ACCT 3121 COST Chapter 21 (20TB)
Which of the following term is defined as: "the flow of goods, services, and information from the initial sources of materials and services to the delivery of products to consumers"? A) customer list B) enterprise requirements plan (ERP) C) material requirements plan (MRP) D) supply chain
D) supply chain
Under economic-order-quantity decision model, which of the following is an assumption? assumed that ________. A) the quantity ordered can vary at each reorder point B) demand, ordering costs, and carrying costs are uncertain C) the purchasing cost per unit is affected by the order quantity D) the same quantity is ordered at each reorder point
D) the same quantity is ordered at each reorder point
Games R Us manufactures various games. For March, there were no beginning inventories of direct materials and no beginning or ending work in process. Conversion costs is the only indirect manufacturing cost category currently used. Journal entries are recorded when materials are purchased and when conversion costs are allocated under backflush costing. Conversion costs — March $440,000 Direct materials purchased — March $1,130,000 Units produced — March 67,800 Units sold — March 42,800 Which of the journal entries properly records conversion costs? A) Conversion Costs 440,000 Various Accounts (such as wages payable) 440,000 B) Various Accounts (such as wages payable) 440,000 Conversion Costs 440,000 C) Conversion Costs 440,000 Inventory: Direct Materials 440,000 D) Inventory: Direct Materials 440,000 Conversion Costs 440,000
A) Conversion Costs 440,000 Various Accounts (such as wages payable) 440,000
Vision Company manufactures digital cameras. For May, there were no beginning inventories of direct materials and no beginning or ending work-in -process. Conversion costs is the only indirect manufacturing cost category currently used. Journal entries are recorded when materials are purchased and when units are sold. Conversion costs - May $106,625 Direct materials purchased - May $255,575 Units produced - May 90,500 units Units sold - May 78,500 units Selling price $27 each Which of the following journal entries properly reflects the purchase of materials under backflush costing? A) Inventory Control $255,575 Accounts Payable Control $255,575 B) Accounts Payable Control $255,575 Allocated Costs: Direct Materials $255,575 C) Accounts Payable Control $255,575 Materials Inventory $255,575 D) Allocated Costs: Direct Materials $255,575 Inventory: Raw and Material $255,575
A) Inventory Control $255,575 Accounts Payable Control $255,575
Relevant total costs in the economic order quantity decision model equal relevant ordering costs plus which of the following costs? A) carrying costs B) stockout costs C) quality costs D) purchasing costs
A) carrying costs
A demand-pull system in which each component in a production line is produced immediately as needed by the next step in the production line is referred to as ________. A) just-in-time production B) materials requirements planning C) relevant total costs D) economic order quantity
A) just-in-time production
Among different types of costs associated with inventory, the incoming freight charges of inventories are ________. A) purchasing costs B) ordering costs C) stockout costs D) carrying costs
A) purchasing costs
Which of the following terms is defined as the time required to get equipment, tools, and materials ready to start production? A) setup time B) delivery time C) manufacturing-cycle time D) product design time
A) setup time
The costs that result from theft of inventory are ________. A) shrinkage costs B) external failure costs C) stockout costs D) costs of quality
A) shrinkage costs
Increases in the carrying cost and decreases in the ordering cost per purchase order result in ________. A) smaller EOQ amounts B) larger EOQ amounts C) larger relevant total costs D) smaller relevant total costs
A) smaller EOQ amounts
The optimal safety stock level is the quantity of safety stock that minimizes the sum of the annual relevant ________. A) stockout costs and carrying costs B) ordering costs and carrying costs C) ordering costs and stockout costs D) ordering costs and purchasing costs
A) stockout costs and carrying costs
The purchase-order lead time is the ________. A) time between placing an order and its delivery B) time between receiving a customer order and producing the products C) time between receiving a customer order and delivering the items D) time required to correct errors in the defective products
