Deck 16: Strategic Management Control: a Lean Perspective

Question 1

The 'lean' accounting approach applies to manufacturing entities and is not appropriate for service entities.

Answer 1

False

Question 2

Lean accounting incorporates which of the following?

A) Just-in-time
B) Total quality management
C) The theory of constraints
D) All of the above

Answer 2

D

Question 3

Under a lean accounting system it is possible to dispense with supplier's invoices.

Answer 3

True

Question 4

The theory of constraints (TOC) is concerned with constraints on the supply side, not those on the demand side.

Question 5

In implementing lean accounting concepts the value chain is considered to end when the product or service is sold to the customer.

Question 6

'Value' in lean accounting is defined through the eyes of the customer.

Question 7

The philosophy of just-in-time processing results in finished goods being completed just in time to be offered for sale.

Question 8

Lean accounting embraces full absorption costing.

Question 9

Under a traditional accounting system any build up of inventory will increase profit as it will include deferred fixed overheads.

Question 10

Under a total quality management approach entities that seek only to match the quality of their competitors should reposition themselves as high-quality producers to maxamise their profitability.

Question 11

The just-in-time system is considered a supply-push system.

Question 12

The philosophy of TQM is to cut costs while increasing quality.

Question 13

Physical inspections at every point of the value chain is the key principle underlying TQM.

Question 14

In throughput costing throughput is the rate at which the system generates cash through sales.

Question 15

Lean accounting is based on the philosophy

A) that there should be a complete employee-focused approach in the organisation
B) that there should be a complete shareholder-focused approach in the organisation
C) that there should be a complete customer-focused approach in the organisation
D) that there should be a complete management-focused approach in the organisation

Question 16

Lean accounting refocuses performance measurement systems to emphasise social controls such as training.

Question 17

The originator of the total quality management (TQM) approach was an American, W. Edwards Deming.

Question 18

An approach to accounting that aims to eliminate all sources of organisational waste from the value chain is known as:

A) just-in-time
B) strategic management
C) lean accounting
D) value chain management

Question 19

The theory of constraints (TOC) involves imposing strict controls and standards on all aspects of the value chain in order to improve efficiency.

Question 20

Under a lean accounting approach the aim is to remove all non-value added activities.

Question 21

Lean accounting may involve cutting:

A) inventory levels
B) the workload
C) paperwork
D) all of the above

Question 22

Just-in-time manufacturing is dedicated to:

A) having excessive amounts of materials on hand at all times
B) having the right amount of materials at the time they are needed
C) having no materials on hand at any time
D) having to order materials when the factory runs out

Question 23

Which of the following terms is typically associated with just-in-time systems?

A) Demand-push system
B) Manufacturing cells
C) Non-value-added activities
D) Linear regression

Question 24

A limitation of the theory of constraints and throughput costing is that:

A) Management's attention is too focused on long-term results
B) Labour and overhead costs may be built up to excessive levels
C) Any product mix changes would not generate immediate cash flow effects
D) a and b are limitations

Question 25

Advantages of just-in time inventory management are all of the following, except:

A) It decreases the space needed for inventory storage
B) It makes the firm more independent of external suppliers
C) It minimises inventory insurance costs
D) It increases manufacturing flexibility

Question 26

Activities performed under a value chain approach to quality management, to insure defect-free production, such as routine equipment maintenance or quality training, represent which category of quality costs?

A) External activities
B) Internal activities
C) Prevention activities
D) Appraisal activities

Question 27

Which of these is not associated with the lean accounting philosophy?

