Deck 11: Conversion Processes and Controls

Question 1

Which of the following is NOT a primary component of the logistics function?

A)Planning
B)Resource management
C)Operations
D)Production

Answer 1

D
Production

Question 2

The form that specifies the components of a product, including descriptions and quantities of materials and parts needed is the:

A)Operations list.
B)Bill of materials.
C)Engineering.
D)Capital budgeting.

Answer 2

B
Bill of materials.

Question 3

Which of the following questions is most likely to be found on an internal control questionnaire concerning a company's conversion processes?

A)Are vendor invoices for materials purchases approved for payment by someone who is independent of the cash disbursements function?
B)Are signed checks for materials purchased mailed promptly without being returned to the department responsible for processing the disbursement?
C)Are approved requisitions required when materials are released from the company's warehouse into production?
D)Are details of payments for materials balanced to the total posted to the general ledger?

Answer 3

C
Are approved requisitions required when materials are released from the company's warehouse into production?

Question 4

The process of logical, systematic flow of resources throughout the organization is referred to as:

A)Logistics.
B)Planning.
C)Reporting.
D)Sales forecast.

Question 5

The component of the logistics function that directs the focus of operations is referred to as:

A)Logistics.
B)Planning.
C)Reporting.
D)Sales forecast.

Question 6

Which of the following company activities would NOT be considered a productive activity?

A)The manufacture of automobiles.
B)The treatment of patients in a medical facility.
C)Providing consulting services.
D)All of the above, A, B, and C, are considered productive activities.

Question 7

Which of the following statements concerning an operations list is true?

A)It is an engineering document that describes the chain of events within a company's conversion process.
B)It is an engineering document that specifies the descriptions and quantities of component parts within a product.
C)It is a capital budgeting document that describes the chain of events within a company's conversion process.
D)It is a capital budgeting document that specifies the descriptions and quantities of component parts within a product.

Question 8

Which of the following activities is an inventory control activity?

A)Engineering
B)Maintenance
C)Routing
D)Quality control

Question 9

Which of the following terms relates to the control of materials being held for future production?

A)Routing
B)Work-in-process
C)Stores
D)Warehousing

Question 10

The conversion process is initiated when the company recognizes:

A)The receipt of raw materials.
B)The shipment of finished goods to customers.
C)The need to conduct operations.
D)None of the above.

Question 11

The goal of a physical inventory reconciliation is to

A)Determine the quantity of inventory sold.
B)Compare the physical count with the perpetual records.
C)Compare the physical count with the periodic records.
D)Determine the quantity of inventory in process.

Question 12

Which of the following internal controls is typically associated with the maintenance of accurate inventory records?

A)Performing regular comparisons of perpetual records with recent costs of inventory items
B)Using a just-in-time system to keep inventory levels at a minimum
C)Performing a match of the purchase request, receiving report, and purchase order before payment is approved
D)Using physical inventory counts as a basis for adjusting the perpetual records

Question 13

Which of the following activities is not part of the planning component of the logistics function?

A)Research and development
B)Capital budgeting
C)Human resource management
D)Scheduling

Question 14

For which of the following computerized conversion systems is Wal-Mart well known?

A)CAD/CAM
B)MRP-II
C)CIMs
D)JIT
TEST BANK - CHAPTER 11 - MULTIPLE CHOICE

Question 15

When additional procedures are necessary to bring a defective product up to its required specifications, this is referred to as:

A)Rework.
B)Scrap.
C)Work-in-process.
D)Variance reporting.

Question 16

A firm expects to sell 1000 units of its best-selling product in the coming year.Ordering costs for this product are $100 per order, and carrying costs are $2 per unit.Compute the optimum order size, using the EOQ model.

A)10 units
B)224 units
C)317 units
D)448 units

Question 17

Which of the following represents a method of managing inventory designed to minimize a company's investment in inventories by scheduling materials to arrive at the time they are needed for production?

A)The economic order quantity EOQ)
B)Material resource planning MRP)
C)First-in, first-out FIFO)
D)Just-in-time JIT)

Question 18

If a manufacturing company's inventory of supplies consists of a large number of small items, which of the following would be considered a weakness in internal controls?

