Deck 7: Measuring and Managing Process Performance

Question 1

The theory of constraints focuses on long-term initiatives to increase operating income.

Answer 1

False

Question 2

In ________,equipment is organized to accommodate the production of a specific product.

A)a process layout
B)a product layout
C)cellular manufacturing
D)low-volume production

Answer 2

a product layout

Question 3

Which model has the greatest contribution margin per unit?

A)base model
B)long model
C)trick model
D)both the base model and the long model

Answer 3

long model

Question 4

How can the Vice-president of sales at Skate Magic encourage her salespeople to promote the more profitable model?

A)Put all sales persons on salary.
B)Provide higher sales commissions for higher priced items.
C)Provide higher sales commissions for items with the greatest contribution margin per constrained resource.
D)Provide higher sales commissions for higher priced items and items with the greatest contribution margin per constrained resource.

Question 5

If there is a machine breakdown,which model is the most profitable to produce?

A)base model
B)long model
C)trick model
D)both the long model and the trick model

Question 6

In ________,all similar equipment or functions are grouped together.

A)a process layout
B)a product layout
C)cellular manufacturing
D)just-in-time production

Question 7

Which model has the greatest contribution margin per machine-hour?

A)base model
B)long model
C)trick model
D)both the long model and the trick model

Question 8

Characteristics of a product layout include:

A)raw materials and purchased parts are delivered directly to the production line where they are needed.
B)low-volume production.
C)a U-shaped layout.
D)small batches of unique products.

Question 9

The buildup of inventories decreases the cycle time of production.

Question 10

As a result of the layout reorganization,reduced levels of work-in-process inventory are projected to decrease inventory carrying costs annually by:

A)$ 1,100.
B)$ 3,750.
C)$ 4,400.
D)$5,500.

Question 11

If there is excess capacity,which model is the most profitable to produce?

A)base model
B)long model
C)trick model
D)both the base model and the long model

Question 12

Process layouts are characterized by long production paths,high inventory levels and small batches of unique products.

Question 13

There are two general types of facility designs: process layouts and product layouts.

Question 14

The theory of constraints:

A)emphasizes long-term optimization.
B)maintains that carefully managing production bottlenecks will increase operating income.
C)helps managers make special one-time decisions.
D)suggests that some component parts should be outsourced.

Question 15

Characteristics of cellular manufacturing include:

A)a layout that is usually circular like a cell.
B)increasing the number of employees needed to produce a product.
C)individual areas for employees so each can work independently without interruption.
D)a flexible layout that can be easily adjusted to make a different product.

Question 16

The operating costs considered by the theory of constraints are all direct manufacturing costs,including direct materials and direct labor.

Question 17

Constraints from the theory of constraints may include:

A)the availability of direct materials in manufacturing.
B)linear square feet of display space for a retailer.
C)direct labor in the service industry.
D)All of the above are correct.

Question 18

Processing cycle efficiency is calculated as processing time divided by the sum of processing time,moving time,storage time,and inspection time.

Question 19

In ________,the plant is organized into areas where all machines used to manufacture a group of similar products are close to each other.

A)a process layout
B)a product layout
C)cellular manufacturing
D)just-in-time production

Question 20

Characteristics of a process layout include:

A)continuous processing.
B)long production paths.
C)small amounts of inventory.
D)no work-in-process storage areas.

Question 21

In lean manufacturing,any resource spending that does not create value for the end customer is wasteful and must be eliminated.

Question 22

Value is defined as any action or process for which a customer would be willing to pay.

Question 23

Inspection costs of purchased parts and materials are examples of:

A)prevention costs.
B)appraisal costs.
C)internal failure costs.
D)external failure costs.

Question 24

After the change,sales are projected to increase because:

A)of shorter delivery lead times.
B)of higher sales prices.
C)of the ability to process larger batch sizes.
D)All of the above are correct.

Question 25

Global competition led to the development of international quality standards such as ISO 9000 Standards.

Question 26

Implementing a just-in-time manufacturing system requires a major cultural change for an organization.

Question 27

Quality engineering costs are an example of:

A)prevention costs.
B)appraisal costs.
C)internal failure costs.
D)external failure costs.

Question 28

Explain the differences between a process layout,a product layout,and cellular manufacturing.

Question 29

When using a just-in-time manufacturing,a problem anywhere in the system can stop all production.

Question 30

As a result of switching to a cellular manufacturing operation,total benefits are projected to increase annually by:

A)$111,400.
B)$113,600.
C)$136,400.
D)$138,600.

Question 31

As a result of the layout reorganization,incremental manufacturing costs are projected to:

A)decrease by $11,400 annually.
B)decrease by $12,500 annually.
C)increase by $12,500 annually.
D)increase by $20,000 annually.

