Posted: August 23rd, 2016

What is the new cost method?

7. _______________ focuses on non-value-added activities.
a. Activity sharing
b. Activity elimination
c. Activity selection
d. Activity reduction
8. Value-added costs equal standard quantity times
a. non-value-added costs.
b. currently attainable standards.
c. standard price.
d. actual price.
9. Each unit of product requires 16 pounds of material. Due to scrap and rework, each unit has been averaging 18 pounds of material. The material costs $6 per pound.
If the company wants to reduce non-value-added costs by 25 percent next year, the currently attainable standard for material would be
a. 16.00 pounds.
b. 16.80 pounds.
c. 17.50 pounds.
d. 18.00 pounds.
10. Sasha Cat Company sells one of its products for $100 each. Sales volume averages 750 units per year. Recently, its main competitor reduced the price of its product to $80. Sasha Cat Company expects sales to drop dramatically unless it matches the competitor’s price. In addition, the current profit per unit must be maintained. Information about the product (for production of 750) is as follows:
SQ AQ Actual Cost
Materials (pounds) 2,000 2,500 $25,000
Labor (hours) 450 500 12,500
Setups (hours) 0 600 7,500
Material handling (moves) 0 300 3,750
Warranties (number repaired) 0 200 15,000
The non-value-added cost per unit is
a. $41.67.
b. $43.33.
c. $40.47.
d. $38.33.

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