. The value-added costs are
$0
Mendelsohn company keeps 20 days of materials inventory on hand to avoid shutdowns due to material shortages. Carrying costs average $4,000 per day. Bach, Inc., a computer, keeps 10 days of inventory on hand, and the competitor's carrying costs average $2,000 per day. The value-added costs are
$0
Your company keeps 15 days of materials inventory on hand to avoid shutdowns due to materials shortages. Carrying costs average $5,000 per day. A competitor keeps 12 days of inventory on hand, and the competitor's carrying costs average $3,000 per day. The value-added costs are
$0
Mattison Company has developed cost formulas for the drivers of the following production activities: Driver Activity Fixed Variable Labor hours Materials $ 0 $20 Labor hours Labor 0 10 Machine hours Maintenance 10,000 8 Machine hours Machining 50,000 2 Number of setups Inspections 30,000 200 Number of setups Setups 0 300 Number of purchase orders Purchasing 75,000 3 If the actual activity was 20 setups and the actual fixed cost for inspections was $28,000 and the variable cost for inspections was $5,000, the total variance for inspections is
$1,000 (F)
A company has 19 days of finished goods inventory on hand to avoid stockouts. The carrying costs of the inventory average $6,000 per day. The non-value-added costs are
$114,000
A company has 5 days of finished goods inventory on hand to avoid stockouts. The carrying costs of the inventory average $2,500 per day. The non-value-added cost are
$12,500
A time-and-motion study revealed that it should take 2 hours to produce a product that currently takes 6 hours to produce. Labor is $8 per hour. The value-added costs are
$16
Salvador Company has developed capacity standards. Information is as follows for a value-added activity.: Activity capacity acquired 60 Activity capacity used 50 Actual activity usage 30 Standard fixed activity rate $2K The volume variance is
$20K unfavorable
Mattison Company has developed cost formulas for the drivers of the following production activities: Driver Activity Fixed Variable Labor hours Materials $ 0 $20 Labor hours Labor 0 10 Machine hours Maintenance 10,000 8 Machine hours Machining 50,000 2 Number of setups Inspections 30,000 200 Number of setups Setups 0 300 Number of purchase orders Purchasing 75,000 3 The activity levels are projected to be as follows: Labor hours 1,000 Machine hours 5,000 Setups 100 Purchase orders 50 What is budgeted for this project activity level?
$295,150
Livingston Company has developed capacity standards. Information is as follows: Standard cost of the activity capacity acquired $250,000 Standard cost of the activity capacity used 200,000 Standard cost of the actual activity used 220,000 The unused capacity variance is
$30,000 favorable
Mattison Company has developed cost formulas for the drivers of the following production activities: Driver Activity Fixed Variable Labor hours Materials $ 0 $20 Labor hours Labor 0 10 Machine hours Maintenance 10,000 8 Machine hours Machining 50,000 2 Number of setups Inspections 30,000 200 Number of setups Setups 0 300 Number of purchase orders Purchasing 75,000 3 The budgeted inspection cost for 20 setups is
$34,000
Magenta Company has developed capacity standards. The following information is provided by Magenta: Standard cost of the activity capacity acquired $125,000 Standard cost of the activity capacity used 90,000 Standard cost of the actual activity used 100,000 The volume variance is:
$35,000 (U)
A time-and-motion study revealed that it should take 3 hours to produce a product that currently takes 7 hours to produce. Labor is $9 per hour. The non-value-added costs are
$36
Aquamarine Company sells one of its product, Product X, for $50 each. Sales volume averages 5,000 units per year. Recently, its main competitor reduced the price of its product to $30. Aquamarine expects sales to drop dramatically unless it matches the price offered by its competitor. In addition, the current profit per unit must be maintained. Information about Product X (for production of 5,000 units) follows: Std qty Actual qty Actual Cost Materials (lbs) 8.5K 10K 25K Labor (hrs) 2K 2.5K 12K Setups (hrs) 0 2K 4K Material handling (moves) 0 1K 2.5K Warranties (# required) 0 500 8K The non-value-added cost per unit is
$4.13
Hogwarts Company has developed ideal standards for four activities: labor, materials, inspection, and receiving. Information is as follows: Activity Activity driver Std qty Actual qty Std price Inspection Inspection hrs. 0 40K $4 Labor Hrs 33K 39K 7 Materials Lbs 110K 115K 4 Receiving Orders 150 190 150 The actual prices paid per unit of each activity driver were equal to the standard prices. The non-value-added costs for labor are
$42,000
Periodt Company has developed ideal standards for four activities: labor, material, inspection, and receiving. Information is as follows: Activity Activity driver Std qty Actual qty Std price Inspection Inspection hrs. 20K $8 Labor Hrs 20K 25K 6 Materials Lbs 90K 120K 5 Receiving Orders 200 250 210 Compute the value-added costs for materials.
