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Financial and Managerial Accounting: The Basis for Business Decisions, 12/e

Jan R. Williams, University of Tennessee
Susan F. Haka, Michigan State University
Mark S. Bettner, Bucknell University
Robert F. Meigs

Costing and the Value Chain

Online Tutorial Quiz

Please answer all questions


1	The value chain is the set of activities and resources necessary to create and deliver the product or service valued by customers.
		A)	True
		B)	False


2	Maintaining the raw materials inventory is a non-value-added activity.
		A)	True
		B)	False


3	Generally, process time is value-added activity.
		A)	True
		B)	False


4	One of the major functions of activity-based management is to eliminate non-value-added costs.
		A)	True
		B)	False


5	Benchmark information is of little value to activity-based management.
		A)	True
		B)	False


6	Activity-based management is a subset of activity-based costing (ABC).
		A)	True
		B)	False


7	Target costing is the process of determining a product's price after its creation and design stages are completed.
		A)	True
		B)	False


8	The target cost is determined by subtracting a desired profit margin from a target price that is competitive.
		A)	True
		B)	False


9	The methods used by engineers and production personnel to determine the least costly combination of resources to create a product desired by the customer are called total quality management (TQM).
		A)	True
		B)	False


10	Life-cycle considerations are a formal part of the target costing approach.
		A)	True
		B)	False


11	A primary objective of the target costing process is to reduce production time.
		A)	True
		B)	False


12	JIT systems are sometimes described as demand-pull manufacturing.
		A)	True
		B)	False


13	The increased value to a product, as perceived by the customer, that is achieved by an activity that does not change the quality of the product is a value-added activity cost.
		A)	True
		B)	False


14	An important element of JIT inventory systems is to develop long-term relationships with suppliers who are reliable and offer the lowest prices.
		A)	True
		B)	False


15	Cycle time includes four separate elements.
		A)	True
		B)	False


16	If the value-added time is 24 hours and the manufacturing efficiency ratio is 80%, the cycle time must be 19.2 hours.
		A)	True
		B)	False


17	The principles of JIT manufacturing offer many benefits to manufacturing companies, one of which is that quality is ensured.
		A)	True
		B)	False


18	The cost of quality training of employees is an example of a prevention cost.
		A)	True
		B)	False


19	The cost of lost sales is an internal failure cost.
		A)	True
		B)	False


20	The cost of inspecting materials is a prevention cost.
		A)	True
		B)	False


21	ISO 9000 refers to quality standards.
		A)	True
		B)	False


22	There is never a point at which additional costs incurred for prevention and appraisal will increase the cost of obtaining higher quality because internal and external failure costs will decrease proportionately.
		A)	True
		B)	False


23	A typical quality report shows the detail of the costs that make up four major categories of cost: prevention, appraisal, internal failure, and external failure.
		A)	True
		B)	False


24	A typical quality cost report does not address the issue of productivity.
		A)	True
		B)	False


25	A defect rate is commonly measured in parts per thousand.
		A)	True
		B)	False


26	Which of the following are included as components of the value chain?
		A)	Active research and development and design activities
		B)	Active supplier and production related activities
		C)	Active marketing and distribution activities
		D)	Active customer service activities
		E)	All of the above


27	Which of the following is not a value-added activity?
		A)	Product testing
		B)	Employee training
		C)	Maintaining inventories
		D)	Converting corn into corn oil
		E)	Activities A and B


28	Which of the following is a basic procedure related to activity-based costing (ABC)?
		A)	Identifying activities
		B)	Creating an associated activity cost pool
		C)	Identifying an activity measure
		D)	Creating the cost per unit of activity
		E)	All of the above


29	At which stage of a product's life cycle is a target cost determined?
		A)	Planning and marketing analysis
		B)	Product development
		C)	Production design
		D)	Production
		E)	Distribution to customers


30	Which of the following is not a characteristic of the target costing process?
		A)	An involvement of the entire value chain to drive cost out while satisfying customer needs.
		B)	A clear understanding of the connection between the key components of the process and the associated costs is critical for focusing value-engineering efforts.
		C)	An emphasis on the product's functional characteristics and their importance to the customer.
		D)	A primary objective to reduce production time.
		E)	A and C


31	Which is essential to a successful JIT system?
		A)	Short-term relationships with quality vendors
		B)	Extremely versatile employees
		C)	Cost of raw materials determining supplier selection
		D)	Efficient plant layout
		E)	B and D

Consider the following:
Process time 4 hours
Waiting time 3 hours
Move time 3 hours
Inspection time 1 hour


32	What is the manufacturing efficiency ratio?
		A)	Less than 30%
		B)	Greater than 60%
		C)	36.4%
		D)	45.5%
		E)	None of the above


33	Which of the following is not true about JIT principles and philosophy?
		A)	The maintenance of inventories at near zero-levels is appropriate for all companies.
		B)	All companies can benefit from the basic philosophy of the JIT approach.
		C)	It reduces the risk of all output not being sold.
		D)	It ensures quality.
		E)	A and D


34	The cost of inspecting raw materials falls under which category of the costs shown below?
		A)	Prevention costs
		B)	Appraisal costs
		C)	Internal failure costs
		D)	External failure costs
		E)	None of the above


35	Which category of quality costs is the largest and most difficult to measure?
		A)	Prevention costs
		B)	Appraisal costs
		C)	Internal failure costs
		D)	External failure costs
		E)	None of the above


36	Which of the following are techniques commonly used by organizations to manage costs over their value chain?
		A)	Activity-based management
		B)	The target costing process
		C)	Just-in-time procedures
		D)	Total quality management
		E)	All of the above

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