ACCT 460 Chapter 11

A system, which involves recording purchases of raw materials inventory, recording all the components of work in process, and recording the total cost of sales for products completed and sold is referred to as: a. A perpetual inventory system b. The accounting information system c. A periodic inventory system d. None of the above

a. A perpetual inventory system

Segregation of duties is accomplished by which of the following? a. Accounting personnel having restricted access to physical inventory b. Warehouse personnel signing all documents related to material movements c. Production personnel restricted to one manufacturing station at all times d. None of the above

a. Accounting personnel having restricted access to physical inventory

Computerization of the conversion process results in all except: a. Automatic computation of materials requirements based on purchase orders. b. Timely transfer of inventories throughout the process c. Automatic updating of inventory status reports d. Automatic computation of materials requirements based on sales orders

a. Automatic computation of materials requirements based on purchase orders

________ integrates all of the conversion processes to allow for minimal disruptions due to reporting requirements or inventory movement issues. a. Computer-integrated manufacturing systems (CIMs) b. Computer aided design (CAD) c. Material resource planning (MRP) d. Computer aided manufacturing (CAM)

a. Computer-integrated manufacturing systems (CIMs)

Earnings management: a. Is the act of misstating financial information b. Is the goal of cost/benefit relationships c. Accomplished through the proper management of inventory and sales d. Is an ethical goal of management

a. Is the act of misstating information

Which of the following statements concerning an operations list is true? a. It is an engineering document that describes the chain of events within a company's conversion process. b. It is an engineering document that specifies the descriptions and quantities of component parts within a product. c. It is a capital budgeting document that describes the chain of events within a company's conversion process. d. It is a capital budgeting document that specifies the descriptions and quantities of component parts within a product

a. It is an engineering document that describes the chain of events within a company's conversion process.

The process of logical, systematic flow of resources throughout the organization is referred to as: a. Logistics b. Planning c. Reporting d. Sales forecast

a. Logistics

The planning component of the logistics function has of all the following elements except: a. Maintenance and control b. Engineering c. Scheduling d. Capital budgeting

a. Maintenance and control

Within the logistics function, segregation of duties means: a. One person should not have both inventory and accounting responsibilities b. One person should have production responsibilities over more than one station c. One person should not have quality assurance responsibilities over work station other than his own d. Each person can only have one duty or function in the production function

a. One person should not have both inventory and accounting responsibilities

The form that describes the chain of events that constitute a product's production is referred to as the: a. Operations list b. Bill of materials c. Engineering d. Capital budgeting

a. Operations list

This schedule outlines the specific timing required for a sales order, including the dates and times designated for the production run. a. Production schedule b. Production orders schedule c. Maintenance and control schedule d. Human resource schedule

a. Production schedule

The final hub in the logistics function which involves a follow-up to production, where the products are inspected before they are moved to the warehouse or shipping area is referred to as: a. Quality control b. Shipping notice c. Purchase requisition d. Warehousing

a. Quality control

Variances: a. Represent the differences between actual costs and the standard costs applied b. Represent the difference between design specifications and production results c. Represent flaws in the production results d. Each of the answers, A, B, and C are correct.

a. Represent the differences between actual costs and the standard costs applied

Select the false completion to the statement which starts "A computer-based conversion process." a. Requires less data input into the system b. Automatically prepares financial accounting entries and cost accounting reports c. Yields greater benefits in terms of workforce efficiency d. Permits more systematic scheduling which allows for greater flexibility

a. Requires less data input into the system

When additional procedures are necessary to bring a defective product to its required specifications, this is referred to as a. Rework b. Scrap c. Work-in-process d. Variance reporting

a. Rework

The major activities within the conversion process include all but a. Strategic planning that supports the company's operational goals. b. Optimizing the use of the employees, property, and inventories that are needed in operations c. Controlling production flows, ensuring product quality d. Preparing the related cost accounting and financial accounting records

a. Strategic planning that supports the company's operational goals.

