Ch 20

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

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

If Kenton Inc. has a safety stock of 175 units and the average weekly demand is 25 units, how many days can be covered if the shipment from the supplier is delayed by 12 days? A) 12 days B) 49 days C) 61 days D) 37 days

B

The time from when an order is received until it becomes a finished good is referred to as ________. A) work-in-process time B) manufacturing cycle time C) pass-through time D) product design time

B

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

Traditional normal and standard costing systems use ________. A) backflush costing B) delayed costing C) variable tracking D) sequential tracking

D

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

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

The time required to get equipment, tools, and materials ready to start production is referred to as ________. A) setup time B) delivery time C) manufacturing-cycle time D) product design time

A

A push-through system that manufactures finished goods for inventory on the basis of demand forecasts is referred to as ________. A) just-in-time purchasing B) materials requirements planning C) relevant total costs D) economic order quantity

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 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

Among different types of costs associated with inventory, the costs that result when features and characteristics of a product or service are not in conformance with the customer specifications are ________. A) EOQ estimation costs B) costs of quality C) purchasing costs D) shrinkage costs

B

Delinz Company can predict with virtual certainty the demand for its products. Delinz's sells 75 hams per week. Purchase-order lead time is 3 weeks and the economic-order quantity is 150 hams. What is the reorder point? A) 675 hams B) 225 hams C) 450 hams D) 150 hams

B

Under backflush costing approach, 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) credited to the Materials Inventory Control account

B

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

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

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

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

Which of the following statements best defines manufacturing cycle time in a JIT production system? A) the time from when raw materials is 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 is 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

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

Which of the following statements is true of lean accounting? A) It is much complex than traditional product costing. B) It does not always compute costs for individual products. 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 compares value stream costs against costs that include costs of all purchased materials

B

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

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) It assumes that quality costs are considered only to the extent that these costs affect ordering or carrying costs. 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

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

________ is also called lean production. A) Economic order quantity production B) Just-in-time production C) Materials requirements planning production D) Push-through system

B

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

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

Beryl Company sells 500 flash drives per week. Purchase-order lead time is 1 1/2 weeks and the economic-order quantity is 1,125 units. What is the reorder point? A) 1,687.5 units B) 937.5 units C) 750 units D) 1,125 units

C

Just-in-time purchasing requires ________. A) larger and less frequent purchase orders B) smaller and less frequent purchase orders C) smaller and more frequent purchase orders D) larger and more frequent purchase orders

C

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

Sharing sales information throughout the supply chain leads to ________. 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

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

The annual relevant total costs are at a minimum when relevant ________. A) ordering costs are greater than the relevant carrying costs B) carrying costs are greater than the relevant ordering costs C) carrying costs are equal to relevant ordering costs D) carrying costs are equal to relevant purchasing costs

C

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

The economic order quantity model completely ignores ________. A) carrying costs B) ordering costs C) stockout costs D) the size of a purchase order

C

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

Which of the following costs is a relevant inventory carrying cost under EOQ decision model? 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 receiving and inspecting inventory and moving the inventories to the warehouses

C

Which of the following costs is a relevant inventory stockout cost under EOQ decision model? 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

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

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. C) They are work areas with different types of equipment grouped together to make related products. D) They are production centers in which goods are manufactured only after receiving customer orders

C

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 can result in incomplete accounting records. D) Backflush costing increases the ability of the accounting system to pinpoint the uses of resources at each step in the production process

C

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) All inventory costs are not available in financial accounting systems. D) Stockout costs are costs that arise when a company runs out of a particular item for which there is no customer demand

C

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) The costs of receiving and inspecting the items are included in the purchase orders are ordering costs. D) Opportunity costs are recorded in financial accounting systems but are a not significant component in several cost categories.

C

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

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

The ________ describes 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

Under economic-order-quantity decision model, it is 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) no inventory stockouts occur

D

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

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

Which of the following statements is true of the 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

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 purchasing B) materials requirements planning C) relevant total costs D) economic order quantity

A

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

If Premium Company has a safety stock of 480 units and the average daily demand is 60 units, how many days can be covered if the shipment from the supplier is delayed by 4 days? A) 8 days B) 4 days C) 12 days D) 7 days

A

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

Relevant total costs in the economic order quantity decision model equal relevant ordering costs plus relevant ________. A) carrying costs B) stockout costs C) quality costs D) purchasing costs

A

The costs that result from theft of inventory are ________. A) shrinkage costs B) external failure costs C) stockout costs D) costs of quality

A

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

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.

D