Deck 4: Activity-Based Management and Activity-Based Costing

Question 1

Preparation of a value chart is the first step in activity analysis

Answer 1

False

Question 2

Machine setup is normally considered a batch-level cost

Answer 2

True

Question 3

Adopting a just-in-time (JIT) manufacturing process may enable a company to increase manufacturing cycle efficiency (MCE).

Answer 3

True

Question 4

Direct materials are normally considered batch-level costs.

Question 5

Unit level costs occur once for each unit produced.

Question 6

Activity-based costing systems generally use volume-based cost drivers.

Question 7

In an activity-based costing system overhead costs are first recorded in activity center pools before being recorded in a general ledger

Question 8

Business value-added activities increase the value of a product without increasing production time.

Question 9

Direct materials are normally considered unit-level costs.

Question 10

Business value-added activities add value to a product.

Question 11

Lead time in a production process includes both value and non-value added time.

Question 12

It is necessary for an organization to define its processes before attempting to establish relationships among company activities.

Question 13

The first step in performing activity analysis is to prepare a process map.

Question 14

A traditional costing system has fewer cost pools that does an activity-based costing (ABC) system.

Question 15

When non-value added time is greater, manufacturing cycle efficiency is higher.

Question 16

A company should strive to reduce all non-value added activities to a minimum.

Question 17

Management should strive to reduce or eliminate non-value added activities from a production process.

Question 18

Batch level costs occur once for each unit produced.

Question 19

There is a positive relationship between value-added (VA) activities and manufacturing cycle efficiency (MCE).

Question 20

When non-value added time is greater, manufacturing cycle efficiency is lower.

Question 21

Implementing activity based costing (ABC) has a direct impact on reducing overhead in an organization.

Question 22

Activity based costing is most effective when it is implemented in an environment that supports total quality management

Question 23

Activity-based costing is appropriate for a company that has high overhead costs that are not proportional to unit volumes of individual products.

Question 24

A series of activities that when performed together satisfy a specific objective is referred to as a ____________________.

Question 25

An activity that a customer is willing to pay for and increases the worth of a product is referred to as a _________________________ activity.

Question 26

A chart that indicates each step in a production process is referred to as a _________________________.

Question 27

Building depreciation is generally considered a product or process level cost.

Question 28

Building depreciation is generally considered an organizational or facility cost.

Question 29

Activity-based costing conforms to GAAP with regard to which costs should be expensed.

Question 30

Product complexity refers to the number of processes through which a product flows.

Question 31

An activity that is essential for business operations but does not add value to a product is referred to as a ___________________________________ activity.

Question 32

Machine setup is normally considered a unit-level cost

Question 33

The actual time taken to perform all necessary manufacturing functions in a process is referred to as _________________________.
or

Question 34

There is a direct relationship between the complexity of a production process and overhead costs.

Question 35

An activity that does not increase the value of a product for a customer is referred to as a _________________________ activity.

Question 36

Activity-based costing is appropriate for a company that manufactures a single product.

Question 37

An activity-based costing system should be evaluated with regard to the benefits it can provide an organization versus the costs of implementing it.

Question 38

Traditional costing systems tend to misallocate overhead to high-volume standard products

Question 39

Activity-based costing is appropriate for a company that manufactures a wide variety of products

Question 40

Activity-based costing is appropriate for a company that has low overhead costs that are proportional to the unit volumes of products.

Question 41

An objective of activity-based management is to

A) eliminate the majority of centralized activities in an organization.
B) reduce or eliminate non-value-added activities incurred to make a product or provide a service.
C) institute responsibility accounting systems in decentralized organizations.
D) all of the above

Question 42

A segment of a production or service process for which management wants a separate report is referred to as a(n) ______________________________.

Question 43

Which of the following statements about business-value-added activities (BVAs) is true?

A) BVAs reflect the same processes in all organizations.
B) A process map will not reflect BVAs because such activities are not essential to process performance.
C) BVAs are actually value-added activities of an organization that relate to administrative processes.
D) It is impossible to eliminate all BVAs in an organization.

Question 44

For a CPA firm, how would the costs of continuing education for audit managers be classified?

A) Yes No
B) No Yes
C) Yes Yes
D) No No

Question 45

The sum of the non-value-added time and the value-added time equals

A) inspection time.
B) production time.
C) the product life cycle.
D) cycle time.

Question 46

For a CPA firm, how would the wages of staff auditors be classified?

A) Yes No
B) No Yes
C) Yes Yes
D) No No

Question 47

The proportion of value added processing time to total cycle time equals __________________________________________________.
or

Question 48

______________________________ refers to the number of different processes through which a product flows.

Question 49

Global competition has forced American industry to

A) seek increased governmental regulation.
B) improve product quality and customer service.
C) narrow product lines.
D) decrease its social responsibility.

