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MODULE 3 C. Decrease for fixed costs and increase for variable costs. Unit decrease remains remains increase
ACTIVITY COST AND COST ANALYSIS D. Increase for fixed costs and increase for variable variable s same same s
costs. Bobadilla cost
THEORIES: Total decrease Increase decrease Increase
6. Which of the following describes the behavior of the variable variable s s s s
1. Cost behavior analysis is a study of how a firm's costs cost per unit? Variable cost: cost
A. relate to competitors' costs. A. Varies in increasing proportion with changes in the activity
B. relate to general price level changes. level. 11. When the number of units manufactured increases, the most
C. respond to changes in activity levels within the company. B. Varies in increasing proportion with changes in the activity significant change in unit cost will be reflected as a(n)
D. respond to changes in the gross national level. A. increase in the fixed element. C. increase
product. Bobadilla C. Remains constant with changes in the activity level. in the mixed element.
D. Varies in direct proportion with the activity level. Bobadilla B. decrease in the variable element. D. decrease
2. The term “relevant range” as used in cost accounting means in the fixed element. Bobadilla
the range over which 7. A cost that remains constant on a per unit basis in a given
A. costs may fluctuate C. period despite changes in the level of activity should be 12. As volume increases,
production considered a(an): A. total fixed costs remain constant and per-unit fixed costs
may vary A. variable cost. C. fixed increase.
B. cost relationships are valid D. relevant cost. B. total fixed costs remain constant and per-unit fixed costs
costs are incurred Bobadilla B. prime cost. D. overhead decrease.
cost. Bobadilla C. total fixed costs remain constant and per-unit fixed costs
3. Most operating decisions by management focus on a narrow remain constant.
range of activity which is called the: 8. Malayan Company’s average cost per unit is the same at all D. total fixed costs increase and per-unit fixed costs
A. relevant range of production. C. optimal levels of volume. Which of the following is true? increase. Bobadilla
level of production. Bobadilla A. MALAYAN must have only variable costs.
B. strategic level of production. D. tactical B. MALAYAN must have only fixed costs. 13. Which of the following best describes a fixed cost?
operating level of production. C. MALAYAN must have some fixed costs and some variable A. It may change in total when such change is unrelated to
costs. changes in production.
4. An item or event that has a cause-effect relationship with the D. MALAYAN’s cost structure cannot be determined from B. It may change in total when such change is related to
incurrence of a variable cost is called a this information. Bobadilla changes in production.
A. mixed cost. C. direct C. It is constant per unit of change in production.
cost. 9. Depreciation expense based on the number of units produced D. It may change in total when such change depends on
B. predictor. D. cost is classified as what type of cost? production within the relevant range. Bobadilla
driver. Bobadilla A. Out-of-pocket cost. C. Variable
cost. 14. If activity increases, which of the following statements about
5. If a predetermined overhead rate is not employed and the B. Marginal cost. D. Fixed cost behavior is true? Bobadilla
volume of production is increased over the level planned, the cost. Bobadilla A. Fixed cost per unit will increase C. Fixed
cost per unit would be expected to cost per unit will decrease
A. Decrease for fixed costs and remain unchanged for 10. When production increases, variable manufacturing costs B. Variable cost per unit will increase D. Variable
variable costs. react in which of the following ways? cost per unit will decrease
B. Remain unchanged for fixed costs and increase for Bobadill A. B. C. D.
variable costs. a
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15. An increase in the activity level within the relevant range 20. Management is considering replacing its existing sales B. Average variable cost per unit. D. Total
results in: commission compensation plan with a fixed salary plan. If the variable costs. Bobadilla
A. an increase in fixed cost per unit. change is adopted, the company’s
B. a proportionate increase in total fixed costs. A. Breakeven point must increase. C. 26. Which costs will change with an increase in activity within the
C. an unchanged fixed cost per unit. Operating relevant range?
D. a decrease in fixed cost per unit. Bobadilla leverage must increase. A. Total fixed costs and total variable cost.
B. Margin of safety must decrease. D. Profit B. Per unit fixed costs and total variable cost.
16. A cost that remains constant in total but varies on a per-unit must increase. Bobadilla C. Per unit variable cost and per unit fixed cost.
basis with changes in activity is called a(n) D. Per unit fixed cost and total fixed cost. Bobadilla
A. expired cost. C. variable 21. The indifference point is the level of volume at which a
cost. company 27. Which of the following best describes the relationship between
B. fixed cost. D. mixed A. earns the same profit under different operating scheme. fixed costs per unit and variable costs per unit, as total volume
cost. Bobadilla B. earns no profit. increases?
