Accounting Systems Chapter 7

What is the economic order quantity if the annual demand is 10,000 units, set up cost of placing each order is $3 and the holding cost per unit per year is $2? a. 174 b. 123 c. 245 d. none of the above

a. 174

An example of automation of manufacturing design is a. Computer Aided Engineering b. Automated Storage and Retrieval Systems c. Computer Numerical Control d. robotics

a. Computer Aided Engineering

Which statement is not correct? a. Inventories provide a competitive advantage. b. Inventories can invite overproduction. c. Inventories are expensive to maintain. d. Inventories may conceal problems.

a. Inventories provide a competitive advantage.

Which of the following is not a principle of lean manufacturing? a. Products are pushed from the production end to the customer b. All activities that do not add value and maximize the use of scarce resources must be eliminated c. Achieve high inventory turnover rate. d. A lean manufacturing firm must have established and cooperative relationships with vendors e. All of the above are lean manufacturing principles.

a. Products are pushed from the production end to the customer

Which statement is not correct? a. general ledger creates a new cost record upon receipt of a work order from production planning and control b. cost accounting updates the cost record with data gathered from the materials requisition c. general ledger posts summary information about the manufacturing process based on a journal voucher prepared by cost accounting d. cost accounting computes variances and applies overhead to individual cost records

a. general ledger creates a new cost record upon receipt of a work order from production planning and control

The purpose of the cost accounting system is to a. produce information for inventory valuation b. authorize release of raw materials c. direct the movement of work-in-process d. determine material requirements

a. produce information for inventory valuation

In traditional firms, information reporting a. provides financially oriented information relating to operations b. presents detailed information about activities c. shows the allocation of costs first to activities and then to cost objects d. identifies nonessential activities

a. provides financially oriented information relating to operations

Characteristics of Just-In-Time manufacturing include all of the following except a. push manufacturing b. zero defects c. reduced setup time and small lot sizes d. reliable vendors

a. push manufacturing

Characteristics of lean manufacturing include all of the following except a. push manufacturing b. zero defects c. reduced setup time and small lot sizes d. reliable vendors

a. push manufacturing

Firms implement a Just-In-Time inventory approach to a. reduce investment in inventories b. determine the optimum inventory level using the EOQ model c. camouflage production problems d. ensure overproduction of inventory

a. reduce investment in inventories

Lead time times daily demand is a. the reorder point b. safety stock c. total inventory d. the economic order quantity

a. the reorder point

Which function is not a part of the batch production process? a. Plan and control production b. Prepare purchase orders c. Maintain inventory control d. Perform cost accounting

b. Prepare purchase orders

Which of the following statements about the EOQ inventory model assumptions is incorrect? a. Demand for the product is constant and known with certainty. b. The lead time is a variable. c. All inventories in the order arrive at the same time. d. Total ordering cost is a variable

b. The lead time is a variable.

Which of the following is not true? a. The complexities of ABC have caused many firms to pursue value stream accounting. b. Value stream accounting captures costs related to value added activities within a specified department or activity. c. An essential aspect in implementing value stream accounting is defining the product family. d. Value stream accounting makes no distinction between direct costs and indirect costs.

b. Value stream accounting captures costs related to value added activities within a specified department or activity.

All of the following are characteristics of batch processing except a. each item in the batch is similar b. batches are produced in accordance with detailed customer specifications c. batches are produced to replenish depleted inventory levels d. setting up and retooling is required for different batches

b. batches are produced in accordance with detailed customer specifications

Which statement is not correct? a. cost objects are the reasons for performing activities b. cost object describes the work performed in a firm c. activities cause costs d. cost objects create a demand for activities

b. cost object describes the work performed in a firm

Which item does not describe a world-class company? a. the goal of a world-class company is to delight its customers b. customers in a world-class company are external departments only c. world-class companies work in cross-functional teams d. a world-class company has a flat organizational structure

b. customers in a world-class company are external departments only

Manufacturing flexibility incorporates four characteristics. These include all of the following except a. high product quality b. high inventory levels c. automation of manufacturing processes d. physical reorganization of production facilities

b. high inventory levels

The internal control significance of the excess materials requisition is that it a. indicates the amount of material released to work centers b. identifies materials used in production that exceed the standard amount allowed c. indicates the standard quantities required for production d. documents the return to raw materials inventory of unused production materials

b. identifies materials used in production that exceed the standard amount allowed

