Deck 7: The Conversion Cycle

Question 1

Lean manufacturing evolved from the Toyota Production System (TPS),which is based on the just-in-time (JIT)production model.

Answer 1

True

Question 2

Typically the only allocated cost in the value stream is a charge per square foot for the value stream production facility.

Answer 2

True

Question 3

Manufacturing resources planning (MRP II)has evolved into enterprise resource planning (ERP).

Answer 3

True

Question 4

Accounting in a world-class manufacturing environment emphasizes standard cost and variance analysis.

Question 5

The objective of the economic order quantity model is to reduce total inventory costs by minimizing carrying costs and ordering costs.

Question 6

Move tickets authorize the storekeeper to release materials to work centers.

Question 7

A purchase requisition authorizes the storekeeper to release materials to individuals or work centers in the production process.

Question 8

The philosophy of customer satisfaction permeates the world-class firm.

Question 9

The cost accounting system authorizes the release of raw materials into production.

Question 10

The work-in-process file is the subsidiary ledger for the work-in-process control account.

Question 11

The complexities of ABC have caused many firms to abandon this method in favor of value stream accounting.

Question 12

Reports generated by the cost accounting system include performance reports and budget reports.

Question 13

ABC assigns cost to cost objects based on their use of activities.

Question 14

The only objective of the just-in-time philosophy is to reduce inventory levels.

Question 15

A company's value stream includes all steps in a process,both essential and non-essential,for which the customer is willing to pay.

Question 16

Cement and petrochemicals are produced by the batch manufacturing method.

Question 17

Computer-integrated manufacturing (CIM)focuses on reducing the complexity of the physical manufacturing layout of the shop floor.

Question 18

The bill of materials specifies the types and quantities of the raw materials and subassemblies used in producing a single unit of finished product.

Question 19

Batch processing creates a homogeneous product through a continuous series of standard procedures.

Question 20

The two subsystems of a traditional conversion cycle are the production system and the delivery system.

Question 21

The internal control significance of the excess materials requisition is that it

A)indicates the amount of material released to work centers
B)identifies materials used in production that exceed the standard amount allowed
C)indicates the standard quantities required for production
D)documents the return to raw materials inventory of unused production materials

Question 22

Which function is not a part of the batch production process?

A)plan and control production
B)prepare purchase orders
C)maintain inventory control
D)perform cost accounting

Question 23

Inventory control performs all of the following tasks except it

A)provides production planning and control with the inventory status report of finished goods
B)updates the raw material inventory records
C)prepares a materials requisition for each production batch
D)records the completed production as an increase to finished goods inventory

Question 24

An example of a continuous process is the production of

A)wedding invitations
B)milk products
C)jet aircraft
D)all of the above

Question 25

When one of the following statements is true?

A)ERP evolved directly from MRP.
B)ERP evolved into MRP and MRP evolved into MRP II.
C)MRP II evolved from MRP and MRP II evolved into ERP.
D)None of the above is true.

Question 26

Which of the following is not an assumption of the economic order quantity model?

A)demand for the product is known with certainty
B)total cost per year of placing orders is fixed
C)lead time is known and is constant
D)there are no quantity discounts

Question 27

An excess materials requisition is a control that signals that a greater than standard quantity of materials is being ordered from the vendor.

Question 28

A move ticket

A)is the formal plan and authority to begin production
B)specifies the materials and production required for each batch
C)records the work done in each work center
D)authorizes the storekeeper to release materials to work centers

Question 29

A company's value stream map depicts only the value-added activities needed to complete a process or product.

Question 30

All of the following are characteristics of batch processing except

A)each item in the batch is similar
B)batches are produced in accordance with detailed customer specifications
C)batches are produced to replenish depleted inventory levels
D)setting up and retooling is required for different batches

Question 31

What is the economic order quantity if the annual demand is 10,000 units,set up cost of placing each order is $3 and the holding cost per unit per year is $2?

A)174
B)123
C)245
D)116

Question 32

Which statement is not true?