The term "operations" is commonly used to refer to: a. The main function of the business b. Any function of the business which generates revenues. c. Only those functions of the business accomplished by the operations department d. Only those functions which move inventory through the production cycle

a. The main function of the business

Which document provides the descriptions and quantities of materials taken into production for a specified sale or other authorized production activity? a. The routing slip b. The shipping notice c. The purchase requisition d. The sales order

a. The routing slip

Variances represent the differences between: a. actual costs and the standard costs applied b. raw materials ordered and raw materials received c. the sales targets and sales accomplishments d. actual quantity on hand and quantity according to the inventory system

a. actual costs and the standard costs applied

Ethical issues on manufacturing include all except: a. Reassignment or retaining employees terminated due to automation b.Absorption costing c. Production of excessive inventory levels d. Earnings management

b. Absorption costing

Production orders: a. Outline the specific timing required for sales orders b. Authorize production activities for a particular need or order c. Are forecasts of needs based on known and anticipated sales d. Are issued by the engineering department to correct product deficiency issues

b. Authorize production activities for a particular need or order

The form that specifies the components of a product, including descriptions and quantities of materials and parts needs is the: a. Operations list b. Bill of materials c. Engineering d. Capital budgeting

b. Bill of materials

The goal of a physical inventory reconciliation is to a. Determine the quantity of inventory sold b. Compare the physical count with the perpetual records c. Compare the physical count with the periodic records d. Determine the quantity of inventory in proces

b. Compare the physical count with the perpetual records

This software allows engineers to work with advanced graphics at electronic work stations to create 3-D models that depict the production environment. a. Computer-integrated manufacturing systems (CIMs) b. Computer-aided design (CAD) c. Material resource planning (MRP) d. Computer aided manufacturing (CAM)

b. Computer-aided design (CAD)

Standard costs are the: a. Responsibility of production accountants b. Expected costs based on required resources c. Costs normally paid for a component d. Prices the customer is expected to pay upon sale

b. Expected costs based on required resources

The department responsible for training production personnel is the: a. Production department b. Human resources department c. Engineering department d. None of the above

b. Human resources department

which of the following is not considered a benefit of using computerized conversion systems? a. Automatic computation of materials requirements b. Increased sales and cost of sales c. Increased efficiency and flexibility d. Early error detection and increased accuracy

b. Increased sales and cost of sales

The responsibility for managing and recording the movement of inventory in the many different directions that it may go throughout the conversion process is assigned to the: a. Production schedule department b. Inventory control department c. Maintenance and control department d. Human resources department

b. Inventory control department

Routing is the: a. Path electronic messages follow in the inventory system b. Issuance and movement of materials into the various production phases c. Physical movement of materials from the point of sale to the customer d. Physical movement of materials from the vendor to the inventory stores facility

b. Issuance and movement of materials into the various production phases

A company's conversion process includes all of the following except: a. Materials b. Office supplies c. Labor d. Overhead

b. Office supplies

The component of the logistics function that directs the focus of operations is referred to as: a. Logistics b. Planning c. Reporting d. Sales forecast

b. Planning

Capital budgeting: a. Is responsible for the issuance of stocks and bonds to finance operations b. Plans the capital resources needed to support operations c. Is responsible for the procurement of production materials d. Is not a function of a company once established and functioning

b. Plans the capital resources needed to support operations

The operations component of the logistics function has which of the following elements? a. Maintenance and control b. Production c. Inventory control d. Capital budgeting

b. Production

The form that authorizes production activities for a particular sales order or forecasted needs is referred to as the: a. Production schedule b. Production orders c. Maintenance and control process d. Human resources process

b. Production orders

The final hub in the logistics function is: a. Packaging b. Quality control c. Sales d. Shipping to the customer

b. Quality control

IT systems permit or allow all of the following except: a. Automatic computation of materials requirements based on sales orders. b. Reduced internal security measures c. Automatic updating of inventory status reports d. Timely transfer of inventories throughout the process.

