Managerial Accounting Chapter 27

Lead time includes ___, ___, and ___.

Value-added time, wait time and other non-value-added time.

Which of the following is not true when applying lean principles to hospital care?

a. The overall quality of patient care will increase. b. The same group of caregivers will serve the patient from admittance to discharge. c. The caregivers should have a more rewarding experience. d. The overall cost of patient care will increase. d. The overall cost of patient care will increase.

Which of the following is not one of the reasons a company would undertake activity analysis?

a. To determine the costs of value-added activities b. To determine prevention costs c. To determine the costs of processes d. To determine quality costs b. To determine prevention costs Companies undertake activity analysis for the purpose of determining the costs of quality activities, value-added activities, and various processes (or activities).

In lean manufacturing, the journal entry to apply conversion costs includes a

a. credit to Raw and In Process Inventory. b. debit to Conversion Costs. c. debit to Accounts Payable. d. credit to Conversion Costs. d. credit to Conversion Costs.

In lean manufacturing, incoming raw materials are received

a. directly by the product cells and entered immediately into production. b. by the warehouse and entered immediately into the inventory system. c. directly by the product cells and held for later production. d. by the warehouse and held for later production. a. directly by the product cells and entered immediately into production.

When lean principles are applied to hospital care,

a. each staff member is cross-trained to perform various services. b. patients are moved from centralized department to centralized department. c. centralized services are maintained in a separate area of the hospital. d. the value-added ratio for each patient decreases. a. each staff member is cross-trained to perform various services.

When lean principles are applied to hospital care,

a. each staff member specializes in one function. b. patients are moved from centralized department to centralized department. c. centralized service functions are distributed to each floor/area. d. the value-added ratio for each patient decreases. c. centralized service functions are distributed to each floor/area.

Costs of inspecting and testing products are classified as

a. external failure costs. b. prevention costs. c. internal failure costs. d. appraisal costs. d. appraisal costs. Appraisal costs are costs of activities that detect, measure, evaluate, and inspect products and processes to ensure they meet customer needs.

Costs of scrap and rework are classified as

a. internal failure costs. b. prevention costs. c. external failure costs. d. appraisal costs. a. internal failure costs.

A cost of quality report normally reports all of the following except

a. percent of each quality cost classification to sales. b. total activity cost for each quality cost classification. c. percent of total quality costs associated with each classification. d. percent of financial operating measures per nonfinancial measures. d. percent of financial operating measures per nonfinancial measures.

External failure costs include all of the following costs except those related to:

a. product field testing. b. product liability suits. c. warranty obligations. d. lost sales and lost customers a. product field testing.

All of the following statements regarding traditional manufacturing are true except

a. traditional manufacturing practices emphasize a product-oriented layout. b. traditional manufacturing practices tolerate defects. c. traditional manufacturing practices decrease lead time to protect against uncertainty. d. traditional manufacturing practices increase inventory to protect against process problems. c. traditional manufacturing practices decrease lead time to protect against uncertainty.

A process is a series of activities that converts an input into an output.

True or False True

A toy manufacturing unit produces two types of products and the labor time for the each product is 10 minutes. The batch size of product A is 50 units and batch size of product B is 8 units. The company considers the lead time of the products is equal to the labor hour's. Is the decision correct and supports your answer by selecting the reason.

Yes or No No, Lead time of the product includes value-added time, idle time and other non-value-added time.

Lopez Company incurred an activity cost of $456,000 for inspecting 120,000 units of production. Management determined that the inspecting objectives could be met without inspecting every unit. Therefore, rather than inspecting 120,000 units of production, the inspection activity was limited to 30% of the production. What is the difference in the activity cost per unit on the 120,000 units after the improvement?

a. $0.27 b. $1.14 c. $3.80 d. $2.66 d. $2.66 $456,000 ÷ 120,000 units = $3.80 per unit before improvement (120,000 units × 30%) × $3.80 = $136,800 $136,800 ÷ 120,000 units = $1.14 per unit after improvement $3.80 - $1.14 =$2.66 difference $2.66 difference

A quality control activity analysis indicated the following four activity costs of an administrative department: Redesigning a form to reduce errors $15,000 Responding to customer complaints 75,000 Verifying the accuracy of a form 30,000 Correcting errors in forms 60,000 Total $180,000 If sales are $3,000,000, what percentage of total sales are the internal failure costs?

a. 33.3% b. 1.0% c. 3.0% d. 2.0% d. 2.0%

McPhee Company manufactures rugs in the cutting and assembly process. Rugs are manufactured in 70-rug batch sizes. The cutting time is 14 minutes per rug. The assembly time is 24 minutes per rug. It takes 18 minutes to move a batch of rugs from cutting to assembly. What is the value-added ratio?

