Professional Documents
Culture Documents
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ANS: $ *. >hen determining which items to produce- a firm must (now a last yearA
s production le)el . b raw material in)entory le)els . c the standard cost of th
e item . d the sales forecast .
ANS: @ .. The production schedule is a the e8pected demand for the firmAs finish
ed goods for a gi)en year . b the formal plan and authority to begin production
. c a description of the type and &uantity of raw materials and subassemblies us
ed to . produce a single unit of finished product d the se&uence of operations d
uring manufacturing .
ANS: $ 3. A mo)e tic(et a is the formal plan and authority to begin production .
b specifies the materials and production re&uired for each batch . c records th
e wor( done in each wor( center .
c cost accounting has custody of and ma(es entries on cost records . d wor( cent
ers record direct labor on /ob tic(ets .
ANS: $ 22. All of the following are internal control procedures that should be i
n place in the con)ersion cycle e8cept a calculation and analysis of direct mate
rial and direct labor )ariances . b retention of e8cess materials by wor( center
s . c physical count of in)entory items on hand . d limited access to raw materi
al and finished goods in)entories .
ANS: $ 2 . +rocess simplification focuses on a using 6omputer Numerical 6ontroll
ed machines which stand alone within a traditional . setting b completely automa
ting the manufacturing en)ironment . c reducing the comple8ity of the physical m
anufacturing layout of the shop floor . d organi!ing the process into functional
departments .
ANS: 6 2#. A manufacturing process that is organi!ed into group technology cells
utili!ing no human labor is called a islands of technology . b process simplifi
cation . c 6omputer 7ntegrated 5anufacturing . d traditional manufacturing .
ANS: 6 2%. An e8ample of automation of manufacturing design is a 6omputer Aided
0ngineering .
b . c . d .
it more accurately allocates costs to products it recogni!es the importance of d
irect labor as a component of total manufacturing cost the financial nature of t
he reports permits comparisons to be made among different types of products
ANS: $ #. 7n traditional firms- information reporting a pro)ides financially ori
ented information relating to operations . b presents detailed information about
acti)ities . c shows the allocation of costs first to acti)ities and then to co
st ob/ects . d identifies nonessential acti)ities .
ANS: A %. Types of information pro)ided by Acti)ity $ased 6osting include a a de
scription of the single acti)ity dri)er used for o)erhead application . b the do
llar )alue of the direct material usage )ariance . c identification of cost dri)
ers . d details of the components of the single o)erhead cost pool .
ANS: 6 '. >hich statement is not correct? a the benchmar( approach compares (ey
acti)ities with similar acti)ities in other firms . b critical success factors i
nclude product and process &uality . c the A$6 model includes two perspecti)es:
an allocation of cost perspecti)e and a process . perspecti)e d in world-class m
anufacturing firms- &uality control acti)ities at the end of the process are . e
ssential
ANS: @ *. All of the following are documents in batch process production systems
e8cept a production schedule .
an acti)ity <or cost= dri)er 14. 08plain benchmar(ing. ANS: >hen a process is be
nchmar(ed- (ey acti)ities are compared to similar acti)ities performed elsewhere
in the firm or in other firms. 11. +ro)ide a specific e8ample of source data au
tomation. ANS: bar coding- magnetic in( character recognition- electronic stripoptical character recognition 12. 7n a traditional manufacturing en)ironment- c
ost accounting pro)ides independent )erification of what information? >hat are t
he benefits? ANS: 6ost accounting reconciles materials and labor usage- from the
materials re&uisitions and /ob tic(etswith prescribed standards and identifies
significant departures. Such )ariance analysis is important for control of the m
anufacturing process. 1 . Fow are cost structures fundamentally different betwee
n the traditional and 675 en)ironments? ANS: 7n the traditional manufacturing en
)ironment- direct labor is a much larger component of total manufacturing costs
than in the 675 en)ironment. 1)erhead- on the other hand- is a far more signific
ant element of cost in ad)anced technology manufacturing. 1#. >hat are the (ey s
egregation of duties issues in the con)ersion cycle? ANS: 7n)entory control must
be separated from raw materials and finished goods custody. 6ost accounting mus
t be separate from the wor( centers. General ledger must be separate from other
accounting functions. 1%. Traditional accounting assumes that products cause cos
ts. A$6 assumes that EEEEEEEEEEEEEEEEE cause costs. ANS: acti)ities 1'. @ifferen
tiate between essential and non-essential acti)ities. ANS: 0ssential acti)ities
add )alue to the organi!ation either through adding )alue to the customer or to
the organi!ation. Non-essential acti)ities do not add )alue. 1*. Name the underl
ying assumptions of the 97T method. ANS: Hero defects- !ero setups- small lot si
!es- !ero in)entories- !ero lead times I reliable )endors- and team attitude.
