[Chapter 7] Strategic Cost Management Flashcards by Stussy Aubrey

A competitive advantage has been established when

A. customers see the variation as important and the value added to the customer exceeds the cost of providing differentiation.
B. a high-cost strategy increases customer value by minimizing customer sacrifices.
C. a low-profit item is dropped from the product line.
D. both a and b.

customers see the variation as important and the value added to the customer exceeds the cost of providing differentiation.

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_______________ involves CHOOSINGamong alternative strategies with the goal of selecting a strategy or strategies that provides a company with reasonable assurance of long-term growth and survival.

A. Strategic decision making
B. Strategic cost management
C. Competitive advantage
D. Customer value

Strategic decision making

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______________ is creating better customer value for the same or lower cost than competitors or creating
equivalent value for lower cost than offered by competitors.

A. Strategic decision making
B. Strategic cost management
C. Competitive advantage
D. Total product

Competitive advantage

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_______________ is the difference between what a customer receives and what the customer gives up.

A. Strategic decision making
B. Strategic cost management
C. Competitive advantage
D. Customer value

Customer value

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The total product is the complete range of _______________ that a customer receives from a purchased
product.

A. tangible benefits
B. intangible benefits
C. activity
D. both a and b

both a and b

A. tangible benefits
B. intangible benefits

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_______________ is the use of cost data to develop and identify superior strategies that will produce a sustainable competitive advantage.

A. Strategic decision making
B. Strategic cost management
C. Competitive advantage
D. Customer value

Strategic cost management

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When a computer company maintains the internal storage space for a lower price, it is following a

A. focusing strategy.
B. cost leadership strategy.
C. differentiation strategy.
D. strategic positioning strategy.

cost leadership strategy.

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When a computer company increases the internal storage space for the same price, it is following a

A. focusing strategy.
B. low-cost strategy.
C. differentiation strategy.
D. strategic positioning strategy.

differentiation strategy.

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When a computer company targets customers in the South, it is following a

A. focusing strategy.
B. low-cost strategy.
C. differentiation strategy.
D. strategic allocation strategy.

focusing strategy.

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When a computer company selects a mix of strategies in order to create sustainable competitive advantage, it is following a

A. focusing strategy.
B. low-cost strategy.
C. differentiation strategy.
D. strategic positioning strategy.

strategic positioning strategy.

Strategic positioning is the process of selecting the optimal mix of the three general strategic approaches.

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The industrial value-chain analysis

A. recognizes only complex linkages within the firm.
B. is not compatible with differentiation strategies.
C. determines a linked set of value-creating activities.
D. requires a firm to operate across the entire value chain.

determines a linked set of value-creating activities.

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_______________ describe the relationships of a firm’s value chain activities that are performed with its suppliers and customers.

A. External linkages
B. Internal linkages
C. Industrial value chain
D. Both a and b

External linkages

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_______________ are relationships among activities that are performed with a firm’s portion of the value chain.

A. External linkages
B. Internal linkages
C. Industrial value chain
D. Both a and b

Internal linkages

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When a computer manufacturing company addresses supplier production problems, it is focusing on

A. external linkages.
B. internal linkages.
C. a differentiation strategy.
D. a cost leadership strategy.

external linkages.

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_______________ are structural and executional factors that determine the long-term cost structure of an organization.

A. Organizational activities
B. Organizational cost drivers
C. Operational activities
D. Operational cost drivers

Organizational cost drivers.

Cost drivers are factors

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Structural and executional activities are types of

A. organizational activities.
B. operating activities.
C. JIT.
D. both a and b.

organizational activities.

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Building plants, management structuring, and grouping employees are examples of

A. executional activities.
B. structural activities.
C. operational activities.
D. both a and b.

structural activities.

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Plant layout, quality management systems, and providing capacity are examples of

A. executional activities.
B. structural activities.
C. operational activities.
D. both a and b.

executional activities.

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The operational activity of moving inventory is classified as a

A. unit-level activity.
B. batch-level activity.
C. product-level activity.
D. facility-level activity.

batch-level activity.

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_______________ are those factors that drive the cost of day-to-day activities performed as a result of the structure and processes selected by the organization.

A. Organizational activities
B. Organizational cost drivers
C. Operational activities
D. Operational cost drivers

Operational cost drivers

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The operational activity of setting up equipment is classified as a

A. unit-level activity.
B. batch-level activity.
C. product-level activity.
D. facility-level activity.

batch-level activity.