A)World-class companies must maintain strategic agility and be able to turn on a dime.
B)World-class companies motivate and treat employees like appreciating assets.
C)Manufacturing firms that achieve world-class status do so by following a philosophy of lean manufacturing.
D)All world-class companies use ERP to integrate all company functions.

Question 33

The production schedule is

A)the expected demand for the firm's finished goods for a given year
B)the formal plan and authority to begin production
C)a description of the type and quantity of raw materials and subassemblies used to produce a single unit of finished product
D)the sequence of operations during manufacturing

Question 34

Which process creates a homogeneous product through a continuous series of standard procedures?

A)batch process
B)make-to-order process
C)continuous process
D)none of the above

Question 35

Cost accounting initiates a WIP account upon receiving the first move ticket of a batch.

Question 36

The inventory control function updates and maintains both raw materials and finished goods inventory subsidiary ledgers.

Question 37

Firms hold safety stock to compensate for

A)mathematical weaknesses of the economic order quantity model
B)variations in lead time or daily demand
C)fluctuations in carrying costs
D)uncertainty in the estimation of ordering costs

Question 38

Pull processing involves pulling products from the consumer end (demand),rather than pushing them from the production end (supply).

Question 39

Lead time times daily demand is

A)the economic order quantity
B)safety stock
C)the reorder point
D)total inventory

Question 40

The storekeeper releases raw materials based on the

A)production schedule
B)materials requisition
C)work order
D)bill of materials

Question 41

Firms are abandoning activity-based costing (ABC)because

A)it does not facilitate the analysis of variances
B)it is complex and time consuming
C)it does not recognize the importance of direct labor as a component of total manufacturing cost
D)the financial nature of the reports does not permit comparisons to be made among different types of products

Question 42

If the daily demand is 40 units and the lead time is 12 days,the reorder point is

A)40 units
B)48 units
C)480 units
D)none of the above

Question 43

An example of automation of manufacturing design is

A)computer-aided engineering
B)automated storage and retrieval systems
C)computer numerical control
D)robotics

Question 44

All of the following are internal control procedures that should be in place in the conversion cycle except

A)calculation and analysis of direct material and direct labor variances
B)retention of excess materials by work centers
C)physical count of inventory items on hand
D)limited access to raw material and finished goods inventories

Question 45

Which of the following would not be included as a value stream cost?

A)Labor costs of employees who simply transport the product from cell to cell.
B)Labor costs of employees who design the product.
C)A charge per square foot for the value stream production facility including cost of rent and building maintenance.
D)All of the above are value stream costs.

Question 46

Deficiencies of the traditional cost accounting information system include all of the following except

A)an emphasis on financial performance
B)inaccurate cost allocations
C)an emphasis on standard costs
D)immediate feedback about deviations from the norm

Question 47

Characteristics of lean manufacturing include all of the following except

A)push manufacturing
B)zero defects
C)reduced setup time and small lot sizes
D)reliable vendors

Question 48

Computer integrated manufacturing includes all of the following technologies except

A)robotics
B)materials requirements planning
C)automated storage and retrieval systems
D)computer-aided design

Question 49

An example of automation of manufacturing planning is

A)computer-aided engineering
B)automated storage and retrieval systems
C)materials requirements planning
D)computer numerical control

Question 50

A flexible manufacturing system

A)creates bottlenecks in the process
B)leads to an "us" versus "them" attitude among workers
C)shortens the physical distance between activities
D)is organized along functional lines

Question 51

Which situation violates the segregation of functions control procedure?

A)production planning and control is located apart from the work centers
B)inventory control maintains custody of inventory items
C)cost accounting has custody of and makes entries on cost records
D)work centers record direct labor on job tickets

Question 52

Which of the following is not true?

A)The complexities of ABC have caused many firms to pursue value stream accounting.
B)Value stream accounting captures costs related to value-added activities within a specified department or activity.
C)An essential aspect in implementing value stream accounting is defining the product family.
D)Value stream accounting makes no distinction between direct costs and indirect costs.

