Deck 8: Setting Process Expectations

Question 1

Process management focuses on how work is done, emphasizing the linkages between people from one individual to another.

Answer 1

True

Question 2

Both functional organizations and process-oriented organizations focus their businesses on the customer.

Answer 2

False

Question 3

Material handling is managed in a functional organization by accumulating buffer stocks, while process-oriented organizations attempt to minimize material handling by adopting just-in-time production.

Answer 3

True

Question 4

A product's value proposition will never be affected by non-value-added activities.

Question 5

Under lean accounting, standards and variances are not used at any point in the costing or performance management cycle.

Question 6

Under lean accounting, like traditional cost accounting, products are charged with all manufacturing costs including direct materials, direct labor, and some appropriate share of manufacturing overhead.

Question 7

Income statements produced using a lean accounting approach conform to generally accepted accounting principles (GAAP).

Question 8

The Theory of Constraints argues that the slowest resource in a production system should set the pace for the entire system.

Question 9

Faced with a bottleneck resource, a company can achieve economies by making process improvements in any of the activities in its production process.

Question 10

One of the key differences between activity-based costing and activity-based management is that the latter takes a forward rather than historical approach.

Question 11

Compared to activity-based costing, activity-based management places more emphasis on segregating value-added activities from non-value-added activities.

Question 12

Traditional forms of budgets and activity-based budgets both emphasize the work that resources accomplish for the company and its stakeholders.

Question 13

A company employing just-in-time management principles will maintain a balanced production line.

Question 14

Like other product costing systems, backflush costing attempts to fully value work-in-process inventories.

Question 15

Just-in-time management can be applied in a service setting if external benchmarks are available to evaluate the efficiency and capacity of activities.

Question 16

A process is a set of sequential activities that produces a specific output. One of the key attributes of these activities is that they:

A) Are interdependent.
B) Take place in isolated silos.
C) Are inherently inefficient.
D) All add value from the point of view of the customer.

Question 17

Process management refers to the set of tools and techniques used to manage activities:

A) Within functional "silos."
B) Within individual organizational departments.
C) Across an entire organization.
D) That are constrained by a bottleneck resource.

Question 18

Which of the following is a key characteristic of a process-oriented organization?

A) The organizational structure is hierarchical.
B) Management's role emphasizes the control function.
C) Material handling is achieved via buffer stocks.
D) The business is focused on the customer.

Question 19

The basic goal of all process-based tools and techniques is:

A) The identification and control of all unfavorable product cost variances.
B) The identification and management of bottleneck resources.
C) The elimination of waste.
D) The appropriate application of overhead costs.

Question 20

Consider the following manufacturing-related activities.
I. Conducting the final assembly of wooden furniture.
II. Moving completed production to the finished goods warehouse.
III. Painting newly manufactured automobiles.
IV. Setting up a machine related to a new production run.
V. Reworking defective goods to bring them up to quality standards.
The activities that would be classified as value-added activities are:

A) II, III, IV, and V only.
B) I, IV, and V only.
C) I, III, and V only.
D) I and III only.

Question 21

Of the following, which best illustrates a non-value-added activity?

A) Engineering design changes to enhance product safety.
B) Taking receipt of a customer order.
C) The movement of materials from one workstation to another.
D) Elimination of production delays via just-in-time material receipts.

Question 22

For a business that has implemented lean manufacturing processes, the adoption of lean accounting is primarily intended:

A) To more accurately report the financial performance of the company.
B) To satisfy generally accepted accounting principles (GAAP).
C) To enhance internal controls.
D) To improve overhead allocations.

Question 23

A lean accounting approach organizes cost information by:

A) Product.
B) Functional department.
C) Cost center.
D) Value stream.

Question 24

Under a lean accounting approach, costs that are not directly traceable to the activities and outcomes of a value stream are:

A) Absorbed by work-in-process and finished goods inventory accounts.
B) Charged against revenues as they are incurred.
C) Charged to the value stream using a predetermined overhead rate.
D) Delayed in inventory and only charged against revenue when products are sold.

Question 25

A core concept of lean accounting is that the selling prices of a company's products and/or services are a function of:

A) Product costs.
B) The product or service's value proposition.
C) The degree of competition in the market.
D) The desired or required rate of profit.