a. 47.4% b. 67.9% c. 1.4% d. 2.1% c. 1.4% Value-added lead time: 14 + 24 = 38 minutes Non-value-added lead time: Total within-batch wait time: 38 × (70 - 1) = 2,622 minutes Move time: 18 minutes Total lead time 2,678 minutes 38 minutes ÷ 2,678 minutes = 1.4%

The budgeted conversion costs for a just-in-time cell are $244,720 for 3,800 production hours. Each unit produced by the cell requires 45 minutes of cell process time. During the month, 2,100 units are manufactured in the cell. The estimated materials cost is $50 per unit. What is the journal entry to record the conversion costs applied to the 2,100 units of production?

a. Conversion Costs 105,000 Raw and In Process Inventory 105,000 b. Finished Goods Inventory 101,430 Raw and In Process Inventory 101,430 c. Raw and In Process Inventory 101,430 Conversion Costs 101,430 d. Raw and In Process Inventory 105,000 Conversion Costs 105,000 c. Raw and In Process Inventory 101,430 Conversion Costs 101,430 The raw and in process inventory account is used to accumulate the applied cell conversion costs during the period. The journal entry should include an increase to this account and a decrease to the conversion costs account, which is similar to the treatment of applied overhead. Each unit requires 45 minutes of cell process time. ($244,720 ÷ 3,800 hours) × (45 ÷ 60 minutes) = $48.30. $48.30 × 2,100 units = $101,430.

Which of the following is the process used by companies that produce products with high quality, low cost, and fast response availability?

a. Opportunity cost b. Job order costing c. Process costing d. Lean manufacturing d. Lean manufacturing

The budgeted conversion costs for a just-in-time cell are $244,720 for 3,800 production hours. Each unit produced by the cell requires 45 minutes of cell process time. During the month, 2,100 units are manufactured in the cell. The estimated materials cost is $50 per unit. What is the journal entry to record the materials purchased on account to produce 2,200 units?

a. Raw and In Process Inventory 190,000 Accounts Payable 190,000 b. Materials 190,000 Raw and In Process Inventory 190,000 c. Raw and In Process Inventory 110,000 Accounts Payable 110,000 d. Finished Goods Inventory 110,000 Raw and In Process Inventory 110,000 c. Raw and In Process Inventory 110,000 Accounts Payable 110,000 This journal entry should include an increase (debit) to the materials account and an increase (credit) to a liability account for material to produce 2,200 units: $50 × 2,200 units = $110,000

Which of the following statements regarding lean principles for nonmanufacturing processes is not true?

a. The goal of lean principles is to maximize the time consumed in a process. b. In services, the product is the customer, patient, or client. c. In the administrative process, the product is normally information. d. Lean service processes often use cross-trained groups. c. In the administrative process, the product is normally information.

In lean accounting, the journal entry to record all materials and conversion costs includes a debit to ________.

a.Cost of Goods Manufactured b.Inventory c.Raw and In Process Inventory d.None of these choices are correct. c.Raw and In Process Inventory

Which of the following are examples of nonfinancial performance?

a.Lead time price quantity variance b.Setup time c.Value-added ratio d.All of these choices are correct.. d.All of these choices are correct..

________ measures the time interval between when a product enters production (started) and when it is completed (finished).

a.Product life cycle b.Operating cycle c.Lead time d.None of these choices are correct. c.Lead time

Which company manufactures products using product-oriented layouts?

a.Sony b.Yamaha c.Motorola d.Hyundai/Kia Motors Group b.Yamaha

Which company claimed more than $17 billion in savings from Six Sigma?

a.Sony b.Yamaha c.Motorola d.Kenney Manufacturing Company c.Motorola

A cost of quality report normally includes which of the following?

a.Total activity cost for each quality cost classification b.Percent of total quality costs associated with each classification c.Percent of each quality cost classification to sales d.All of these choices are correct.

Which company uses RFID tags for greater supply chain transparency and flexibility?

a.Yamaha b.Kenney Manufacturing Company c.Hyundai/Kia Motors Group d.Sony c.Hyundai/Kia Motors Group

Which company cut assembly time from 70 minutes to 15 minutes per product by using four-person teams to assemble products?

a.Yamaha b.Motorola c.Kenney Manufacturing Company d.Sony d.Sony

The last step in Six Sigma is ________.

a.define b.control c.analyze d.improve b.control

Lean manufacturing normally uses nonfinancial measures to help guide ________.

a.long-term operating performance b.short-term operating performance c.short-term budgeting d.None of these choices are correct. b.short-term operating performance

If manufacturing processes are organized around a product, the company has a __________ layout.

a.manufacturing-oriented b.product-oriented c.process-oriented d.None of these choices are correct. b.product-oriented

All of the following are lead time terms and classifications except __________ time.

a.operating cycle b.value-added c.non-value-added d.within-batch wait a.operating cycle

Activity analysis determines the cost of activities for the purpose of determining the cost of ________.

a.quality b.value-added activities c.processes d.All of these choices are correct. d.All of these choices are correct.