1 Examples of value-added activities include all of the following except:
a Product design.
b Material movement.
c Assembly activities.
d Establish an effective distribution network.

2 Of the following components of total quality cost, which is most damaging to a company attempting to achieve a reputation as a world-class manufacturer?
a Prevention costs.
b Appraisal costs.
c Internal failure costs.
d External failure costs

3 Of the following processes, which is chiefly concerned with products and services that have not yet been developed?
a Just-in-time manufacturing.
b Activity-based management.
c Target costing.
d Total quality management.

4 For a furniture manufacturer, which of the following activities could not be eliminated without changing the customer's perception of the product's desirability?
a Inspection of incoming shipments of wood and fabrics.
b Movement of work-in-process from one work station to another.
c Set-up of machinery to produce different pieces of furniture.
d Reducing the product's distribution network.

5 The cost borne by the customer of disposing of nickel-cadmium batteries is a component of the batteries':
a Life-cycle cost.
b Overhead cost.
c Cost of quality.
d Direct production cost.

2. Listed below are eight technical accounting terms introduced or emphasized in this chapter:

Activity-based management Life-cycle costing
Value-added activity Non-value-added activity
Target costing Total quality management
Just-in-time manufacturing system Cycle time

Each of the following statements may (or may not) describe one of these technical terms. In the space provided below each statement, indicate the accounting term described, or answer "None" if the statement does not correctly describe any of the terms.

a The process of using activity-based costs to help reduce or eliminate non-value-added activities.
______________________________

b Can be eliminated without affecting the desirability of the product from the perspective of the customer.
______________________________

c The length of time for a product to pass completely through a specific manufacturing process.
______________________________

d If eliminated, the desirability of the product to consumers is decreased.
______________________________

e Consideration of all potential resources that will be consumed by a product from development through disposal.
______________________________

f A method in which a product's selling price is determined by adding a fixed profit margin to its production cost.
______________________________

g An approach that explicitly monitors quality costs and rewards quality enhancing behavior.
______________________________

3. Define the following
1. Opportunity cost
2. Outsourcing
3. Relevant cost
4. Irrelevant Cost
5. Direct Cost
6. Indirect cost
7. Manufacturing Overhead
8. Work in process
9. Cost of goods sold
10. Just in time inventory
11. Value added activities
12. Non value added activities
13. Activity based costing
14. Activity based management