Which of the following is false regarding activity-based costing (ABC)? a. Companies that have a high potential for cost distortions are more likely to benefit from ABC b. Opportunities for continuous improvement are rarely revealed by using ABC. c. The cost of implementing ABC may outweigh the benefits d. Increased accuracy with budgeting resources is often realized

Which of the following is false regarding activity-based costing (ABC)? a. Companies that have a high potential for cost distortions are more likely to benefit from ABC b. Opportunities for continuous improvement are rarely revealed by using ABC. c. The cost of implementing ABC may outweigh the benefits d. Increased accuracy with budgeting resources is often realized

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter1: Accounting As A Tool For Managers

Section: Chapter Questions

Problem 23MC: Which of the following is not true regarding continuous improvement? It applies to both service and...

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Continuous improvement is the governing principle of a lean accounting system. Following are several performance measures. Some of these measures would be associated with a traditional standard-costing accounting system, and some would be associated with a lean accounting system. a. Materials price variances b. Cycle time c. Comparison of actual product costs with target costs d. Materials quantity or efficiency variances e. Comparison of actual product costs over time (trend reports) f. Comparison of actual overhead costs, item by item, with the corresponding budgeted costs g. Comparison of product costs with competitors product costs h. Percentage of on-time deliveries i. First-time through j. Reports of value- and non-value-added costs k. Labor efficiency variances l. Days of inventory m. Downtime n. Manufacturing cycle efficiency (MCE) o. Unused (available) capacity variance p. Labor rate variance q. Using a sister plants best practices as a performance standard Required: 1. Classify each measure as lean or traditional (standard costing). If traditional, discuss the measures limitations for a lean environment. If it is a lean measure, describe how the measure supports the objectives of lean manufacturing. 2. Classify the measures into operational (nonfinancial) and financial categories. Explain why operational measures are better for control at the shop level (production floor) than financial measures. Should any financial measures be used at the operational level? 3. Suggest some additional measures that you would like to see added to the list that would be supportive of lean objectives.
Which of the following is a reason a company would implement activity-based costing? A. The cost of record keeping is high. B. The additional data obtained through traditional allocation are not worth the cost. C. They want to improve the data on which decisions are made. D. A company only has one cost driver.
Which statement is correct? A. Activity-based cost systems are less costly than traditional cost systems. B. Activity-based cost systems are easier to implement than traditional cost systems. C. Activity-based cost systems are more accurate than traditional cost systems. D. Activity-based cost systems provide the same data as traditional cost systems.
Which of the following is not true regarding continuous improvement? It applies to both service and manufacturing companies. It is used to reduce performance costs. It rejects the idea of good enough. It can be applied only to improve processes and products but not services and practices.
Which of the following is the most likely explanation for an unfavorable materials usage variance and a favorable labor wage variance? a. The new labor contract increased wages. b. Higher quality materials were purchased, resulting in less waste. c. The company experience labor turnover and newer, less experienced workers were hired. d. A new supplier offered a lower price for materials.
Why does a company use a standard costing system? A. to identify variances from actual cost that assist them in maintaining profits B. to identify nonperformers in the workplace C. to identify what vendors are unreliable D. to identify defective materials
Discuss how financial data prepared on the basis of variable costing can assist management in the development of short-run pricing policies.
Which of the following is a possible cause of an unfavorable labor rate variance? A. hiring too many workers B. hiring higher-quality workers at a higher wage C. making too many units D. purchasing too much material
Explain how a plantwide overhead rate, using a unit-based driver, can produce distorted product costs. In your answer, identify two major factors that impair the ability of plantwide rates to assign cost accurately.
In designing a bonus structure to reward your production managers, one of the options is to reward the managers based on reaching annual income targets. What are the differences between a reward system for a company that uses absorption costing and one for a company that uses variable costing?
The following sentences relate to achieving the financial goal of cost minimization. Which of the following statements is FALSE? a. Prioritizing which costs to incur relates to the operating decisions of the firm only.b. Savings is the end product of this financial goal.c. There is a need to determine cost.d. Controling costs involves addressing unfavorable cost variances.
Which of the following is NOT a problem associated with standard cost accounting? a. Standard costing motivates management to produce large batches of products and build inventory. b. Applying standard costing leads to product cost distortions in a lean environment. c. Standard costing data are associated with excessive time lags that reduce its usefulness. d. The financial orientation of standard costing may promote bad decisions. e. All of the above are problems with standard costing.