A) time between placing an order and its delivery
If Premium Company has a safety stock of 480 units and the average daily demand is 68 units, how many days can be covered if the shipment from the supplier is delayed by 4 days? A) 7 days B) 4 days C) 11 days D) 3 days
Answer: A Explanation: Days that can be covered = 480 / 68 = 7 days
Vision Company manufactures digital cameras. For May, there were no beginning inventories of direct materials and no beginning or ending work-in -process. Conversion costs is the only indirect manufacturing cost category currently used. Journal entries are recorded when materials are purchased and when units are sold. Conversion costs - May $109,625 Direct materials purchased - May $255,575 Units produced - May 86,500 units Units sold - May 77,500 units Selling price $30 each Which of the following journal entries would be recorded when units are sold for the month under backflush costing? Please round intermediate calculations to two decimal places (i.e., unit costs) A) Cost of Goods Sold $327,050 Inventory: Raw and In-Process $327,050 B) Cost of Goods Sold $327,050 Inventory Control $228,625 Conversion Costs Allocated $98,425 C) Inventory Inventory Control $228,625 Conversion Costs Allocated $98,425 Cost of Goods Sold $327,050 D) Cost of Goods Sold $354,000 Inventory: Raw and In-Process $255,575 Conversion Costs Allocated $98,425
Answer: B Explanation: Direct materials ($255,575 / 86,500) $2.95 Conversion costs ($109,625 / 86,500) 1.27 Total $4.22 Cost of Goods Sold = 77,500 × $4.22 = $327,050 Inventory Control = 77,500 × $2.95 = $228,625 Conversion Costs Allocated = 77,500 × $1.27 = $98,425
Games R Us manufactures various games. For March, there were no beginning inventories of direct materials and no beginning or ending work in process. Conversion costs is the only indirect manufacturing cost category currently used. Journal entries are recorded when materials are purchased and when conversion costs are allocated under backflush costing. Conversion costs — March $410,000 Direct materials purchased — March $1,130,000 Units produced — March 59,800 Units sold — March 49,800 Which of the following entries properly records the cost of goods sold for the month? A) Finished Goods 1,282,475 Work in Process 1,282,475 B) Cost of Goods Sold 1,282,475 Finished Goods 1,282,475 C) Finished Goods 1,282,475 Cost of Goods Sold 1,282,475 D) Cost of Goods Sold 1,282,475 Work in Process 1,282,475
Answer: B Explanation: (Conversion costs of $410,000 + Direct Materials Purchased of $1,130,000)/59,800 units produced x 49,800 units sold = $1,282,475.
The following information applies to Krynton Corp. which supplies microscopes to laboratories throughout the country. Krynton purchases the microscopes from a manufacturer which has a reputation for very high quality in its manufacturing operation. Annual demand (weekly demand= 1/52 of annual demand) 16,000 units Orders per year as per EOQ model 17 Lead time in days 18 days Annual relevant carrying costs $2600 Assuming each order was made at the economic order quantity amount, what is the cost of placing an order? A) $850 per order B) $153 per order C) $144 per order D) $900 per order
Answer: B Explanation: Cost of placing an order = $2600 / 17 = $153 per order
If Kenton Inc. has a safety stock of 215 units and the average weekly demand is 35 units, how many days can be covered if the shipment from the supplier is delayed by 16 days? A) 16 days B) 43 days C) 59 days D) 27 days
Answer: B Explanation: Days that can be covered = 215 / 35 = 6 weeks = 43 days
The following information applies to Krynton Corp. which supplies microscopes to laboratories throughout the country. Krynton purchases the microscopes from a manufacturer which has a reputation for very high quality in its manufacturing operation. Annual demand (weekly demand= 1/52 of annual demand) 18,000 units Orders per year as per EOQ model 18 Lead time in days 16 days Annual relevant carrying costs $3600 What is the economic order quantity assuming each order was made at the economic-order-quantity amount? A) 2057 units B) 1000 units C) 1108 units D) 3200 units
Answer: B Explanation: EOQ = 18,000 / 18 = 1000