A) Reducing transaction processing steps
B) Refocusing the performance measurement system to emphasise social controls such as training
C) Centralising the organisational structure
D) All are associated with the lean accounting philosophy

Question 28

The statement concerning lean accounting that is true is:

A) a perpetual inventory system needs to be implemented
B) the focus is on achieving economies of scale in production
C) labour is considered to be a period cost and is treated as more fixed than variable
D) all of the statements are true

Question 29

It is correct that under a successful just-in-time production and inventory control system:

A) there must be only one supplier
B) distance from the supplier is not an issue as long as the supplier is reliable
C) suppliers will normally make frequent deliveries of small lots of materials
D) all of the above are correct

Question 30

In relation to the drum-buffer-rope concept that is used to maxamise flow through an organisational bottleneck, the statement that is correct is:

A) the 'drum' relates to the activity associated with only inserting materials into the constraint when needed
B) the 'buffer' is the activity of only maintaining a small amount of work in process
C) the 'rope' involves calculating the demand for materials according to specified lead times
D) All the statements are correct

Question 31

The first stage in the lean accounting model is:

A) Learning and growth within the organisation to strive for continual perfection
B) Identify the relevant value-chain processes and activities
C) Identify and define value in organisational offerings
D) Implement a pull system in sync with customer demand

Question 32

A just-in-time system reduces costs in all of these ways, except:

A) maximising the use of space
B) reducing defect rates
C) reducing the range of products produced
D) enhancing manufacturing flexibility

Question 33

Under TOC a constraint that is a demand side rather an a supply side constraint is:

A) insufficient processing time available
B) lack of the necessary knowledge or skills
C) a shortage of raw materials
D) none of the above are demand side constraints, all are supply side constraints

Question 34

The statement concerning the theory of constraints (TOC) that is not true is:

A) The theory is only relevant to a small number of businesses
B) It centres on identifying bottlenecks in the organisation
C) Constraints can be on the demand or supply side
D) None of the statements is untrue, i.e. all are true statements

Question 35

The major disadvantage of the just-in-time system is:

A) the number of small deliveries that must occur
B) the number of inspections that must occur
C) unforeseen, external events disrupting the delivery schedule
D) all of the above are major disadvantages

Question 36

A practice associated with lean accounting is:

A) Producing to forecast
B) Vertical reporting
C) Accounting information provided to managers and supervisors only
D) Producing in teams

Question 37

In throughput costing the throughput of a product refers to its:

A) selling price minus its fixed and variable costs
B) selling price minus its total fixed costs
C) selling price minus its totally variable costs
D) variable costs

Question 38

Which of these is not typically associated with successful implementation of just-in-time (JIT) systems?

A) Finding high quality suppliers
B) Locating suppliers with short transit times
C) Using as many suppliers as possible to minimise the risk of non-delivery
D) Developing management commitment to the JIT process

Question 39

Which of these is not a benefit of the just-in-time system?

A) it guarantees that inventory will always be available from the supplier
B) it reduces inventory obsolescence
C) it reduces raw material handling costs
D) none of the above is not a benefit, i.e. all are benefits of the just-in-time system

Question 40

In throughput costing which of the following is untrue?

A) Profit is defined as throughput less operating expenses
B) The throughput of a product is its selling price minus its totally variable costs
C) Investment is also called inventory
D) Operating expenses are classified and thought of as direct costs

Question 41

The just-in-time inventory system is considered a:

A) supply-pull system
B) demand-push system
C) supply-push system
D) demand-pull system

Question 42

Under a value chain approach to quality management, product inspections are an example of which category of quality costs?

A) Appraisal activities
B) Internal activities
C) Prevention activities
D) External activities

Question 43

NRL's accounting information system reported warranty repair and product replacement costs totaling $120,000 in a recent accounting period. These costs are an example of which type of quality costs?

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

Question 44

The total quality management (TQM) approach originated in:

A) Japan
B) Germany
C) USA
D) South Korea

Question 45

The statement concerning total quality management (TQM) that is not true is:

A) TQM is an important part of lean accounting
B) it promotes an organisation-wide philosophy
C) the units cost of the product or service generally increase slightly as quality is improved
D) none of the statements is untrue. i.e. all are true statements

Question 46

The statement that is incorrect concerning total quality management is:

A) there is a strong customer focus
B) there is an emphasis on process management
C) there is extensive employee participation and training
D) none of the statements is incorrect, i.e. all are correct statements