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ANS.
Enterprise systems help achieve these three goals by doing the following:
Enterprise systems specifically help out in the four key areas discussed as
important for achieving the three goals as follows:
DQ15-2
ANS.
DQ15-3
Table 15.1 presents a summary of trends in cost management and cost accounting
that have occurred over the past two decades.
a. Which trends do you consider most significant? Explain your answer.
ANS.
As discussed in the chapter text, the move toward more accurate and detailed cost
information that cuts across the value chain and across the life of the product
presents a significant trend toward focusing on the use of cost information to
strategically manage the enterprise. This information takes the form of activitybased costing and lifecycle costing. The following trends from Table 15.1 might
also be cited as the most significant:
The increased emphasis on managing, rather than just reporting, costs places
the cost accountant in a different, and much more important, position in the
manufacturing organization.
Cost accounting has been a fairly stable discipline. The need for flexible cost
processes, real-time data capture, direct technology costs, and so on will
change the nature and rate of change of the cost accounting discipline.
Some cost trends that might fly in the face of what has been learned in
traditional cost accounting classes include the following:
Shift from direct labor to some other basis for charging overhead.
Although direct labor is becoming a less important cost component, many
firms cling to direct labor as a method for applying overhead. Automation
costs (a fixed cost) or time spent in a production step are often cited as
more meaningful bases for allocating overhead.
b. The first footnote to Table 15.1 indicates that there are additional cause-andeffect relationships that could be shown between the items in the right column
and those in the left column. Give several examples (with explanations) of
those other relationships.
ANS.
Other than the relationships shown in Table 15.1, the following relationships
might be described:
Cell throughput time might be a factor in managing the shorter product life
cycle.
Statistical data might be useful in making decisions in the new shorter life
cycle.
Factory automation has contributed to the trend away from job order to
process systems.
DQ15-4
ANS.
DQ15-5
ANS.
DQ15-6
ANS.
Agreed. An examination of Figure 15.1 should reveal that most of the flexible
manufacturing components are, by definition, computerized. For example,
engineering designs, routing master records, and the bill of materials are
automatically called to run machines and route parts. Additionally, shop floor
control involves a number of activities specifically designed to automatically
collect data.
DQ15-7
ANS.
b. Now assume that you implement JIT, and your raw materials in stock drop to
zero. Explain how you expect this change to impact your income statement
and balance sheet.
ANS.
b. On the surface, the costs in part a evaporate, but, in typical JIT environments,
the supplier is required to maintain a certain level of inventory. By doing this,
it is likely that raw material prices will increase, unless the vendor can save in
other areas (or chooses to reduce profits). Assets on the balance sheet should
decline. Expenses, related to carrying cost of raw materials, should be
eliminated (in a true JIT), whereas cost of goods sold may rise because of an
increase in expenses to the suppliers.
DQ15-8
Without redrawing the figure, discuss the changes that would occur in Figure15.7
if the company used an actual costing process instead of a standard cost process.
ANS.
Note: Although the question specifically states that Figure 15.7 is not to be
redrawn, your understanding of the following solution will be improved if you
review it in conjunction with the solution to P15-8, which shows the redrawn
Figure 15.7.
Changes in process inputs:
A single RM issue notice reflecting the actual materials issued (and the actual
cost of those materials) would replace the following flows in Figure 15.7:
RM returned notice
Job time tickets and at least a final completed move ticket would continue to
be process inputs.
A data flow called GL actual costs update would replace the flow, GL
standard cost update.
The flow, GL cost of goods completed update, would remain but would now
notify the General Ledger process of the actual (not standard) cost of the jobs
completed and transferred to finished goods.
The Standard Cost master data and General Ledger master data would not
appear in the process.
The other three files would continue, but two of them would change as
follows:
The Work in Process inventory data would reflect actual materials used,
actual direct labor incurred, and applied manufacturing overhead.
