Fundementals Of Cost Accounting Seventh Edition-McGraw Hill- ACCT521 CH 10 QUESTIONS Week 5

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Apr 3, 2024

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Activity-based cost management is an approach that uses activity-based costing data to Blank______. Multiple select question. evaluate the cost of value-chain activities correct identify opportunities for improvement incorrect looks to significantly reduce production costs using just-in-time inventory and production provides measures at the work cell or process level Correct Answer  evaluate the cost of value-chain activities  identify opportunities for improvement Activity analysis includes Blank______. Multiple select question. classifying activities as value-added or nonvalue-added correct determining opportunities to improve performance incorrect improving the efficiency of nonvalue-added activities comparing activity costs to the value the customer assigns to it correct Correct Answer  classifying activities as value-added or nonvalue-added  determining opportunities to improve performance  comparing activity costs to the value the customer assigns to it Activity-based cost management (ABCM) concepts apply to Blank______. Multiple choice question. manufacturing and retail organizations but not to service organizations manufacturing, retail, service, nonprofit, and governmental agencies correct for-profit and nonprofit organizations, but not governmental agencies for-profit organizations only Correct Answer

manufacturing, retail, service, nonprofit, and governmental agencies Which of the following statements are true? Multiple select question. Allocating all costs to units can be misleading. incorrect Decisions that can affect capacity will probably affect all costs in the cost hierarchy. correct A company that makes custom products has few product level costs. incorrect Capacity level costs cannot be changed by management decisions. Correct Answer  Allocating all costs to units can be misleading.  Decisions that can affect capacity will probably affect all costs in the cost hierarchy. An approach that uses activity-based costing data to evaluate the cost of value-chain activities and identify opportunities for improvement is Blank______. Multiple choice question. activity-based cost management correct cost-improvement management value-chain analysis cost accounting analysis Correct Answer activity-based cost management Activity analysis includes Blank______. Multiple select question. charting company activities for completing a product incorrect setting prices for the finished product incorrect identifying customer wants and expectations

incorrect developing activity-based costing information for each activity incorrect Correct Answer  charting company activities for completing a product  identifying customer wants and expectations  developing activity-based costing information for each activity Activity-based cost management applies to Blank______. Multiple choice question. manufacturing organizations only service organizations only many different types of organizations, including manufacturing, service, retail, nonprofit, and governmental correct many different types of organizations, with the exception of nonprofit and governmental organizations Correct Answer many different types of organizations, including manufacturing, service, retail, nonprofit, and governmental Which of the following statements are correct? Multiple select question. When determining groups of customers that are most profitable, the only focus should be on the amount of product various groups purchase. incorrect Reason: This is one reason customers are profitable, but costs must also be considered. Some customers cost more money to serve than others. correct Firms must make decisions about customers much like the decisions made about products and services. incorrect Correct Answer  Some customers cost more money to serve than others.  Firms must make decisions about customers much like the decisions made about products and services.

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Lean manufacturing Blank______. Multiple select question. requires the use of lean accounting Reason: Lean accounting is often a result of lean manufacturing but it is not required. focuses on the elimination of waste correct attempts to significantly reduce production costs correct flows naturally from careful activity analysis correct Correct Answer  focuses on the elimination of waste  attempts to significantly reduce production costs  flows naturally from careful activity analysis A firm has two major customers, Betty and Bill. The firm assigns general delivery costs to customers based on the total value of orders placed. Last year, Betty placed 100 orders at a total value of $49,980, and Bill placed 250 orders at a total value of $52,020. If total general delivery costs were $20,000, the amount assigned to Betty equals Blank______. Multiple choice question. $10,000 Reason: [$49,980 ÷ ($49,980 + $52,020)] × $20,000 = $9,800 $10,200 Reason: [$49,980 ÷ ($49,980 + $52,020)] × $20,000 = $9,800 $9,800 correct Reason: [$49,980 ÷ ($49,980 + $52,020)] × $20,000 = $9,800 $5,714 Reason: [$49,980 ÷ ($49,980 + $52,020)] × $20,000 = $9,800 Correct Answer

$9,800 Many of the greatest opportunities for reducing costs through activity-based management is in Blank______ level costs. Multiple choice question. product and batch correct unit and batch batch and capacity product and capacity Correct Answer product and batch Activity-based cost management is an approach that uses activity-based costing data to Blank______. Multiple select question. looks to significantly reduce production costs using just-in-time inventory and production provides measures at the work cell or process level identify opportunities for improvement correct evaluate the cost of value-chain activities correct Correct Answer  identify opportunities for improvement  evaluate the cost of value-chain activities If customers are not charged based on their cost, Blank______ customers will seek other sellers. Multiple choice question. lower cost correct all higher cost Correct Answer lower cost

