Deck 12: Activity-Based Management

Question 1

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.

Answer 1

D

Question 2

_______________ is the effort expended to identify those factors that are the root causes of activity costs.

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

Answer 2

C

Question 3

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

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

Answer 3

B

Question 4

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 5

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 6

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 7

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 8

_______________ are the results or products of an activity.

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

Question 9

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 10

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 11

_______________ are the resources consumed by the activity in producing its output.

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

Question 12

Processes are

A) tasks that must be completed to do work.
B) outcomes of activities.
C) activities linked to perform a specific objective.
D) the linked set of value-creating activities from disposal of materials to disposal of the finished product by end consumers.

Question 13

_______________ is the process of identifying, describing, and evaluating the activities an organization performs.

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

Question 14

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

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

Question 15

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 16

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 17

Which of the following is NOT an expected outcome of activity analysis?

A) What activities are performed?
B) How many people perform the activities?
C) The time and resources required to perform the activities
D) All of these are expected outcomes.

Question 18

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 19

_______________ are those activities necessary to remain in business.

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

Question 20

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 21

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 22

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 23

_______________ decreases the time and resources required by different activities.

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

Question 24

_______________ is an effort to reduce costs of existing products and processes.

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

Question 25

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 26

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 27

A company keeps 20 days of materials inventory on hand to avoid shutdowns due to materials shortages.Carrying costs average $4,000 per day.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) $80,000.
B) $40,000.
C) $20,000.
D) $-0-.

Question 28

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 29

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 non-value-added costs are

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

Question 30

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

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

Question 31

_______________ increases the efficiency of necessary activities by using economies of scale.

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

Question 32

_______________ focuses on non-value-added activities.

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

Question 33

A company keeps 20 days of materials inventory on hand to avoid shutdowns due to materials shortages.Carrying costs average $4,000 per day.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) $80,000.
B) $40,000.
C) $20,000.
D) $-0-.

Question 34

Which of the following is a value-added activity?

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

Question 35

Value-added costs equal standard quantity times

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

Question 36

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 37

Value-added costs are standard costs based on

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

Question 38

_______________ involves choosing among various sets of activities that are caused by competing strategies.

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

Question 39

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 40

A company has 20 days of finished goods inventory on hand to avoid stockouts.The carrying costs of the inventory average $5,000 per day.

-The value-added costs would be

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

Question 41

Setup time for a product is 12 hours.A firm that uses JIT and produces the same product has reduced setup time by 1 hour.Setup labor is $20 per hour.If the company wants to reduce non-value-added costs by 40 percent next year, the currently attainable standard for setup time would be

A) 7.6 hours.
B) 7.2 hours.
C) 6.6 hours.
D) 4.8 hours.

Question 42

Sasha Cat Company sells one of its products for $100 each.Sales volume averages 750 units per year.Recently, its main competitor reduced the price of its product to $80.Sasha Cat Company expects sales to drop dramatically unless it matches the competitor's price.In addition, the current profit per unit must be maintained.Information about the product (for production of 750) is as follows: The non-value-added cost per unit is

A) $41.67.
B) $43.33.
C) $40.47.
D) $38.33.

Question 43

Larry Corporation has developed ideal standards for four activities: labor, materials, inspection, and receiving.Information is as follows: 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) $420,000.
B) $60,000.
C) $480,000.
D) $40,000.

Question 44

A time-and-motion study revealed that it should take 3 hours to produce a product that currently takes 7.5 hours to produce.Labor is $18 per hour.The non-value-added costs are

A) $27.
B) $54.
C) $81.
D) $0.

Question 45

Larry Corporation has developed ideal standards for four activities: labor, materials, inspection, and receiving.Information is as follows: The actual prices paid per unit of each activity driver were equal to the standard prices.

-The actual costs for receiving are

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

Question 46

Larry Corporation has developed ideal standards for four activities: labor, materials, inspection, and receiving.Information is as follows: The actual prices paid per unit of each activity driver were equal to the standard prices.

-The value-added costs for labor are

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

Question 47

A company keeps 15 days of materials inventory on hand to avoid shutdowns due to materials shortages.Carrying costs average $5,000 per day.A competitor keeps 12 days of inventory on hand, and the competitor's carrying costs average $3,000 per day.

-The value-added costs are

A) $5,000.
B) $-0-.
C) $30,000.
D) $75,000.

Question 48

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) 16.80 pounds.
C) 17.50 pounds.
D) 18.00 pounds.

Question 49

Setup time for a product is 12 hours.A firm that uses JIT and produces the same product has reduced setup time to 1 hour.Setup labor is $6 per hour.

-The value-added costs are

A) $72.
B) $66.
C) $12.
D) $6.

Question 50

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 $4 per pound.

-The non-value-added costs are

A) $4.
B) $8.
C) $64.
D) $72.

Question 51

A company keeps 15 days of materials inventory on hand to avoid shutdowns due to materials shortages.Carrying costs average $5,000 per day.A competitor keeps 12 days of inventory on hand, and the competitor's carrying costs average $3,000 per day.

-The non-value-added costs would be

A) $-0-.
B) $30,000.
C) $75,000.
D) $80,000.

Question 52

Larry Corporation has developed ideal standards for four activities: labor, materials, inspection, and receiving.Information is as follows: 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) $1,575,000.
B) $157,500.
C) $150,000.
D) $75,000.

Question 53

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 54

A company has 5 days of finished goods inventory on hand to avoid stockouts.The carrying costs of the inventory average $2,500 per day.The non-value-added costs are

A) $-0-.
B) 500.
C) $2,500.
D) $12,500.