Vision Company sells optical equipment. Blitz Company manufactures special glass lenses. Vision orders 11,400 lenses per year, 220 per week, at $40 per lens. Blitz covers all shipping costs. Vision earns 22% on its cash investments. The purchase-order lead time is 3.0 weeks. Vision sells 315 lenses per week. The following data are available: Relevant ordering costs per purchase order $47.25 Relevant insurance, materials handling, breakage, and so on, per year $5.50 What is the reorder point? A) 660 lenses B) 945.0 lenses C) 1318 lenses D) 1605.0 lenses
Answer: B Explanation: Reorder point = 315 lenses × 3.0 weeks = 945.0 lenses
The following information applies to Krynton Company, which supplies microscopes to laboratories throughout the country. Krynton purchases the microscopes from a manufacturer which has a reputation for very high quality in its manufacturing operation. Annual demand (weekly demand = 1/52 of annual demand) 53,000 units Orders per year 20 Lead time in days 18 days Cost of placing an order $200 What is the reorder point? (Assume a 365 day year.) A) 1040 units B) 2614 units C) 2650 units D) 2944 units
Answer: B Explanation: Reorder point = Number of units sold per time period × Purchase-order lead time Daily demand = 53,000 / (52 × 7) = 145.21 Therefore, reorder point = 145.21 × 18 = 2614
The Allianz Company produces a specialty wood furniture product, and has the following information available concerning its inventory items: Relevant ordering costs per purchase order $510 Relevant carrying costs per year for each package: Required annual return on investment 15% Required other costs per year $4 Annual demand is 35,000 packages per year. The purchase price per package is $52. How many deliveries will be required at the economic order quantity? A) 16.36 deliveries B) 15.91 deliveries C) 20.12 deliveries D) 23.14 deliveries
Answer: C Explanation: Deliveries at EOQ = 35,000 / 1739.37 = 20.12 deliveries
Vision Company manufactures digital cameras. For May, there were no beginning inventories of direct materials and no beginning or ending work-in -process. Conversion costs is the only indirect manufacturing cost category currently used. Journal entries are recorded when materials are purchased and when units are sold. Conversion costs - May $105,625 Direct materials purchased - May $262,575 Units produced - May 89,500 units Units sold - May 87,500 units Selling price $23 each If the two trigger points are completion of good finished units of product and sale of finished goods, which of the following entries would be used to record cost of finished units completed under backflush costing? (Round intermediate calculations to the nearest cent and final calculations to the nearest dollar.) A) Finished Goods $359,625 Inventory Control $256,375 Conversion Costs Allocated $103,250 B) Finished Goods $368,200 Inventory: Raw Materials $262,575 Conversion Costs Allocated $105,625 C) Finished Goods $368,200 Accounts Payable Control $262,575 Conversion Costs Allocated $368,200 D) Inventory Inventory Control $256,375 Conversion Costs Allocated $103,250 Finished Good $359,625
Answer: C Explanation: Finished Goods = 89,500 × $4.11 = $368,200 Accounts Payable Control = 89,500 × $2.93 = $262,575 Conversion Costs Allocated = 89,500 × $1.18 = $105,625
The following information applies to Krynton Corp. which supplies microscopes to laboratories throughout the country. Krynton purchases the microscopes from a manufacturer which has a reputation for very high quality in its manufacturing operation. Annual demand (weekly demand= 1/52 of annual demand) 14,000 units Orders per year as per EOQ model 17 Lead time in days 16 days Annual relevant carrying costs $3500 What are the annual relevant ordering costs, assuming that relevant total costs are minimal? A) $824 B) $3719 C) $3500 D) $3294
Answer: C Explanation: In EOQ decision model, annual relevant ordering costs and annual relevant carrying costs are equal when relevant total costs are minimal at the EOQ. Diff: 2
Short Grass Incorporated is a distributor of golf balls. Martin's Golf Supplies is a local retail outlet which sells golf balls. Martin's purchases the golf balls from Short Grass Incorporated at $0.85 per ball; the golf balls are shipped in cartons of 42. Short Grass Incorporated pays all incoming freight, and Martin's Golf Supplies does not inspect the balls due to Short Grass' reputation for high quality. Annual demand is 158,520 golf balls at a rate of 3191 balls per week. Martin's Golf Supplies earns 7% on its cash investments. The purchase-order lead time is one week. The following cost data are available: Relevant ordering costs per purchase order $130.00 Carrying costs per carton per year: Relevant insurance, materials handling, breakage, etc., per year $0.77 If Martin's makes an order (1 / 12 of annual demand) once per month, what are the relevant total costs? (Round costs to the nearest cent and quantities to the nearest whole number.) A) $1560.00 B) $514.09 C) $2075.03 D) $3120.00
