Deck 12: Activity-Based Management

Question 1

Activity-based management focuses management's attention on activities resulting in improving customer value and profits.

Answer 1

True

Question 2

Process value consists of three elements: .driver analysis, activity analysis, and performance measurement.

Answer 2

True

Question 3

A financial-based responsibility accounting system focuses on the assignment of responsibility to organizational units and measures performance in financial terms.

Answer 3

True

Question 4

Activity-based costing is very concerned with waste issues.

Question 5

Financial-based responsibility accounting focuses on functional organizational units.

Question 6

The activity-based management model has two dimensions: a cost dimension and a process dimension.

Question 7

Driver analysis identifies performance levels.

Question 8

Kaizen costing is concerned with reducing the costs by identifying small, continuous improvement for existing products and processes.

Question 9

Process improvement refers to incremental and erratic increases in the efficiency of an existing process.

Question 10

Implementing an activity-based management requires careful planning and execution.

Question 11

Performance measurement is concerned with how well activities are performed.

Question 12

Reducing non-value added costs decreases activity deficiency.

Question 13

Identifying, defining, and classifying activities require more attention for ABC than ABM.

Question 14

Activity-based responsibility accounting assigns responsibility to processes and uses only nonfinancial measures of performance.

Question 15

The common steps in implementing activity-based management are systems planning and activity identification, definition, and classification.

Question 16

One of the major reasons for the failure of ABM is lack of upper management support.

Question 17

Financial measures of performance focus on the dollar effect of activity performance changes.

Question 18

Process value analysis maximizes systemwide performance by emphasizing activity management.

Question 19

Cost reduction is a measure of activity improvement.

Question 20

Activity-based costing does not provide good information for activity-based management.

Question 21

What are the two dimensions of an activity-based management model?

A)the cost dimension and the project dimension
B)the cost dimension and the process dimension
C)the quality dimension and the process dimension
D)the quality dimension and the activity dimension

Question 22

The process of improving performance and constantly eliminating waste is known as __________ .

Question 23

What is the purpose of driver analysis?

A)identify activities in a process
B)identify number of processes
C)identify root causes of activity costs
D)identify complexity of processes

Question 24

The responsibility accounting system that uses both operational and financial measures is called __________ responsibility.

Question 25

Which of the following is NOT part of the process dimension of the activity-based management model?

A)resources
B)driver analysis
C)activities
D)performance measures

Question 26

Activity-based management attempts to

A)identify and eliminate all unnecessary activities.
B)increase the efficiency of necessary activities.
C)add new activities that increase value.
D)all of these.

Question 27

The process that focuses on accountability for activities rather than costs and emphasizes systemwide performance is called __________ .

Question 28

Which of the following is NOT part of the two-dimensional activity-based management model?

A)personnel selection
B)driver analysis
C)resources
D)performance measures

Question 29

The system that provides the justification for implementing activity-based management and addresses the issues related with its implementation is called __________ .

Question 30

Which of the following is true of the process dimension of an activity-based management (ABM) model?

A)The process dimension aims at improving the accuracy of cost assignments.
B)The process dimension provides the ability to engage in and measure continuous improvement.
C)The process dimension provides cost information about resources, activities, and cost objects of interest.
D)The process dimension is not concerned with the issue or presence of waste in activities.

Question 31

Activities that contribute to customer value and are necessary to remain in business are called __________ activities.

Question 32

Activity flexible budgeting differs from traditional approaches by using more than __________ drivers to predict costs.

Question 33

Which of the following is part of the cost and process dimensions of the activity-based management model?

A)resources
B)driver analysis
C)activities
D)cost objects

Question 34

The successful implementation of activity-based management relies on support from higher __________ .

Question 35

The results or products of an activity are called:

A)Activity inputs
B)Driver analysis
C)Activity outputs
D)Value-added activities

Question 36

The objective of the cost dimension of activity-based management is:

A)reducing the number of trade debtors of a firm.
B)increasing the sales of all products.
C)improving the accuracy of cost assignments.
D)reducing the amount of bad debts incurred by a firm.

Question 37

The resources consumed by the activity in producing its output are called __________ .

Question 38

A well accepted approach for reducing costs by eliminating waste is called __________ costing.

Question 39

The major source of information for the activity management system is

A)driver analysis.
B)an activity-based costing system.
C)a performance measurement system.
D)product information.

Question 40

The responsibility accounting system that focuses on organizational units such as departments and plants is called __________ responsibility.

Question 41

Which of the following process dimensions of the activity-based management model deals with "what"?

