Question 1

Which of the following statements best defines setup time?
A) It is the time required to manufacture an item, including order preparation time, inspection time, and customer delivery time.
B) It is the time required to get equipment, tools, and materials ready to start the production of a component or product.
C) It is a time or period ranging from the time when a customer orders goods to the time when they are delivered to the customer.
D) It is the time required to create a new product to be sold by a business to its customers.

Accepted Answer

Setup time refers to the time required to prepare equipment, tools, and materials for production. This includes tasks such as changing over machines, cleaning and maintenance, and setting up components. It is a crucial factor in manufacturing operations, as reducing setup time can lead to increased productivity and improved efficiency.

Question 2

A costing system that omits recording some or all of the journal entries relating to the cycle from purchase of direct materials to the sale of finished goods is called ________.
A) dependent costing
B) synchronous costing
C) sequential costing
D) backflush costing

Accepted Answer

The system described is known as backflush costing, as it omits recording intermediate journal entries and only "flushes" the costs through the system at the end of the production cycle or when certain trigger events occur. This type of costing system is often used in lean manufacturing or just-in-time environments where minimizing paperwork and administrative tasks is a priority.

Question 3

Traditional normal and standard costing systems usually use 4 trigger points to record the flow of costs through the production system. Such costing is called ________.
A) backflush costing
B) delayed costing
C) variable tracking
D) sequential tracking

Accepted Answer

This question is asking for the term used to describe traditional costing systems that use 4 trigger points to track costs through the production system. The correct term is "sequential tracking." Backflush costing, delayed costing, and variable tracking are not the correct terms for this type of costing system.

Question 4

The Controller of Nip-it-in-the-Bud Inc. has studied the possibility of implementing a JIT production system. The annual incremental retooling costs of the JIT system is projected to be about $67,000 however, the new system will lower insurance costs by $10,000 and storage costs will drop by $20,000 a year as the company will be able to reuse warehouse space for other strategic purposes. In addition, material handling costs will drop by $10,000 a year and because of a resulting increase in quality and faster delivery, the company's contribution margin on the product will increase by $2.00 on annual sales of 20,000 units.
Required:
Calculate the net incremental benefit of the JIT system implementation.

Accepted Answer

The answer of The Controller of Nip-it-in-the-Bud Inc. has studied...

Question 5

Successful implementation of a JIT production system and effective accomplishments of its goals should result in a decrease in the inventory turnover ratio and a decrease in the number of days of inventory on hand.

Accepted Answer

It should result in an increase in the inventory turn over ratio and a decrease in the average number of days of inventory on hand.

Question 6

A system that comprises a single database that collects data and feeds it into software applications supporting all of a company's business activities is known as a(n) ________.
A) economic order quantity (EOQ) system
B) enterprise resource planning (ERP) system
C) just-in-time (JIT) system
D) material requirements planning (MRP) system

Accepted Answer

An enterprise resource planning (ERP) system is a software system that integrates all of a company's business activities into a single database, providing a comprehensive view of the organization's operations. This includes areas such as finance, human resources, supply chain management, inventory management, and customer relationship management. The system collects data from various sources and uses it to support decision-making and streamline business processes. Economic order quantity (EOQ), just-in-time (JIT), and material requirements planning (MRP) systems are specific types of inventory and supply chain management systems, but they do not integrate all business activities into a single database.

Question 7

Which of the following statements is true of the financial and nonfinancial measures in just-in-time production systems?
A) The inventory turnover ratio is expected to decrease.
B) Units produced per hour are expected to increase.
C) Manufacturing cycle time is expected to increase.
D) Total setup time for machines with respect to total manufacturing time is expected to increase.

Accepted Answer

The just-in-time production system aims to eliminate waste and increase efficiency. Financial measures such as inventory turnover ratio are expected to decrease because the inventory level is reduced in a JIT system. However, nonfinancial measures such as units produced per hour are expected to increase because of the elimination of waste and better flow of materials in the production process. Manufacturing cycle time is also expected to decrease in a JIT system, and the total setup time for machines with respect to total manufacturing time is expected to decrease as well.

Question 8

In a just-in-time system, suppliers are selected primarily on the basis of their ability to provide materials and products at the lowest possible price.

Accepted Answer

In a just-in-time system, suppliers are selected on the basis of their ability to deliver quality materials in a timely manner.