A)Supplies of relatively low value are expensed when acquired.
B)Supplies are physically counted on a cycle basis, whereby limited counts occur quarterly and each item is counted at least once annually.
C)The stores function is responsible for updating perpetual records whenever inventory items are moved.
D)Perpetual records are maintained for inventory items only if they are significant in value.

Question 19

Which of the following is not considered a benefit of using computerized conversion systems?

A)Automatic computation of materials requirements
B)Increased sales and cost of sales
C)Increased efficiency and flexibility
D)Early error detection and increased accuracy

Question 20

The term conversion processes is often used synonymously with:

A)Operations.
B)Production.
C)Manufacturing.
D)All of the above.

Question 21

Capital budgeting:

A)Is responsible for the issuance of stocks and bonds to finance operations.
B)Plans the capital resources needed to support operations.
C)Is responsible for the procurement of production materials.
D)Is not a function of a company once established and functioning.

Question 22

Which document provides the descriptions and quantities of materials taken into production for a specified sale or other authorized production activity?

A)The routing slip.
B)The shipping notice.
C)The purchase requisition.
D)The sales order.

Question 23

The issuance and movement of materials into the various production phases is referred to as:

A)Production scheduling process.
B)Inventory control process.
C)The routing process.
D)The production orders process.

Question 24

The form that describes the chain of events that constitute a product's production is referred to as the:

A)Operations list.
B)Bill of materials.
C)Engineering.
D)Capital budgeting.

Question 25

The form that authorizes production activities for a particular sales order or forecasted needs is referred to as the:

A)Production schedule.
B)Production orders.
C)Maintenance and control process.
D)Human resources process.

Question 26

Within the planning component of the logistics function, which of the following processes is responsible for preparing bill of materials and the operations list?

A)Research and development
B)Capital budgeting
C)Engineering
D)Scheduling

Question 27

Which of the following involves managing the holding area for finished goods awaiting sale?

A)Purchase orders
B)Shipping notices
C)Purchase requisitions
D)Inventory warehousing

Question 28

Engineering is responsible for:

A)Designing the product while operations is responsible the bill of materials and the operations list.
B)Designing the plant and equipment used in manufacturing.
C)Is responsible for the procurement of production equipment.
D)Designing the product and creating the bill of materials and the operations list.

Question 29

The process that is concerned with maintaining the capital resources used to support production is referred to as:

A)The production schedule.
B)Production orders.
C)Maintenance and control.
D)The human resources process.

Question 30

This schedule outlines the specific timing required for a sales order, including the dates and times designated for the production run.

A)Production schedule
B)Production orders schedule
C)Maintenance and control schedule
D)Human resources schedule

Question 31

Which of the following processes focuses on product improvement?

A)Engineering
B)Research and development
C)Production
D)Capital budgeting

Question 32

The _______ function concerns the control of raw materials inventory held in storage or in holding areas, waiting for processing.

A)Raw materials
B)Inventory warehousing
C)Inventory stores
D)Quality control

Question 33

The responsible for managing the placement and development of sufficient qualified personnel which includes hiring and training workers as well as maintaining records of their performance is the task of the:

A)Production schedule department.
B)Production orders department.
C)Maintenance and control department.
D)Human resources department.

Question 34

The operations component of the logistics function has which of the following elements?

A)Maintenance and control.
B)Production.
C)Inventory control.
D)Capital budgeting.

Question 35

The component of the logistics function that directs the focus of operations is the:

A)Operations component.
B)Resource management component.
C)Planning component.
D)The sales component.

Question 36

The responsibility for managing and recording the movement of inventory in the many different directions that it may go throughout the conversion process is assigned to the:

A)Production schedule department.
B)Inventory control department.
C)Maintenance and control department.
D)Human resources department.

Question 37

One inventory control function that is important to the conversion process is the determination of _______, or the most efficient quantity of products to purchase.

A)Economic purchase amount
B)Economic order quantities
C)Materials resource quantities
D)Resource purchase quantities

Question 38

The responsibility to conduct make/buy decisions is usually given to:

A)Engineering.
B)Capital budgeting.
C)Operations.
D)Research and development.

Question 39

The major function within the conversion process is the:

A)Sales order function.
B)Sales forecast function.
C)Logistics function.
D)Reporting function.

Question 40

The process that plans the timing for production activities is referred to as:

A)Operations list.
B)Bill of materials.
C)Scheduling.
D)Capital budgeting.