A)resources
B)driver analysis
C)activities
D)performance measures

Question 42

The effort to reduce costs of existing products and processes is named:

A)Activity reduction
B)Activity elimination
C)Activity selection
D)Kaizen costing

Question 43

The process of identifying, describing, and evaluating the activities an organization performs is called:

A)Activity inputs
B)Driver analysis
C)Activity analysis
D)Value-added activities

Question 44

The process that decreases the time and resources required by different activities is called:

A)Activity sharing
B)Activity elimination
C)Activity reduction
D)Activity selection

Question 45

The process that focuses on non-value-added activities is called:

A)Activity sharing
B)Activity reduction
C)Activity selection
D)Activity elimination

Question 46

The activities necessary to remain in business are called:

A)Value-added activities
B)Activity inputs
C)Activity outputs
D)Activity drivers

Question 47

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

A)assembly
B)scheduling
C)finishing
D)All of these are value-added activities.

Question 48

Non-value-added activities

A)are unnecessary inputs.
B)are valued outputs to internal users.
C)are valued outputs to external users.
D)help meet the organization's needs, not the product needs.

Question 49

Which of the following is a reason for managerial activity to be considered a value-added activity?

A)It is an enabling resource for operational activities that bring about a change of state.
B)Managing activities brings order by changing the state from uncoordinated activities to coordinated activities.
C)Both are reasons for classifying managerial activities as value-added activity.
D)Neither is a reason for classifying managerial activities as value-added activity.

Question 50

The resource(s) consumed by the activity in producing its output is(are) called:

A)Value-added activities
B)Activity outputs
C)Driver analysis
D)Activity inputs

Question 51

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

A)Driver analysis
B)Activity outputs
C)Activity inputs
D)Value-added activities

Question 52

Which of the following is true of activity selection in an activity-based management system?

A)It is a process that focuses on eliminating the non-value-added activities performed within an organization.
B)It is a process that involves choosing among various sets of activities that are caused by competing strategies.
C)It is a process that decreases the time and resources required by a set of activities to achieve an organizational goal.
D)It is a process that increases the efficiency of necessary activities using economies of scale.

Question 53

Which of the following is NOT a necessary condition for classification as a value-added activity?

A)The activity produces no change of state.
B)The change of state was not achievable by preceding activities.
C)Activity enables other activities to be performed.
D)All of these are necessary conditions.

Question 54

An example of activity reduction would be

A)improving cycle time so the need for expediting is eliminated.
B)redesigning products to lead to a reduced cost set of activities.
C)designing a new product that uses components already used by another product.
D)reducing demand for customer complaint handling by improving product quality.

Question 55

Which of the following is a value-added activity?

A)moving
B)inspection
C)processing
D)waiting

Question 56

Which of the following is true of value-added activities?

A)They include activities such as inspection of finished goods.
B)They are activities that are necessary to remain in business.
C)They are synonymous with the state-detection activities.
D)They are the activities that replicate work because it wasn't done correctly the first time.

Question 57

An activity output measure is

A)the number of outputs from a process.
B)the cost of the activity measured.
C)the effort expended to identify root causes.
D)the number of times an activity is performed.

Question 58

Which of the following process dimensions of the activity-based management model deals with "how well"?

A)resources
B)driver analysis
C)activities
D)performance measures

Question 59

Non-value added costs are caused by:

A)activities that comply with legal mandates.
B)state-changing activities.
C)activities necessary to remain in business.
D)value-added activities that perform inefficiently.

Question 60

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

A)supervision of production workers
B)inspection of products
C)scheduling of production
D)All of these are value-added activities.

Question 61

Value-added costs are standard costs based on

A)currently attainable standards.
B)ideal usage standards.
C)cycle time.
D)the value added.

Question 62

Bandolero Corporation has developed ideal standards for four activities: labor, materials, inspection, and receiving. Information is as follows: $$\begin{array} { l l r r r } \text { Activity } & \text { Activity Driver } & \text { SQ } &{ \text { AQ } } & \text { SP } \\\text { Inspection } & \text { Inspection hours } & 0 & 40,000 & \$ 12 \\\text { Labor } & \text { Hours } & 50,000 & 56,000 & 18 \\\text { Materials } & \text { Pounds } & 100,000 & 105,000 & 15 \\\text { Receiving } & \text { Orders } & 150 & 190&450\end{array}$$ The actual prices paid per unit of each activity driver were equal to the standard prices. The value-added costs for labor are

A)$792,000.
B)$900,000.
C)$84,000.
D)$75,000.