Question 50

The sum of value-added processing time plus non-value added time equals __________________________.
or
or

Question 51

Costs that are associated with the production of a single unit of a product are referred to as _________________________.

Question 52

Costs that support a product type or process are referred to as ________________________.

Question 53

In the pharmaceutical or food industries, quality control inspections would most likely be viewed as

A) non-value-added activities.
B) business-value-added activities.
C) value-added-activities.
D) process-efficiency activities.

Question 54

The amount of time between the development and the production of a product is

A) the product life cycle.
B) lead time.
C) production time.
D) value-added time.

Question 55

A(n) _________________________ measures the resources consumed by a manufacturing process.

Question 56

Costs that support an overall production or service process are referred to as ______________________________.
or

Question 57

_________________________ refers to the number of products made.

Question 58

Lead time minus production time is equal to

A) idle time.
B) storage time.
C) non-value-added time.
D) value-added time.

Question 59

For a company that manufactures candy, how would the costs of product inspection be classified?

A) Yes No
B) No Yes
C) Yes Yes
D) No No

Question 60

Costs that are associated with the production of a group of similar products at the same time are referred to as ______________________________.

Question 61

Manufacturing cycle efficiency should be increased by employing which of the following techniques?

A) yes yes yes
B) yes yes no
C) no no no
D) yes no yes

Question 62

Which of the following is considered a value-added activity?

A) yes yes no
B) no no no
C) yes no yes
D) no yes yes

Question 63

When a firm redesigns a product to reduce the number of component parts, the firm is

A) increasing consumer value.
B) increasing the value added to the product.
C) decreasing product variety.
D) decreasing non-value-added costs.

Question 64

Which of the following is typically regarded as a cost driver in traditional accounting practices?

A) number of purchase orders processed
B) number of customers served
C) number of transactions processed
D) number of direct labor hours worked

Question 65

When a company is labor-intensive, the cost driver that is probably least significant would be

A) direct labor hours.
B) direct labor dollars.
C) machine hours.
D) cost of materials used.

Question 66

Cost allocation bases in activity-based costing should be

A) cost drivers.
B) value-added activities.
C) activity centers.
D) processes.

Question 67

The term cost driver refers to

A) any activity that can be used to predict cost changes.
B) the attempt to control expenditures at a reasonable level.
C) the person who gathers and transfers cost data to the management accountant.
D) any activity that causes costs to be incurred.

Question 68

Non-value-added activities that are necessary to businesses, but not costs that customers are willing to pay for are known as

A) business-value-added activities.
B) long-term variable activities.
C) short-term variable activities.
D) superior business activities.

Question 69

Manufacturing cycle efficiency is a measure of

A) bottlenecks.
B) effectiveness.
C) efficiency.
D) quality.

Question 70

A value chart should include which of the following?

A) yes no yes
B) no no yes
C) yes yes no
D) yes yes yes

Question 71

For a company that manufactures candy, how would the cost of sugar be classified?

A) Yes No
B) No Yes
C) Yes Yes
D) No No

Question 72

Costs that are common to many different activities within an organization are known as ____ costs.

A) product- or process-level
B) organizational-level
C) batch-level
D) unit-level

Question 73

A value chart indicates

A) all steps in a process and the time it takes for them to be completed.
B) the value-added steps in a process and the time it takes for them to be completed.
C) the time and cost of all value-added steps in a process.
D) the time and costs of all value-added and non-value-added steps in a process.

Question 74

The actual time it takes to perform a specific task is called

A) inspection time.
B) service time.
C) transfer time.
D) quality time.

Question 75

An activity driver is used for which of the following reasons?

A) yes yes
B) yes no
C) no yes
D) no no

Question 76

For one product that a firm produces, the manufacturing cycle efficiency is 25 percent. If the total production time is 10 hours, what is the total manufacturing time?

A) 2.5 hours
B) 8.0 hours
C) 10.0 hours
D) 40.0 hours

Question 77

A process map

A) should indicate only value-added activities.
B) is also known as a detailed flowchart.
C) should indicate only those steps/processes that are obvious in the production of goods/services.
D) is also known as a value chart.

Question 78

Which of the following would not be considered a value-added activity in the preparation of a tax return?

A) printing a copy of the return for the client
B) printing a copy of the return for the IRS
C) installing tax software
D) checking for accuracy

Question 79

Which of the following add customer value?

A) setup time
B) storage time
C) idle time
D) processing time

Question 80

For one product that a firm produces, the manufacturing cycle efficiency is 20 percent. If the total production time is 12 hours, what is the total manufacturing time?

A) 15.0 hours
B) 60.0 hours
C) 12.0 hours
D) 2.4 hours