Cost Accounting Systems
(C. Strategic Cost Management and JIT)
STRATEGIC COST MANAGEMENT AND JIT
C. development and implementation of the business strategy.
D. a and c.
THEORIES:
7. Which focuses on process improvement, process innovation, or business reengineering?
A.. functional-based responsibility accounting
B. activity-based responsibility accounting
C. strategic-based responsibility accounting
D. none of the above
1. The major functions of management are
A. strategic management and long-range planning.
B. planning and decision making.
C. identifying threats and opportunities for the firm.
D. all of the above.
8. The optimal level in the optimal cost management system is when
A. measurement costs are greater than error costs
B. measurement costs are less than error costs
C. the total of measurement costs and error costs are minimized
D. both b and c
2. The three major types of competitive strategy include
A. cost leadership, differentiation, and productivity.
B. cost leadership, focus, and productivity.
C. differentiation, focus, and productivity.
D. cost leadership, differentiation, and focus.
9. A repetitive action fulfilling a business function and increasing the worth of the product and the
price that the customer is willing to pay for the product is referred to as a:
A. non-value added activity
B. value-added activity
C. business value-added activity
D. activity analysis
3. Sustainability means the balancing of
A. short term and long term goals in economic performance.
B. short term and long term goals in social aspects.
C. short term and long term goals in environmental aspects.
D. all of the above.
4. Simultaneous engineering can be used to
A. reduce both product and process complexity.
B. integrate activity-based costing with value chain analysis.
C. reduce the time-to-market of new products through elimination of batch-level activities.
10. The actual time that a product must be delayed while waiting to be processed is called:
A. service time
C. transfer time
B. inspection time
D. idle time
11. The resource utilized by a given product divided by the total amount of the resource available
is called the
A. activity driver
C. cost object
B. consumption ratio
D. sustaining activity
D. reduce manufacturing cycle efficiency by reducing process waste.
5. Engaging in which of the following will result in radical changes being made to an
organization's processes?
A. Continuous improvement
C. Reengineering
B. Benchmarking
D. Mass customization
12. The primary objective of just-in-time processing is to
A. accumulate overhead in activity cost pools
B. eliminate or reduce all manufacturing inventories
C. identify relevant activity cost drivers
D. none of them
6. In the contemporary business environment, cost management focus is on
A. financial reporting and cost analysis.
B. common emphasis on standardization and standard costs.
37
Cost Accounting Systems
(C. Strategic Cost Management and JIT)
13. The benefits of a successful Just-In-Time system include all of the following except:
A. funds tied up in inventories are released for use elsewhere.
B. inventory buffers are increased.
C. throughput time is reduced.
D. defect rates are decreased.
production process.
18. Under just-in-time processing
A. raw materials are received just in time for use in production
B. subassembly parts are completed just in time for use in assembling finished goods
C. finished goods are completed just in time to be sold
D. all of the above
14. Which of the following is not a benefit of just-in-time processing?
A. Control of significant inventory balances.
B. Enhanced product quality.
C. Reduction of rework costs.
D. Production cost savings.
19. A successful JIT system is based upon which of the following concepts?
A. The company must rely upon a large number of suppliers to ensure frequent deliveries
of small lots.
B. The company should always choose those suppliers offering the lowest prices.
C. The company should avoid long-term contracts with suppliers so as to exert pressure
on suppliers to make prompt and frequent deliveries.
D. A small number of suppliers make frequent deliveries of specific quantities thus
avoiding the buildup of large inventories of materials on hand.
15. A key concept of the JIT inventory system is:
A. the raw materials, work in process, and finished goods inventories of manufacturing
companies act as buffers so that operations can proceed smoothly even if suppliers are
late with deliveries or a department is unable to operate for a brief period due to
breakdowns or other reasons.
B. the use of many suppliers so as to ensure rapid delivery of materials for production.
C. the maintenance of a stock of raw materials so that defective materials can be replaced
quickly so as to maintain a high rate of productivity.
D. inventories are costly to carry and can be kept to minimum levels or eliminated
completely with careful planning.
20. A company adopting the JIT approach would:
A. produce large batches of products so as to recoup the costs associated with setups.
B. attempt to reduce setup time so as to economically produce in smaller batches.
C. adapt a functional plant layout so as to enhance production flexibility.
D. require workers to become highly specialized in operating a single machine.
16. The just in time (JIT) concept applies to which of the following:
I. The acquisition of raw materials.
II. The assembly of manufactured parts in products.
III. The shipment of finished products to customers.
A. I.
C. I, II, III.
B. I, III.
D. II, III.
21. Conventional and just-in-time manufacturers differ in that the conventional manufacturer is
likely to
A. be a new entrant into its industry.
B. need less storage space than its JIT competitors.
C. give less credibility to management accounting reports.
D. have a longer production cycle than its JIT competitors.
17. The flow of goods through a JIT system is based on:
A. a workstation efficiently completing its processing of a batch of units so that the units
can proceed forward to the next workstation before the next workstation is ready to
receive them.