C. earns its target profit. A. Fixed cost per unit stays the same and variable cost per
17. Which of the following statements regarding fixed costs is D. any of the above. Bobadilla unit stays the same.
incorrect? B. Fixed cost per unit stays the same and variable cost per
A. Expressing fixed costs on a per unit basis usually is the 22. Operating leverage is the relative mix of unit increases.
best approach for decision-making process. A. revenues earned and manufacturing costs C. Fixed cost per unit increases and variable cost per unit
B. Fixed costs expressed on a per unit basis will react B. fixed and variable costs. increases.
inversely with changes in activity. C. high-volume and low-volume products. D. Fixed cost per unit decreases and variable cost per unit
C. Assumptions by accountants regarding the behavior of D. manufacturing costs and period costs. Bobadilla stays the same. Bobadilla
fixed costs rest heavily on the concept of the relevant
range. Bobadilla 23. The increased use of automation and less use of the work 28. Within the relevant range, the difference between variable
D. Fixed costs frequently represent long-term investments in force in companies has caused a trend towards an increase in costs and fixed costs is:
property, plant, and equipment. A. both variable and fixed costs. A. variable costs per unit fluctuate and fixed cost per unit
B. fixed costs and a decrease in variable costs. remains constant.
18. Lamang Company changed its cost structure by increasing C. variable costs and a decrease in fixed costs. B. variable cost per unit is constant and fixed cost per unit
fixed costs and decreasing its per-unit variable costs. The D. variable costs and no change in fixed costs. Bobadilla fluctuates.
change: C. both total variable cost and total fixed cost are constant.
A. Increases risk and increases potential profit. 24. If fixed costs decrease while variable cost per unit remains D. both total variable cost and total fixed cost
B. Increases risk and decreases potential profit. constant, the contribution margin will be fluctuate. Bobadilla
C. Decreases risk and decreases potential profit. A. Unchanged C. Higher
D. Decreases risk and increases potential profit. Bobadilla B. Lower D. 29. The learning curve in cost estimation is a good example of:
Indeterminate A. non-linear cost behavior. C. simple
19. A management’s preference for a very low degree of operating Bobadilla regression.
leverage might indicate that: B. machine-intensive production. D. a random
A. an increase in sales volume is expected. 25. Costs that increase as the volume of activity decreases within variable. Bobadilla
B. a decrease in sales volume is expected. the relevant range are
C. the firm is very unprofitable. A. Average cost per unit. C. Total 30. Cost estimation is the process of
D. the firm has very high fixed costs. Bobadilla fixed costs. A. estimating the relationship between costs and the cost
drivers that cause those costs.
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B. documenting costs in terms of direct and indirect costs. xy = na + b x y = na + B. the contribution margin method D.
C. summarizing past costs into fixed and variable bx Bobadilla regression
components. analysis Bobadilla
D. all of the above. Bobadilla 36. Weaknesses of the high-low method include all of the following
except 41. Regression analysis is better than the high-low method of cost
31. Which of the following methods is used to estimate costs? A. Only two observations are used to develop the cost estimation because regression analysis:
A. Account analysis C. function. A. is more mathematical. C. fits its
Engineering B. The high and low activity levels may not be representative. data into a mathematical equation.
method C. the method does not detect if the cost behavior is B. uses all the data points, not just two. D. takes
B. High-low method D. All of the nonlinear. more time to do. Bobadilla
above Bobadilla D. the mathematical calculations are relatively
complex. Bobadilla 42. In regression analysis, what does the variable "X" stand for in
32. For analysis purposes, the high-low method usually produces the model Y = a + bX + e?
a(n) 37. Which of the following methods estimates costs by identifying A. The amount of the dependent variable, the cost to be
A. reasonable estimate. C. costs as variable or fixed based on qualitative analysis? estimated.
overstated A. Regression analysis C. B. The regression error, which is the distance between the
estimate. Engineering regression line and the data point.