Answer: C Explanation: Order Quantity = Annual Demand / 12 = 13,210 balls / month / 42 golf balls per carton = 315 cartons per month Relevant Total Costs = Ordering Costs + Carrying Costs Carrying Cost per carton = price × invest rate + insurance/handling Carrying Cost per carton = ($0.85 × $42 × 7%) + $0.77 = $3.27 RTC = (12 × $130.00) + ((315 / 2) × $3.27) = $2075.03
Beryl Company sells 900 flash drives per week. Purchase-order lead time is 2 weeks and the economic-order quantity is 1625 units. What is the reorder point? A) 3250 units B) 1450 units C) 1800 units D) 1625 units
Answer: C Explanation: Reorder point = 900 × 2= 1800 units
The Allianz Company produces a specialty wood furniture product, and has the following information available concerning its inventory items: Relevant ordering costs per purchase order $490 Relevant carrying costs per year for each package: Required annual return on investment 15% Required other costs per year $8 Annual demand is 33,000 packages per year. The purchase price per package is $50. What are the total relevant costs, assuming the quantity ordered equals 1500 units? A) $16,405 B) $18,280 C) $16,780 D) $22,405
Answer: D Explanation: Unit carrying costs = ($50 × 0.15) + $8 = $15.50 Total relevant costs =[(33,000x490)/1500 + (1500x15.50)/2] = $22,405
Delinz Company sells 115 hams per week. Purchase-order lead time is 6 weeks and the economic-order quantity is 210 hams. What is the reorder point? A) 1950 hams B) 690 hams C) 1260 hams D) 210 hams
B) 690 hams
Which of the following statements is true of the economic-order-quantity decision model? A) It assumes purchasing costs are relevant because the cost per unit changes due to the quantity ordered. B) Demand, ordering costs, and carrying costs are all known with certainty. C) It assumes that stockout costs are relevant even if no stockouts occur. D) It assumes that ordering costs and carrying costs are irrelevant.
B) Demand, ordering costs, and carrying costs are all known with certainty.
Games R Us manufactures various games. For March, there were no beginning inventories of direct materials and no beginning or ending work in process. Conversion costs is the only indirect manufacturing cost category currently used. Journal entries are recorded when materials are purchased and when conversion costs are allocated under backflush costing. Conversion costs — March $470,000 Direct materials purchased — March $1,090,000 Units produced — March 61,800 Units sold — March 44,800 Which of the following journal entries properly records the purchase of direct materials? A) Accounts Payable Control 470,000 Inventory: Raw and In-Process Control 470,000 B) Inventory: Materials and In-Process Control 1,090,000 Accounts Payable Control 1,090,000 C) Inventory: Raw and In-Process Control 1,090,000 Conversion Costs 1,090,000 D) Conversion Costs 1,090,000 Inventory: Raw and In-Process Control 1,090,000
B) Inventory: Materials and In-Process Control 1,090,000 Accounts Payable Control 1,090,000
Which of the following statements is true of lean accounting? A) It is much complex than traditional product costing but produces more accurate product unit costs. B) It does not always compute costs for individual products but does emphasize product costs by value stream. C) It omits recording some of the journal entries relating to the stages from the purchase of direct materials to the sale of finished goods. D) It is acceptable under GAAP.
B) It does not always compute costs for individual products but does emphasize product costs by value stream.
Which of the following statements best defines setup time? A) It is the time required to manufacture an item, including order preparation time, inspection time, and customer delivery time. B) It is the time required to get equipment, tools, and materials ready to start the production of a component or product. C) It is a time or period ranging from the time when a customer orders goods to the time when they are delivered to the customer. D) It is the time required to create a new product to be sold by a business to its customers.