b. Reduced internal security measures

Manpower displacement through automation: a. Is considered a benefit through cost/benefit analysis. b. Should be a concern of management c. Is the goal of proper engineering d. Seldom results in termination of employees

b. Should be a concern of management

Which of the following is NOT a responsibility given to the individuals making purchases for the company? a. Purchasing raw materials for production b. Specifying the order and sequence of payments to vendors c. Selecting vendors d. Specifying the quantities to be ordered

b. Specifying the order and sequence of payments to vendors

Overhead includes all of the following except: a. Various other expenses necessary to run the operating facility b. The president's salary c. Indirect labor d. Indirect materials

b. The president's salary

A company must have systems in place to accomplish all of the following except: a. Capture data b. Vocalize data c. Record data d. Summarize data

b. Vocalize data

The major function within the conversion process is the: a. Sales order function b. Sales forecast function c. Logistics function d. Reporting function

c. Logistics function

A firm expects to sell 1000 units of its best-selling product in the coming year. Ordering costs for this product are $100 per order, and carrying costs are $2 per unit. Compute the optimum order size, using the EOQ model. a. 10 units b. 224 units c. 317 units d. 448 units

c. 317 units

Rework refers to: a. Generating a better quote for a customer b. Overhaul a manufacturing machine c. Additional procedures to bring a product up to specifications. d. Parts that are beyond repair at any cost

c. Additional procedures to bring a product up to specifications

Which of the following questions is most likely to be found on an internal control questionnaire concerning a company's conversion processes? a. Are vendor invoices for materials purchases approved for payment by someone who is independent of the cash disbursements function? b. Are signed checks for materials purchased mailed promptly without being returned to the department responsible for processing the disbursement? c. Are approved requisitions required when materials are released from the company's warehouse into production? d. Are details of payments for materials balanced to the total posted to the general ledger?

c. Are approved requisitions required when materials are released from the company's warehouse into production?

When absorption costing is used: a. Production inefficiencies are immediately identified b. Production to absorb cost of waste and yield factors not considered in other costing methods c. Both variable and fixed costs are included in unit costs d. The transfer of values to the income statement through inventory accounts.

c. Both variable and fixed costs are included in unit costs

Select the true statement. a. Computer-aided manufacturing (CAM) requires computer-aided design b. Computer-aided design is always two dimensional c. Computer-aided design may be three dimensional d. Computer-aided design requires additional manpower during assembly

c. Computer-aided design may be three dimensional

A production schedule: a. Does not contain requirements due to sales forecasts b. Does not contain information from the bill of materials c. Contains information from the operations list d. Are issued by the maintenance and control department

c. Contains information from the operations list

The act of misstating financial information in order to improve financial statement results is referred to as: a. Just in time production systems b. Manufacturing resource planning c. Earning management d. Absorption costing

c. Earning management

Functions of corporate governance includes all of the following except: a. Management oversight b. Earnings management c. Financial stewardship d. Internal control system

c. Financial stewardship

The operations list is the: a. Schedule of production for the day, week, or month as specified by the company. b. Document of instructions utilized to assemble a product c. Form that specifies the components of a product d. Designing the product and creating the bill of materials

c. Form that specifies the components of a product

Which of the following activities is not part of the planning component of the logistics function? a. Research and development b. Capital budgeting c. Human resource management d. Scheduling

c. Human resource management

Select the true statement from the choices below. a. Inventory stores and warehousing are both concerned with raw materials b. Neither inventory stores nor warehousing are concerned with raw materials c. Inventory stores is concerned with raw materials and warehousing is concerned with finished goods d. Inventory stores is concerned with finished goods

c. Inventory stores is concerned with raw materials and warehousing is concerned with finished goods

The process that is concerned with maintaining the capital resources used to support production is referred to as: a. The production schedule b. Production orders c. Maintenance and control d. The human resources process

c. Maintenance and control

________ involves the automated scheduling of production orders and movement of materials in the production process. a. Computer-integrated manufacturing systems (CIMs) b. Computer aided design (CAD) c. Material resource planning (MRP) d. Computer aided manufacturing (CAM)

c. Material resource panning (MRP)

The component of the logistics function that directs the focus of operations is the: a. Operations component b. Resource management component c. Planning component d. The sales component

c. Planning component

Inventory status reports are: a. Generated only for raw materials b. Only generated for finished goods c. Prepared at various stages of the production process d. Only generated for work in progress

c. Prepared at various stages of the production process

Perpetual Inventory systems: a. Record changes in inventory categories only at the end of each period b. Record changes in inventory categories only when sales are made c. Record changes in inventory categories whenever material is moved from one category to another d. Does not address raw materials

c. Record changes in inventory categories whenever material is moved from one category to another