B. precise estimate. D. method C. The value for the independent variable, the cost driver for
understated B. Account analysis D. High-low the cost to be estimated; there may be one or more cost
estimate. Bobadilla method Bobadilla drivers.
D. The unit variable cost, also called the coefficient of the
33. The high-low method is criticized because it 38. Account analysis as compared to the engineering method independent variable. Bobadilla
A. is not a graphical method. A. relies on past data.
B. is a mathematical method. B. relies on present and future data. 43. Simple regression is
C. ignores much of the available data by concentrating on C. measures the work involved in the activities that go into a A. a regression equation with more than one independent
only the extreme points. product. variable.
D. does not provide reasonable estimates. Bobadilla D. a and c. Bobadilla B. a regression equation with more than one dependent
variable.
34. The high-low method may give unsatisfactory results if 39. Which of the following methods may be used to estimate costs C. a regression equation with more than one independent
A. the data points all fall on a line. C. the points by using time-and-motion studies to approximate labor time? and dependent variables.
are not representative. A. Regression analysis C. D. a regression that considers all unknown factors. Bobadilla
B. volume of activity is heavy. D. volume of Engineering
activity is light. Bobadilla method 44. Regression shows
B. Account analysis D. High-low A. the proportion of the variation of dependent variable
35. The equation(s) required for applying the least squares method Bobadilla explained by dependent variables.
method in the computation of fixed and variable production B. the proportion of the variation of independent variable
costs could be expressed as 40. The cost estimation method that gives the most explained by the independent variables.
A. xy = ax + b x2 C.  y = na + mathematically precise cost prediction equation is C. the proportion of the variation of dependent variable
b x A. the high-low method C. the explained by the independent variables.
B. y = a + bx2 D. xy = scatter-diagram method D. none of the above. Bobadilla
ax + b x2
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45. In the method of least squares, the deviation is the difference C. a determination of whether the data point is considered to C. the squared differences between actual observations and
between the be an "outlier." the line (cost function) are minimized
A. predicted and estimated costs. C. predicted D. the proportion of the variation in the dependent variable D. all the observations have an effect on the cost
and average costs. explained by the independent variable. Bobadilla function Bobadilla
B. predicted and actual costs. D. average
and actual costs. Bobadilla 51. The closeness of the relationship between the cost and the 56. The scatter diagram method of cost estimation
activity is called A. is influenced by extreme observations
46. A cost-predicting equation determined through regression A. correlation C. spurious B. requires the use of judgment
analysis B. regression analysis D. C. uses the least-squares method
A. always gives close predictions. manufacturin D. is superior to other methods in its ability to distinguish
B. will not work any better than one obtained using the high- g overhead Bobadilla between discretionary and committed fixed
low method. costs Bobadilla
C. can be used only for costs that vary with sales of 52. R-squared is a measure of D. RISK AND LEVERAGE
production. A. the spurious relationship between cost and activity
D. could be severely affected by outliers. Bobadilla B. the fixed cost component THEORIES:
C. the variable cost per unit of activity Bobadilla Risk
47. In the cost equation TC = F + VX, the X term is: D. how well the regression line accounts for the changes in Business risk
A. total fixed costs. C. unit the dependent variable Financial risk
variable cost. 12. Financial risk refers to the:
B. total variable costs. D. activity - 53. The principal advantage of the scatter-diagram method over A. risk of owning equity securities
units. Bobadilla the high-low method of cost estimation is that the scatter- B. risk faced by equity holders when debt is used
diagram method C. general business risk of the firm
48. Which of the following methods would be best for estimating A. includes cost outside the relevant range. D. possibility that interest rates will increase
costs for totally new activities? B. considers more than two points.
A. Engineering method C. C. can be used with more types of costs than the high-low Market risk
Scattergraph method. Comprehensive
method D. gives a precise mathematical fit of the points to the 5. A decrease in the debt ratio will least likely affect:
B. Account analysis method D. High-Low line. Bobadilla A. Financial risk C.
method Bobadilla Systematic or
54. The major objective of preparing a scatter-diagram is to market risk
49. The engineering method of estimating costs: A. develop an equation to predict future costs. B. Business risk D. Total risk
A. can be used to estimate costs for totally new activities. B. perform regression analysis on the results.
B. can detail each step required to perform an operation. C. determine the relevant range. Bobadilla 14. Which of the following situations is likely to have the highest
C. sometimes can be quite expensive to use. D. find the high and low points to use for the high-low method combined business and financial risk impact upon a business?
