Learning Objective 7-4

1) The cost that, if eliminated, would reduce actual or perceived value or utility customers experience from using the product or service is ________.

A) value-added cost

B) locked-in cost

C) designed-in cost

D) conversion costs

E) non-value added costs

2) Costs that have not yet been incurred but will be incurred in the future based on decisions that have already been made are:

A) value-added costs.

B) locked-in costs.

C) non-value-added costs.

D) targeted costs.

E) conversion costs.

3) In reference to locked-in cost curves and the cost-incurrence curves, the top curve plots:

A) single locked-in costs.

B) cumulative locked-in costs.

C) single cost per unit.

D) cumulative cost per unit.

E) double cost per unit.

4) A non-value-added-cost is a cost that, if eliminated, would reduce the actual or perceived value or utility that customers gain from using the product or service.

5) Companies seek to minimize non-value added costs because they do not provide benefits to customers.

6) What do managers do when activities and costs do not fall neatly into value-added or non-value added categories? What is the risk involved with this decision?

This can be risky because the organization may cut some costs that are value-adding. As a result, the impact could be poor customer service or other value-added elements that once enhanced the organization.

7) What is cost incurrence? What does cost incurrence measure?

8) What are the key steps in value engineering?

9) Kaizen is a continuous improvement technique used to reduce the time it takes to do a task, eliminate waste, and improve operating efficiency and productivity.

10) Value engineering decreases both value-added costs and non-value-added costs.

11) What can managerial accountants do to avoid the undesirable effects of value engineering and target costing?


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