Just-in-time (JIT) production systems: a. Require close communications with the engineering department. b. Do not require close communication with vendors c. Require closely controlled inventory levels d. Do not require additional monitoring

c. Require closely controlled inventory levels

Security of assets and documents include all of the following except: a. Water sprinklers b. Adequate insurance coverage c. Restricted movement of office supplies d. Security guards

c. Restricted movement of office supplies

Which of the following activities is an inventory control activity? a. Engineering b. Maintenance c. Routing d. Quality control

c. Routing

The process that plans the timing for production activities is referred to as: a. Operations list b. Bill of materials c. Scheduling d. Capital budgeting

c. Scheduling

Which of the following terms relate to the control of materials being held for future production? a. Routing b. Work-in-process c. Stores d. Warehousing

c. Stores

Scheduling: a. Plans the timing for acquisition of fixed assets b. Does not take into account machine breakdowns c. Takes into consideration all the open sales orders d. Does not take inventory needs

c. Takes into consideration all the open sales orders

Standard costs take into consideration all of the following except: a. The cost of materials utilized to maintain production equipment b. The cost of labor used to operate the production machinery c. The cost of sales manager's salary d. Factory overhead items that cannot be directly correlated to product production

c. The cost of sales manager's salary

When there is a difference between the inventory records quantity and the physical count of inventory: a. There is a variance b. The difference can be ignored if minor c. The difference is resolved through inventory reconciliation d. The difference is ignored if the physical quantity exceeds inventory record quantity

c. The difference is resolved through inventory reconiliation

The conversion process is initiated when the company recognizes: a. The receipt of raw materials b. The shipment of finished goods to customers c. The need to conduct operations d. None of the above

c. The need to conduct operations

The issuance and movement of materials into the various production phases is referred to as: a. Production scheduling process b. Inventory control process c. The routing process d. The production orders process

c. The routing process

If a manufacturing company's inventory of supplies consists of a large number of small items, which of the following would be considered a weakness in internal controls? a. Supplies of relatively low value are expensed when acquired. b. Supplies are physically counted on a cycle basis, whereby limited counts occur quarterly and each item is counted at least once annually. c. The stores function responsible for updating perpetual records, whenever inventory items are moved. d. Perpetual records are maintained for inventory for inventory items only if they are significant in value

c. The stores function responsible for updating perpetual records, whenever inventory items are moved.

In inventory systems, when the actual quantity and the accounting records quantity are compared it is referred to as: a. Perpetual inventory b. Inventory resolution c. The physical inventory reconciliation d. Periodic inventory

c. the physical inventory reconciliation

Which of the following involves the inclusion of both variable and fixed costs in the determination of unit costs for ending inventories and cost of goods sold? a. Just in time production systems b. Manufacturing resource planning c. Earnings management d. Absorption costing

d. Absorption costing

Cost-benefit can be defined as: a. Gross profit sales are made b. Cameras and security guards to protect construction materials in a restricted access warehouse c. Verifying inventory levels at the end of each working shift d. Alarm systems are vaults for fine jewelry

d. Alarm systems and vaults for fine jewelry inventories

The term conversion processes is often used synonymously with a. Operations b.Production c. Manufacturing d. All of the above

d. All of the above

Which of the following company activities would NOT be considered a productive activity? a. The manufacture of automobiles b. The treatment of patients in a medical facility c. Providing consulting services d. All of the above, A, B, and C, are considered productive activities

d. All of the above, A, B, and C, are considered productive activities

Economic order quantity (EOQ) is a function: a. Of the purchasing customer or client. b. Of the sales force to provide the purchasing customer or client with the greatest value c. Of the responsibility of engineering through the operations list. d. Associated with inventory control

d. Associated with inventory control

The resource management component of the logistics function has all of the following elements except: a. Maintenance and control b. Human resources c. Inventory control d. Capital budgeting

d. Capital budgeting

The bill of materials is the: a. Cost of raw materials purchased from a vendor. b. Document of instructions utilized to assemble product c. Form the specifies the components of a product d. Designing the product and creating the bill of materials and the operations list

d. Designing the product and creating the bill of materials and the operations list

Manufacturing has changed in recent years as a result of each of the following factors except: a. globalization b. technological advances c. increased competition d. lack of economic prosperity

d. lack of economic prosperity

Engineering is responsible for: a. Designing the product while operations is responsible for the bill of materials and the operations list. b. Designing the plant and equipment used in manufacturing c. Is responsible for the procurement of production materials d. Designing the product and creating the bill of materials and the operations list.

d. Designing the product and creating the bill of materials and the operations list.

