Sanford Tracking Has Two Production Plants

question 140

Multiple Choice

Sanford Tracking has two production plants. Recently, the company conducted an ABM study to determine the cost of activities involved in processing orders for parts at each of the plants. How might an operations manager use this information to manage the cost of processing orders?

• A) By closing down the plant with the highest cost
• B) By comparing the cost to process an order at each plant and the nature of the orders to determine if costs are out of control-if out of control, investigate
• C) By setting up an ABC costing system
• D) By including all manufacturing overhead in a single cost pool to reduce the cost of analysis

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Definitions:

Cash Payments

Outflows of cash to settle obligations or purchase goods and services.

Voucher

A written authorization or proof of transaction that details the terms and conditions of a financial exchange or payment.

Liability

A financial obligation or amount owed by a business or individual to another entity.

Account Receivable

Funds that customers owe to a business for products or services they have received but have not paid for.