The five process bubbles shown in Figure 15.7 would be replaced by the
following processes:
DQ15-9
Discuss how the inventory control process goals support the production planning
process and the risks to the production process if such controls are not in place.
Do not limit your discussion to loses from fraud.
ANS.
Problems
Bill of Materials
Master
Product Design
1.1
Determine
Product
Description
Parts master
data
1.2
Add
descriptions
for new
parts
Product
descriptions
1.3
Determine
Product
Routing
Work center
needs
Routing
M aster
Work Center
Master
1.4
Add new
work
centers
FIGURE SM-15.1
M aster
production
schedule
Time-phased
order requirements
schedule
Bill of materials
master
3.1
Explode
Bills of
M aterials
Materials
Needs
3.2
Develop
Time-phased
order
requirements
Parts
master
RM /WIP
inventory
status
Purchase
Needs
Open purchase
order data
3.3
Generate
Purchase
Requisitions
Key:
RM = Raw materials
WIP = Work in process
FIGURE SM-15.2
Purchase
requisitions
Routing
master
Work center
master
Master
Production
Schedule
Time-phased
order
requirements
4.1
Obtain
capacity
information
Work center
status
Employee/
Payroll Master
Data
Details of machine
and labor capacity
and needs
Detailed
production
plan
4.2
Release MOs,
move tickets
and materials
requisitions
4.3
Update
schedules
Manufacturing
Orders
KEY
MO = Manufacturing orders
FIGURE SM-15.3
M ove
tickets
Raw materials
requisitions
10
WIP
Inv entory
Status
Routing
M aste r
shows
associate d
with
associated
With
Associate d
with
Bill of
Mate rials
M aste r
Employe e/
Payroll
Maste r Data
Lists
associated
with
Parts Maste r
Job Time
Record
associate d
with
FG Inv entory
Status
lists
Maste r
Production
Schedule
are for
Manufacturing
Orde rs
associated
with
Work Ce nter
M aste r
issue d
for
is for
lists
are for
are for
RM
Issue/Re turn
Notices
M ove
Tickets
list
has
Parts M aster
Work Ce nter
Status
FIGURE SM-15.4
Time Phased
Order
Re quirements
Sche dule
list
Raw
Materials
Re quisitions
Work progress
data
5.1
Capture
move ticket
data
5.2
Update MO
and work
center
status
Move
tickets
Work center
status
5.3
Update work
center
status and
close MO
Manufacturing
Orders
5.4
Process
Employee
Time
Labor Time
Finished goods
inventory status
Job Time
Records
Material Use
data
5.5
Process
RM Issues/
Returns
KEY
MO = Manufacturing orders
RM = Raw materials
Note: The order of steps 5.4 and 5.5
within the process is unimportant.
FIGURE SM-15.5
RM issue/
return notices
11
12
P15-6 ANS.
P15-7 ANS.
A standard cost variance report is prepared only once a month; the report
includes the direct materials usage, direct labor, and manufacturing overhead
variances.
The variances data in Figure SM-15.6 stores the computed variances until they
are reported periodically.
P15-8 ANS.
All inventory data (i.e., RM, WIP, and FG) are carried at standard costs.
The RM price variance is isolated and reported when raw materials are
purchased (i.e., received) rather than later when the materials are issued.
See notes b and c (pg. 560) in Figure 15.7 in Chapter 15 for a description of
certain flows entering bubble 7.0 in Figure SM-15.9.
For solution, see Figure SM-15.10. In addition, see the solution to DQ15-8 for a
description of the differences between Figure 15.7 in Chapter 15 and Figure SM15.10.