Operations may be performed by all of the following except: a. Continuous processing of homogeneous products. b. Batch processing c. Custom, made-to-order processing d. Each of the above is a valid form of operations

d. Each of the above is a valid form of operations

Physical controls include all but: a. Fences and alarm systems b. Security guards c. High tech security tools d. Each of the answers A, B, and C are correct

d. Each of the answers A, B, and C are correct

Which of the following factors does NOT influence the need to safeguard and monitor inventory movement? a. Inconsistent or high levels of inventory movement b. If the inventory is held at various locations c. If a company's inventory items are difficult to differentiate d. Each of the answers, A, B, and C are correct

d. Each of the answers, A, B, and C are correct

The responsible for managing the placement and development of sufficient qualified personnel which includes hiring and training workers as well as maintaining records of their performance is the task of the: a. Production schedule department b. Production orders department c. Maintenance and control department d. Human resources department

d. Human resources department

Which of the following activities in the conversion process does NOT require express authorization? a. Initiation of production orders b. Issuance of materials into production process c. Transfer of finished goods to the warehouse or shipping areas d. Initiation of a sales order

d. Initiation of sales order

Which of the following involves managing the holding area for finished goods awaiting sale? a. Purchase orders b. Shipping notices c. Purchase requisitions d. Inventory warehousing

d. Inventory warehousing

Perpetual inventory systems: a. Are only updated at the end of each fiscal period b. Are concerned only with finished goods c. Are not concerned with raw materials d. Involve every level of inventory necessary for production

d. Involve every level of inventory necessary for productiuon

For which of the following computerized conversion system s is Wal-Mart well known? a. CAD/CAM b. MRP-II c. CIMs d. JIT

d. JIT

Which of the following represents a method of managing inventory designed to minimize a company's investment in inventories by scheduling materials to arrive at the time they are needed for production? a. The economic order quantity (EOQ) b. Material resource planning (MRP) c. First-in, first-out (FIFO) d. Just-in-time (JIT)

d. Just-in-time (JIT)

Periodic inventory systems: a. Are only updated at the end of each fiscal period b. Are concerned with finished good c. Are not concerned with raw materials d. May not reflect current inventory levels

d. May not reflect current inventory levels

Variances: a. Are only investigated if they are unfavorable b. Are always investigated c. Will always result in the improvement of the logistics function d. May not result in any changes in the logistics function

d. May not result in any changes in the logistics function

The activity in the conversion process that does NOT require express authorization is the: a. Initiation of production orders b. Issuance of materials into the production process c. Transfer of finished goods to the warehouse of shipping areas d. Movement of production pieces from one stage of production to the next

d. Movement of production pieces from one stage of production to the next

When the proper tone of corporate governance is in place: a. Encouraging ethical conduct is unnecessary b. Effectiveness is not improved c. Risk of fraud tends to increase d. Proper stewardship of assets increases

d. Proper stewardship of assets increases

Physical inventory counts should only include: a. Finished goods b. Finished goods and raw materials c. Finished goods and work-in-process d. Raw materials, work-in-process, and finished goods

d. Raw materials, work-in-process, and finished goods

The responsibility to conduct make/buy decisions is usually given to: a. Engineering b. Capital budgeting c. Operations d. Research and development

d. Research and development

The expected cost based on projections of a product's required resources which includes direct materials, direct labor and overhead is referred to as: a. Quality control costs b. Sales order cost c. Rework costs d. Standard costs

d. Standard costs

Which of the following internal controls is typically associated with the maintenance of accurate inventory records? a. Performing regular comparisons of perpetual records with recent costs of inventory items b. Using a just-in-time system to keep inventory levels at a minimum c. Performing a match of the purchase request, receiving report, and purchase order before payment is approved d. Using physical inventory counts as a basis for adjusting the perpetual records

d. Using physical inventory counts as a basis for adjusting the perpetual records