B. processing goods in large batch sizes rather than less economical small batches.
C. maintaining a stockpile of raw materials in anticipation of materials shortages.
D. producing to meet customer demand with no buildup of inventory at any point in the
22. In JIT manufacturing, each operation produces
A. only what is necessary for the succeeding operations
B. all that it can to offset fixed costs
C. a fixed percentage in excess of orders to ensure adequate quality stock
D. all that it can in order to build inventories
23. Many companies have significantly lowered inventory levels and costs using
38
Cost Accounting Systems
(C. Strategic Cost Management and JIT)
A.
B.
C.
D.
activity-based costing.
an enterprise resource planning system.
the just-in-time method.
a total quality management system.
30. When JIT manufacturing is used, which of the following costs is considered a direct product
cost?
A. insurance on the plant and equipment C. janitors’ salary
B. repair parts for the machinery
D. salary of the plant supervisor
24. JIT manufacturing emphasizes
A. large amounts of inventory on hand so that the company does not run out of it
B. small amounts of inventory on hand resulting in lower quality goods because production
is rushed
C. reducing investment in inventory and increasing the emphasis on quality
D. both b and c
31. Problems encountered with using traditional product costing for JIT manufacturing usually
stem from
A. assigning direct materials costs to units of product.
B. assigning direct labor costs to units of product.
C. assigning overhead costs to units of product.
D. all of the above.
25. A just-in-time manufacturer is more likely than a conventional manufacturer to
A. receive more frequent deliveries of materials.
B. spend less money on advertising.
C. need workers with fewer skills.
D. all of the above.
32. A characteristic of the just-in-time manufacturing environment is
A. frequent deliveries of materials
B. manufacturing cells
C. little or no inventory of finished product
D. all of the above
26. Just-in-time manufacturing
A. is a demand pull rather than a push through the system
B. allows the firm to focus on quality and productivity simultaneously
C. increases product cost accuracy by increasing a firm’s ability to track costs to products
D. all of the above
33. Just-in-time relates to
A. people getting to their job location just in time to begin their work.
B. machinery placed in service just in time to begin production.
C. materials received from suppliers just in time for production needs.
D. all of the above.
27. If JIT manufacturing is used, maintenance of the production equipment would be classified
as a
A. unit-level activity
C. product-level activity
B. cell-level activity
D. facility-level activity
34. Which of the following is a value-added activity?
A. Engineering design.
C. Inventory storage.
B. Machinery repair.
D. Inspections.
28. Under JIT manufacturing, many overhead costs formerly classified as indirect costs are now
A. eliminated
C. no longer traceable
B. depreciated
D. directly traceable to the product
35. Which of the following is a nonvalue-added activity?
A. Engineering design.
C. Inspection.
B. Machining.
D. Packaging.
29. When JIT manufacturing is used, which of the following costs is considered an indirect
product cost?
A. the cost to set up cell equipment
C. property taxes on the plant
B. the cost of maintenance on equipment D. salary of the cell supervisor
36. A nonvalue-added activity in a service enterprise is
A. taking appointments.
C. advertising.
B. traveling.
D. all of them.
39
Cost Accounting Systems
(C. Strategic Cost Management and JIT)
37. Value-added activities
A. should be reduced or eliminated.
B. involve resource usage that customers are willing to pay for.
C. add cost to a product without affecting the selling price.
D. cannot be differentiated from nonvalue-added activities.
C. a total quality control system.
D. all of them.
45. Which account is used in just-in-time processing?
A. Raw materials inventory
C. Merchandise inventory
B. Work in process inventory
D. Raw and In-Process inventory
38. The company's goal for defective units as a percentage of total units produced should be:
A. 1.50%
C. 0.05%
B. 0.00%
D. 0.53%
46. Under just-in-time processing, all of the following are received or completed “just in time”
except
A. finished goods.
C. supplies.
B. raw materials.
D. subassembly parts.
39. All of the following are examples of non-value-added activities except
A. ordering
C. receiving
B. assembling
D. inspections
47. A just-in-time manufacturing process should have substantially less of which of the following
than a traditional manufacturing process?