Computer
From DCRP
Notification of
manufacturing order
re le ase d to production
From production
work ce nte rs
WIP
inv e ntory
re cord
scree n
Comple te d
mov e ticke t
Ke y comple te d
mov e ticke t
M ove ticke t
scree n
From inv e ntory
control
Standard raw
materials
re quisitions
Ke y comple te d
raw mate rials
re quisitions
Raw
materials
re quisition
scre en
WIP
inv e ntory
M aste r data
Print standard
costs applie d
notification
Standard costs
applie d
notification
KEY
FG = Finishe d goods
MO = Manufacturing orders
FIGURE SM-15.6
Standard
costs
M aste r data
To ge neral
ledger proce ss
13
14
Excess raw
materials issue
notice
Computer
Calculate RM
usage variance
Standard
costs MD
Calculate labor
variances
Raw materials
returned notice
Variances
data
WIP
inventory
MD
Print monthly
variance reports
Calculate MO
variances
Enter excess
quantities
General
ledger
MD
3
From production
work centers
Job time
tickets
Key actual
hours worked
At end of each
accounting period
2
Variance
report
To general
ledger process
To production
control supervisor
To various
managers
Budgets
MD
Standard
costs MD
Cost of goods
completed notice
Final completed
move ticket
KEY
Close inventory
record and compute
standard cost of
goods completed
From production
work centers
Close M O
FIGURE SM-15.6
WIP
inventory
MD
M D = M aster data
M O = M anufacturing order
RM = Raw materials
WIP = Work in process
Production
work
centers
RM variance
report
Move
ticket
data
DL variance
report
MOH variances
re port
Job time
data
Final move
ticket data
GL standard
costs applied
update
Standard
cost
accounting
process
GL RM
variances
update
Standard RM
issue notice
GL DL
variances update
Excess RM
issue notice
Inv entory
process
GL M OH
variances
update
RM returne d
notice
GL cost of goods
completed update
KEY
RM = Raw materials
DL = Dire ct labor
MOH = M anufacturing ov erhead
FIGURE SM-15.7
Various
mangers
General
ledge r
process
15
16
Purchasing
process
AP/CD
proce ss
DCRP
proce ss
RM purchase price
variance re port
RM receipt
notification
Various
mangers
RM quantity
variance
report
RM payable
inventory
notification
DL variance s
report
M OH variances
report
Standard RM
requisition
Excess RM
requisition
RM returned
notice
Production
work
centers
GL RM re ceive d
update
Standard cost accounting
process
KEY
DCRP = Detailed capacity requirements planning
DL = Direct labor
M OH = M anufacturing overhead
RM = Raw materials
FIGURE SM-15.8
GL RM purchase
price variance update
GL standard costs
applied update
GL RM quantity
v ariance update
Gl DL
variances
update
GL M OH variance
update
Gl cost of goods
complete d update
General
ledger
proce ss
Purchasing
process
General
ledger
process
RM re ceipt GL RM
notification rece ive d
update
AP/CD
process
RM payable
inv entory
notification
Work in process
inve ntory
6.0
Close
manufacturing
orders
Standard cost
maste r data
1.0
Record
rece ipt of
RM
FG master
data
GL cost of goods
completed update
(de bit FG, credit WIP)
KEY
DCRP = De tailed
capacity
re quirements
planning
DL = Direct labor
FG = Finishe d goods
M OH = M anufacturing
ove rhead
RM = Raw materials
Std. = Standard
UC = Unit cost
WIP = Work in
Process
Gl DL
v ariances
update
Final completed
move ticke t
RM master
data
2.0
Isolate
purchase
price
variance
GL RM purchase
price variance
update
Employee
master data
(Std. cost of
goods rece iv ed)
RM purchase price
variance report
Job time
tickets
(Actual hourly
pay rate s)
Various
managers
RM master
data
Production
work
centers
5.0
Compute DL
variance s
Work in process
inventory data
Budge ts
master data
General
ledger
process
GL standard
costs update
3.0
Record
standard costs
applie d to
WIP
Standard RM
Requisition
Completed
move ticket
DCRP
process
FIGURE SM-15.9
Production
work
centers
Standard cost
master data
Exce ss RM
requisition
RM re turned
notice
RM master
data
RM quantity
variance report
4.0
Compute RM
quantity
variance
Gl RM