1.. >hat document signals the completion of the production process? ANS: The rec
eipt by cost accounting of the last mo)e tic(et for a batch from the wor( center
signals the completion of the production process. 13. >hat document triggers th
e beginning of the cost accounting process for a gi)en production run? ANS: The
wor( order from the production planning and control department triggers the cost
accounting process. 24. Name fi)e documents associated with batch production sy
stems. ANS: Sales forecast- production schedule- bill of materials- route sheetwor( order- mo)e tic(et- and materials re&uisition. ESSA# 1. >hat are the accou
nting implications when a firm mo)es toward world-class status? ANS: >hen a firm
mo)es toward world-class status- changes will be re&uired in accounting techni&
ues- in information reporting- and in the integration of the information system.
>orld-class companies will apply accounting techni&ues li(e Acti)ity $ased 6ost
ing to obtain impro)ed cost information in order to ma(e better decisions concer
ning pricing- product mi8- and product and process design. 7nformation will be d
e)eloped to help managers understand and e)aluate manufacturing acti)itiesidenti
fy and eliminate nonessential acti)ities- identify cost dri)ers- and establish l
in(s between performance measures and decision ma(ing. "inally- firms will imple
ment information systems that integrate financial and nonfinancial information u
sing software li(e the 5anufacturing Resource +lanning 77. "irms will maintain a
n electronic lin( with e8ternal parties by implementing 0lectronic @ata 7ntercha
nge <0@7=. 2. 6ontrast the treatment of in)entories in the traditional manufactu
ring en)ironment and the world-class manufacturing en)ironment. ANS: 7n the trad
itional manufacturing en)ironment- in)entories are used to reduce or eliminate b
ac( orders. The goal in the traditional en)ironment is to minimi!e the cost of h
olding in)entory and the costs of ordering or manufacturing in)entory. 7n a worl
d-class manufacturing en)ironment the 9ust-7n-Time <97T= in)entory system is oft
en implemented. 7n)entories are (ept to the absolute minimum. 7n)entories arri)e
in small &uantities from )endors se)eral times per day. 7n)entory is :pulled; t
hrough the manufacturing processD there are no batches of partially completed pr
oducts throughout the production process. The 97T in)entory concept assumes: !er
o defects- !ero setup time- small lot si!es- !ero in)entories- !ero lead time- a
nd reliable )endors.
. @iscuss the (ey segregation of duties that should e8ist in the traditional man
ufacturing en)ironment. ANS: +roduction planning and control should be separate
from the wor( centers. 7n)entory control- which maintains accounting records for
raw materials <R5= and <"G= in)entories should be (ept separate from the materi
als storeroom and from the "G warehouse functions where these assets reside. The
cost accounting function accounts for wor( in process and should be separate fr
om the wor( centers in the production process. The general ledger <GC= function
should be separate from departments (eeping subsidiary account #. >hat are the f
our categories of business processes as defined as modules by SA+ R, ? 08plain.
ANS: "inancial: The financial modules include the financial accounting module th
at collects financial data for both internal and e8ternal reporting- the control
ling module for reporting and controlling costs- the fi8ed asset management modu
le that supports the management of fi8ed- leased- and real corporate assets- and
the ability to respond to interacti)e re&uests. Cogistics: The logistics module
s support manufacturing by means of an a)ailable-to-promise module to respond to
customer in&uiries- sales and distribution module to handle order entry and ord
er status- a product planning module for forecasting- and additional modules for
materials management- ser)ice calls- and plant maintenance. Fuman resources: Th
is module supports management of employees including hiring- wor( scheduling- an
d payroll processing. $usiness process support: Two types of modules handle wor(
flow and industry specific acti)ities. %. Fow can a world-class information syst
em yield a paperless en)ironment? ANS: Traditional paper flow can be essentially
eliminated in a world-class information system en)ironment. Sa)ings occur by el
iminating printing- handling- filing of paper documents- and data entry errors.