Question 53

Which of the following statements about the EOQ inventory model assumptions is incorrect?

A)Demand for the product is constant and known with certainty.
B)The lead time is a variable.
C)All inventories in the order arrive at the same time.
D)Total ordering cost is a variable.

Question 54

A manufacturing process that is organized into group technology cells utilizing no human labor is called

A)islands of technology
B)process simplification
C)computer-integrated manufacturing
D)traditional manufacturing

Question 55

Which statement is not correct?

A)General ledger creates a new cost record upon receipt of a work order from production planning and control.
B)Cost accounting updates the cost record with data gathered from the materials requisition.
C)General ledger posts summary information about the manufacturing process based on a journal voucher prepared by cost accounting.
D)Cost accounting computes variances and applies overhead to individual cost records.

Question 56

The cost of poor quality includes all of the following except

A)cost of rework
B)warranty claims
C)scheduling delays
D)proceeds from the sale of scrap

Question 57

Which of the following is not a problem associated with standard cost accounting?

A)Standard costing discourages management from producing large batches of products and build inventory.
B)Applying standard costing leads to product cost distortions in a lean environment.
C)Standard cost data are associated with excessive time lags that reduce its usefulness.
D)The financial orientation of standard costing may promote bad decisions.

Question 58

Which of the following is not an example of waste?

A)overproduction of products
B)safety hazards that cause injury
C)stand-alone processes that are not linked to upstream or downstream processes
D)All of the above are examples of waste.

Question 59

Which statement is not correct?

A)cost objects are the reasons for performing activities
B)cost object describes the work performed in a firm
C)activities cause costs
D)cost objects create a demand for activities

Question 60

Which of the following is not true regarding ABC?

A)ABC is too time-consuming and complicated for practical applications over a sustained period.
B)ABC identifies the most and least profitable products and customers.
C)ABC promotes the lean manufacturing philosophies of process simplification and waste elimination.
D)All of the statements are true.

Question 61

In activity-based costing,distinguish between activities and cost objects.

Question 62

Traditional accounting assumes that _______________ cause costs.ABC assumes that _________________ cause costs.

Question 63

Describe the primary goal of lean manufacturing.

Question 64

What is meant by the term "islands of technology"?

Question 65

Explain the conversion cycle.

Question 66

Which statement is not correct?

A)Inventories provide a competitive advantage.
B)Inventories can invite overproduction.
C)Inventories are expensive to maintain.
D)Inventories may conceal problems.

Question 67

All of the following are documents in batch process production systems except

A)production schedule
B)route sheet
C)materials requisition
D)bill of manufacturing

Question 68

What is the difference between a materials requisition and a purchase requisition?

Question 69

Transaction authorization occurs in a traditional manufacturing environment in all of the following ways except

A)production planning and control initiates production with a work order
B)movement of the work through the production process follows the move ticket
C)the sales department modifies work orders to match changes in demand
D)the materials requisition authorizes the storekeeper to release materials to the work centers

Question 70

What are the key segregation of duties issues in the conversion cycle?

Question 71

In a traditional manufacturing environment,cost accounting provides independent verification of what information? What are the benefits?

Question 72

List two disadvantages of using a traditional cost accounting system.

Question 73

Discuss inventory control objectives.

Question 74

What information is contained in the bill of materials (BOM)?

Question 75

How are cost structures fundamentally different between the traditional and CIM environments?

Question 76

Which type of manufacturing creates a homogeneous product through a continuous series of standard procedures?

Question 77

Differentiate between essential and non-essential activities.

Question 78

Which of the following is not a principle of lean manufacturing?

A)Products are pushed from the production end to the customer.
B)All activities that do not add value and maximize the use of scarce resources must be eliminated.
C)A goal is the achievement of a high inventory turnover rate.
D)A lean manufacturing firm must have established and cooperative relationships with vendors.

Question 79

List one authorization control in the traditional manufacturing environment.

Question 80

What is one benefit of the flexible production system?