A.
B.
C.
D.
Idle Time
Yes
Yes
Yes
No
Transfer Time
Yes
No
Yes
Yes
Value-added Time
Yes
No
No
No
Cycle Time
Yes
Yes
Yes
No
40. Sequencing if-then statements is a simple method of:
A. testing a strategy
C. creating lead measures
B. prioritizing objectives
D. evaluating performance
41. Setting balanced objectives, setting target values, and aligning rewards are:
A. necessary steps in creating a balanced scorecard
B. important aspects of the capital budgeting process
C. the heart of process innovation
D. the ingredients for economic forecasting
42. Delivery performance declines by:
A. increasing cycle time
B. decreasing cycle time
48. Manufacturing cycle efficiency should be increased
techniques?
A.
Just-in-Time Inventory
Yes
Flexible Manufacturing Systems
Yes
Batch Manufacturing
Yes
C. increasing velocity
D. decreasing turnover
by employing which of the following
B.
Yes
Yes
No
C.
No
No
No
D.
Yes
No
Yes
Question Nos. 49 and 50 are based on the following:
Small Computer Company has the following personnel:
I.
Two inspectors: inspect the final computers
II.
Four fabricators: make the computer cases
III.
Two computer programmers: run all of the bookkeeping for the accounting records
IV.
Seven assemblers: manufacture the mother boards
V.
One owner: writes the paychecks
43. Just-in-time processing
A. is based on a just-in-case philosophy.
B. results in a push approach.
C. minimizes inventory storage and waiting time.
D. all of these.
44. An element of just-in-time processing is
A. dependable suppliers who are willing to deliver on short notice.
B. a multi-skilled workforce.
49. Which groups of employees are value-added workers?
A. I and II
C. II and III
40
Cost Accounting Systems
(C. Strategic Cost Management and JIT)
B. III and V
D. II and IV
manager feels that the market share can be increased to 33 percent with a reduction in price to
P130. The product is currently earning a profit of P24 per unit. The president of Wine Factory
feels that the P24 profit per unit must be maintained.
50. Which groups of employees are non-value-added workers?
A. I, II, and III
C. I, III and V
B. III, IV, and V
D. I, II, and IV
3
PROBLEMS:
Questions 1 & 2 are based on the following information.
Brad Company developed the following budgeted life-cycle income statement for two proposed
products. Each product's life cycle is expected to be two years.
Product A
P230,000
150,000
P 80,000
Product B
P220,000
150,000
P 70,000
4
Total
P450,000
300,000
P150,000
.
If research and development costs and marketing costs are traced to each product, life-cycle
income for Product A would be
A. P18,000
C. P70,000
B. P22,000
D. P80,000
2
Return on sales for Product A would be
A. 34.8%
B. 10%
.
What is the target cost per unit?
A. P130
B. P150
C. P106
D. P126
What is the original cost per unit?
A. P130
B. P150
C. P106
D. P126
Hristec Company sells a product for P215 per unit. Its market share is 20 percent. The
marketing manager feels that the market share can be increased to 30 percent with a
reduction in price to P195. The product is currently earning a profit of P45 per unit. The
president of Hristec Company feels that the P45 profit per unit must be maintained. What is
the original cost per unit?
A. P170
C. P215
B. P195
D. P150
Question Nos. 6 and 7 are based on the following:
Prior to installing a JIT system, Friendly Company used machine hours to assign maintenance
costs to its three products of 4-inch, 6-inch, and 9-inch insulation. The maintenance costs totaled
P840,000 per year. The machine hours used by each product and the quantity produced of each
product are as follows:
Relative to Product B, Product A requires more research and development costs but fewer
resources to market the product. Seventy percent of the research and development costs are
traceable to Product A, and 40 percent of the marketing costs are traceable to Product A.
.
.
5
Sales
Cost of goods sold
Gross profit
Period expenses:
Research and development
(60,000)
Marketing
(50,000)
Life-cycle income
P40,000
A 10% return on sales is required for new products. Because the proposed products did not have
a 10% return on sales, the products were going to be dropped.
1
.
Machine Hours
Quantity Produced
4-inch
6,000
15,000 rolls
6-inch
10,000
12,500 rolls
9-inch
8,000
11,200 rolls
After installing JIT, three manufacturing cells were created and the cell workers were trained to
perform maintenance. Maintenance costs for the three cells still totaled P840,000; however, these
costs are now traceable to each cell.
Cell, 4-inch
P220,000
Cell, 6-inch
300,000
Cell, 9-inch
320,000
C. 7.83%
D. 8.89%
Questions 3 & 4 are based on the following information.
