At the End of a Recent Year, Solectron, Milpitas, California

question 277

Multiple Choice

At the end of a recent year, Solectron, Milpitas, California, an electronics contractor, made half of his purchases under vendor-managed inventory programs. Solectron:

• A)had its suppliers perform all materials handling activities.
• B)authorized its suppliers to eliminate as many wholesaling functions as possible from the supply chain.
• C)authorized the use of distribution centres to provide quicker customer response times.
• D)used a system in which its suppliers determined the product amount and assortment that should be in stock.

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Definitions:

Overhead Rates

The method used to allocate indirect costs, such as utilities or rent, to products or services based on predetermined criteria, often as a rate per unit of activity.

Activity Cost Drivers

Factors that influence the costs of business activities, often used in activity-based costing to allocate costs more accurately.

ABC Costing System

Activity Based Costing system; a method of cost accounting that identifies and assigns costs to specific activities involved in the production process to better understand overhead costs.

Plantwide Overhead Rate

A single overhead absorption rate used throughout an entire plant or company to allocate indirect costs to products.