Question 55

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

Question 56

A company has 20 days of finished goods inventory on hand to avoid stockouts.The carrying costs of the inventory average $5,000 per day.

-The non-value-added costs are

A) $100,000.
B) $10,000.
C) $5,000.
D) $250.

Question 57

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 58

Setup time for a product is 12 hours.A firm that uses JIT and produces the same product has reduced setup time to 1 hour.Setup labor is $6 per hour.

-The non-value-added costs are

A) $72.
B) $66.
C) $12.
D) $6.

Question 59

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 $4 per pound.

-The value-added costs are

A) $4.
B) $8.
C) $64.
D) $72.

Question 60

A company has 5 days of finished goods inventory on hand to avoid stockouts.The carrying costs of the inventory average $5,000 per day.The value-added costs are

A) $-0-.
B) $1,000.
C) $5,000.
D) $25,000.

Question 61

Rollo Company has developed cost formulas for the drivers of the following production activities:

- If the actual activity was 20 setups and the actual fixed cost for inspections was $28,000 and the variable cost for inspections was $5,000, the total variance for inspections is due to

A) favorable variance on fixed costs.
B) unfavorable variance on fixed costs.
C) favorable variance on variable costs.
D) unfavorable variance on variable costs.

Question 62

A firm's warranty costs are $225,000 per year.A competitor's warranty costs are $75,000 per year.

-The non-value-added costs are

A) $-0-.
B) $75,000.
C) $150,000.
D) $225,000.

Question 63

The maintenance subcycle is defined by what sequence?

A) establish-do-check-act
B) establish-act-do-check
C) do-act-establish-check
D) check-do-plan-act

Question 64

Friedrich Company has developed ideal standards for four activities: labor, materials, inspection, and receiving. Information is as follows:
The actual prices paid per unit of each activity driver were equal to the standard prices.

-The non-value-added costs for labor are

A) $300,000.
B) $36,000.
C) $28,000.
D) $25,000.

Question 65

The purpose of trend reporting on non-value-added costs is to

A) trace resources to cost objectives.
B) assess value content.
C) define root causes.
D) see if cost reductions occurred as expected.

Question 66

A time-and-motion study revealed that it should take 3 hours to produce a product that currently takes 7.5 hours to produce.Labor is $18 per hour.The value-added costs are

A) $27.
B) $135.
C) $81.
D) $54.

Question 67

The unused capacity variance is

A) the difference in costs between activity availability and activity usage.
B) the difference in costs between actual activity level acquired and the value-added standard quantity of activity that should have been used.
C) the difference in costs between practical capacity of activity and the standard capacity of the activity.
D) none of these.

Question 68

A technique for improving performance of activities and processes that predicts activity costs as activity output changes is called

A) value-added reporting.
B) activity flexible budgeting.
C) Kaizen costing.
D) benchmarking.

Question 69

Pillow Company sells one of its products for $35 each.Sales volume averages 2,400 units per year.Recently, its main competitor reduced the price of its product to $30.Pillow Company expects sales to drop dramatically unless it matches the competitor's price.In addition, the current profit per unit must be maintained.Information about the product (for production of 2,400) is as follows: The non-value-added cost per unit is

A) $4.525.
B) $4.875.
C) $4.190.
D) $3.475.

Question 70

The capacity variance is composed of the unused capacity variance and

A) the activity volume variance.
B) the used capacity variance.
C) the activity benchmark.
D) the value-added standard.

Question 71

Rollo Company has developed cost formulas for the drivers of the following production activities:

- If the actual activity was 20 setups and the actual fixed cost for inspections was $28,000 and the variable cost for inspections was $5,000, the total variance for inspections is

A) $2,000 favorable.
B) $2,000 unfavorable.
C) $1,000 favorable.
D) $1,000 unfavorable.

Question 72

Controlling the cost reduction process using Kaizen costing is accomplished

A) through repetition of subcycle processes.
B) by punishment of those not reaching the Kaizen standard.
C) through one-time adjustments.
D) through reviews every four to five years.

Question 73

A technique for improving performance of activities and processes that searches for best practices is called

A) value-added reporting.
B) Kaizen costing.
C) trend reporting.
D) benchmarking.

Question 74

Friedrich Company has developed ideal standards for four activities: labor, materials, inspection, and receiving.Information is as follows:

-The value-added costs for materials are

A) $525,000.
B) $500,000.
C) $50,000.
D) $25,000.

Question 75

A firm's warranty costs are $225,000 per year.A competitor's warranty costs are $75,000 per year.

-The value-added costs are

A) $-0-.
B) $75,000.
C) $150,000.
D) $225,000.

Question 76

A technique for improving performance of activities and processes that compares the number of times an activity can be performed to the number actually performed is called

A) value-added activity reporting.
B) activity flexible budgeting.
C) activity capacity reporting.
D) activity trend reporting.

Question 77

When different units that perform the same types of activities within the same organization are compared to the unit with the best performance, this practice is called

A) variance benchmarking.
B) competitive benchmarking.
C) external benchmarking.
D) internal benchmarking.

Question 78

Rollo Company has developed cost formulas for the drivers of the following production activities:

-The activity levels are projected to be as follows:

What is budgeted for this projected activity level?

A) $3,504,450
B) $1,655,430
C) $295,150
D) $165,543

Question 79

The continuous improvement subcycle of Kaizen costing is defined by what sequence?

A) check-do-plan-act
B) do-check-plan-act
C) plan-do-check-act
D) None of these is the correct sequence.

Question 80

Rollo Company has developed cost formulas for the drivers of the following production activities:

- The budgeted inspection cost for 20 setups is

A) $175,860.
B) $40,000.
C) $34,000.
D) $30,000.