Question : Objective 9.3 1) Companies have recently been able to reduce inventory : 1217277

Objective 9.3

1) Companies have recently been able to reduce inventory levels because:

A) there is better sharing of information between suppliers and manufacturers

B) just-in-time production strategies are being implemented

C) production quotas are being implemented

D) Both A and B are correct.

2) Many companies have switched from absorption costing to variable costing for internal reporting:

A) to comply with external reporting requirements

B) to increase bonuses for managers

C) to reduce the undesirable incentive to build up inventories

D) so the denominator level is more accurate

3) Ways to “produce for inventory” that result in increasing operating income include:

A) switching production to products that absorb the least amounts of fixed manufacturing costs

B) delaying items that absorb the greatest amount of fixed manufacturing costs

C) deferring maintenance to accelerate production

D) All of these answers are correct.

4) Switching production to products that absorb the highest amount of fixed manufacturing costs is also called:

A) cost reduction

B) cherry picking

C) producing for sales

D) throughput costing

5) To discourage producing for inventory, management can:

A) evaluate nonfinancial measures such as units in ending inventory compared to units in sales

B) evaluate performance over a three- to five-year period rather than a single year

C) incorporate a carrying charge for inventory in the internal accounting system

D) All of these answers are correct.

6) Which method is NOT a way to discourage producing for inventory?

A) incorporate a carrying charge for inventory

B) focus on careful budgeting and inventory planning

C) include nonfinancial measures when evaluating performance

D) evaluate performance on a quarterly basis only

7) Under absorption costing, if a manager’s bonus is tied to operating income, then increasing inventory levels compared to last year would result in:

A) increasing the manager’s bonus

B) decreasing the manager’s bonus

C) not affecting the manager’s bonus

D) being unable to determine the manager’s bonus using only the above information

8) Under variable costing, if a manager’s bonus is tied to operating income, then increasing inventory levels compared to last year would result in:

A) increasing the manager’s bonus

B) decreasing the manager’s bonus

C) not affecting the manager’s bonus

D) being unable to determine the manager’s bonus using only the above information

9) Critics of absorption costing suggest to evaluate management on their ability to:

A) exceed production quotas

B) increase operating income

C) decrease inventory costs

D) All of these answers are correct.

10) Differences between absorption costing and variable costing are much smaller when a:

A) large part of the manufacturing process is subcontracted out

B) just-in-time inventory strategy is implemented

C) significant portion of manufacturing costs are fixed

D) Both A and B are correct.