Question 32

The quality movement was pioneered by:

A)Eli Whitney.
B)Henry Ford.
C)Edwards Deming.
D)Frederick Taylor.

Question 33

A processing cycle efficiency (PCE)of 14% indicates better efficiency than a PCE of 50%.

Question 34

The cost of reworking defective components is an example of:

A)prevention costs.
B)appraisal costs.
C)internal failure costs.
D)external failure costs.

Question 35

Carey Manufacturing,Inc.,is considering reorganizing its plant into manufacturing cells. The following estimates have been prepared to evaluate the benefits from the reorganization:
Before the change After the change

Required:
a. Why do the layout reorganization estimates include
1. a decrease in work-in-process inventory?
2.a decrease in direct material costs as a percentage of sales?
3.an increase in sales?
b. As a result of the layout reorganization,what amount of annual change is projected
1.from carrying reduced levels of work-in-process inventory?
2.for incremental manufacturing costs?
3.in total benefits?

Question 36

________ include the cost of raw-materials inspections and assembly-line inspections.

A)Prevention costs
B)Appraisal costs
C)Internal failure costs
D)External failure costs

Question 37

Lean manufacturing:

A)has a central philosophy that resource spending that does not add value must be eliminated.
B)defines value as any action or process for which the customer is willing to pay.
C)is derived from the Toyota Production System.
D)All of the above are correct.

Question 38

Warranty costs are an example of:

A)prevention costs.
B)appraisal costs.
C)internal failure costs.
D)external failure costs.

Question 39

After the change,work-in-process inventory carrying costs are projected to decrease because of:

A)reduced costs in materials handling.
B)lower financing costs.
C)the decreased need for inventory storage.
D)All of the above are correct.

Question 40

Distinguish between internal failure costs and external failure costs. Give examples of each.

Question 41

________ starts with the estimated product costs and next determines the estimated selling price.

A)Standard costing
B)Target costing
C)Kaizen costing
D)Traditional costing

Question 42

A motorcycle manufacturer is currently using a conventional processing system.Recently work-in-process inventory has been piling up at two stations along the assembly line.To eliminate this problem,management discussed the possibility of implementing just-in-time manufacturing.Discuss the advantages and concerns of implementing JIT.

Question 43

Under traditional costing,supervisors and engineers are assumed to have superior knowledge about how to improve processes because they actually work with the manufacturing processes used to produce products.

Question 44

Concerns about Kaizen costing include:

A)radical process improvements.
B)excessive pressures are put on employees.
C)focus is on the overall system.
D)grace periods may be granted.

Question 45

Why is a cost-of-quality report useful?

Question 46

One goal of ________ is to design costs out of products in the research,development,and engineering stage.

A)cost-plus pricing
B)target costing
C)Kaizen costing
D)traditional costing

Question 47

Under kaizen costing,cost reduction targets are set and applied monthly and continuous improvement (kaizen)methods are applied all year long to meet targets.

Question 48

All the statements below are true regarding Kaizen costing EXCEPT that:

A)cost-variance analysis compares target Kaizen costs with actual cost reduction amounts.
B)cost reductions apply to all variable costs.
C)workers are assumed to have the best knowledge to improve processes and reduce costs.
D)cost reduction targets are set and applied on an annual basis.

Question 49

Characteristics of just-in-time manufacturing include all of the following EXCEPT:

A)the ability to process items in large batches.
B)making a product only when the customer requires it.
C)no work-in-process inventories.
D)a problem anywhere can stop production.

Question 50

Measures of JIT (just-in-time)manufacturing reliability include all of the following EXCEPT:

A)defect rates.
B)labor and machine utilization ratios.
C)cycle times.
D)percent of on-time deliveries.

Question 51

In a just-in-time management system,explain
a.why suppliers become very important to the overall manufacturing process,and
b.what incentives can be offered to reward good suppliers.

Question 52

Standard costing includes:

A)continuous improvement.
B)monthly cost reduction targets.
C)the assumption that workers closest to the process know best.
D)goals to meet performance standards.

Question 53

The implementation of just-in-time production results in all of the following EXCEPT:

A)decreased cycle times.
B)reduced amount of waste.
C)a slower pace for employees.
D)structural changes.

Question 54

The goal of standard costing is to reduce costs through small,incremental changes.

Question 55

High levels of inventory result in all EXCEPT:

A)high moving, handling, and storage costs.
B)increased product obsolescence and damage.
C)increased financing costs.
D)idle facilities.

Question 56

Kaizen costing requires relevant financial results to be shared with front-line employees.

Question 57

Kaizen costing assumes engineers and managers possess the best knowledge to improve processes and reduce costs.

Question 58

Discuss cost reductions that can result from reducing work-in-process inventory.