Which situation violates the segregation of functions control procedure? a. production planning and control is located apart from the work centers b. inventory control maintains custody of inventory items c. cost accounting has custody of and makes entries on cost records d. work centers record direct labor on job tickets

b. inventory control maintains custody of inventory items

Firms are abandoning Activity Based Costing (ABC) because a. it does not facilitates the analysis of variances b. it is complex and time consuming c. it does not recognize the importance of direct labor as a component of total manufacturing cost d. the financial nature of the reports does not permit comparisons to be made among different types of products

b. it is complex and time consuming

Firms are abandoning activity-based costing (ABC) because a. it does not facilitate the analysis of variances b. it is complex and time consuming c. the financial nature of the reports does not permit comparisons to be made among different types of products d. it does not recognize the importance of direct labor as a component of total manufacturing cost

b. it is complex and time consuming

Firms are adopting Activity Based Costing (ABC) because a. it facilitates the analysis of variances b. it more accurately allocates costs to products c. it recognizes the importance of direct labor as a component of total manufacturing cost d. the financial nature of the reports permits comparisons to be made among different types of products

b. it more accurately allocates costs to products

Computer integrated manufacturing groups all of the following technologies except a. robotics b. materials requirements planning c. automated storage and retrieval systems d. computer aided design

b. materials requirements planning

Computer integrated manufacturing includes all of the following technologies except a. robotics b. materials requirements planning c. automated storage and retrieval systems d. computer aided design

b. materials requirements planning

The storekeeper releases raw materials based on the a. production schedule b. materials requisition c. work order d. bill of materials

b. materials requisition

An example of a continuous process is the production of a. wedding invitations b. milk products c. jet aircraft d. all of the above

b. milk products

All of the following are internal control procedures that should be in place in the conversion cycle except a. calculation and analysis of direct material and direct labor variances b. retention of excess materials by work centers c. physical count of inventory items on hand d. limited access to raw material and finished goods inventories

b. retention of excess materials by work centers

The production schedule is a. the expected demand for the firm's finished goods for a given year b. the formal plan and authority to begin production c. a description of the type and quantity of raw materials and subassemblies used to produce a single unit of finished product d. the sequence of operations during manufacturing

b. the formal plan and authority to begin production

Which of the following is not an assumption of the Economic Order Quantity model? a. demand for the product is known with certainty b. total cost per year of placing orders is fixed c. lead time is known and is constant d. there are no quantity discounts

b. total cost per year of placing orders is fixed

Firms hold safety stock to compensate for a. mathematical weaknesses of the Economic Order Quantity model b. variations in lead time or daily demand c. fluctuations in carrying costs d. uncertainty in the estimation of ordering costs

b. variations in lead time or daily demand

If the daily demand is 40 units and the lead time is 12 days, the reorder point is a. 52 units b. 48 units c. 480 units d. none of the above

c. 480 units

The SAP R/3 system provides pre-defined modules to support business processes in the all of the following categories except a. human resources b. business process support c. strategic d. financial

c. strategic

Which of the following is not true regarding ABC? a. ABC is too time-consuming and complicated for practical applications over a sustained period. b. ABC identifies the most and least profitable products and customers. c. ABC promotes the lean manufacturing philosophies of process simplification and waste elimination. d. All of the statements are true.

c. ABC promotes the lean manufacturing philosophies of process simplification and waste elimination.

When one of the following statements is true? a. ERP evolved directly from MRP. b. ERP evolved into MRP and MRP evolved into MRP II c. MRP II evolved from MRP and MRP II evolved into ERP d. None of the above is true.

c. MRP II evolved from MRP and MRP II evolved into ERP

An example of automation of manufacturing planning is a. Computer Aided Engineering b. Automated Storage and Retrieval Systems c. Materials Requirements Planning d. Computer Numerical Control

c. Materials Requirements Planning

Which of the following is not true? a. The complexities of ABC have caused many firms to pursue value stream accounting. b. An essential aspect in implementing value stream accounting is defining the product family. c. Value stream accounting captures costs related to value-added activities within a specified department or activity. d. Value stream accounting makes no distinction between direct costs and indirect costs.

c. Value stream accounting captures costs related to value-added activities within a specified department or activity.