Question 63

Bandolero Corporation has developed ideal standards for four activities: labor, materials, inspection, and receiving. Information is as follows: $$\begin{array} { l l r r r } \text { Activity } & \text { Activity Driver } & \text { SQ } &{ \text { AQ } } & \text { SP } \\\text { Inspection } & \text { Inspection hours } & 0 & 40,000 & \$ 12 \\\text { Labor } & \text { Hours } & 50,000 & 56,000 & 18 \\\text { Materials } & \text { Pounds } & 100,000 & 105,000 & 15 \\\text { Receiving } & \text { Orders } & 150 & 190&450\end{array}$$ The actual prices paid per unit of each activity driver were equal to the standard prices. The actual costs for receiving are

A)$49,500.
B)$67,500.
C)$85,500.
D)$18,000.

Question 64

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

A)$100,000.
B)$-0-.
C)$5,000.
D)$10,000.

Question 65

Mendelsohn company keeps 20 days of materials inventory on hand to avoid shutdowns due to materials shortages. Carrying costs average $4,000 per day. Bach, Inc., a competitor, keeps 10 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

A)$-0-.
B)$40,000.
C)$20,000.
D)$80,000.

Question 66

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

A)$125,000.
B)$100,000.
C)$25,000.
D)$-0-.

Question 67

Bandolero Corporation has developed ideal standards for four activities: labor, materials, inspection, and receiving. Information is as follows: $$\begin{array} { l l r r r } \text { Activity } & \text { Activity Driver } & \text { SQ } &{ \text { AQ } } & \text { SP } \\\text { Inspection } & \text { Inspection hours } & 0 & 40,000 & \$ 12 \\\text { Labor } & \text { Hours } & 50,000 & 56,000 & 18 \\\text { Materials } & \text { Pounds } & 100,000 & 105,000 & 15 \\\text { Receiving } & \text { Orders } & 150 & 190&450\end{array}$$ The actual prices paid per unit of each activity driver were equal to the standard prices. The non-value-added costs for materials are

A)$75,000.
B)$157,500.
C)$150,000.
D)$1,575,000.

Question 68

Mendelsohn company keeps 20 days of materials inventory on hand to avoid shutdowns due to materials shortages. Carrying costs average $4,000 per day. Bach, Inc., a competitor, keeps 10 days of inventory on hand, and the competitor's carrying costs average $2,000 per day.
The value-added costs are

A)$0.
B)$40,000.
C)$20,000.
D)$80,000.

Question 69

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

A)$250.
B)$10,000.
C)$5,000.
D)$114,000.

Question 70

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

A)16.00 pounds.
B)17.50 pounds.
C)16.80 pounds.
D)18.00 pounds.

Question 71

Bandolero Corporation has developed ideal standards for four activities: labor, materials, inspection, and receiving. Information is as follows: $$\begin{array} { l l r r r } \text { Activity } & \text { Activity Driver } & \text { SQ } &{ \text { AQ } } & \text { SP } \\\text { Inspection } & \text { Inspection hours } & 0 & 40,000 & \$ 12 \\\text { Labor } & \text { Hours } & 50,000 & 56,000 & 18 \\\text { Materials } & \text { Pounds } & 100,000 & 105,000 & 15 \\\text { Receiving } & \text { Orders } & 150 & 190&450\end{array}$$ The actual prices paid per unit of each activity driver were equal to the standard prices. The non-value-added costs for inspection are

A)$480,000.
B)$60,000.
C)$420,000.
D)$40,000.

Question 72

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

A)$125,000.
B)$100,000.
C)$25,000.
D)$0.

Question 73

The process which increases the efficiency of necessary activities by using economies of scale is called:

A)Activity elimination
B)Activity sharing
C)Activity selection
D)Activity reduction

Question 74

Which of the following is a financial measure of activity efficiency?

A)activity flexible budgeting
B)trends in activity costs
C)benchmarking
D)all of these

Question 75

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

A)$48.
B)$32.
C)$16.
D)$-0-.

Question 76

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

A)$56.
B)$24.
C)$36.
D)$0.

Question 77

For non-value-added activities that are unnecessary, the standard quantity is

A)one.
B)zero.
C)actual quantity minus standard price.
D)actual quantity plus standard price.

Question 78

Which of the following focuses on the relationship of activity outputs to activity inputs?

A)activity reduction
B)quality
C)time
D)efficiency

Question 79

Value-added costs equal standard quantity times

A)non-value-added costs.
B)currently attainable standards.
C)standard price.
D)actual price.

Question 80

Alpha, Inc., manufactures Product A. The setup time for each unit of Product A is 8 hours. Gamma, Inc., that uses the just-in-time system and produces the same product has reduced setup time by 1 hour. Setup labor is $35 per hour. If Alpha wants to reduce non-value-added costs by 30 percent next year, compute the currently attainable standard for setup time. (Round answer to one decimal place.)

A)4.5 hours
B)7.3 hours
C)6.2 hours
D)5.9 hours