Question 9

A grouping of all the different types of equipment used to make a given product is referred to as ________.
A) total quality management
B) materials requirements planning
C) manufacturing cells
D) economic order quantity

Accepted Answer

Manufacturing cells refer to a grouping of various types of equipment used to make a particular product. Total quality management, materials requirements planning, and economic order quantity are different concepts related to operations management but not specifically related to a grouping of equipment.

Question 10

Which of the following statements best defines manufacturing cycle time in a JIT production system?
A) the time from when raw materials are received until it becomes a finished good
B) the time from when an order is received until it becomes a finished good
C) the time from when raw materials are received until it is delivered to the customers
D) the time from when an order is received until it is delivered to the customers

Accepted Answer

Manufacturing cycle time in a JIT production system refers to the time it takes to complete the production of a product once an order is received. Option A refers to lead time, option C refers to delivery lead time, and option D refers to order fulfillment lead time.

Question 11

Which of the following terms is defined as the time required to get equipment, tools, and materials ready to start production?
A) setup time
B) delivery time
C) manufacturing-cycle time
D) product design time

Accepted Answer

Setup time refers to the time taken to prepare the necessary tools, equipment, and materials needed for production. This process includes the setup of the machines, equipment calibration, and conducting necessary tests to ensure that everything is ready to start production.

Question 12

Which of the following statements best defines an enterprise resource planning (ERP) system?
A) a demand-pull system in which each component in a production line is produced immediately as needed by the next step in the production line as planned by enterprise resource management
B) a system that comprises a single database that collects data and feeds it into software applications supporting all of a company's business activities
C) a planning system that omits recording some of the journal entries relating to the stages from the purchase of direct materials to the sale of finished goods
D) a system that is made up of work areas with different types of equipment grouped together to make related products

Accepted Answer

An enterprise resource planning (ERP) system is a system that comprises a single database that collects data and feeds it into software applications supporting all of a company's business activities. It is designed to integrate all aspects of a business, including financial management, human resources, supply chain and operations management, customer relationship management, and more. Its purpose is to provide real-time visibility into a company's operations and facilitate decision-making. Options A, C, and D do not accurately describe an ERP system.

Question 13

Which of the following is a disadvantage of an enterprise resource planning (ERP) system?
A) The use of standard costing systems is not allowed in an ERP system.
B) Shifting manufacturing and distribution plans rapidly in response to changes in supply and demand is not possible in an ERP system.
C) The ERP systems must often be customized to fit the strategic needs of the user.
D) The ERP system increases lead times when purchasing material from a different supplier.

Accepted Answer

ERP systems often require customization to fit the specific needs of a business, which can be a complex and costly process.

Question 14

The Jarvis Corporation produces bucket loader assemblies for the tractor industry. The product has a long term life expectancy. Jarvis has a traditional manufacturing and inventory system. Jarvis is considering the installation of a just-in-time inventory system to improve its cost structure. In doing a full study using its manufacturing engineering team as well as consulting with industry JIT experts and the main vendors and suppliers of the components Jarvis uses to manufacture the bucket loader assemblies, the following incremental cost-benefit relevant information is available for analysis:
The Jarvis cost of investment capital hurdle rate is 15%.
One time cost to rearrange the shop floor to create the manufacturing cell workstations is $275,000.
One time cost to retrain the existing workforce for the JIT required skills is $60,000.
Anticipated defect reduction is 40%. Currently there is a cost of quality defect assessment listed as $150,000 per year.
The setup time for each of the existing functions will be reduced by 67%. Currently the forecast for setup costs are $225,000 per year.
Jarvis will expect to save $200,000 per year in carrying costs as a result of having a lower inventory.
The suppliers will require a 15% premium over the current level of prices in order to position themselves to supply the material on a smaller and more frequent schedule. Currently the materials purchases are $1,500,000 per year.
Required:
Determine whether it is in the best interest of Jarvis Corporation to install a JIT system.

Accepted Answer

The answer of The Jarvis Corporation produces bucket loader assemblies...

Question 15

Which of the following statements best defines backflush costing system?
A) an integrated costing system covering a company's accounting, distribution, manufacturing, purchasing, human resources, and other functions
B) a costing system that omits recording some of the journal entries relating to the stages from the purchase of direct materials to the sale of finished goods
C) a push-through system in which each component in a production line is produced immediately as needed by the next step in the production line
D) a costing system that comprises a single database that collects data and feeds it into software applications supporting all of a company's business activities

Accepted Answer

Backflush costing system is a method of costing that omits recording some of the journal entries relating to the stages from the purchase of direct materials to the sale of finished goods. Instead, the system waits until the production process is completed and then records all the costs in a single transaction. This method is typically used in JIT (Just-in-Time) inventory systems.