Question 26

Among other products, Bendix Company produces automotive brake pads in its Bowling Green, Ky., factory. In a lean accounting system, which of the following manufacturing costs would Bendix charge to the brake pads produced?

A) Property and casualty insurance premiums on the factory.
B) Property taxes on the factory imposed by the city of Bowling Green.
C) Electric utility costs in the factory.
D) Raw materials used in the brake pads.

Question 27

Activity-based management (ABM) refers to the set of methods intended to control activities so as to:

A) Achieve performance goals.
B) Enhance customer value.
C) Improve profitability.
D) ABM focuses on achieving all of the above.

Question 28

Activity-based management (ABM) relies on which of the following for its major source of data?

A) An activity-based costing (ABC) system.
B) A standard cost accounting system.
C) An absorption cost accounting system rooted in generally accepted accounting principles (GAAP).
D) The American Society of Mechanical Engineers (ASME).

Question 29

When a business has entered into the decline phase of its life cycle, activity-based management (ABM) is primarily used to:

A) Manage bottlenecks and optimize revenue based on resources available.
B) Provide information to support downsizing and cost-cutting decisions.
C) Identify non-value-added costs and improve operations to enhance profitability.
D) Improve processes to gain more productivity and find funds for growth by removing waste.

Question 30

Unlike traditional budgets that are focused on resources consumed by a company or cost center, activity-based budgeting (ABB) places emphasis on:

A) Traceable direct costs.
B) The work that the resources will accomplish for the company.
C) Standard costs and variances.
D) Best-in-class benchmarks.

Question 31

Of the following innovative approaches to the organization of work, which emphasizes the resources that define current limits on the rate of output of goods and/or services?

A) Activity-based management.
B) Just-in-time management.
C) The Theory of Constraints.
D) Cellular flow management.

Question 32

Adirondack Designs, Inc., produces wooden furniture in a sequential process involving four departments: cutting, assembly, finishing, and packaging. Labor time available in the finishing department exerts a limiting constraint on the output of the company. According to the Theory of Constraints, the pace of production for the entire system would be set by:

A) The cutting department.
B) The assembly department.
C) The finishing department.
D) The packaging department.

Question 33

Adirondack Designs, Inc., produces wooden furniture in a sequential process involving four departments: cutting, assembly, finishing, and packaging. Limited labor time available in the finishing department exerts a limiting constraint on the output of the company. According to the Theory of Constraints, optimal use of the time available in the finishing department requires:

A) Production of the product with the largest contribution margin per hour of time available in the finishing department.
B) Production of the product with the largest contribution margin.
C) Production of the product with the largest operating income per unit.
D) Production of the product with the shortest assembly time.

Question 34

Adirondack Designs, Inc., produces wooden furniture in a sequential process involving four departments: cutting, assembly, finishing, and packaging. Labor time available in the finishing department exerts a limiting constraint on the output of the company. According to the Theory of Constraints, process improvements should be confined solely to:

A) The cutting department.
B) The assembly department.
C) The finishing department.
D) The packaging department.

Question 35

Classic Cars, Inc., produces reproduction parts for older automobiles in a sequential process involving four departments: cutting, shaping, painting and finishing, and packaging. Labor time available in the shaping department exerts a limiting constraint on the output of the company. A principal aim of just-in-time management at Classic Cars would be to balance the flow of work through the four departments so as to:

A) Minimize the accumulation of raw material and finished goods inventories.
B) Stabilize inventory turnover.
C) Accurately account for work-in-process inventories.
D) Minimize delivery times of finished goods to customers.

Question 36

Presario Inc. recently installed just-in-time production and purchasing systems. If Presario's experience is similar to that of other companies, Presario will likely:

A) Reduce the number of suppliers with which it does business.
B) Increase the size of individual orders of raw materials.
C) Increase the dollar investment in finished goods inventory.
D) Be less reliant on sales orders as a "trigger" mechanism for production runs.

Question 37

Just-in-time management systems often employ what is called "backflush costing." Under this accounting approach, work-in-process inventories are valued at:

A) The sum of traceable costs.
B) The sum of products of unit costs and equivalent units of material and conversion.
C) Zero.
D) The sum of direct material, direct labor, and applied overhead costs.

