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?