quantity
variance
update
Various
mange rs
M OH
variances
report
7.0
Compute
M OH
variances
GL M OH
v ariances
update
Ge neral
ledger
proce ss
Standard cost
master data
Work in proce ss
inve ntory data
17
18
Production
work
ce nte rs
Inve ntory
process
General
le dge r
proce ss
Final comple te d
move ticket
RM issue
notice
GL cost of goods
completed update
5.0
Close manufacturing orders
and compute
unit costs
1.0
Record
RM code
Jobs
comple te d
notice
b
Employe e
master data
a
Inve ntory
process
2.0
Distribute
manufacturing
labor
Job time
tickets
d
Indirect labor
costs
4.0
Re port
WIP costs
incurred
Production
work
ce nters
General
ledge r
process
3.0
Apply MO
GL actual
costs update
NOTES:
a - Actual pay rate s
b - DL hours and cost
c - DL hours
d - Predetermine d overhead rates
e - Applied MOH
f - Actual costs (RM, DL, applie d M OH)
KEY:
DL = Dire ct labor
MOH = M anufacturing ove rhead
RM = Raw mate rials
WIP = Work in proce ss
Budge ts
maste r data
19
Credit
(SQ*SP)
(SH*SR)
(SQ*SR)
(Note A)
(Note A)
(Note B)
(Note C)
XXXX
(Note D)
(Note E)
XXXX
(Note F)
(Note F)
20
Notes:
A - (AQ-SQ)*SP.
B - (AR-SR)*AH.
C - (AH-SH)*SR.
D - MOH incurred minus the standard budget allowed for output actually achieved.
E - The standard budget allowed for output actually achieved minus the MOH charged to WIP in
entry 1 c.
F - Quantity completed at standard cost to produce.
Key:
DL = Direct labor
RM = Raw materials
FG = Finished goods
AQ = Actual quantity
SQ = Standard quantity
AH = Actual DL hours
SH = Standard DL hours
b. ANS.
In addition to the following solution, see the assumptions in part a previously and
the Key in the solution to part a.
(1) The following entry would be made to record the purchase of RM:
Debit
RM inventory
(AQ*SP)
RM purchase price variance
(NOTE 1)
Accounts payable
Credit
(AQ*AP)
(2) The following pair of entries would be made to record the sale of goods and related cost of
goods sold:
Debit
Credit
Accounts receivable
XXXX
Sales
XXXX
Cost of goods sold
(NOTE 2)
FG inventory
(NOTE 2)
21
(3) Annually, the variance accounts would be closed to cost of goods sold (Note 3) through the
following entry:
Debit
XXXX
Credit
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
Notes:
1 - (AP-SP)*AQ.
2 - For standard cost of goods sold.
3 - Alternatively, the variance accounts might be allocated to inventory accounts and cost of
goods sold.
P15-10 ANS. The analysis should be structured to address the three areas of concern:
effectiveness of operations, efficiency of operations, and resource security
objectives. First, recognize that effectiveness will be hampered by increased risk
of stock outs, a limited capability to work in a just-in-time environment, and the
increased difficulty of identifying other warehouses that may have required goods.
Efficiency will also be hampered as stock reordering becomes more labor
intensive. Physical security is less of a concern other than the risk of not
recognizing at an early stage problems with theft and/or spoilage.
As such, the focus of revised control plans should be on controls that enhance
efficiency and effectiveness. These control plans could include a broad range of
approaches but, at a minimum, should address issues related to maintaining
sufficient short periods between counts for the records to be effective in
supporting the inventory ordering and distribution process. Efficiency issues
should be sure to address the means by which counts can be taken at a minimum
cost and at reasonable intervals so as not to exceed necessary costs but also to
assure adequate maintenance of stock levels.
P15-11 ANS. a. The main concepts conveyed by lean manufacturing include the following:
Waste minimization
Continuous improvement
Pull processing
Flexibility
22
P15-13 ANS. The answer will vary based on the company selected, although each student
should address the points provided in the text of the question.