Question 38

The practice called "backflush costing" only charges cost to a unit of product when:

A) The unit leaves a just-in-time cell.
B) The unit is delivered to the customer.
C) The unit enters the finished goods inventory.
D) Raw material is added to the unit.

Question 39

Throughput time is most likely to be minimized in a production system organized:

A) As a job order system.
B) As a continuous process environment.
C) As a large batch production system.
D) By a company employing just-in-time management methods.

Question 40

Just-in-time management reduces total throughput time by:

A) Eliminating the "queue" and "move" activities from the work flow.
B) Managing the bottleneck resource.
C) Increasing productive capacity.
D) Allowing for large buffer stocks of essential raw materials.

Question 41

According to the Theory of Constraints, all of the following activities help to relieve the problem of a bottleneck in operations except:

A) Eliminating idle time at the bottleneck operation.
B) Reducing set-up time at the bottleneck operation.
C) Shifting products that do not have to be made on bottleneck machines to nonbottleneck machines.
D) Increasing the efficiency of operations at nonbottleneck machines.

Question 42

Producing under the Theory of Constraints is not always the least expensive way to operate because:

A) Excess capacity is often retained in nonbottleneck areas.
B) Large batch inventories are tolerated.
C) Process management is sacrificed in order to manage individual steps in the production sequence.
D) Traceable costs are not distinguished from operating expenses.

Question 43

A kanban, or small buffer stock, is employed in a cellular flow design to:

A) Minimize internal product failures.
B) Balance a production line where activities have differing output capabilities.
C) Enhance productive capacity.
D) Avoid the limitation imposed by a bottleneck resource.

Question 44

Two workers, A and B, perform sequential tasks on a balanced line producing wooden bookcases. Worker B applies a spray coating of paint primer to shelves that Worker A has sanded. Worker A can only sand one shelf at a time while Worker B is able to apply the spray primer to four shelves simultaneously. In order to keep the line balanced:

A) Output of Worker A will need to be stored in four-piece kanbans.
B) Output of Worker B will need to be stored in four-piece kanbans.
C) Worker B will necessarily experience idle capacity.
D) Worker A will be required to produce a large batch of in-process inventory.

Question 45

Two machines, A and B, are arranged sequentially on a balanced production line. Output from Machine A is stored in a kanban. This indicates that:

A) Machine A is a bottleneck resource.
B) Machine B is able to produce fewer units at a time than Machine A.
C) Machine A is able to produce fewer units at a time than Machine B.
D) Production on Machine A is a non-value-added activity.

Question 46

Clean and Shiny, LLC, provides window cleaning services to a number of commercial clients. Window-washing crews are given standard times for servicing certain buildings. Given the experience of the crew, these standards can allow more or less time. The Sunshine Crew has recently begun work for Clean and Shiny. Its performance is evaluated using a rolling or moving average standard that reflects the crew's rate of improvement. The table below contains the required time for washing the windows at the home office of the Pony Express National Bank for six months.
Required:
Using three months as the basis for a lean accounting elapsed time metric, compute the average time the Sunshine Crew requires to complete the Pony Express National Bank job over time. Use the first three months as your baseline, then add one new observation and delete one to produce successive averages.

Question 47

True Vision Cable Systems, Inc., employs activity-based budgeting systems. A recent study was done to analyze the activities completed by the company's customer service manager, who is paid $45,000 per year. The table below lists the activities performed by the customer service manager and the percentage of time she reported spending on each activity.
Required:
Develop an activity-based budget for the customer service manager.

Question 48

Everything U Need is the campus store at Upstate College. Due to the growing importance of used and rented textbooks, the business model for the store is under reevaluation. A part of this process has led to the application of activity-based management and budgeting principles. The store is preparing its activity-based budget for the upcoming July through September quarter, its busiest time of the year. The store classifies its product line into three categories: books and supplies; technology products; and clothing and personal items. The store has developed a listing of five activities that consume indirect resources. The table below lists the activities, their associated cost drivers, the cost driver rates, and the budgeted driver consumption by each activity for each product class in the July through September quarter.
Required:
a. Compute the total budgeted indirect cost for Everything U Need for the July through September quarter.
b. Compute the budgeted indirect cost for each product category for the July through September quarter.