Activity analysis includes Blank______. Multiple select question. classifying activities as value-added or nonvalue-added correct improving the efficiency of nonvalue-added activities comparing activity costs to the value the customer assigns to it correct determining opportunities to improve performance correct Correct Answer  classifying activities as value-added or nonvalue-added  comparing activity costs to the value the customer assigns to it  determining opportunities to improve performance Which of the following are true of customers? Multiple select question. For most firms, customer costs do not vary between customers. Firms make decisions about products or services and not about customers. incorrect A group of customers may be more profitable because it could be less costly to serve. correct A group of customers may be more profitable because it would buy more product. incorrect Correct Answer  A group of customers may be more profitable because it could be less costly to serve.  A group of customers may be more profitable because it would buy more product. A firm has two major customers, Betty and Bill. The firm assigns general delivery administrative costs to customers based on the total value of orders

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placed. Last year, Betty placed 100 orders at a total value of $49,980, and Bill placed 250 orders at a total value of $52,020. Which of the following statements are correct? Multiple select question. Betty is likely to be satisfied with the costs she is charged for general delivery administrative costs. Reason: Because Betty placed fewer orders, she is subsidizing Bill and is likely to be dissatisfied. Bill and Betty were charged approximately the same amount of general delivery costs during the year. correct Reason: Betty was assigned 49% ($49,980 ÷ $102,000) and Bill was assigned 51% ($52,020 ÷ $102,000). Bill is likely to be satisfied with the costs he is charged for general delivery administrative costs. incorrect When customer buying patterns are different, costs need to be charged based on those differences. correct Correct Answer  Bill and Betty were charged approximately the same amount of general delivery costs during the year.  Bill is likely to be satisfied with the costs he is charged for general delivery administrative costs.  When customer buying patterns are different, costs need to be charged based on those differences. Adding a flat fee for each order in addition to other delivery charges will Blank______. Multiple choice question. encourage customers to place larger orders correct encourage customers to place smaller orders decrease total delivery costs increase inventory holding costs Correct Answer encourage customers to place larger orders

When a company assigns costs to customers incorrectly, they run the danger of being left Blank______ customers. Multiple choice question. without any with lower cost with higher cost correct Correct Answer with higher cost Abert's uses two suppliers for a component part used in production. Supplier A charges $1.50 per unit and Supplier B charges $1.52 per unit. The cost of late deliveries adds $0.15 to the unit cost. If the probability of a late delivery is 40% for Supplier A and 10% for Supplier B, the effective cost per unit for Supplier A is Blank______. Multiple choice question. $1.50 Reason: $0.15 × 40% = $0.06 per unit cost of late delivery. $1.50 + $0.06 = $1.56 effective cost per unit. $1.58 Reason: $0.15 × 40% = $0.06 per unit cost of late delivery. $1.50 + $0.06 = $1.56 effective cost per unit. $1.65 Reason: $0.15 × 40% = $0.06 per unit cost of late delivery. $1.50 + $0.06 = $1.56 effective cost per unit. $1.56 correct Reason: $0.15 × 40% = $0.06 per unit cost of late delivery. $1.50 + $0.06 = $1.56 effective cost per unit. Correct Answer $1.56

Which of the following are true? Multiple select question. Unused resource capacity is the difference between resources used and resources supplied. incorrect Activity-based costing estimates the cost of resources used. incorrect Expenditures or the amounts spent on a specific activity are resources used. incorrect The cost drive rate multiplied by the cost driver volume is resources supplied. incorrect Correct Answer  Unused resource capacity is the difference between resources used and resources supplied.  Activity-based costing estimates the cost of resources used. Which of the following statements are correct? Multiple select question. Firms must make decisions about customers much like the decisions made about products and services. incorrect When determining groups of customers that are most profitable, the only focus should be on the amount of product various groups purchase. incorrect Reason: This is one reason customers are profitable, but costs must also be considered. Some customers cost more money to serve than others. correct Correct Answer  Firms must make decisions about customers much like the decisions made about products and services.  Some customers cost more money to serve than others.

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If the allocation base for fixed costs does not vary over time and fixed costs remain unchanged, reported unit fixed cost will Blank______. Multiple choice question. be higher in years when volume is lower remain constant from year to year correct be higher in years when volume is higher Correct Answer remain constant from year to year Adding a flat fee for each order in addition to other delivery charges will put the trade-off decision between delivery costs and inventory holding costs in the hands of the Blank______. Multiple choice question. seller shipping company customer correct Correct Answer customer Which of the following is NOT a potential reason for unused capacity? Multiple choice question. expansion plans seasonal demand incorrect unexpected demand Correct Answer unexpected demand Abert's uses two suppliers for a component part used in production. Supplier A charges $1.75 per unit and Supplier B charges $1.80 per unit. The cost of late deliveries adds $0.20 to the unit cost. If the probability of a late delivery is 50% for Supplier A and 20% for Supplier B, the effective cost per unit for Supplier B is Blank______. Multiple choice question. $1.84

