41 eliminating non value added activities by reducing their cost drivers is referred 4302418



Eliminating non-value added activities by reducing their cost drivers, is referred to as,

______ A)

value engineering. B)

value-added activity base pricing. C)

cost incurrence costing. D)

value-added pricing. E)

price engineering.


When are a product's direct materials cost most likely to be locked in?

______ A)

when the bill for the materials is paid B)

when materials are received from the supplier C)

when the materials are used in production D)

when the product is designed E)

when purchasing commits to buying the materials


In a graph with cumulative costs per unit as the Y-axis, with two curves, one being the cumulative costs locked-in, and a second curve showing the cumulative costs per unit incurred in different business functions, which of the following is TRUE?

______ A)

Locked-in costs rise much slower initially than the incurred cost, but joining the incurred cost line at the completion of the value chain functions. B)

Both curves deal with the same cumulative cost per unit. C)

No differences unless the product is manufactured inefficiently. D)

The two cost lines will run parallel . E)

The graph will show the divergence between the amount of locked-in costs and costs incurred, by the end of the production cycle.


Which of the following is TRUE concerning value-engineering?

______ A)

After a product's design has been value-engineered, costs are difficult to influence. B)

Value-engineering activities reduce both value-added and non-value-added costs. C)

The goal of value-engineering is to eliminate locked-in costs. D)

When and how costs are locked in are more important than when and how costs are incurred. E)

Value-engineering does not work when dealing with direct costs.

Use the information below to answer the following question(s).


Pershing Company budgeted the following costs for the production of its one and only product, blades, for the next fiscal year:


Direct materials$187,500

Direct labour130,000

Factory overhead:



Selling and administrative:



Total costs$705,000


Pershing has a target profit of $150,000.


What is the target profit percentage as a percentage of total manufacturing costs ?

______ A)

185 % B)

51 % C)

245 % D)

125 % E)



If total invested capital is $1,000,000, what is the company's target rate of return on investment?

______ A)

53 percent B)

140 percent C)

122 percent D)

15 percent E)

69 percent


The target profit percentage for setting prices as a percentage of total variable costs would be:

______ A)

228 percent. B)

328 percent. C)

36 percent. D)

65 percent. E)

.15 percent


The target profit percentage for setting prices as a percentage of total costs would be:

______ A)

21 percent. B)

15 percent. C)

228 percent. D)

328 percent. E)

36 percent.


Which of the following describes the cost-plus pricing approach?

______ A)

Variable cost + Fixed cost + Contribution margin = Prospective selling price B)

Cost base + Gross margin = Prospective selling price C)

Cost base + Markup component = Prospective selling price D)

Cost base plus markup ÷ 100% = selling profit percentage E)

Prospective selling price – Cost base = Markup component


The current selling price for the Pluto, a mid-sized car, is $19,000. For next year it is anticipated that Pluto will have a $12,000 cost base. What is its prospective selling price, using cost-plus pricing, if the company desires a markup component of 15 percent?

______ A)

$31,000 B)

$19,000 C)

$10,200 D)

$13,800 E)




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