Chapter 4- Review

Cost distortion is more likely to occur when:

a. A company manufactures one type of product.

d. Departments incur different types of overhead and the products or jobs use the departments to a different extent.

c. A company uses departmental overhead rates rather than a single plantwide overhead rate.

d. All products require the same amount and type of processing activities.

Departments incur different types of overhead and the products or jobs use the departments to a different extent

The first step in computing and using ABC is which of the following?

a. Selecting appropriate allocation bases
b. Calculating activity costs allocation rates
c. Identifying the company’s primary activities
d. Allocating some MOH to each job

Identifying the company’s primary activities.

Activities incurred regardless of how many units, batches, or products are produced are called _____ activities.

a. Product-level
b. Facility-level
c. Batch-level
d. Unt-level

Facility-level

Which of the following is true?

a. ABM refers to using activity-based cost information to make decisions.

b. Value-added activities are also referred to as waste activities.

c. The goal of value engineering is to decrease the amount of value-added activities.

d. ABV is only applicable to manufacturers.

ABM refers to using activity-based cost information to make decisions.

The potential benefits of ABC/ABM are generally higher for companies that:

a. Are in non-competitive markets.
b. Produce one product.
c. Produce high volumes of some products and low volumes of other products.
d. Have low manufacturing overhead costs.

Produce high volumes of some products and low volumes of other products.

Lean operations are generally characterized by:

a. JIT inventory systems
b. Production in self-contained cells
c. Employee empowerment
d. All of the above

All of the above

Which of the following is not one of the "eight wastes" included in the acronym DOWNTIME?

a. Transportation
b. Neglect
c. Overproduction
d. Inventory

Neglect

Concerning lean operations, which of the following is false?

a. Can be found in all sectors, not just manufacturing.
b. Can leave companies vulnerable to supply-chain disruptions.
c. Focus on internal and external waste
d. Are quickly becoming the dominant business paradigm.

Focus on internal and external waste

Which of the following is not one of the costs of quality categories?

a. Appraisal costs
b. External failure costs
c. Prevention costs
d. Transportation costs

Transportation costs

Which of the following would be considered an external failure cost?

a. Warranty costs
b. Rework costs
c. Cost to train personnel
d. Cost of inspecting incoming raw materials

Warranty costs