correct Reason: $0.20 × 20% = $0.04 per unit cost of a late delivery. $1.80 + $0.04 = $1.84 effective cost per unit. $1.79 Reason: $0.20 × 20% = $0.04 per unit cost of a late delivery. $1.80 + $0.04 = $1.84 effective cost per unit. $2.00 Reason: $0.20 × 20% = $0.04 per unit cost of a late delivery. $1.80 + $0.04 = $1.84 effective cost per unit. $1.90 Reason: $0.20 × 20% = $0.04 per unit cost of a late delivery. $1.80 + $0.04 = $1.84 effective cost per unit. Correct Answer $1.84 When excess capacity costs are assigned to customers who do not benefit from those costs, Blank______. Multiple choice question. pricing decisions will be fair for all customers profit will be understated poor pricing decisions may result in the loss of customers correct Correct Answer poor pricing decisions may result in the loss of customers The expenditures or the amounts spent on an activity are the Blank______. Multiple choice question. unused resource capacity resources used resources supplied correct Correct Answer resources supplied

To prevent costs per unit from changing as activity level changes, Blank______. Multiple select question. variable costing may be used correct Reason: The problem with this is fixed costs may be forgotten. a measure of capacity may be used as the allocation base correct all costs should be allocated based on expected volume annually Reason: This is what causes unit costs to change. Correct Answer  variable costing may be used  a measure of capacity may be used as the allocation base A total quality management (TQM) system will have little economic benefit unless Blank______. Multiple choice question. separate cost and quality systems are maintained there is unused capacity in production the cost accounting system is designed to support it correct Correct Answer the cost accounting system is designed to support it When a company has excess capacity due to plans for expansion, the better cost system to report cost would use Blank______. Multiple choice question. theoretical capacity practical capacity correct normal activity Reason: This measure suggests that customers should pay for the unused capacity. actual activity

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Reason: This measure suggests that customers should pay for the unused capacity. Correct Answer practical capacity When unused capacity costs are for the benefit of specific customers, it is best to Blank______. Multiple choice question. allocate the costs to those who are not benefited incorrect allocate the costs evenly to all customers assign costs to a separate idle capacity account allocate the costs to the specific customers who are benefited Correct Answer allocate the costs to the specific customers who are benefited Which of the following statements are true? Multiple select question. Customer expectations always provide a useful guide for managers. Customer expectations of quality are important quality determinants. correct The external view of quality is everything the customer values. correct Customer expectations of quality are both tangible and intangible. incorrect Correct Answer  Customer expectations of quality are important quality determinants.  The external view of quality is everything the customer values.  Customer expectations of quality are both tangible and intangible. Quality training and product design are examples of Blank______ costs. Multiple choice question. internal failure prevention correct external failure

appraisal Correct Answer prevention If a company records and reports cost increases but does not record and report quality improvements, managers Blank______. Multiple choice question. may view quality improvements as cost-free may choose not to improve quality correct will be motivated to make changes to improve quality Correct Answer may choose not to improve quality End-of-process sampling and field testing are examples of appraisal Blank 1 Blank 1 appraisal , Correct Unavailable costs. (Enter only one word per blank.) Correct Answer  Blank 1: appraisal or detection The ultimate goal in implementing a quality improvement program is to achieve zero defects Blank______ costs of quality. Multiple choice question. regardless of while incurring minimal correct while incurring zero Correct Answer while incurring minimal Allocating the cost of unused capacity to the idle capacity account is Blank______ the excess capacity is for the benefit of customers. Multiple choice question. not appropriate if correct

only appropriate if always appropriate whether or not Correct Answer not appropriate if How salespeople treat customers and delivery time are both Blank______ features of a product. Multiple choice question. intangible correct tangible Correct Answer intangible Inspections (materials, processes, and equipment) are examples of _____ costs Prevention Costs incurred to detect individual units of product that do not conform to specifications are Blank______ costs. Multiple choice question. prevention internal failure appraisal correct external failure Correct Answer appraisal Which of the following statements are correct? Multiple select question. Total costs of quality must be reduced over time. incorrect The ultimate goal in implementing a quality improvement program is to achieve zero quality costs. incorrect Reason:

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The goal is zero defects at minimal costs. Managers make trade-offs between the four costs of quality categories. correct Correct Answer  Total costs of quality must be reduced over time.  Managers make trade-offs between the four costs of quality categories.

Fundementals Of Cost Accounting Seventh Edition-McGraw Hill- ACCT521 CH 10 QUESTIONS Week 5

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