Wine Factory sells a product for P150 per unit. Its market share is 25 percent. The marketing
6
.
41
The maintenance cost per roll of 4-inch insulation before JIT is installed would be
Cost Accounting Systems
(C. Strategic Cost Management and JIT)
A. P24.00
B. P17.50
C. P14.00
D. P13.16
B. 2.44 units per hour
D. 2.75 units per hour
. Actual velocity is:
A. 2.5 units per hour
B. 2.75 units per hour
C. 2.32 units per hour
D. 2.44 units per hour
11
7
.
The maintenance cost per roll of 9-inch insulation before JIT is installed would be
A. P17.50
C. P28.57
B. P25.00
D. P75.00
12
. Dapitan, Inc. manufactures a product that experiences the following activities:
8
.
The product cell for Crane Company has budgeted conversion costs of P420,000 for the
year. The cell is planned to be available 2,100 hours for production. Each unit requires
P12.50 of materials costs. The cell started and completed 700 units. The cell process time
for the product is 15 minutes per unit.
What is the total product cost for the period?
A. P35,000
C. P40,000
B. P38,750
D. P43,750
9
.
Processing (three departments)
Moving (four moves)
Waiting time
Storage time (before delivery)
The MCE for the product is
A. 5%
B. 25%
C. 20%
D. 40%
13
Big Computers has the following personnel:
Seven assemblers: manufacture the mother boards
One owner: writes the paychecks
Two inspectors: inspect the final computers
Three fabricators: make the computer cases
One computer programmer: runs all of the bookkeeping for the accounting records
Two shipping clerks; ship computers to the warehouse
What would be the value-added labor ratio for this company?
A. 4/8 or 37.5 percent
C. 5/8 or 62.5 percent
B. ½ or 50 percent
D. ¾ or 75 percent
. At the beginning of 2007, Sanchez Company installed a JIT purchasing and manufacturing
system. The following information has been gathered about one of the company's products:
Theoretical annual capacity
2,200
Actual production
2,000
Production hours available
1,000
On-time deliveries
900
Total deliveries
940
Number of defective units
30
The company's on-time delivery percentage is:
A. 90 percent
C. 94 percent
B. 95.7 percent
D. 104.4 percent
Questions 10 & 11 are based on the following information.
At the beginning of 2005, Peterson Company installed a JIT purchasing and manufacturing system.
The following information has been gathered about one of the company's products:
Theoretical annual capacity
2,200
Actual production
2,000
Production hours available
800
On-time deliveries
900
Total deliveries
950
10
. The theoretical velocity is:
A. 2.32 units per hour
40 hours
18 hours
42 hours
100 hours
C. 2.5 units per hour
42
1
.
Answer: A
Gross profit
Deduct:
Research and development costs (0.70 x P60,000)
Marketing costs (0.40 x P50,000)
Life-cycle income of Product A
2
.
Answer: C
Return on sales, Product A: (P18,000 ÷ P230,000) = 7.83%
3
.
Answer: C
Target price
Less target profit
Target cost
4
. Answer: D
Original selling price
Less profit
Original unit cost
5
.
6
.
7
.
8
.
9
.
P80,000
( 42,000)
( 20,000)
P18,000
P130
24
P106
P150
24
P126
Answer: A
Original Cost: (P215 – P45) = P170
Answer: C
Maintenance cost per MH: (P840,000 ÷ 24,000)
Maintenance cost per roll, 4-Inch (6,000 x P35 ÷ 15,000)
P25
P14
Answer: C
Maintenance cost per unit, 9-Inch: (P320,000 ÷ 11,200) = P28.57
Answer: D
Materials cost (700 x P12.50)
Conversion costs (700 x 0.25 x P200)
Total
Answer: C
Value-added labor:
Assemblers
Fabricators
Total
Value-added activity ratio: (10 ÷ 16)
10
. Answer: D
Theoretical velocity = Theoretical capacity ÷ Available hours
(2,200 units ÷ 800 hours) = 2.75 units per hour
11
. Answer: A
Actual Velocity: Actual Production ÷ Available Hours
(2,000 ÷ 800) = 2.5 units per hour
12
.
Answer: C
MCE = Value Added Time ÷ Throughput Time
P 8,750
35,000
P43,750
7 personnel
3 personnel
10 personnel
5/8 or 62.5%
40 ÷ (40 + 18 + 42 + 100) = 0.20
13
. Answer: B
On-time Delivery Percentage = On-time Delivery ÷ Total Delivery
(900 ÷ 940) = 95.7%