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The operational activity of assembling parts is an example of a

A. unit-level activity.
B. batch-level activity.
C. product-level activity.
D. facility-level activity.

unit-level activity.

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The operational activity of inspecting is classified as a

A. unit-level activity.
B. batch-level activity.
C. product-level activity.
D. facility-level activity.

batch-level activity.

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The operational activity of redesigning products is classified as a

A. unit-level activity.
B. batch-level activity.
C. product-level activity.
D. facility-level activity.

product-level activity.

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Activities required to design, develop, produce, market, distribute, and service a product are known as A. whole life activities. B. value-chain activities. C. target activities. D. overhead.

value-chain activities.

The first link of the internal value chain is A. design. B. develop. C. market. D. distribute.

design.

The last link of the internal value chain is A. design. B. service. C. market. D. distribute.

service.

Analyzing how costs and other financial factors vary as different bundles of activities are considered to strengthen a firm's strategic position is the process of A. exploiting linkages. B. design. C. cost driver analysis. D. distribution.

exploiting linkages.

The industry value chain includes A. shareholder value chain activities as well as firm activities. B. buyer and supplier value chain activities as well as firm activities. C. only firm activities. D. only firm production activities.

buyer and supplier value chain activities as well as firm activities.

Which of the following are true about total quality control? A. Total quality control is an approach to differentiate and reduce overall quality costs. B. Total quality control demands production of defect-free products. C. Total quality control links suppliers closely with the firm. D. All of these statements are true about total quality control.

All of these statements are true about total quality control. A. Total quality control is an approach to differentiate and reduce overall quality costs. B. Total quality control demands production of defect-free products. C. Total quality control links suppliers closely with the firm.

In activity-based costing, supplier costs A. must be narrower, including only the purchase price. B. are allocated to products arbitrarily. C. include costs of quality, reliability and timeliness and are assigned to products on a causal basis. D. all of these statements are true.

include costs of quality, reliability and timeliness and are assigned to products on a causal basis.

Identifying profitable and unprofitable customers is an example of exploiting A. supplier linkages. B. the product life cycle. C. consumable life. D. customer linkages.

customer linkages.

_______________ is the length of time that a product serves the needs of customers. A. Product life cycle B. Revenue producing life C. Consumable life D. Introduction stage

Consumable life

The _______________ is when the product loses market acceptance. A. introduction stage B. growth stage C. maturity stage D. decline stage

decline stage

The _______________ is a period of time when sales increase at a decreasing rate. A. introduction stage B. growth stage C. maturity stage D. decline stage

maturity stage

The _______________ is characterized by preproduction and startup activities. A. introduction stage B. growth stage C. maturity stage D. decline stage

introduction stage

The _______________ is a period of time when sales increase at an increasing rate. A. introduction stage B. growth stage C. maturity stage D. decline stage

growth stage

_______________ describes the general sales pattern of a product as it passes through the introduction, growth, maturity, and decline stages. A. Accounting viewpoint B. Customer viewpoint C. Production viewpoint D. Marketing viewpoint

Marketing viewpoint

_______________ defines stages of the life cycle by changes in the type of activities performed. A. Accounting viewpoint B. Customer viewpoint C. Production viewpoint D. Marketing viewpoint

Production viewpoint

Which of the following is NOT a stage of the marketing viewpoint of the product life cycle? A. decline B. growth C. maturity D. production

production. The MARKETING viewpoint is comprised of the following stages: -introduction -growth -maturity -decline.

Which stage in the marketing viewpoint is characterized by preproduction and startup activities? A. decline B. introduction C. growth D. maturity

introduction

Which of the following is NOT a stage of the consumable life-cycle viewpoint? A. disposal B. maintaining C. logistics D. purchasing

logistics. The CONSUMABLE life-cycle view point is made up of four stages: -purchasing -operating -maintaining -disposal Logistics is part of the PRODUCTION viewpoint NOT the consumable life-cycle viewpoint.

Life-cycle cost management consists of A. actions taken to enable a product to be designed, developed, produced, marketed, distributed, operated, maintained, serviced, and disposed of in order to maximize profits. B. actions to extend the life of a product through design, development, production, and maintenance. C. actions that focus on minimizing the cost of developing, designing, producing, distributing, operating, servicing, and disposal of a product. D. actions taken to design, develop, test, market, distribute, maintain, service, and dispose of a product to maximize revenues.

actions taken to enable a product to be designed, developed, produced, marketed, distributed, operated, maintained, serviced, and disposed of in order to maximize profits.

