Deck 18: Value-Based Systems: Activity-Based Costing and Lean Accounting

Question 1

Activity-based management and lean operations can be used either together or separately to eliminate waste and manage activities.

Answer 1

True

Question 2

For a manufacturer,materials storage is a value-adding activity.

Answer 2

False

Question 3

A non value-adding activity is one that adds cost to a product or service but does not increase its market value.

Answer 3

True

Question 4

The value chain is the sequence of business activities in which usefulness is added to the products or the services within an organization.

Question 5

A value chain involves a sequence of value-creating activities within an organization.

Question 6

To minimize costs,managers continuously seek to improve processes and activities.

Question 7

A manufacturing chain is a path that leads from the suppliers of the materials from which a product is made to the final customer.

Question 8

A value-adding activity is one that increases the cost of a product but does not add to the product's market value.

Question 9

Value -based systems are information systems that provide customer- related,activity -based information.

Question 10

Full product cost includes both nonproduction costs and production costs required to satisfy customers.

Question 11

For a manufacturer,the final customer is part of the supply chain and customer service is part of the value chain.

Question 12

The repair of machines is an example of a value-adding activity.

Question 13

The value chain analysis allows a company to focus on its core competencies.

Question 14

One of the drawbacks of full product cost is that it is relevant only for companies providing services.

Question 15

Activity-based management focuses on identifying product costs as either variable or fixed.

Question 16

The customer's perspective governs whether an activity adds value to a product or service.

Question 17

Nonvalue-adding activity costs do not increase a product's cost because they do not add value to the product.

Question 18

Activity-based management is an extension of activity-based costing.

Question 19

The value chain is also called the supply chain.

Question 20

For service organizations,customer relations are part of the supply chain and customers are part of the value chain.

Question 21

For a bank,a credit check of a loan applicant is an example of a batch-level activity.

Question 22

When managing inventory in a just-in-time environment,the need of controlling workers does not exists.

Question 23

A just-in-time philosophy seeks to maximize inventories.

Question 24

Traditional environments emphasize functional departments that tend to group similar activities together.

Question 25

Activity costs per unit equal total volume divided by total activity costs.

Question 26

Unit level,batch level,and service level are examples of cost drivers.

Question 27

Cost hierarchy includes only value-adding activities.

Question 28

In a just-in-time environment,more quality control inspectors are needed because of the high speed of production.

Question 29

In moving toward the just-in-time continuous work flow concept,a key objective is the reduction in the use of raw materials for manufacturing a product.

Question 30

One element of a just-in-time operating environment is pull-through production,which means that a firm starts production of a product only after an order is received.

Question 31

Activity-based costing is the tool used in an ABM environment to assign activity costs to cost objects.

Question 32

A cost hierarchy and a bill of activities are tools for the implementation of activity-based costing.

Question 33

In a just-in-time environment,a manager is interested in trends in inventory turnover.

Question 34

Activity-based management is useful for both strategic planning and operational decision making.

Question 35

A just-in-time operating environment requires maintenance of large material and finished goods inventories in order to meet customer demand for products.

Question 36

Cost traceability is decreased in a just-in-time operating environment.

Question 37

A bill of activities will complicate the estimation of profits of a company.

Question 38

Reports and analyses prepared in traditional management settings will match the requirement of the new manufacturing environment.

Question 39

A bill of activities is used to compute both the costs assigned to activities and the product unit cost.

Question 40

Typically,there are four levels in the cost hierarchy.

Question 41

When managing the production process in a just-in-time environment,the manager's focus is on the quantity of raw material used to produce a product.

Question 42

A just-in-time operation would attempt to eliminate inspection time.

Question 43

The JIT operating philosophy requires a push-through production system.

Question 44

Product storage time refers to the amount of time that a product spends in a production cell.

Question 45

A just-in-time operation seeks to eliminate all product support functions.

Question 46

Many indirect costs in a traditional system become direct costs in a JIT system.

Question 47

The ending balance of the Cost of Goods Sold account will differ in traditional and backflush costing.

Question 48

In just-in-time manufacturing,the basic cost classifications used in product costing are materials and overhead costs.