B) It is the time required to get equipment, tools, and materials ready to start the production of a component or product.
A system that emphasizes lean production techniques, low quantities of inventory, and close coordination among production workstations is called ________. A) Economic order quantity production B) Just-in-time production C) Materials requirements planning production D) Push-through system
B) Just-in-time production
Which of the following statements is true of relevant inventory costs? A) The salaries paid to clerks, stock keepers, and materials handlers are relevant carrying costs if they are unaffected by changes in inventory levels. B) The costs of expediting an order from a supplier are relevant incremental costs of stockouts. C) Warehouse rent, warehouse workers' salaries and costs of insurance, that change with the quantity of inventory held are irrelevant carrying costs. D) Those ordering costs that change with the number of orders placed are irrelevant ordering costs.
B) The costs of expediting an order from a supplier are relevant incremental costs of stockouts.
Which of the following statements is true of the financial and nonfinancial measures in just-in-time production systems? A) The inventory turnover ratio is expected to decrease. B) Units produced per hour are expected to increase. C) Manufacturing cycle time is expected to increase. D) Total setup time for machines with respect to total manufacturing time is expected to increase.
B) Units produced per hour are expected to increase.
Which of the following statements best defines lean accounting? A) an accounting system that comprises a single database that collects data and feeds it into software applications supporting all of a company's business activities B) a costing method that supports creating value for the customer by costing the entire value stream thereby eliminating waste in the accounting process C) an accounting system that omits recording some of the journal entries relating to the stages from the purchase of direct materials to the sale of finished goods D) an integrated costing system covering a company's accounting, distribution, manufacturing, purchasing, human resources, and other functions
B) a costing method that supports creating value for the customer by costing the entire value stream thereby eliminating waste in the accounting process
Which of the following statements best defines backflush costing system? A) an integrated costing system covering a company's accounting, distribution, manufacturing, purchasing, human resources, and other functions B) a costing system that omits recording some of the journal entries relating to the stages from the purchase of direct materials to the sale of finished goods C) a push-through system in which each component in a production line is produced immediately as needed by the next step in the production line D) a costing system that comprises a single database that collects data and feeds it into software applications supporting all of a company's business activities
B) a costing system that omits recording some of the journal entries relating to the stages from the purchase of direct materials to the sale of finished goods
Which of the following statements best defines a materials requirements planning system? A) a demand-pull system in which each component in a production line is produced immediately as needed by the next step in the production line B) a push-through system that manufactures finished goods for inventory on the basis of demand forecasts C) a demand-pull system that manufactures finished goods for inventory on the basis of demand forecasts D) a push-through system in which each component in a production line is produced immediately as needed by the next step in the production line
B) a push-through system that manufactures finished goods for inventory on the basis of demand forecasts
Which of the following statements best defines an enterprise resource planning (ERP) system? A) a demand-pull system in which each component in a production line is produced immediately as needed by the next step in the production line as planned by enterprise resource management B) a system that comprises a single database that collects data and feeds it into software applications supporting all of a company's business activities C) a planning system that omits recording some of the journal entries relating to the stages from the purchase of direct materials to the sale of finished goods D) a system that is made up of work areas with different types of equipment grouped together to make related products
B) a system that comprises a single database that collects data and feeds it into software applications supporting all of a company's business activities
Under backflush costing approach where three trigger points are used (stage A, stage C, and stage D), the purchase of materials is: A) credited to the Materials and In-Process Inventory Control account B) debited to the Materials and In-Process Inventory Control account C) debited to the Materials Inventory Control account D) ignored because the manufacturing process moves so quickly from acquisition of materials to the sale of the finished good
B) debited to the Materials and In-Process Inventory Control account
A system that comprises a single database that collects data and feeds it into software applications supporting all of a company's business activities is known as a(n) ________. A) economic order quantity (EOQ) system B) enterprise resource planning (ERP) system C) just-in-time (JIT) system D) material requirements planning (MRP) system
