Please choose one answer for each question and clearly identify the choice

Activity based costing decompose overhead so it can be properly assigned to cost drivers rather than allocated according to standard cost accounting. Buyers can use this information too. Buyers can use activity-based costing as a tool to reduce supplier costs by eliminating nonvalue-adding activities, reducing activity occurrences, and reducing the cost driver rate. Activity based costing attempts to correct the distortions built into product costing:

**by tracking cost drivers of direct costs and turning direct costs into indirect.

**by tracking cost drivers of indirect costs and turning indirect costs into direct.

**by improving the way that direct costs are allocated.

**by improving the way that the learning curve is applied to direct labor costs.

The assessment of positions of strength, if done well, allows the negotiator to prepare arguments and counter arguments. By estimating the range of acceptable results for both buyer and seller, the negotiator can determine, first, if there is a zone of overlap, meaning negotiation is feasible and likely to result in an agreement, or if there is a gap, and if it can be closed during negotiation. The zone of possible agreement:

**is the range of options the buyer will consider during the negotiation.

**is perceived in exactly the same way by buyer and seller in a negotiation.

**indicates the feasibility of negotiation and the likelihood of an agreement.

**may be positive or negative depending on the gap between buyers and sellers objectives.

The list of things that give each party (buyer and seller) strength can be used to determine (a) if there is enough overlap in interests to make negotiation worth the cost, (b) generate likely talking points that each side will probably use in the negotiation, and (c) help each party face reality when it comes to likely outcomes.

**True

**False

it has been empirically determined that labor time declines dramatically as volume increases. Although conceptually most closely identified with direct labor, most experts believe the learning curve or manufacturing progress function is actually brought about by a combination of factors.

The learning curve is based on:

**the common principle that one becomes more proficient with experience.

**premise that more training leads to lower costs.

**an indirect relationship to direct material costs.

**a direct relationship to overhead costs.

The concept of _______ acknowledges that acquisition price is merely one part of the costs associated with owning a good or procuring a service. While the most obvious reason for using ________ is to identify the actual cost of the supply decision, the cost data can be used in each action listed above.

**cost of goods sold

**manufacturer's suggested retail price

**total cost of ownership

**target cost