Which of the following is NOT a stage of the production life-cycle viewpoint? A. design B. introduction C. research D. testing

introduction. The PRODUCTION viewpoint is comprised of the folowing stages: -research -development -production -logistics support.

Which of the following is NOT a stage of the production life-cycle viewpoint? A. planning B. production C. purchasing D. logistics

purchasing Purchasing is not a stage of the production life-cycle viewpoint. PRODUCTION viewpoint includes: -reasearch and development activities -production activites -logistical activities.

Which of the life-cycle viewpoints is the revenue-oriented viewpoint? A. consumable life-cycle viewpoint B. production viewpoint C. marketing viewpoint D. planning viewpoint

marketing viewpoint

Which of the life-cycle viewpoints is the cost-oriented viewpoint? A. product life-cycle B. consumable life-cycle C. production life-cycle D. planning life-cycle

production life-cycle

Which viewpoint of the product life-cycle is customer-value oriented? A. production life-cycle B. marketing life-cycle C. consumable life-cycle D. planning life-cycle

consumable life-cycle. The CONSUMABLE life-cycle is comprised of the following stages: -production -operating -maintaining -disposal.

Which stage of the marketing life-cycle has slow sales growth with peak sales? A. introduction B. growth C. maturity D. decline

maturity

At which stage of the consumable life-cycle is price sensitivity low? A. introduction B. growth C. maturity D. decline

introduction

Life-cycle cost management emphasizes A. cost control. B. cost reduction. C. normal costing. D. process costing.

cost reduction.

Life-cycle cost management emphasizes A. cost control. B. cost reduction. C. normal costing. D. process costing.

cost reduction.

According to the authors, 90 percent or more of a product's life-cycle costs are determined during A. growth stage. B. development stage. C. decline stage. D. maturity stage

development stage.

Information for life-cycle cost management is supported by a(n) A. functional-based costing system. B. activity-based costing system. C. normal costing system. D. all of these.

activity-based costing system.

_______________ is the difference between the sales price needed to capture a predetermined market share and the desired profit per unit. A. Gross profit B. Target cost C. Target price D. Both a and b

Target cost

____________ manufacturing reduces inventory levels because production is geared to demand. A. Traditional B. Conventional C. JIT D. Both a and b

JIT

Which of the following is a trait of a JIT system? A. push-through system B. significant inventory C. buyers' market D. large supplier base

buyers' market A JIT system involves a buyers' market, while the traditional system involves a sellers' market.

JIT manufacturing differs from traditional manufacturing in all of the following ways EXCEPT A. the treatment of direct materials and direct labor for product costing. B. the level of inventories. C. the approach to quality control. D. the physical layout of the manufacturing process.

the treatment of direct materials and direct labor for product costing.

Traditional manufacturing uses which of the following philosophies of quality control? A. zero defects B. total quality control C. acceptable quality level D. both a and b

acceptable quality level

Which of the following is a trait of a traditional manufacturing system? A. push-through system B. value-chain focus C. total quality control D. high employee involvement

push-through system

Which of the following is NOT a trait of a traditional manufacturing system? A. push-through system B. short-term supplier contracts C. value-added focus D. total quality control

total quality control. The following are traits of a traditional manufacturing system: push-through system, short-term supplier contracts, and value-added focus. On the other hand, JIT focuses on a pull-through system, long-term supplier contracts, and value-chain focus.

The goal of total quality control is A. to have less defective material than good material. B. to permit defects as long as they do not exceed a certain level. C. to have zero defects. D. both b and c.

to have zero defects.

The ___________________ approach to quality control strives for zero defects. A. acceptable quality level B. total quality control C. traditional D. both a and c

total quality control

___________________ is the traditional approach of permitting defects to occur as long as they do NOT exceed a certain level. A. Acceptable quality level B. Zero defects C. Total quality control D. Both a and c

Acceptable quality level

Which of the following is NOT a trait of a JIT system? A. acceptable quality level B. long-term contracts C. multi-skilled labor D. high employee involvement

acceptable quality level

JIT manufacturing uses which of the following philosophies of quality control? A. just-in-case (JIC) B. acceptable quality level (AQL) C. total quality control (TQC) D. both a and c

total quality control (TQC)

If traditional manufacturing is used, which of the following is considered direct costs? A. setup costs B. direct labor C. maintenance of machinery D. inspection costs

direct labor

In a JIT manufacturing environment, product-costing information is used mainly for all of the following EXCEPT A. product costing of inventory for financial reporting purposes. B. pricing decisions. C. product profitability analysis. D. make-or-buy decisions.

product costing of inventory for financial reporting purposes.