Question 41

Select the true statement from the choices below.

A)Inventory stores and warehousing are both concerned with raw materials.
B)Neither inventory stores nor warehousing are concerned with raw materials.
C)Inventory stores are concerned with raw materials and warehousing is concerned with finished goods.
D)Inventory stores are concerned with finished goods and warehousing is concerned with raw materials.

Question 42

A system which involves recording purchases of raw materials inventory, recording all the components of work in process, and recording the total cost of sales for products completed and sold is referred to as:

A)A perpetual inventory system.
B)The accounting information system.
C)A periodic inventory system.
D)None of the above.

Question 43

Which of the following correctly lists activities within the conversion process in chronological order?

A)Prepare bill of materials, initiate production, inspect goods, prepare purchase requisition
B)Prepare purchase requisition, prepare bill of materials, initiate production, inspect goods
C)Inspect goods, prepare bill of materials, initiate production, prepare purchase requisition
D)Prepare bill of materials, prepare purchase requisition, initiate production, inspect goods

Question 44

Routing is the:

A)Path electronic messages follow in the inventory system.
B)Issuance and movement of materials into the various production phases.
C)Physical movement of materials from the point of sale to the customer.
D)Physical movement of materials from the vendor to the inventory stores facility.

Question 45

The final hub in the logistics function is:

A)Packaging.
B)Quality control.
C)Sales.
D)Shipping to the customer.

Question 46

All of the following are classifications of inventory EXCEPT:

A)Raw materials
B)Finished goods
C)Sold goods
D)Work-in-process

Question 47

Inventory status reports are:

A)Generated only for raw materials.
B)Only generated for finished goods.
C)Prepared at various stages of the production process.
D)Only generated for work in process.

Question 48

The bill of materials is the:

A)Cost of raw materials purchased from a vendor.
B)Document of instructions utilized to assemble a product.
C)Form that specifies the components of a product.
D)Designing the product and creating the bill of materials and the operations list.

Question 49

Variances represent the differences between:

A)Actual costs and the standard costs applied.
B)Raw materials ordered and raw materials received.
C)The sales targets and sales accomplishments.
D)Actual quantity on hand and quantity according to the inventory system.

Question 50

The operations list is the:

A)Schedule of production for the day, week, or month as specified by the company.
B)Document of instructions utilized to assemble a product.
C)Form that specifies the components of a product.
D)Designing of the product and creating the bill of materials.

Question 51

Perpetual inventory systems:

A)Record changes in inventory categories only at the end of each period.
B)Record changes in inventory categories only when sales are made.
C)Record changes in inventory categories whenever material is moved from one category to another.
D)Does not address raw materials.

Question 52

The term "operations" is commonly used to refer to:

A)The main function of the business.
B)Any function of the business which generates revenues.
C)Only those functions of the business accomplished by the operations department.
D)Only those functions which move inventory through the production cycle.

Question 53

Production orders:

A)Outline the specific timing required for sales orders.
B)Authorize production activities for a particular need or order.
C)Are forecasts of needs based on known and anticipated sales.
D)Are issued by the engineering department to correct product deficiency issues.

Question 54

The final hub in the logistics function which involves a follow-up to production, where the products are inspected before they are moved to the warehouse or shipping area is referred to as:

A)Quality control.
B)Shipping notice.
C)Purchase requisition.
D)Warehousing.

Question 55

The department responsible for training production personnel is the:

A)Production department.
B)Human resources department.
C)Engineering department.
D)None of the above.

Question 56

Scheduling:

A)Plans the timing for acquisition of fixed assets.
B)Does not take into account machine breakdowns.
C)Takes into consideration all the open sales orders.
D)Does not take inventory needs.

Question 57

A production schedule:

A)Does not contain requirements due to sales forecasts.
B)Does not contain information from the bill of materials.
C)Contains information from the operations list.
D)Are issued by the maintenance and control department.

Question 58

Rework refers to:

A)Generating a better quote for a customer.
B)Overhaul of a manufacturing machine.
C)Additional procedures to bring a product up to specifications.
D)Parts that are beyond repair at any cost.

Question 59

The expected cost based on projections of a product's required resources which includes direct materials, direct labor and overhead is referred to as:

A)Quality control costs.
B)Sales order cost.
C)Rework costs.
D)Standard costs.