D. all of the above are true. Bobadilla of estimating costs. A. A new labor-intensive operation is funded with operating
cash flows
50. The correlation coefficient or R-squared (R2) is interpreted as: 55. Advantages of the method of least squares over the high-low B. A fully automated plant is completed, funded with retained
A. the minimum distance between the regression line and a method include all of the following except earnings
single data point. A. a statistical method is used to mathematically derive the C. A fully automated plant is completed, funded with the
B. the measure of the linear relationship between two or cost function issuance of 10-year bonds
more variables. B. only two points are used to develop the cost function D. An automated, but dated plant in the southern region is
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closed and operations are resumed in a labor-intensive risk exposure. D. Decrease the market value of the equity.
plant in Central Luzon
Financial Leverage 15. The most commonly held view of capital structure is that the
Operating Leverage 4. It refers to management strategy of financing assets with weighted average cost of capital:
2. Which of the following is a key determinant of operating borrowed capital; such an extensive use raise the entity risk A. falls first with moderate levels of leverage and then
leverage? thereby impacting on the return on common stockholders’ increases.
A. Level of debt C. equity to be above or below the rate of return on total assets. B. does not change with leverage.
Technology A. Factoring C. Mortgage. C. increases proportionately with increases in leverage.
B. Cost of debt D. Capital B. Leverage. D. D. increases with moderate amounts of leverage and then
structure Restructuring falls.

3. The degree of operating leverage for Alabang Company is 3.5,
and the degree of operating leverage for Paranaque
Corporation is 7.0. According to this information, which firm is
considered to have greater business risk?
A. Alabang Company.
B. Paranaque Corporation.
C. The degree of operating leverage is not a measure of
business risk, so it is not possible to tell which firm has the
greater business risk given the above information.
D. To determine which firm has the greater business risk, we
need to know the operating income (NOI or EBIT) of each
firm. Paranaque Corporation would have less business
risk if its operating income is at least twice that of Alabang
Company.
9. Which of the following is incorrect regarding operating
leverage?
A. Operating leverage is the degree to which costs are fixed.
B. A project's break-even point will be affected by the extent
to which costs can be reduced as sales decline.
C. If the project has mostly variable costs, it is said to have
high operating leverage.
D. High operating leverage implies that profits are more
sensitive to changes in sales.
11. The extent to which fixed costs are used in a firm’s operations
is called its:
A. financial leverage. C. financial
leverage.
B. operating leverage. D. foreign
1. The use of financial leverage by the firm has a potential impact Target capital structure
on which of the following? 10. The mix of debt, preferred stock, and common equity with
(1) The risk associated with the firm which the firm plans to raise capital is called the:
(2) The return experienced by the shareholder A. financial risk C. business
(3) The variability of net income risk
(4) The degree of operating leverage B. operating leverage D. target
(5) The degree of financial leverage capital structure
A. 1, 3, 5 C. 1, 2, 3, 5
B. 2, 3, 4, 5 D. 1, 2, 5 Optimal capital structure
13. The mix of debt and equity that minimizes the cost of capital is
16. The degree of financial leverage for April Company is 3.0, and the:
the degree of financial leverage for August Corporation is 6.2. A. optimal operating leverage C. optimal
According to this information, which firm is considered to have degree of combined leverage
greater overall (total) risk? B. target financial structure D. optimal
A. April Company. capital structure
B. August Corporation.
C. The degree of financial leverage is a measure of financial 7. When establishing their optimal capital structure, firms should
risk, so the only conclusion that can be made with the strive to:
information given is that August Corporation has greater A. minimize the weighted average cost of capital
financial risk than April Company -- we cannot tell which B. minimize the amount of debt financing used
firm has greater total risk. C. maximize the marginal cost of capital
D. To determine which firm has the greater total risk, we need D. none of the above
to know the financial breakeven point of each firm.
8. Although debt financing is usually the cheapest component of
Weighted average Cost of capital capital, it cannot be used to excess because
6. Which of the following changes would tend to decrease the A. the interest rates may change.
company cost of capital for a traditional firm? B. the firm's stock price will increase and raise the cost of
A. Decrease the proportion of equity financing. equity financing.
B. Increase the market value of the debt. C. the financial risk of the firm may increase and thus drive
C. Decrease the proportion of debt financing. up the cost of all sources of financing.
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D. none of the above.