A manufacturing process that is organized into group technology cells utilizing no human labor is called a. islands of technology b. process simplification c. computer integrated manufacturing d. traditional manufacturing

c. computer integrated manufacturing

Which process creates a homogeneous product through a continuous series of standard procedures? a. batch process b. make-to-order process c. continuous process d. none of the above

c. continuous process

Types of information provided by Activity Based Costing include a. a description of the single activity driver used for overhead application b. the dollar value of the direct material usage variance c. identification of cost drivers d. details of the components of the single overhead cost pool

c. identification of cost drivers

Inventory control performs all of the following tasks except it a. provides production planning and control with the inventory status report of finished goods b. updates the raw material inventory records c. prepares a materials requisition for each production batch d. records the completed production as an increase to finished goods inventory

c. prepares a materials requisition for each production batch

A move ticket

c. records the work done in each work center

Process simplification focuses on a. using Computer Numerical Controlled machines which stand alone within a traditional setting b. completely automating the manufacturing environment c. reducing the complexity of the physical manufacturing layout of the shop floor d. organizing the process into functional departments

c. reducing the complexity of the physical manufacturing layout of the shop floor

Which of the following is not a category of critical success factors in most manufacturing companies? a. product quality b. customer service c. revenue generation d. resource management

c. revenue generation

A flexible manufacturing system a. creates bottlenecks in the process b. leads to an "us" versus "them" attitude among workers c. shortens the physical distance between activities d. is organized along functional lines

c. shortens the physical distance between activities

Transaction authorization occurs in a traditional manufacturing environment in all of the following ways except a. production planning and control initiates production with a work order b. movement of the work through the production process follows the move ticket c. the sales department modifies work orders to match changes in demand d. the materials requisition authorizes the storekeeper to release materials to the work centers

c. the sales department modifies work orders to match changes in demand

The stages of the automation continuum are (in order) a. traditional, computer-integrated manufacturing, islands of technology, process simplification b. process simplification, traditional, islands of technology, computer-integrated manufacturing c. traditional, islands of technology, process simplification, computer-integrated manufacturing d. traditional, process simplification, computer-integrated manufacturing, islands of technology

c. traditional, islands of technology, process simplification, computer-integrated manufacturing

Which of the following is not an example of waste? a. overproduction of products b. safety hazards that cause injury c. stand-alone processes that are not linked to upstream or downstream processes d. All of the above are examples of waste.

d. All of the above are examples of waste.

Which of the following would not be included as a value stream cost? a. Labor costs of employees who simply transport the product from cell to cell. b. Labor costs of employees who design the product. c. A charge per square foot for the value stream production facility including cost of rent and building maintenance. d. All of the above are value stream costs

d. All of the above are value stream costs

Which statement is true? a. World-class companies must maintain strategic agility and be able to turn on a dime. b. World-class companies motivate and treat employees like appreciating assets. c. Manufacturing firms that achieve world-class status do so by following a philosophy of lean manufacturing d. All the above are true

d. All the above are true

All of the following are documents in batch process production systems except a. production schedule b. route sheet c. materials requisition d. bill of manufacturing

d. bill of manufacturing

Deficiencies of the traditional cost accounting information system include all of the following except a. an emphasis on financial performance b. inaccurate cost allocations c. an emphasis on standard costs d. immediate feedback about deviations from the norm

d. immediate feedback about deviations from the norm

Which statement is not correct? a. the benchmark approach compares key activities with similar activities in other firms b. critical success factors include product and process quality c. the ABC model includes two perspectives: an allocation of cost perspective and a process perspective d. in world-class manufacturing firms, quality control activities at the end of the process are essential

d. in world-class manufacturing firms, quality control activities at the end of the process are essential

Which subsystem is not a part of the production system? a. directing the movement of work through the process b. determining raw material requirements c. authorizing work to be performed d. monitoring the flow of cost information related to production

d. monitoring the flow of cost information related to production

The cost of poor quality includes all of the following except a. cost of rework b. warranty claims c. scheduling delays d. proceeds from the sale of scrap

d. proceeds from the sale of scrap

When determining which items to produce, a firm must know a. last year's production level b. raw material inventory levels c. the standard cost of the item d. the sales forecast

d. the sales forecast

All of the following are problems with traditional accounting information except: a. Managers in a lean setting require immediate information. b. The measurement principle tends to ignore standards other than money. c. Standard costing motivates nonlean behavior in operations. d. The overhead component in a manufacturing company is usually very large. e. All of the above are problems associated with traditional accounting information.

e. All of the above are problems associated with traditional accounting information.

Which of the following is not a problem associated with standard cost accounting? a. Standard costing motivates management to produce large batches of products and build inventory. b. Applying standard costing leads to product cost distortions in a lean environment. c. Standard cost data are associated with excessive time lags that reduce its usefulness. d. The financial orientation of standard costing may promote bad decisions. e. All of the above are problems with standard costing.

e. All of the above are problems with standard costing.