Question 16

An order is received by a company and then spends 1 day in assembly and 3 days in finishing before being stored in the warehouse. On average, the units are stored for 3 days before being shipped to a customer. Which of the following measures would be true?
A) work-in-process time of 7 days
B) manufacturing cycle time of 4 days
C) pass-through time of 6 days
D) manufacturing cycle time of 7 days

Accepted Answer

Manufacturing cycle time includes the time from the start of production to the end of production, which in this case is 1 day in assembly plus 3 days in finishing, totaling 4 days.

Question 17

A successful implementation of a JIT production system should result in a lowering of the inventory turnover ratio.

Accepted Answer

The inventory turnover ratio: (cost of goods sold/average inventory) should increase as a result of a JIT system implementation as the average inventory should fall, relatively speaking, as less inventory is on hand as a result of JIT practices.

Question 18

What are five features of a just-in-time manufacturing system?

Accepted Answer

The answer of What are five features of a just-in-time...

Question 19

Which of the following statements best defines manufacturing cells?
A) They are manufacturing areas that use a "push-through" approach whereby finished goods are manufactured on the basis of demand forecasts.
B) They are manufacturing centers which focuses on production of a single product and in which workers focus on master one skill so as to be efficient and effective in their work
C) They are work areas with different types of equipment grouped together to make related products and to minimize handling costs
D) They are production centers positioned in various areas throughout a production facility, close to the associated talent (direct laborers) in which goods are manufactured only after receiving customer orders.

Accepted Answer

Manufacturing cells are designed to minimize handling costs by grouping different types of equipment together to make related products, enhancing efficiency and reducing movement.

Question 20

Which of the following statements is true of just-in-time production systems?
A) In a just-in-time production system, a master production schedule specifies the quantity and timing of each item to be produced.
B) Sales budget triggers each step of the production process in a just in time production system.
C) Defects arising at one workstation affect other workstations in the line quickly because of the tight links between workstations.
D) Production is organized in manufacturing cells in a just in time production system, which are production centers that use a "push-through" approach whereby finished goods are manufactured on the basis of demand forecasts.

Accepted Answer

Just-in-time production systems rely on tight links between workstations and a continuous flow of materials, components, and finished products. Defects at one workstation can quickly affect other workstations down the line, potentially disrupting the entire production process. Therefore, statement C is true of just-in-time production systems. Statements A and B are inaccurate, as just-in-time systems rely on demand-pull rather than forecast-driven production schedules. Statement D is also inaccurate, as just-in-time production systems typically organize production around manufacturing cells that use a "pull-through" approach based on customer demand rather than a "push-through" approach based on forecasts.

Quiz 20: Inventory Management, Just-in-Time, and Simplified Costing Methods

Which of the following statements best defines setup time?

A costing system that omits recording some or all of the journal entries relating to the cycle from purchase of direct materials to the sale of finished goods is called ________.

Traditional normal and standard costing systems usually use 4 trigger points to record the flow of costs through the production system. Such costing is called ________.

Successful implementation of a JIT production system and effective accomplishments of its goals should result in a decrease in the inventory turnover ratio and a decrease in the number of days of inventory on hand.

A system that comprises a single database that collects data and feeds it into software applications supporting all of a company's business activities is known as a(n) ________.

Which of the following statements is true of the financial and nonfinancial measures in just-in-time production systems?

In a just-in-time system, suppliers are selected primarily on the basis of their ability to provide materials and products at the lowest possible price.

A grouping of all the different types of equipment used to make a given product is referred to as ________.

Which of the following statements best defines manufacturing cycle time in a JIT production system?

Which of the following terms is defined as the time required to get equipment, tools, and materials ready to start production?

Which of the following statements best defines an enterprise resource planning (ERP) system?

Which of the following is a disadvantage of an enterprise resource planning (ERP) system?

Which of the following statements best defines backflush costing system?

An order is received by a company and then spends 1 day in assembly and 3 days in finishing before being stored in the warehouse. On average, the units are stored for 3 days before being shipped to a customer. Which of the following measures would be true?

A successful implementation of a JIT production system should result in a lowering of the inventory turnover ratio.

What are five features of a just-in-time manufacturing system?

Which of the following statements best defines manufacturing cells?

Which of the following statements is true of just-in-time production systems?