E. QUANTITATIVE METHODS
THEORIES:
Economic Order Quantity
1. The economic order quantity is the order quantity that results
in
A. the minimum total annual inventory costs.
B. no inventory shortages.
C. the maximum total annual inventory costs.
D. minimum ordering costs.
Sensitivity analysis
2. Missile Company has correctly computed its economic order
quantity as 500 units. However, management feels it would
rather order quantities of 600 units. How should Missile’s total
annual purchase-order costs and total annual carrying cost for
an order quantity of 600 units compare to the respective
amounts for an order quantity of 500 units?
A. Higher purchase-order cost and lower carrying cost.
B. Higher purchase-order cost and higher carrying cost.
C. Lower purchase-order cost and higher carrying cost.
D. Lower purchase-order cost and lower carrying cost.
3. A decrease in inventory order costs will
A. Increase the reorder point.
B. Decrease the economic order quantity.
C. Have no effect on the economic order quantity.
D. Decrease the holding cost percentage.
4. An increase in inventory holding costs will
A. Decrease the economic order quantity.
B. Have no effect on the economic order quantity.
C. Increase the economic order quantity.
D. Decrease the number of orders issued per year.
PERT-CPM
5. Which one of the following statements best describes a warehouse. To minimize delays in loading and
difference between basic PERT and the Critical Path Method
(CPM) of network analysis? unloading trucks, an adequate number of loading docks
A. PERT uses probability distribution on the activity times
while CPM uses point estimates for the activity times. must be built. The most relevant technique to assist in
B. PERT does not allow for slack times on the activities while
CPM does.
C. PERT considers only activity cost while CPM considers determining the proper number docks is
only activity time.
D. PERT determines the least-cost path through a network
A. Cost-volume-profit analysis C. Linear
while CPM determines the least-time path through a
network.
programming
B. PERT/CPM analysis D. Queuing
6. Critical Path Method (CPM) is a technique for analyzing,
theory
planning, and scheduling large, complex projects by
STRATEGIC COST MANAGEMENT AND JIT
determining the critical path from a single time estimate
THEORIES:
for each event in a project. The critical path:
1. The major functions of management are
A. strategic management and long-range planning.
A. Is the shortest path from the first event to the last event
B. planning and decision making.
for a project.
C. identifying threats and opportunities for the firm.
B. Is an activity within the path that requires the most
D. all of the above.
number of time.
C. Has completion that reflects the earliest time to complete
2. The three major types of competitive strategy include
the project.
A. cost leadership, differentiation, and productivity.
D. Is the maximum amount of time an activity may be
B. cost leadership, focus, and productivity.
delayed without delaying the total project beyond its
C. differentiation, focus, and productivity.
target completion time.
D. cost leadership, differentiation, and focus.
3. Sustainability means the balancing of
Queuing Theory A. short term and long term goals in economic performance.
B. short term and long term goals in social aspects.
C. short term and long term goals in environmental aspects.
7. A company is designing a new regional distribution D. all of the above.
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4. Simultaneous engineering can be used to
A. reduce both product and process complexity.
B. integrate activity-based costing with value chain analysis.
C. reduce the time-to-market of new products through
elimination of batch-level activities.
D. reduce manufacturing cycle efficiency by reducing
process waste.
5. Engaging in which of the following will result in radical
changes being made to an organization's processes?
A. Continuous improvement C.
Reengineering
B. Benchmarking D. Mass
customization
6. In the contemporary business environment, cost management
focus is on
A. financial reporting and cost analysis.
B. common emphasis on standardization and standard
costs.
C. development and implementation of the business
strategy.
D. a and c.
7. Which focuses on process improvement, process innovation,
or business reengineering?
A.. functional-based responsibility accounting
B. activity-based responsibility accounting
C. strategic-based responsibility accounting
D. none of the above
8. The optimal level in the optimal cost management system is
when
A. measurement costs are greater than error costs
B. measurement costs are less than error costs
C. the total of measurement costs and error costs are
minimized
D. both b and c
9. A repetitive action fulfilling a business function and increasing
the worth of the product and the price that the customer is 15. A key concept of the JIT inventory system is:
willing to pay for the product is referred to as a: A. the raw materials, work in process, and finished goods
A. non-value added activity inventories of manufacturing companies act as buffers
B. value-added activity so that operations can proceed smoothly even if
C. business value-added activity suppliers are late with deliveries or a department is
D. activity analysis unable to operate for a brief period due to breakdowns
or other reasons.
