64 Questions
Which of the following statements is true about logistics costs?
Logistics costs vary across industries.
What proportion of gross domestic product is estimated to be the total cost of logistics in the USA?
10%
What does logistics activity generate, in addition to cost?
Revenue
What is the potential danger of focusing solely on 'the bottom line'?
Reduced investment in brands, R&D, and capacity
Which financial dimension is commonly used to measure the productivity of capital?
Return on investment (ROI)
What is the impact of logistics management on the balance sheet of a business?
It can improve the shape of the balance sheet
Which component of current assets is crucial to the liquidity of a business?
Cash and receivables
What is the impact of shorter order cycle time on cash flow?
It improves cash flow
Which of the following is a key driver behind the growth of the third-party logistics service sector?
Desire to reduce fixed asset investment
What is the 'cash-to-cash' cycle time?
The elapsed time from procurement of materials/components through to sale of the finished product
How can working capital requirements be reduced in the supply chain?
By reducing non-value-adding time in the supply chain
What is a key consideration for large global companies with production facilities in many different countries and dispersed distribution centers?
All of the above
Which one of the following is a reason why the adoption of an integrated approach to logistics and distribution management is difficult for many companies?
Lack of appropriate cost information
According to the text, how are the effects of trade-offs assessed in logistics decisions?
By their impact on total costs and sales revenue
What is the purpose of total cost analysis in logistics decisions?
To identify the change in costs brought about by decisions
What is the largest cost element in holding inventory according to the text?
Cost of capital
Which of the following is a key principle of mission costing?
Functional budgets are determined by the demands of the missions served
What is the best measure of customer profitability?
Avoidable costs and incremental revenue
What is the purpose of the customer profitability matrix?
To identify customers that can be serviced at a lower cost
What is the concept of direct product profitability (DPP)?
Identifying all costs associated with a product as it moves through the distribution channel
Which of the following can lead to excessive levels of raw materials inventory?
All of the above
Which of the following is a technique used to convert a fixed asset into a continuing expense?
Leasing plant facilities and equipment
Which measure is used to determine the worth of a company to its owners?
Market value added (MVA)
What are the five basic drivers of enhanced shareholder value?
Revenue growth, operating cost reduction, fixed capital efficiency, working capital efficiency, tax minimization
Which of the following is NOT a factor that can cause variation in the cost of service?
Number of lines on an order
What is the purpose of logistics cost analysis?
To allocate resources more effectively
What is the point at which the principles of activity-based costing and mission costing coincide?
Identifying the resources used to support customer segments
According to the text, what is the principle of 'avoidability' used for?
Attributing activity costs by customer type or segment
What is the ultimate goal of logistics and supply chain management?
To meet customer service requirements
What is the purpose of identifying the service elements that impact costs?
To determine the cost drivers involved in activity-based costing
True or false: Cash flow is not as important as profit in decision making and management.
False
True or false: Return on investment (ROI) is the ratio between net profit and the capital employed.
True
True or false: Logistics management has no impact on the balance sheet of a business.
False
True or false: The shorter the order cycle time, the longer it takes to issue an invoice.
False
True or false: Traditional accounting systems tend to focus on understanding customer costs rather than product costs.
False
True or false: The total cost of logistics as a proportion of gross domestic product in the USA is estimated to be close to 10%.
True
True or false: Logistics activity generates revenue through the provision of availability.
True
True or false: Logistics activity does not require any resources in the form of fixed capital and working capital.
False
True or false: Economic order quantities always reflect actual manufacturing or distribution requirements.
False
True or false: The phasing of supplies to match the total logistics requirements of the system can be achieved through materials requirement planning (MRP) and distribution requirements planning.
True
True or false: Leasing plant facilities and equipment can convert a fixed asset into a continuing expense.
True
True or false: Economic value added (EVA) is the difference between operating income after taxes and the true cost of capital employed to generate those profits.
True
True or false: The total cost of logistics includes only the transportation, storage, handling, and order processing costs within a business.
False
True or false: Working capital requirements can be reduced through time compression in the supply chain.
True
True or false: Companies that have low inventory turns assume that it is a feature of their industry and nothing can be done to improve it.
True
True or false: The location decisions of a company can have an impact on its total tax bill.
True
True or false: Mission costing is a cost or budgeting method where a functional budget is determined by the demands of the missions it serves.
True
True or false: Customer profitability analysis measures the costs that would be avoided and the revenues that would be lost if a customer is lost.
True
True or false: Direct product profitability (DPP) attempts to identify all the costs that attach to a product or an order as it moves through the distribution channel.
True
True or false: The implementation of an effective mission costing process involves defining the customer service segment and treating all customers the same.
False
True or false: The purpose of logistics cost analysis is to provide managers with reliable information to achieve better resource allocation.
True
True or false: The principle of 'avoidability' is used to attribute activity costs by customer type or segment.
False
True or false: The basic purpose of logistics and supply chain management is to meet customer service requirements in the most cost-effective way.
True
True or false: The effects of trade-offs in logistics decisions are assessed by evaluating the impact on cash flow.
False
True or false: The adoption of an integrated approach to logistics and distribution management is difficult for many companies.
True
True or false: The concept of direct product profitability (DPP) measures the productivity of capital in logistics.
False
True or false: The lack of appropriate cost information is one of the main reasons why the adoption of an integrated approach to logistics and distribution management has been difficult for many companies.
True
True or false: Total cost analysis in logistics decisions is used to identify the change in costs brought about by these decisions, viewing cost in incremental terms.
True
True or false: The cost of holding inventory includes the cost of capital, which comprises the cost to the company of debt and the cost of equity.
True
True or false: One of the basic principles of logistics costing is that the system should be capable of enabling separate cost and revenue analyses to be made by customer type and by market segment or distribution channel.
True
True or false: The lack of appropriate cost information is one of the main reasons why the adoption of an integrated approach to logistics and distribution management is difficult for many companies.
True
True or false: The concept of total cost analysis involves identifying the change in costs brought about by logistics decisions.
True
True or false: The cost of holding inventory includes the cost of capital, which comprises the cost of debt and the cost of equity.
True
True or false: One of the basic principles of logistics costing is that the system should be capable of enabling separate cost and revenue analyses to be made by customer type and by market segment or distribution channel.
True
Test your knowledge on mission costing and its impact on activity center costs in supply chain management. Explore the reverse budgeting approach and understand how functional budgets are determined based on mission demands.
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