+art of the benefit comes from source data automation using technologies such as
bar coding <the familiar J+6 code permits scanning which eliminates most errors
=. Thus- recording of materials is simplified. 5agnetic monitoring of labor is p
ossible to tally labor charges and mo)ement of e&uipment and in)entory. '. Fow d
oes 5R+ 77 <manufacturing resource planning= e8pand on 5R+ <materials re&uiremen
ts planning=? ANS: 5R+ is an older system that focused only on the materials re&
uirements of the production process. 7t used wor( orders as a basis for a bill o
f materials and to determine in)entory re&uirements prior to production. 5R+ 77
e8pands on this idea by identifying production need for all inputsKmaterials <as
in 5R+=- labor- and e&uipment. 7n fact- 5R+ 77 pro)ides planning- feedbac(- and
control for coordinating all of the acti)ities of a firm. *. Name and e8plain t
he fi)e categories of critical success factors. ANS:
+roduct &uality: The firmAs product must meet or e8ceed the customerAs e8pectati
ons. +rocess &uality: The amount of process )ariation that results in scrap or r
ewor( must be minimi!ed. 6ustomer ser)ice: The demands of customers for finished
products must be met. Resource management: The firm must ma8imi!e the use of al
l resources in manufacturing. "le8ibility: The firm must be willing to ad/ust to
changes in demands in its en)ironment. .. 5R+ 77 integrates product design and
the production process with order entry- accounting. and acti)ity based costing.
>hat are some of the benefits? ANS: The benefits include: impro)ed customer ser
)ice- reduced in)entory in)estment- increased producti)ity- impro)ed cash flowassistance in achie)ing long-term strategic goals- help in managing changes and
fle8ibility in the production process. 3. The 9ust-7n-Time <97T= approach to in)
entories is regarded as a great ad)ance in in)entory management. There are si8 a
ssumptions that underlie 97T. @iscuss three. ANS: 9ust-7n-Time <97T= manufacturi
ng is a model which fosters in)entory reduction and e)en elimination. 7t is base
d on the following assumptions: Zero defects are assumed for raw materials- >7+and finished goods. The presence of e8cessi)e defects would re&uire e8tra in)en
tory as security. Zero setup time is desired because set-up time is not producti
)e. Small lot sizes permit high machine utili!ation. Zero inventories reduce the
in)estment that can be utili!ed elsewhere. Zero lead times and reliable vendors
are re&uired to ha)e the materials a)ailable when needed. A team attitude is re
&uired of all employees. 14. The te8t discusses the :e)ils of in)entory.; >hat a
re they? >hy are they :e)il?; ANS: 7n)entories cost money. They represent an in)
estment. They need to be insured and stored- both of which cost money. 7n)entori
es can become obsolete o)er time. 7n)entories camouflage production problemsKif
a cushion e8ists- orders can be filled e)en if production is slowed or stopped d
ue to difficulties. >illingness to maintain in)entories can precipitate o)erprod
uctionKif an organi!ation is willing to ha)e high stoc(- and if any incenti)es e
8ist to produceKrewards etc.- e8cess in)entory may be produces without ade&uate
demand. 11. Automation of manufacturing can be )iewed as a progression beginning
with the traditional manufacturing en)ironment. >hat are the stages? >hat disti
nguishes them? ANS: Automation of the manufacturing process can be )iewed as a g
radual progression. The stages are: Traditional manufacturing which consists of
many different types of machines that re&uire a lot of setup time- each controll
ed by a single operator. The >7+ follows a circuitous route through the differen
t operations. Islands of technology in which stand alone islands employ computer
numerical controlled <6N6= machines that can perform multiple operations with l
ess human in)ol)ementKless set up time. Process simplification which reduces the
comple8ity of the physical layout. Groups of 6N6 machines are arranged in cells
to produce an entire part from start to finish. No human in)ol)ement in a cell.