10. The actual time that a product must be delayed while waiting B. the use of many suppliers so as to ensure rapid delivery
to be processed is called: of materials for production.
A. service time C. transfer C. the maintenance of a stock of raw materials so that
time defective materials can be replaced quickly so as to
B. inspection time D. idle time maintain a high rate of productivity.
D. inventories are costly to carry and can be kept to
11. The resource utilized by a given product divided by the total minimum levels or eliminated completely with careful
amount of the resource available is called the planning.
A. activity driver C. cost
16. The just in time (JIT) concept applies to which of the
object
following:
B. consumption ratio D. sustaining
I. The acquisition of raw materials.
activity
II. The assembly of manufactured parts in products.
III. The shipment of finished products to customers.
12. The primary objective of just-in-time processing is to
A. I. C. I, II, III.
A. accumulate overhead in activity cost pools
B. I, III. D. II, III.
B. eliminate or reduce all manufacturing inventories
C. identify relevant activity cost drivers
17. The flow of goods through a JIT system is based on:
D. none of them
A. a workstation efficiently completing its processing of a
batch of units so that the units can proceed forward to
13. The benefits of a successful Just-In-Time system include all
the next workstation before the next workstation is
of the following except:
ready to receive them.
A. funds tied up in inventories are released for use
B. processing goods in large batch sizes rather than less
elsewhere.
economical small batches.
B. inventory buffers are increased.
C. maintaining a stockpile of raw materials in anticipation of
C. throughput time is reduced.
materials shortages.
D. defect rates are decreased.
D. producing to meet customer demand with no buildup of
inventory at any point in the production process.
14. Which of the following is not a benefit of just-in-time
processing?
18. Under just-in-time processing
A. Control of significant inventory balances.
A. raw materials are received just in time for use in
B. Enhanced product quality.
production
C. Reduction of rework costs.
B. subassembly parts are completed just in time for use in
D. Production cost savings.
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assembling finished goods 23. Many companies have significantly lowered inventory levels traceable
C. finished goods are completed just in time to be sold and costs using B. depreciated D. directly
D. all of the above A. activity-based costing. traceable to the product
B. an enterprise resource planning system.
19. A successful JIT system is based upon which of the C. the just-in-time method. 29. When JIT manufacturing is used, which of the following costs
following concepts? D. a total quality management system. is considered an indirect product cost?
A. The company must rely upon a large number of A. the cost to set up cell equipment C. property
suppliers to ensure frequent deliveries of small lots. 24. JIT manufacturing emphasizes taxes on the plant
B. The company should always choose those suppliers A. large amounts of inventory on hand so that the company B. the cost of maintenance on equipment D. salary of
offering the lowest prices. does not run out of it the cell supervisor
C. The company should avoid long-term contracts with B. small amounts of inventory on hand resulting in lower
suppliers so as to exert pressure on suppliers to make quality goods because production is rushed 30. When JIT manufacturing is used, which of the following costs
prompt and frequent deliveries. C. reducing investment in inventory and increasing the is considered a direct product cost?
D. A small number of suppliers make frequent deliveries of emphasis on quality A. insurance on the plant and equipment C. janitors’
specific quantities thus avoiding the buildup of large D. both b and c salary
inventories of materials on hand. B. repair parts for the machinery D. salary of
25. A just-in-time manufacturer is more likely than a conventional the plant supervisor
20. A company adopting the JIT approach would: manufacturer to
A. produce large batches of products so as to recoup the A. receive more frequent deliveries of materials. 31. Problems encountered with using traditional product costing
costs associated with setups. B. spend less money on advertising. for JIT manufacturing usually stem from
B. attempt to reduce setup time so as to economically C. need workers with fewer skills. A. assigning direct materials costs to units of product.
produce in smaller batches. D. all of the above. B. assigning direct labor costs to units of product.
C. adapt a functional plant layout so as to enhance C. assigning overhead costs to units of product.
production flexibility. 26. Just-in-time manufacturing D. all of the above.