Which of the following manufacturing costs is assigned to products in a traditional environment using direct tracing? A. supervision B. materials C. repairs and maintenance D. energy

materials

Which of the following manufacturing costs is assigned to products in a traditional and JIT environment using direct tracing? A. direct materials B. direct labor C. operating supplies D. both a and b

both a and b A. direct materials B. direct labor

If JIT manufacturing is used and each manufacturing cell produces a single product, all of the following are considered direct product costs EXCEPT A. overtime wages for cell workers. B. the salary of the plant supervisor. C. the salary of the cell supervisor. D. all of these.

the salary of the plant supervisor.

If JIT manufacturing is used and each manufacturing cell produces a single product, which of the following is considered a direct product cost? A. inspection costs B. materials C. setup costs D. all of these

all of these A. inspection costs B. materials C. setup costs

Which of the following manufacturing costs is assigned to products in a traditional and JIT environment using allocation? A. insurance and taxes B. direct labor C. supervision (department) D. custodial services

insurance and taxes

Which of the following manufacturing costs is assigned to products in JIT environment using direct tracing? A. material handling B. repairs and maintenance C. custodial services D. all of these

all of these A. material handling B. repairs and maintenance C. custodial services In a JIT environment, many overhead costs assigned to products using either driver tracing or allocation are now directly traceable to products.

Which of the following manufacturing costs is assigned to products in a traditional environment using driver tracing? A. direct labor B. direct materials C. energy D. indirect labor

energy

Which of the following manufacturing costs is assigned to products in a JIT environment using allocation? A. cafeteria services B. equipment depreciation C. insurance and taxes D. operating supplies

insurance and taxes

Strategic cost management is the identification of strategies to develop a competitive advantage.

TRUE

Strategic decision making is important to achieve good inventory control

FALSE. Strategic decision making is concerned with long-term growth and survival.

The objective of strategic cost management is to reduce costs while strengthening strategic positions.

TRUE

There are two general cost management strategies: cost leadership and focusing.

FALSE. There are three general cost management strategies: cost leadership, differentiation, and focusing. A combination of these three general cost management strategies is the strategic positioning.

Value-chain analysis is identifying and exploiting internal and external linkages to achieve strong strategic positions.

TRUE

Exploiting internal linkages involves the assessment of management reliability.

FALSE

Exploiting supplier linkages is the exploitation of a firm’s internal activities.

FALSE

Exploiting customer linkages is not important since customers do not affect profitability.

FALSE

Strategic cost management emphasizes the importance of an external focus and the need to recognize and exploit internal and external linkages.

TRUE

Life-cycle cost management involves two types of life-cycle viewpoints: the marketing viewpoint and the production viewpoint.

TRUE

Target costing provides a method for reducing costs by exploiting customer and supplier linkages.

TRUE

Life-cycle costs are all costs associated with a product during the production viewpoint.

FALSE

JIT manufacturing eliminates waste by producing products only when, and in the quantities needed.

TRUE

In JIT purchasing, materials are usually at warehouse long before they are needed.

FALSE

A major difference between traditional and JIT environments is the degree of responsibility given to workers in the organization.

TRUE

Acceptable quality level (AQL) allows defects to occur within predetermined parameters.

TRUE

In a JIT environment, many overhead costs are directly traceable to products.

TRUE

The structure for a JIT environment is a vastly complicated process costing system.

FALSE

Accounting is simplified in the JIT system by the use of backflush costing.

TRUE

In a job-order setting using JIT, repetitive business is separated from unique orders.

TRUE

Choosing alternative strategies that provide long-term growth involves ________________ decision making.

STRATEGIC

The creation of customer value for same or lower cost than competitors is called ______________ advantage.

COMPETITIVE

The difference between what the customer receives and gives up is the _______________.

CUSTOMER VALUE

______________________ analysis relies on identifying and exploiting internal and external linkages.

VALUE CHAIN

The assignments to suppliers and customers that provide the best cost information needed are called ________________ assignments.

ACTIVITY-BASED

The length of time a product serves the needs of customers is called the __________________ life.

CONSUMABLE

The stage during which a product loses market acceptance is called the _______________stage.

DECLINE

The manufacturing system focused on reducing inventory levels and waste is called _________________ manufacturing

JUST-IN-TIME (JIT)

In traditional and JIT environments using direct tracing, the manufacturing costs assigned to products are the direct materials costs and the ________________ costs.

DIRECT LABOR