Question 59

Kaizen costing includes:

A)cost control system concept.
B)standards set annually or semiannually.
C)continuous improvement.
D)comparing actual costs to standard costs.

Question 60

________ starts with the estimated product costs and next adds the expected profit margin.

A)Cost-plus pricing
B)Target costing
C)Kaizen costing
D)Standard costing

Question 61

Vander Belt Manufacturing, Inc., is considering reorganizing its plant into manufacturing cells. The following estimates have been prepared to evaluate the benefits from the reorganization:

As a result of the layout reorganization,reduced levels of work-in-process inventory are projected to decrease inventory carrying costs annually by:

A)$ 2,200.
B)$ 7,500.
C)$ 8,800.
D)$11,000.

Question 62

Experience shows that it is more expensive to prevent defects than to detect and repair them.

Question 63

Vander Belt Manufacturing, Inc., is considering reorganizing its plant into manufacturing cells. The following estimates have been prepared to evaluate the benefits from the reorganization:

As a result of the layout reorganization,incremental manufacturing costs are projected to:

A)decrease by $22,800 annually.
B)decrease by $25,000 annually.
C)increase by $25,000 annually.
D)increase by $40,000 annually.

Question 64

________ is the most common method of gathering information where companies independently obtain information about one or several other companies that excel in the area of interest.

A)Cooperative benchmarking
B)Database benchmarking
C)Unilateral (covert)benchmarking
D)Indirect/third party benchmarking

Question 65

Vander Belt Manufacturing, Inc., is considering reorganizing its plant into manufacturing cells. The following estimates have been prepared to evaluate the benefits from the reorganization:

As a result of switching to a cellular manufacturing operation,total benefits are projected to increase annually by:

A)$222,800.
B)$227,200.
C)$272,800.
D)$277,200.

Question 66

All of the following are true regarding benchmarking EXCEPT:

A)that buy-in by employees is critical.
B)benchmarking can save time and money by avoiding the mistakes made by others.
C)that the purpose is to gather information regarding the best practices of others.
D)benchmarking initiatives generally result in quick changes to the work environment.

Question 67

Bingington Corporation is using the Kaizen approach to budgeting for 2011.The budgeted income statement for the month ended January 31,2011 is as follows:
Sales (360,000 units) $1,080,000
Less: Cost of goods sold 720,000
Gross margin 360,000
Operating expenses (includes $54,000 of fixed costs) 270,000
Net income $ 90,000
Under the Kaizen approach,cost of goods sold and variable operating expenses are budgeted to decline by 2% per month.
Required:
Prepare a Kaizen-based budgeted income statement for the month ended February 28,2011.Assume sales are constant each month.

Question 68

Allscott Company is developing its budgets for 2012 and,for the first time,they will use the Kaizen approach.The initial 2012 income statement,based on static data from 2011,is as follows:

Required:
Prepare a Kaizen-based budgeted income statement for the year ended December 31,2012.

Question 69

What is the budgeted gross margin for March 2011?

A)$196,020
B)$198,000
C)$204,020
D)$205,970

Question 70

________ is where participants meet openly to discuss their methods,visit each other's sites,and generally have a long-run association.

A)Group benchmarking
B)Cooperative benchmarking
C)Unilateral (covert)benchmarking
D)Indirect/third party benchmarking

Question 71

After the change,work-in-process inventory carrying costs are projected to decrease because of:

A)reduced costs in materials handling.
B)lower financing costs.
C)the decreased need for inventory storage.
D)All of the above are correct.

Question 72

Benchmarking requires that organizational members first look to the best practices of other organizations for guidance on improving and then understand their current operations and approaches to conducting business,

Question 73

After the change,direct labor costs as a percentage of sales are projected to decrease because:

A)less work-in-process inventory needs to be moved from location to location.
B)fewer employees are needed to produce a product due to the new work design.
C)less supervisors are needed to oversee operations.
D)All of the above are correct.

Question 74

After the change,a decreased amount of work-in-process inventory is projected because:

A)of reduced cycle times resulting from a more continuous production flow.
B)of lower financing costs and the reduced need for storage and handling.
C)larger batches can be processed faster and more efficiently.
D)All of the above are correct.

Question 75

After the change,sales are projected to increase because:

A)of shorter delivery lead times.
B)of higher sales prices.
C)of the ability to process larger batch sizes.
D)All of the above are correct.

Question 76

What is the budgeted cost of goods sold for March 2011?

A)$294,030
B)$294,000
C)$300,000
D)$297,000

Question 77

Work-in-process inventory generally decreases after the implementation of a just-in-time inventory system.

Question 78

________ can be a cost beneficial way to gather information because the company can avoid mistakes other companies have made.

A)QFD
B)TLCC
C)Benchmarking
D)Kaizen