B) enterprise resource planning (ERP) system
An order is received by a company and then spends 1 day in assembly and 3 days in finishing before being stored in the warehouse. On average, the units are stored for 3 days before being shipped to a customer. Which of the following measures would be true? A) work-in-process time of 7 days B) manufacturing cycle time of 4 days C) pass-through time of 6 days D) manufacturing cycle time of 7 days
B) manufacturing cycle time of 4 days
A push-through system that manufactures finished goods for inventory on the basis of demand forecasts and produces a master schedule for quantity and timing of units to be produced. A) just-in-time purchasing B) materials requirements planning C) relevant total costs D) economic order quantity
B) materials requirements planning
Among different types of costs associated with inventory, the costs of obtaining purchase approvals are ________. A) purchasing costs B) ordering costs C) stockout costs D) carrying costs
B) ordering costs
Which of the following is the best definition of inventory management? A) planning and control of the flow inventory into and through an organization B) planning, coordinating, and controlling activities related to the flow of inventory into, through, and out of an organization C) planning and coordinating activities related to the flow of inventory into and through an organization D) planning, coordinating, and control of inventory into an organization
B) planning, coordinating, and controlling activities related to the flow of inventory into, through, and out of an organization
Which of the following statements best defines manufacturing cycle time in a JIT production system? A) the time from when raw materials are received until it becomes a finished good B) the time from when an order is received until it becomes a finished good C) the time from when raw materials are received until it is delivered to the customers D) the time from when an order is received until it is delivered to the customers
B) the time from when an order is received until it becomes a finished good
Which of the following is the correct mathematical expression to calculate annual relevant ordering costs? A) Demand in units for a specified period / (Relevant ordering cost per purchase order × Size of each order) B) Size of each order × Relevant ordering cost per purchase order / Demand in units for a specified period C) (Demand in units for a specified period / Size of each order) × Relevant ordering cost per purchase order D) (Demand in units for a specified period - Size of each order) × Relevant ordering cost per purchase order
C) (Demand in units for a specified period / Size of each order) × Relevant ordering cost per purchase order
The Allianz Company produces a specialty wood furniture product, and has the following information available concerning its inventory items: Relevant ordering costs per purchase order $550 Relevant carrying costs per year for each package: Required annual return on investment 17% Required other costs per year $7 Annual demand is 30,000 packages per year. The purchase price per package is $53. Which of the following statements is true of Allianz's EOQ system costs? A) At EOQ, the annual relevant ordering costs is exactly the half of annual relevant carrying costs. B) At EOQ, the annual relevant carrying costs is higher than the annual relevant ordering costs. C) At EOQ, the annual relevant carrying costs is exactly the half of the annual relevant total costs. D) At EOQ, the annual relevant carrying costs is equal to the annual relevant total costs.
C) At EOQ, the annual relevant carrying costs is exactly the half of the annual relevant total costs.
Which of the following statements is true of just-in-time production systems? A) In a just-in-time production system, a master production schedule specifies the quantity and timing of each item to be produced. B) Sales budget triggers each step of the production process in a just in time production system. C) Defects arising at one workstation affect other workstations in the line quickly because of the tight links between workstations. D) Production is organized in manufacturing cells in a just in time production system, which are production centers that use a "push-through" approach whereby finished goods are manufactured on the basis of demand forecasts.
C) Defects arising at one workstation affect other workstations in the line quickly because of the tight links between workstations.
Which of the following statements is true of just-in-time (JIT) purchasing? A) In JIT purchasing, the optimal safety-stock level is the quantity of safety stock that minimizes the sum of annual relevant stockout and carrying costs. B) JIT purchasing is guided solely by the EOQ model because that model emphasizes the tradeoff between relevant carrying and ordering costs. C) In JIT purchasing, raw materials (or goods) are purchased so that products are delivered just as needed for production or sales. D) Only disadvantage of JIT purchasing is the higher level carrying and inspection costs.
C) In JIT purchasing, raw materials (or goods) are purchased so that products are delivered just as needed for production or sales.
Which of the following statements is true of costs associated with goods for sale? A) Appraisal costs is a subcategory of shrinkage costs. B) Special processing costs are always part of purchasing costs. C) Opportunity costs are not recorded in the accounting system. D) Stockout costs are costs that arise when a company runs out of a particular item for which there is no customer demand.