D. require workers to become highly specialized in A. is a demand pull rather than a push through the system
operating a single machine. B. allows the firm to focus on quality and productivity 32. A characteristic of the just-in-time manufacturing environment
simultaneously is
21. Conventional and just-in-time manufacturers differ in that the C. increases product cost accuracy by increasing a firm’s A. frequent deliveries of materials
conventional manufacturer is likely to ability to track costs to products B. manufacturing cells
A. be a new entrant into its industry. D. all of the above C. little or no inventory of finished product
B. need less storage space than its JIT competitors. D. all of the above
C. give less credibility to management accounting reports. 27. If JIT manufacturing is used, maintenance of the production
D. have a longer production cycle than its JIT competitors. equipment would be classified as a 33. Just-in-time relates to
A. unit-level activity C. product- A. people getting to their job location just in time to begin their
22. In JIT manufacturing, each operation produces level activity work.
A. only what is necessary for the succeeding operations B. cell-level activity D. facility- B. machinery placed in service just in time to begin
B. all that it can to offset fixed costs level activity production.
C. a fixed percentage in excess of orders to ensure C. materials received from suppliers just in time for
adequate quality stock 28. Under JIT manufacturing, many overhead costs formerly production needs.
D. all that it can in order to build inventories classified as indirect costs are now D. all of the above.
A. eliminated C. no longer
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34. Which of the following is a value-added activity?
A. Engineering design. C. Inventory 41. Setting balanced objectives, setting target values, and aligning 47. A just-in-time manufacturing process should have substantially
storage. rewards are: less of which of the following than a traditional manufacturing
B. Machinery repair. D. A. necessary steps in creating a balanced scorecard process?
Inspections. B. important aspects of the capital budgeting process A. B. C. D.
C. the heart of process innovation Idle Time Yes Yes Yes No
35. Which of the following is a nonvalue-added activity? D. the ingredients for economic forecasting Transfer Yes No Yes Yes
A. Engineering design. C. Time
Inspection. 42. Delivery performance declines by: Value-added Yes No No No
B. Machining. D. A. increasing cycle time C. increasing Time
Packaging. velocity Cycle Time Yes Yes Yes No
B. decreasing cycle time D.
36. A nonvalue-added activity in a service enterprise is decreasing 48. Manufacturing cycle efficiency should be increased by
A. taking appointments. C. turnover employing which of the following techniques?
advertising. A. B. C. D.
B. traveling. D. all of 43. Just-in-time processing
Just-in-Time Yes Yes No Yes
them. A. is based on a just-in-case philosophy.
Inventory
B. results in a push approach.
Flexible Yes Yes No No
37. Value-added activities C. minimizes inventory storage and waiting time.
Manufacturing
A. should be reduced or eliminated. D. all of these.
Systems
B. involve resource usage that customers are willing to pay
Batch Manufacturing Yes No No Yes
for. 44. An element of just-in-time processing is
C. add cost to a product without affecting the selling price. A. dependable suppliers who are willing to deliver on short
D. cannot be differentiated from nonvalue-added activities. notice. Question Nos. 49 and 50 are based on the following:
B. a multi-skilled workforce. Small Computer Company has the following personnel:
38. The company's goal for defective units as a percentage of total C. a total quality control system. I. Two inspectors: inspect the final computers
units produced should be: D. all of them. II. Four fabricators: make the computer cases
A. 1.50% C. 0.05% III. Two computer programmers: run all of the
B. 0.00% D. 0.53% 45. Which account is used in just-in-time processing? bookkeeping for the accounting records
A. Raw materials inventory C. IV. Seven assemblers: manufacture the mother boards
39. All of the following are examples of non-value-added activities Merchandise V. One owner: writes the paychecks
except inventory
A. ordering C. receiving B. Work in process inventory D. Raw and 49. Which groups of employees are value-added workers?
B. assembling D. In-Process inventory A. I and II C. II and III
inspections B. III and V D. II and IV
46. Under just-in-time processing, all of the following are received
40. Sequencing if-then statements is a simple method of: or completed “just in time” except 50. Which groups of employees are non-value-added workers?
A. testing a strategy C. creating A. finished goods. C. supplies. A. I, II, and III C. I, III and V
lead measures B. raw materials. D. B. III, IV, and V D. I, II, and IV
B. prioritizing objectives D. evaluating subassembly
performance parts.