$450,000
Bandolero Corporation has developed ideal standards for four activities: labor, materials, inspection, and receiving. Information is as follows: Activity Activity driver Std qty Actual qty Std price Inspection Inspection hrs. 0 40K $12 Labor Hrs 50K 56K 18 Materials Lbs 100K 105K 15 Receiving Orders 150 190 450 The actual prices paid per unit of each activity driver were equal to the standard prices. The non-value-added costs for inspection are
$480,000
A time-and-motion study revealed that it should take 3 hours to produce a product that currently takes 7.5 hours to produce. Labor is $18 per hour. The value-added costs are
$54
Setup time for a product is 12 hours. A firm that uses JIT and produces the same product has reduced setup time to 1 hour. Setup labor labor $6 per hour. The value-added costs are
$6
Salvador Company has developed capacity standards. Information is as follows for a value-added activity.: Activity capacity acquired 60 Activity capacity used 50 Actual activity usage 30 Standard fixed activity rate $2K The unused capacity variance is
$60,000 (F)
Livingston Company has developed capacity standards. Information is as follows: Standard cost of the activity capacity acquired $60,000 Standard cost of the activity capacity used 0 Standard cost of the actual activity used 50,000 The volume variance is
$60,000 favorable
Each unit of product requires 16 pounds of material. Due to scrap and rework, each unit has been averaging 18 pounds of material. The material costs $4 per pound. The value-added costs are
$64
Setup time for a product is 12 hours. A firm that uses JIT and produces the same product has reduced setup time to 1 hour. Setup labor is $6 per hour. The non-value-added costs are
$66
Bandolero Corporation has developed ideal standards for four activities: labor, materials, inspection, and receiving. Information is as follows: Activity Activity driver Std qty Actual qty Std price Inspection Inspection hrs. 0 40K $12 Labor Hrs 50K 56K 18 Materials Lbs 100K 105K 15 Receiving Orders 150 190 450 The actual prices paid per unit of each activity driver were equal to the standard prices. The non-value-added costs for materials are
$75,000
Each unit of product requires 16 pounds of material. Due to scrap and rework, each unit has been averaging 18 pounds of material. The material costs $4 per pound. The non-value-added costs are
$8
Mendelsohn company keeps 20 days of material inventory on hand to avoid shutdowns due to materials shortages. Carrying costs average $4,000 per day. Bach, Inc., a competitor keeps t0 days of inventory on hand, and the competitor's carrying costs average $2,000 per day. The non-value-added costs for the company are
$80,000
Bandolero Corporation has developed ideal standards for four activities: labor, materials, inspection, and receiving. Information is as follows: Activity Activity driver Std qty Actual qty Std price Inspection Inspection hrs. 0 40K $12 Labor Hrs 50K 56K 18 Materials Lbs 100K 105K 15 Receiving Orders 150 190 450 The actual prices paid per unit of each activity driver were equal to the standard prices. The actual costs for receiving are
$85,500
Bandolero Corporation has developed ideal standards for four activities: labor, materials, inspection, and receiving. Information is as follows: Activity Activity driver Std qty Actual qty Std price Inspection Inspection hrs. 0 40K $12 Labor Hrs 50K 56K 18 Materials Lbs 100K 105K 15 Receiving Orders 150 190 450 The actual prices paid per unit of each activity driver were equal to the standard prices. The value-added costs for labor are
$900,000
Each unit of product requires 16 pounds of material. Due to scrap and rework, each unit has been averaging 18 pounds of material. The material costs $6 per pound. If the company wants to reduce non-value-added costs by 25 percent next year, the currently attainable standard for material would be
17.50 pounds
Alpha, Inc., manufactures Product A. The setup time for each unit of Product A is 8 hours. Gamma, Inc., that used the just-in-time system and produces the same product has reduced setup time by 1 hours. Setup labor is $35 per hour. If Alpha wants to reduce non-value-added costs by 30% next year, compute the currently attainable standard for setup time.
5.9
Under what conditions would the activity capacity used be zero?
If the activity is non-value-added
Activity-based management can be viewed as an information system with broad objectives. Which of the following is NOT on of the broad objectives of ABM?
Increase the non-value added costs through increased collection of more accurate cost accounting information
Which of the following is true of activity selection in an activity-based management system?
It is a process that involves choosing among various sets of activities that are caused by competing strategies
Which of the following is descriptive of activity-based responsibility accounting?
