Question 1

Reverse engineering has the objective of reducing costs while still satisfying customer needs.

Accepted Answer

Reverse engineering primarily aims to understand a product's components, functions, and operations, often for learning, analysis, or creating a similar product, not specifically to reduce costs.

Question 2

Rework is an example of a value-added cost.

Accepted Answer

Rework is a cost that does not add value to the product or service, as it involves correcting mistakes or defects that should have been prevented in the first place. Value-added costs refer to expenses that directly contribute to enhancing the quality, functionality, or performance of the product or service, such as product design, research and development, or customer service.

Question 3

We describe an activity as a value-added activity if its elimination by a manager would reduce the perceived value or utility (usefulness)that customers experience from using the relevant output.

Accepted Answer

Value-added activities add value to the final product or service and are therefore essential to maintaining customer satisfaction. If a manager were to eliminate a value-added activity, it would ultimately hurt the customer experience and reduce perceived value or usefulness.

Question 4

A graph comparing locked-in costs with incurred costs will have:

Accepted Answer

Locked-in costs are the costs that are incurred at the beginning of the value chain functions, while incurred costs are the costs that are incurred during the production process. Initially, the locked-in costs will rise much faster as they are associated with the design and development of the product. However, as the product moves through the value chain functions, the incurred costs will start to rise at a faster rate. Eventually, the two lines will join at the completion of the value chain functions. Therefore, option A is the correct answer.

Question 5

Designed-in or (locked-in)costs are costs that have not yet been incurred but will be incurred in the future (and cannot be avoided)because they are dictated by the design of the output.

Accepted Answer

Designed-in costs refer to costs that are inherently part of the design of a product or process, and cannot be avoided. These costs may include things like the cost of raw materials, the cost of tooling, or the cost of research and development. As such, they are costs that have not yet been incurred but will be incurred in the future.

Question 6

It is always clear which activities add value and which do not add value to a product.

Accepted Answer

It is not always clear which activities add value and which do not add value to a product. Determining value can depend on various factors such as customer perception, market trends, and production costs.

Question 7

Which of the following can be included in cross-functional engineering teams?

Accepted Answer

Cross-functional engineering teams can include a wide range of roles beyond traditional engineering positions, such as management accountants, marketing managers, and suppliers, to ensure diverse perspectives and expertise are incorporated into the engineering process.

Question 8

A locked-in cost is a(n):

Accepted Answer

A locked-in cost is a cost that has not yet been incurred but based on decisions that have already been made, will be incurred in the future. It cannot be changed in the short run. Options A, C, and D do not accurately describe a locked-in cost.

Question 9

Activity analysis is a fundamental tool in value engineering,the systematic evaluation of all aspects of the value chain with the objective of reducing costs and achieving a quality level that satisfies customers.

Accepted Answer

The statement correctly defines activity analysis as a tool in value engineering, which aims to reduce costs and improve quality by evaluating all aspects of the value chain.

Question 10

Which of the following focuses on reducing costs during the manufacturing stage?

Accepted Answer

Kaizen costing focuses on reducing costs during the manufacturing stage by continuously improving the production process through small incremental improvements. It involves analyzing the production process to identify areas where improvements can be made and implementing changes to reduce costs.

Question 11

Graphic analysis of incurred and locked-in costs provides several insights as to how the different concepts influence decisions.Which of the following statements is FALSE?

Accepted Answer

This statement is false as most costs are locked in before or during the design phase, rather than during the manufacturing process. Therefore, option C is incorrect. Option A is true as decision-makers aim to lock in costs at the earliest possible stage to reduce uncertainty, and the timing of when and how costs are locked in often has a larger impact on decisions than the timing of when costs are incurred. Option B is also true as many costs, such as those related to suppliers or equipment purchases, are locked in before they are incurred. Option D is also true as costs related to a product's design, such as tooling or materials, are often difficult to influence once the design is approved.

Question 12

Direct material costs are locked in when they are:

Accepted Answer

Direct material costs are determined and locked in during the design phase, as this is when the materials to be used in the product are specified. Once the design is finalized and production begins, the costs for these materials are unlikely to change significantly. However, once the product is assembled, delivered or sold, other costs such as labor, shipping and overhead may continue to vary.

Question 13

Concerns about target costing include all the following EXCEPT:

Accepted Answer

Target costing is a process of setting a cost target for a product or service and then designing the product or service to meet that target. While target costing is a useful tool for cost management, it may also have negative consequences such as putting excessive pressure on suppliers or design engineers. However, development time may decrease if the target cost is set early on in the design process and cross-functional teams may add too many features if they are not aligned with the target cost. Burnout of design engineers is also a potential concern with target costing. Therefore, A is the correct answer as it is not a concern about target costing.

Question 14

Value engineering can reduce all of the following EXCEPT:

Accepted Answer

Value engineering focuses on reducing non-value-added costs, rework hours, and sometimes can even reduce value-added costs by finding more efficient ways to deliver the same value. However, it does not typically reduce existing fixed manufacturing costs, as these are often sunk costs or costs that do not change with the level of output.

Question 15

Locked-in costs have already been incurred.

Accepted Answer

The answer of Locked-in costs have already been incurred....

Question 16

________ analysis is a fundamental tool in value engineering.

Accepted Answer

Activity analysis is a fundamental tool in value engineering because it helps to identify and eliminate unnecessary activities that do not add value to the product or service.

Question 17

For manufacturing firms,product costs are generally locked in during the manufacturing stage.

Accepted Answer

The answer of For manufacturing firms,product costs are generally locked...

Question 18

In some industries,such as legal and consulting,most costs are locked in:

Accepted Answer

In industries such as legal and consulting, most costs are incurred when the services are provided, meaning that costs are locked in when they are incurred. These costs include things like employee salaries, overhead expenses, and any other direct costs associated with delivering the service. Therefore, the best choice is B.

Question 19

Value engineering has the objective of reducing costs while still satisfying customer needs.

Accepted Answer

Value engineering is a systematic approach to identify and eliminate unnecessary costs in a product or service while ensuring that customer requirements and expectations are met or exceeded. Therefore, the objective of value engineering is to reduce costs without compromising the quality, functionality, and performance of the product or service.

Question 20

Cost accounting systems focus on when costs are:

Accepted Answer

Cost accounting systems focus on when costs are incurred, meaning when the cost is initially generated or accrued. This helps in measuring and analyzing the costs associated with each stage of the production process, identifying areas where costs can be minimized, and optimizing resource utilization. While the other options may have some relevance, they are not the primary focus of cost accounting systems.

Quiz 7: Target Costing, Managing Activities and Managing Capacity