Question 1

Accounting for JIT
Vail operates a JIT plant assembling ceiling fans. The Sunset Model ceiling fam has a standard material cost of $28.40, a standard direct labor cost of $14.80, and overhead (fixed and variable) of $16.10. On Monday, a batch of 100 Sunset fans is completed. All of the materials for the 100 fans were on hand prior to Monday and had been previously recorded in the raw and in-process inventory account.
Required:
a. Describe the accounting entries that are made at the end of Monday to record the assembly of the batch of 100 Sunset fans.
b. In analyzing the financial statements of a firm using JIT and another firm in the same industry not using JIT, what differences would you expect to observe?

Accepted Answer

The answer of Accounting for JIT
Vail operates a JIT plant...

Question 2

An Inspection Decision With Quality Costs
A company is considering additional final inspection costs of $1 per unit before delivery to customers. The additional inspection should reduce the defective rate from 3 percent to 1 percent. If a defective unit is found, it is scrapped at no additional cost. The manufacturing costs before the final inspection are $200 per unit. The management believes that the external failure costs are $40 per defective unit.
Should the management incur the additional inspection costs?

Accepted Answer

The answer of An Inspection Decision With Quality Costs
A company...

Question 3

JIT and Stock-Out Costs
James Industries is considering a shift to JIT. The president feels that considerable costs can be saved by reducing inventory. The marketing manager is worried, however. She recognizes that the inventory holding costs such as storage and the opportunity cost of cash used to hold inventory are high and will be reduced if the company changes to JIT. But she is worried that the president has forgotten about stock-out costs. Stock-out costs occur when customers want to purchase an item, but the item is not immediately available so the customer goes elsewhere to make the purchase.
How should the company measure stock-out costs and what can be done to minimize stock-out costs?

Accepted Answer

The answer of JIT and Stock-Out Costs
James Industries is considering...

Question 4

JIT Accounting
Warm Glo manufactures gas furnaces for residential use. It uses a standard cost system that isolates all variances at purchase so that all product costs are stated at standard cost. All variances are included as part of cost of goods sold. Overhead is allocated based on direct labor hours. Standard cost for the basic economy model furnace follows.
  Warm Glo manufactures the basic economy furnace in a dedicated flow line using just-in-time production principles. All raw materials and purchased parts needed to assemble a complete furnace are delivered to the plant by 8:00 am of the day the furnace begins production. While each furnace requires eight direct labor hours, total throughput time for each furnace is two working days (16 hours). The difference between total throughput time and the eight direct labor hours is waiting time. Furnaces that are started in production one day are finished the next day. Four hours of direct labor are used the first day and four hours of direct labor are worked the second day. All production for the week is accumulated and shipped out to the distributor by train on Saturday.
Warm Glo maintains a finished-goods inventory account for basic economy furnaces that reflects the standard cost of furnaces not yet shipped out. Warm Glo uses a raw and in-process materials account (RIP) and JIT backflushing accounting. All accounts are updated at the end of each day for all production and transactions occurring that day. Conversion costs are charged directly to the finished goods inventory account as work is performed on furnaces. Through the end of Thursday of the current week the following table contains information about the plant's production of basic economy furnaces:  Required:
a. What is the balance in the RIP account for the basic economy model at the end of Thursday?
b. What is the balance in the finished goods account (basic economy model) at the end of Thursday?

Accepted Answer

The answer of JIT Accounting
Warm Glo manufactures gas furnaces for...

Question 5

JIT and the Role of Accounting
The president of Kelly Windows is an avid believer in JIT. Kelly Windows manufactures bay windows. The president wants no inventory or work-in-process on the floor at the end of each day. Windows are only manufactured after being ordered and throughput time is quick enough to complete most orders during the day of the order. The president is also trying to eliminate all non-value added activities. She considers accounting to be non-value added and would like to reduce accounting activities sharply if not completely.
As the controller, how can you defend the accounting activities performed by your department?

Accepted Answer

The answer of JIT and the Role of Accounting
The president...

Question 6

Productivity Measures With Multiple Inputs and Outputs
A farmer grows two crops: lettuce and beans. The farmer uses three inputs: labor, seed, and fertilizer. The past prices and the quantities of each are given in the following tables:  Required:
a. Calculate productivity measures for last year and this year using past prices.
b. Calculate the percentage change in productivity.

Accepted Answer

The answer of Productivity Measures With Multiple Inputs and Outputs
A...

Quiz 1: Accounting for Decision Making and Control