C) Opportunity costs are not recorded in the accounting system.
Which of the following statements is true of costs associated with goods for sale? A) Information-gathering technology increases the reliability and timeliness of inventory information and increases the costs related to inventory. B) Opportunity costs are not recorded in financial accounting systems because they are not a significant component in several cost categories. C) Purchasing costs include incoming freight costs and are reduced by discounts D) Opportunity costs are recorded in financial accounting systems but are a not significant component in several cost categories.
C) Purchasing costs include incoming freight costs and are reduced by discounts
Which of the following is a disadvantage of an enterprise resource planning (ERP) system? A) The use of standard costing systems is not allowed in an ERP system. B) Shifting manufacturing and distribution plans rapidly in response to changes in supply and demand is not possible in an ERP system. C) The ERP systems must often be customized to fit the strategic needs of the user. D) The ERP system increases lead times when purchasing material from a different supplier.
C) The ERP systems must often be customized to fit the strategic needs of the user.
Which of the following costs is a relevant inventory stockout cost? A) The costs of obsolescence and costs of insurance that change with the quantity of inventory held. B) The return forgone by investing capital in inventory rather than elsewhere. C) The lost contribution margin on sales forgone as a result of customer dissatisfaction due to unavailability of goods. D) The costs of storage space owned that cannot be used for other profitable purposes when inventories decrease.
C) The lost contribution margin on sales forgone as a result of customer dissatisfaction due to unavailability of goods.
Which of the following statements best defines manufacturing cells? A) They are manufacturing areas that use a "push-through" approach whereby finished goods are manufactured on the basis of demand forecasts. B) They are manufacturing centers which focuses on production of a single product and in which workers focus on master one skill so as to be efficient and effective in their work C) They are work areas with different types of equipment grouped together to make related products and to minimize handling costs D) They are production centers positioned in various areas throughout a production facility, close to the associated talent (direct laborers) in which goods are manufactured only after receiving customer orders.
C) They are work areas with different types of equipment grouped together to make related products and to minimize handling costs
Which of the following statements is true of a backflush costing system? A) All costs are tracked sequentially as products pass through each stage of production. B) When inventories are minimal, as in JIT production systems, backflush costing complicates costing systems. C) Usage of a backflush costing system does not satisfy the absorption costing rules of GAAP D) Backflush costing increases the ability of the accounting system to pinpoint the uses of resources at each step in the production process.
C) Usage of a backflush costing system does not satisfy the absorption costing rules of GAAP
All of the following are reasons why a company might carry a safety stock except: A) a buffer against unexpected increases in demand B) a contingency against the uncertainty about lead time C) a strategy to lower the carrying cost of inventory D) a way of softening the impact of sudden unavailability of stock from suppliers
C) a strategy to lower the carrying cost of inventory
Lean accounting is much simpler than traditional product costing because ________. A) it compares value stream costs against costs that include costs of all purchased materials B) it computes the cost of individual products C) calculating actual product costs by value streams requires less overhead allocation D) adding a larger markup on value stream costs to compensate for some of the excluded costs is easier than tracing all non value added costs
C) calculating actual product costs by value streams requires less overhead allocation
Sharing sales information throughout the supply chain leads to which of the following? A) larger stockouts B) increased manufacturing of products not immediately needed by retailers C) fewer manufacturing orders that had to be expedited D) higher inventories held by each company in the supply chain
C) fewer manufacturing orders that had to be expedited
Which of the following is not a reason why a company would adopt JIT purchasing practices? A) high shrinkage costs B) low ordering costs C) low carrying costs of inventory D) reliable supply chains
C) low carrying costs of inventory
The management accountant aids in MRP by ________. A) doing journal entries as requested B) preparing plant appropriation requests C) maintaining accurate records of inventory and its costs D) contacting vendors to make sure they can deliver the materials in time
C) maintaining accurate records of inventory and its costs
A grouping of all the different types of equipment used to make a given product is referred to as ________. A) total quality management B) materials requirements planning C) manufacturing cells D) economic order quantity
