Question 1

A plant produces 92 different electronic products. Each product requires an average of seven components that are purchased externally. By redesigning the products, it is possible to produce the 92 products that have five components in common. This redesign will reduce the demand for purchasing, receiving, and paying bills. Estimated savings from the reduced demand are $1,500,000 per year. What is the non-value-added cost of purchasing, receiving, and paying bills?

Accepted Answer

The non-value-added cost is the cost that can be eliminated without affecting the product's value to the customer. Since the redesign leads to savings of $1,500,000 per year, this amount represents the non-value-added cost of the current purchasing, receiving, and paying bills process.

Question 2

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

Accepted Answer

Efficiency focuses on the relationship of activity inputs to activity outputs by minimizing waste and maximizing productivity. Time refers to the duration of completing an activity, quality refers to meeting or exceeding customer expectations, and cycle time refers to the time it takes to complete one cycle of a process.

Question 3

What type of product meets or exceeds customer expectations?

Accepted Answer

A quality product meets or exceeds customer expectations as it is designed and manufactured to perform well and satisfy the needs of the customer. A robust product might be durable, but it may not necessarily meet customer expectations. A defective product fails to meet customer expectations. A traditional product may or may not meet customer expectations depending on the customer's preferences and changing consumer trends.

Question 4

What type of activity is performed in response to poor quality?

Accepted Answer

The answer of What type of activity is performed in...

Question 5

What type of costs are field trials and quality engineering?

Accepted Answer

Field trials and quality engineering are considered prevention costs because they are activities aimed at preventing defects and ensuring quality before the product reaches the customer.

Question 6

Which term reflects bringing a good from a nonconforming state to a conforming state?

Accepted Answer

Rework refers to the process of bringing a good from a nonconforming state to a conforming state. This may involve correcting defects or making necessary adjustments. Appraisal and inspection are related to evaluating the quality of a good, while prevention involves taking steps to avoid nonconforming states before they occur.

Question 7

Which term reflects the number of units that can be produced in a given period of time?

Accepted Answer

The answer of Which term reflects the number of units...

Question 8

Inspection time for a plant is 20,000 hours per year. The cost of inspection consists of the salaries of four inspectors, totalling $120,000. Inspection also uses supplies costing $6 per inspection hour. The company has a close to zero-defect state and has eliminated the need for any inspection activity. What is the non-value-added cost of inspection per year?

Accepted Answer

The non-value-added cost of inspection is equal to the cost of inspection activity minus the value it adds. In this case, since the company has a close to zero-defect state and eliminated the need for inspection, there is no value added by inspection activity. Therefore, the non-value-added cost of inspection is equal to the cost of inspection activity which consists of the salaries of four inspectors totaling $120,000 plus supplies costing $6 per inspection hour multiplied by the total inspection time of 20,000 hours per year. This gives us a total cost of $240,000 per year. Therefore, the correct answer is C.

Question 9

What type of costs are packaging inspection and process acceptance?

Accepted Answer

Packaging inspection and process acceptance are both appraisal costs, which are costs incurred to detect defects in products or services before they are delivered to customers.

Question 10

Which term reflects the identification and removal of activities that fail to add value?

Accepted Answer

Activity elimination is the process of identifying and removing activities that do not add value to a product or service. This is an important step in improving efficiency and reducing costs. Activity selection involves choosing the most valuable activities to prioritize, while activity reduction and stabilization do not necessarily involve removing activities.

Question 11

Which activity performance measure is concerned with doing the activity right the first time it is performed?

Accepted Answer

Quality is the activity performance measure concerned with doing the activity right the first time it is performed. Time refers to how long it takes to complete the activity, efficiency refers to how well resources are used to complete the activity, and cycle time refers to how long it takes to complete one cycle of a repeated activity.

Question 12

Which term reflects increasing the efficiency of necessary activities by using economies of scale?

Accepted Answer

Activity sharing involves increasing the efficiency of necessary activities by using economies of scale. This is achieved by sharing resources, capabilities or processes across different activities within the same organization. This can lead to lower costs, higher productivity, and improved performance overall. Activity selection involves choosing the most efficient activities to undertake given a set of constraints, while activity elimination involves removing or reducing activities that are not necessary or do not add value. Activity management is a broader term that encompasses all aspects of planning, implementing, and monitoring activities within an organization.

Question 13

A product currently requires eight moves. By changing the plant layout, the number of moves can be reduced to zero. The cost per move is $150. What is the reduction in the non-value-added cost of the moving activity?

Accepted Answer

The reduction in non-value-added cost is calculated by multiplying the number of moves eliminated (8) by the cost per move ($150), resulting in a reduction of $1,200.

Question 14

A company takes 10,000 hours to produce 20,000 units of a product. What is the cycle time?

Accepted Answer

To find the cycle time, we need to divide the total time taken to produce the units by the number of units produced. 
Therefore, cycle time = total time / number of units 
cycle time = 10,000 hours / 20,000 units 
cycle time = 0.5 hour (or 30 minutes) 
Therefore, the best choice is A) 0.50 hour.

Question 15

Which term reflects the process of decreasing the time and resources required by an activity?

Accepted Answer

Activity reduction refers to the process of decreasing the time and resources required by an activity. Activity sharing involves sharing resources between different activities, activity mapping involves identifying and analyzing all the steps involved in an activity, and activity elimination involves eliminating an activity altogether.

Question 16

What quality-control method involves sampling from batches of Finished Goods Inventory to determine whether they meet an acceptable quality level?

Accepted Answer

Product acceptance involves sampling from batches of Finished Goods Inventory to determine whether they meet an acceptable quality level. Quality acceptance and process acceptance refer to different types of quality control methods that do not involve sampling from Finished Goods Inventory. Velocity acceptance is not a commonly used quality-control method.

Question 17

Each unit of a product requires eight components. The average number of components is 8.25 due to component failure. Purchasing higher quality components can reduce the average number of components to four per unit. The cost per component is $500. What is the reduction in failure costs per unit due to purchasing higher quality components?

Accepted Answer

The answer of Each unit of a product requires eight...

Question 18

Which term reflects the process of choosing among different sets of activities caused by competing strategies?

Accepted Answer

Activity selection refers to the process of choosing among different sets of activities caused by competing strategies. Activity costing is the process of determining the costs of specific activities or tasks. Activity reduction and elimination both refer to reducing or eliminating certain activities to increase efficiency, but they do not necessarily involve choosing among different sets of activities.

Question 19

A company takes 15,000 hours to produce 30,000 units of a product. What is the velocity?

Accepted Answer

To find the velocity, we need to divide the total number of units produced (30,000) by the total time taken (15,000 hours):
Velocity = Units produced / Time taken
Velocity = 30,000 units / 15,000 hours
Velocity = 2.0 units per hour
Therefore, the correct answer is C) 2.0 units per hour.

Question 20

Which term reflects the time required to produce one unit of a product?

Accepted Answer

Cycle time reflects the time required to produce one unit of a product. Speed refers to the rate at which something moves, while velocity refers to the speed and direction of movement. Efficiency refers to the ability to accomplish something with the least amount of wasted time, money, or effort, but it does not directly relate to the time required to produce one unit of a product.

Quiz 7: Activity-Based Costing and Management