Mission Costing and Activity Center Costs Quiz
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Questions and Answers

Which of the following statements is true about logistics costs?

  • Logistics costs vary across industries. (correct)
  • Traditional accounting systems focus on customer costs.
  • Logistics costs are fully understood by all organizations.
  • Logistics costs have no impact on profit.

    • What proportion of gross domestic product is estimated to be the total cost of logistics in the USA?

  • 5%
  • 10% (correct)
  • 1%
  • 15%

    • What does logistics activity generate, in addition to cost?

  • Financial issues
  • Revenue (correct)
  • Profit
  • Working capital

    • What is the potential danger of focusing solely on 'the bottom line'?

    <p>Reduced investment in brands, R&amp;D, and capacity</p> Signup and view all the answers

    Which financial dimension is commonly used to measure the productivity of capital?

    <p>Return on investment (ROI)</p> Signup and view all the answers

    What is the impact of logistics management on the balance sheet of a business?

    <p>It can improve the shape of the balance sheet</p> Signup and view all the answers

    Which component of current assets is crucial to the liquidity of a business?

    <p>Cash and receivables</p> Signup and view all the answers

    What is the impact of shorter order cycle time on cash flow?

    <p>It improves cash flow</p> Signup and view all the answers

    Which of the following is a key driver behind the growth of the third-party logistics service sector?

    <p>Desire to reduce fixed asset investment</p> Signup and view all the answers

    What is the 'cash-to-cash' cycle time?

    <p>The elapsed time from procurement of materials/components through to sale of the finished product</p> Signup and view all the answers

    How can working capital requirements be reduced in the supply chain?

    <p>By reducing non-value-adding time in the supply chain</p> Signup and view all the answers

    What is a key consideration for large global companies with production facilities in many different countries and dispersed distribution centers?

    <p>All of the above</p> Signup and view all the answers

    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?

    <p>Lack of appropriate cost information</p> Signup and view all the answers

    According to the text, how are the effects of trade-offs assessed in logistics decisions?

    <p>By their impact on total costs and sales revenue</p> Signup and view all the answers

    What is the purpose of total cost analysis in logistics decisions?

    <p>To identify the change in costs brought about by decisions</p> Signup and view all the answers

    What is the largest cost element in holding inventory according to the text?

    <p>Cost of capital</p> Signup and view all the answers

    Which of the following is a key principle of mission costing?

    <p>Functional budgets are determined by the demands of the missions served</p> Signup and view all the answers

    What is the best measure of customer profitability?

    <p>Avoidable costs and incremental revenue</p> Signup and view all the answers

    What is the purpose of the customer profitability matrix?

    <p>To identify customers that can be serviced at a lower cost</p> Signup and view all the answers

    What is the concept of direct product profitability (DPP)?

    <p>Identifying all costs associated with a product as it moves through the distribution channel</p> Signup and view all the answers

    Which of the following can lead to excessive levels of raw materials inventory?

    <p>All of the above</p> Signup and view all the answers

    Which of the following is a technique used to convert a fixed asset into a continuing expense?

    <p>Leasing plant facilities and equipment</p> Signup and view all the answers

    Which measure is used to determine the worth of a company to its owners?

    <p>Market value added (MVA)</p> Signup and view all the answers

    What are the five basic drivers of enhanced shareholder value?

    <p>Revenue growth, operating cost reduction, fixed capital efficiency, working capital efficiency, tax minimization</p> Signup and view all the answers

    Which of the following is NOT a factor that can cause variation in the cost of service?

    <p>Number of lines on an order</p> Signup and view all the answers

    What is the purpose of logistics cost analysis?

    <p>To allocate resources more effectively</p> Signup and view all the answers

    What is the point at which the principles of activity-based costing and mission costing coincide?

    <p>Identifying the resources used to support customer segments</p> Signup and view all the answers

    According to the text, what is the principle of 'avoidability' used for?

    <p>Attributing activity costs by customer type or segment</p> Signup and view all the answers

    What is the ultimate goal of logistics and supply chain management?

    <p>To meet customer service requirements</p> Signup and view all the answers

    What is the purpose of identifying the service elements that impact costs?

    <p>To determine the cost drivers involved in activity-based costing</p> Signup and view all the answers

    True or false: Cash flow is not as important as profit in decision making and management.

    <p>False</p> Signup and view all the answers

    True or false: Return on investment (ROI) is the ratio between net profit and the capital employed.

    <p>True</p> Signup and view all the answers

    True or false: Logistics management has no impact on the balance sheet of a business.

    <p>False</p> Signup and view all the answers

    True or false: The shorter the order cycle time, the longer it takes to issue an invoice.

    <p>False</p> Signup and view all the answers

    True or false: Traditional accounting systems tend to focus on understanding customer costs rather than product costs.

    <p>False</p> Signup and view all the answers

    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%.

    <p>True</p> Signup and view all the answers

    True or false: Logistics activity generates revenue through the provision of availability.

    <p>True</p> Signup and view all the answers

    True or false: Logistics activity does not require any resources in the form of fixed capital and working capital.

    <p>False</p> Signup and view all the answers

    True or false: Economic order quantities always reflect actual manufacturing or distribution requirements.

    <p>False</p> Signup and view all the answers

    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.

    <p>True</p> Signup and view all the answers

    True or false: Leasing plant facilities and equipment can convert a fixed asset into a continuing expense.

    <p>True</p> Signup and view all the answers

    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.

    <p>True</p> Signup and view all the answers

    True or false: The total cost of logistics includes only the transportation, storage, handling, and order processing costs within a business.

    <p>False</p> Signup and view all the answers

    True or false: Working capital requirements can be reduced through time compression in the supply chain.

    <p>True</p> Signup and view all the answers

    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.

    <p>True</p> Signup and view all the answers

    True or false: The location decisions of a company can have an impact on its total tax bill.

    <p>True</p> Signup and view all the answers

    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.

    <p>True</p> Signup and view all the answers

    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.

    <p>True</p> Signup and view all the answers

    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.

    <p>True</p> Signup and view all the answers

    True or false: The implementation of an effective mission costing process involves defining the customer service segment and treating all customers the same.

    <p>False</p> Signup and view all the answers

    True or false: The purpose of logistics cost analysis is to provide managers with reliable information to achieve better resource allocation.

    <p>True</p> Signup and view all the answers

    True or false: The principle of 'avoidability' is used to attribute activity costs by customer type or segment.

    <p>False</p> Signup and view all the answers

    True or false: The basic purpose of logistics and supply chain management is to meet customer service requirements in the most cost-effective way.

    <p>True</p> Signup and view all the answers

    True or false: The effects of trade-offs in logistics decisions are assessed by evaluating the impact on cash flow.

    <p>False</p> Signup and view all the answers

    True or false: The adoption of an integrated approach to logistics and distribution management is difficult for many companies.

    <p>True</p> Signup and view all the answers

    True or false: The concept of direct product profitability (DPP) measures the productivity of capital in logistics.

    <p>False</p> Signup and view all the answers

    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.

    <p>True</p> Signup and view all the answers

    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.

    <p>True</p> Signup and view all the answers

    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.

    <p>True</p> Signup and view all the answers

    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.

    <p>True</p> Signup and view all the answers

    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.

    <p>True</p> Signup and view all the answers

    True or false: The concept of total cost analysis involves identifying the change in costs brought about by logistics decisions.

    <p>True</p> Signup and view all the answers

    True or false: The cost of holding inventory includes the cost of capital, which comprises the cost of debt and the cost of equity.

    <p>True</p> Signup and view all the answers

    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.

    <p>True</p> Signup and view all the answers

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