C) manufacturing cells
Among different types of costs associated with inventory, four categories of quality costs are ________. A) control costs, inspection costs, internal failure costs, and external failure costs B) prevention costs, inspection costs, internal failure costs, and external failure costs C) prevention costs, appraisal costs, internal failure costs, and external failure costs D) prevention costs, control costs, internal failure costs, and external failure costs
C) prevention costs, appraisal costs, internal failure costs, and external failure costs
The annual relevant carrying costs of inventory consists of the sum of the ________. A) relevant ordering costs and the relevant costs of quality B) relevant ordering costs plus the relevant opportunity costs of capital C) relevant incremental costs plus the relevant opportunity costs of capital D) relevant incremental costs plus the relevant ordering costs
C) relevant incremental costs plus the relevant opportunity costs of capital
The costs that result when a company runs out of a particular item for which there is a customer demand are ________. A) shrinkage costs B) shortage costs C) stockout costs D) EOQ estimation costs
C) stockout costs
The economic order quantity model completely ignores ________. A) carrying costs B) ordering costs C) stockout costs D) the size of a purchase order
C) stockout costs
For inventory carrying costs, which of the following statements is true of the relevant opportunity cost of capital of inventory? A) It is the return received by investing capital in inventory rather than elsewhere. B) It is calculated as the per-unit costs of carrying inventory divided by the required rate of return . C) It is the return foregone by investing capital elsewhere rather than in inventory. D) It is calculated as the required rate of return multiplied by the per-unit costs of acquiring inventory including the purchase price, incoming freight, and incoming inspection.
D) It is calculated as the required rate of return multiplied by the per-unit costs of acquiring inventory including the purchase price, incoming freight, and incoming inspection.
Which of the following costs is a relevant inventory carrying cost of carrying inventory? A) The lost contribution margin on future sales forgone as a result of customer dissatisfaction in product quality. B) The lost contribution margin on sales forgone because of the shortage of inventory. C) The costs of storage space owned that cannot be used for other profitable purposes when inventories decrease. D) The costs of shrinkage.
D) The costs of shrinkage.
Which of the following statements is true of the economic order quantity decision model? A) The economic order quantity increases with higher demand and higher carrying costs and decreases with higher ordering costs. B) The simplest version of the economic order quantity model assumes there are only ordering costs, carrying costs, stockout costs, and purchasing costs. C) It assumes the purchase order lead time is not known with certainty. D) The larger the order quantity, the lower the annual relevant ordering costs and the higher the annual relevant carrying costs.
D) The larger the order quantity, the lower the annual relevant ordering costs and the higher the annual relevant carrying costs.
Which of the following statements best defines a just-in-time production system? A) a push-through system that manufactures finished goods for inventory on the basis of demand forecasts B) a push-through system in which each component in a production line is produced immediately as needed by the next step in the production line C) a demand-pull system that manufactures finished goods for inventory on the basis of demand forecasts D) a demand-pull system in which each component in a production line is produced immediately as needed by the next step in the production line
D) a demand-pull system in which each component in a production line is produced immediately as needed by the next step in the production line
Which of the following statements best defines a trigger point in a sequential-tracking costing system? A) the inventory level at which a new purchase order is generated B) the point at which the sum of annual relevant stockout and ordering costs is minimal C) the production level at which the costing system becomes incapable of tracking the production costs D) a stage in the production cycle at which journal entries are made in the accounting system
D) a stage in the production cycle at which journal entries are made in the accounting system
A costing system that omits recording some or all of the journal entries relating to the cycle from purchase of direct materials to the sale of finished goods is called ________. A) dependent costing B) synchronous costing C) sequential costing D) backflush costing
D) backflush costing
Among different types of costs associated with inventory, the opportunity cost of the investment tied up in inventory is a(n) ________. A) purchasing cost B) ordering cost C) stockout cost D) carrying cost
D) carrying cost
Traditional normal and standard costing systems usually use 4 trigger points to record the flow of costs through the production system. Such costing is called ________. A) backflush costing B) delayed costing C) variable tracking D) sequential tracking
D) sequential tracking
