CMA Final · Strategic Cost Management · Activity Based Cost Management
Under activity based management, an activity is classified as non-value-added when it
An activity is non-value-added when it can be removed without lowering the quality or performance the customer perceives, such as rework or excess handling. Its frequency, cost rate or place in the activity hierarchy does not determine whether it adds value.
- Acan be eliminated without reducing the customer's perceived product quality or performanceCorrect
- Bis performed in every production batch
- Chas the highest cost driver rate among all activities
- Dis classified as a facility-sustaining activity
Explanation
A non-value-added activity adds cost but no customer-perceived value, so removing it does not reduce quality or performance; examples are rework and excess material movement. Frequency, cost rate or hierarchy level does not decide value-added status.
Did you get it right without looking?
One question tells you little. A timed set on Activity Based Cost Management shows your real accuracy, how long you take and where you lose marks.
More Activity Based Cost Management questions
- Ganga Electronics has two products. Overhead pools: setups Rs 4,00,000 (driver: 100 setups) and packing Rs 2,40,000 (driver: 1,200 packing o…
- Kaveri Components Ltd has a quality inspection cost pool of Rs 3,60,000 with a cost driver of number of inspections, total 1,200 inspections…
- Meera Foods Ltd has a distribution activity pool of Rs 9,00,000. The practical capacity is 6,000 deliveries, but only 4,500 deliveries are e…
- Under activity based costing, the cost of 'product design modification', which is incurred for each product line regardless of the number of…
- Under activity based management, a non-value-added activity such as rework of defective output is best handled by:
- Kaveri Textiles has a material-handling pool of Rs 4,80,000 and uses the number of material movements as the driver. Budgeted movements are …