Its focus is the organization
The effort to reduce costs of existing products and processes is named:
Kaizen costing
Which of the following is true of the process dimension of an activity-based management (ABM) model?
The process dimension provides the ability to engage in and measure continuous improvement
Which of the following is true of value-added activities?
They are activities that are necessary to remain in business
Activity-based management focuses management's attention on activities resulting in providing customer value and profits.
True
Process value analysis maximized systemwide performance by emphasizing activity management.
True
Which of the following process dimensions of the activity-based management model deals with "what"?
activities
The process of identifying, describing, and evaluating the activities an organization performs is called:
activity analysis
A technique for improving performance of activities and processes that compares the number of times an activity can be performed to the number actually performed is called
activity capacity reporting
The process that focuses on non-value-added activities is called
activity elimination
A technique for improving performance of activities and processes that predicts activity costs as activity output changes is called
activity flexible budgeting
the resource(s) consumed by the activity in producing its output is(are) called:
activity inputs
The results or products of an activity are called:
activity outputs
The process that decreases the time and resources required by different activities is called:
activity reduction
The responsibility accounting system developed for operations in a continuous improvement environment would be
activity-based responsibility accounting
Activity-based management attempts to
all of these choices are correct
Which of the following is a financial measure of activity efficiency?
all of these choices are correct
The major source of information for the activity management system is
an activity-based costing system
Non-value-added activities
are unnecessary inputs
Which of the following is NOT a common step in an ABM implementation model?
assess value content of activities
A technique for improving performance of activities and processes that searches for best practices is called
benchmarking
Which of the following is a reason for managerial activity to be considered a value-added activity?
both are reasons for classifying managerial activities as value-added activity
The effort expended to identify those factors that are the root causes of activity costs is(are) called:
driver analysis
Which of the following focuses on the relationship of activity outputs to activity inputs?
efficiency
The maintenance subcycle is defined by what sequence?
establish-do-check-act
Mattison Company has developed cost formulas for the drivers of the following production activities: Driver Activity Fixed Variable Labor hours Materials $ 0 $20 Labor hours Labor 0 10 Machine hours Maintenance 10,000 8 Machine hours Machining 50,000 2 Number of setups Inspections 30,000 200 Number of setups Setups 0 300 Number of purchase orders Purchasing 75,000 3 If the actual activity was 20 setups and the actual fixed cost for inspections was $28,000 and the variable cost for inspections was $5,000, the total variance for inspections is due to
favorable variance on fixed cost
What is the purpose of drive analysis?
identity root causes of activity costs
Which of the following is a reason for an activity-based management (ABM) system breakdown?
lack of support from higher-level management
Which of the following process dimensions of the activity-based management model deals with "how well"?
performance measures
Which of the following is NOT part of the two-dimensional activity-based management model?
personnel election
The continuous improvement subcycle of Kaizen costing is defined by what sequence
plan-do-check-act
Which of the following is a value-added activity?
processing
An example of activity reduction would be
reducing demand for customer complaint handling by improving product quality
Which of the following is NOT part of the process dimension of the activity-based management model?
resources
Which of the following is NOT an essential element of responsibility accounting?
ridiculing poor performers
Which of the following is an example of a non-value-added manufacturing activity?
scheduling
The purpose of trend reporting on non-value added costs is to
see if cost reductions occurred as expected
Which of the following is an example of a value-added activity?
supervision of production workers
Which of the following is NOT a necessary condition for classification as a value-added activity?
the activity produces no change of state
The capacity variance is composed of the unused capacity variance and
the activity volume variance
What are the two dimensions of an activity-based management model?
the cost dimension and the process dimension
The unused capacity variance is
the difference in costs between activity availability and activity usage
Controlling the cost reduction process using Kaizen costing is accomplished
through repetition of subcycle processes
An objective of activity-based management is:
to encourage cost reduction through continuous improvement techniques
The activities necessary to remain in business are called:
value-added activities
Non-value added costs are caused by:
value-added activities that perform inefficiently
A firm's warranty costs are $125,000 per year. A competitor's warranty costs are $25,000 per year. The non-value-added costs are
$125,000
Cadmium, Inc., keeps 20 days of material inventory on hand to avoid shutdowns due to material shortages. Carrying costs average $800 per day. A competitor, Barium Inc., keeps 10 days of inventory on hand, and the competitor's carrying costs average $600 per day. Compute the non-value-added costs incurred by Cadmium, Inc.
$16,000
A firm's warranty costs are $375,000 per year. A competitor's warranty costs are $175,000 per year. The non-value-added costs are
$375,000
A time-and-motion study revealed that is should take 3 hours to produce a product that currently takes 7.5 hours to produce. Labor is $18 per hour. The non-value-added costs are
$81