Question 49

Storage time is the time a product spends waiting to be worked on once it arrives at the next operation.

Question 50

The JIT operating philosophy must be adopted by everyone in a company before its total benefits can be realized.

Question 51

In the JIT environment,direct materials and conversion costs will vary significantly for each product in a work cell.

Question 52

Shifting to a just-in-time approach in a manufacturing environment usually will not require a new approach in evaluating costs.

Question 53

The time a product spends waiting to be worked on is called storage time.

Question 54

In a traditional manufacturing environment,both push-through and pull-through methods trigger scheduling of production.

Question 55

The just-in-time operating environment typically is characterized by a large number of non-value-adding activities.

Question 56

In a just-in-time environment,costs associated with product movement and storage typically decrease,whereas costs of inspection and queue time typically increase.

Question 57

In order for a manager to reduce throughput time,it is necessary for the accounting system to focus on calculating units produced per direct labor hour.

Question 58

The use of computer monitoring allows product costs to be traced directly to work cells.

Question 59

Just-in-time operating environments encourage continuous improvement of the work environment.

Question 60

A work cell is an autonomous production line that can perform only one required operation efficiently at a time.

Question 61

Which of the following is an example of a nonvalue-adding activity?

A)Product distribution activity
B)Customer service activity
C)Data processing activity
D)Product design activity

Question 62

Which of the following statements is true of nonvalue-adding activities?

A)They are unnecessary activities.
B)They are included in the value chain of activities.
C)They are wasteful and targeted for elimination.
D)They add cost to a product or service but does not increase its market value.

Question 63

Both the number of entries and the number of ledger accounts decrease when you change to a backflush costing system.

Question 64

Lean uses ABC to assign overhead costs to the product by using appropriate cost drivers.

Question 65

Which of the following is included in full product cost?

A)All direct labor and direct material costs and all production and nonproduction costs.
B)Only nonproduction costs.
C)Only the costs of direct material.
D)Only the costs of direct labor.

Question 66

Backflush costing eliminates the use of a Work in process account.

Question 67

In a backflush environment,costs are tracked through the various production departments as products or services move through the production process.

Question 68

Both activity-based management (ABM)and just-in-time (JIT)seek to eliminate or reduce nonvalue-adding activities and to improve the allocation of resources.

Question 69

Traditional costing and backflush costing provide the same ending balances only when there is little or no ending inventory.

Question 70

Customer relations are usually part of

A)the supply chain.
B)the value chain.
C)both the value chain and the supply chain.
D)neither the value chain nor the supply chain.

Question 71

Backflush costing aims at decreasing waste in the production process.

Question 72

Lean's primary goal is to eliminate waste in business processes.

Question 73

Activity-based costing applies only to production-related activities.

Question 74

The three inventory accounts used in traditional costing are replaced by two inventory accounts in backflush costing.

Question 75

From the four selections below,identify which are necessary to develop the value chain of a product or service. 1.Processes 3.Nonvalue-adding activities
2)Departments 4.Value-adding activities

A)1 and 3
B)2 and 4
C)1 and 4
D)1 and 2

Question 76

Which of the following statements is true?

A)A company's value chain is not part of its supply chain.
B)A manufacturer's supply chain typically includes research and development and customer service.
C)A company's supply chain includes the value chains of its suppliers.
D)Your supplier's suppliers are part of your value chain.

Question 77

Which of the following activities would be part of the value chain of a manufacturer?

A)Inventory control
B)Product design
C)Cost accounting
D)Materials storage

Question 78

Which of the following activities would be part of the supply chain of a manufacturer?

A)Shipping
B)Customer service
C)Parts manufacturing
D)Research and development

Question 79

Process value analysis (PVA)identifies all activities of a production and/or assembly operation for the purpose of

A)preparing budgets based on activity centers.
B)determining the value of the process.
C)replacing cost drivers used in cost assignment analyses with activities.
D)relating cost assignment to the activities that caused the cost to be incurred.

Question 80

Backflush costing eliminates the need to make journal entries during the period to track cost flows through the production process as the product is made.