Question 60

Economic order quantity EOQ) is a function:

A)Of the purchasing customer or client.
B)Of the sales force to provide the purchasing customer or client with the greatest value.
C)Of the responsibility of engineering through the operations list.
D)Associated with inventory control.

Question 61

When there is a difference between the inventory records quantity and the physical count of inventory:

A)There is a variance.
B)The difference can be ignored if minor.
C)The difference is resolved through inventory reconciliation.
D)The difference is ignored if the physical quantity exceeds inventory record quantity.

Question 62

Periodic inventory systems:

A)Are only updated at the end of each fiscal period.
B)Are concerned only with finished goods.
C)Are not concerned with raw materials.
D)May not reflect current inventory levels.

Question 63

Computerization of the conversion process results in all except:

A)Automatic computation of materials requirements based on purchase orders.
B)Timely transfer of inventories throughout the process.
C)Automatic updating of inventory status reports.
D)Automatic computation of materials requirements based on sales orders.

Question 64

Segregation of duties is accomplished by which of the following?

A)Accounting personnel having restricted access to physical inventory.
B)Warehouse personnel signing all documents related to material movements.
C)Production personnel restricted to one manufacturing station at all times.
D)None of the above.

Question 65

Variances:

A)Are only investigated if they are unfavorable.
B)Are always investigated.
C)Will always result in the improvement of the logistics function.
D)May not result in any changes in the logistics function.

Question 66

In inventory systems, when the actual quantity and the accounting records quantity are compared it is referred to as:

A)Perpetual inventory.
B)Inventory resolution.
C)The physical inventory reconciliation.
D)Periodic inventory.

Question 67

Physical inventory counts should only include:

A)Finished goods.
B)Finished goods and raw materials.
C)Finished goods and work-in-process.
D)Raw materials, work-in-process, and finished goods.

Question 68

Which of the following is NOT a responsibility given to the individuals making purchases for the company?

A)Purchasing raw materials for production.
B)Specifying the order and sequence of payments to vendors.
C)Selecting vendors.
D)Specifying the quantities to be ordered.

Question 69

Which of the following factors influences the need to safeguard and monitor inventory movement?

A)Inconsistent or high levels of inventory movement.
B)If the inventory is held at various locations.
C)If a company's inventory items are difficult to differentiate.
D)Each of the answers, A, B, and C are correct.

Question 70

This software allows engineers to work with advanced graphics at electronic work stations to create 3-D models that depict the production environment.

A)Computer-integrated manufacturing systems CIMs)
B)Computer aided design CAD)
C)Material resource planning MRP)
D)Computer aided manufacturing CAM)

Question 71

Perpetual inventory systems:

A)Are only updated at the end of each fiscal period.
B)Are concerned only with finished goods.
C)Are not concerned with raw materials.
D)Involve every level of inventory necessary for production.

Question 72

The preparation of production orders and routing slips on prenumbered forms minimizes the related risk of:

A)Omitted transactions
B)Incorrect amounts
C)Duplicate payroll transactions
D)Invalid orders

Question 73

_____________ integrates all of the conversion processes to allow for minimal disruptions due to reporting requirements or inventory movement issues.

A)Computer-integrated manufacturing systems CIMs)
B)Computer aided design CAD)
C)Material resource planning MRP)
D)Computer aided manufacturing CAM)

Question 74

Cost-benefit can be defined as:

A)Gross profit after sales are made.
B)Cameras and security guards to protect construction materials in a restricted access warehouse.
C)Verifying inventory levels at the end of each working shift.
D)Alarm systems and vaults for fine jewelry inventories.

Question 75

Variances:

A)Represent the differences between actual costs and the standard costs applied.
B)Represent the difference between design specifications and production results.
C)Represent flaws in the production results.
D)Each of the answers, A, B, and C are correct.

Question 76

Within the logistics function, segregation of duties means:

A)One person should not have both inventory and accounting responsibilities.
B)One person should not have production responsibilities over more than one station.
C)One person should not have quality assurance responsibilities over a work station other than his own.
D)Each person can only have one duty or function in the production function.

Question 77

Physical controls include all but:

A)Fences and alarm systems.
B)Security guards.
C)High tech security tools.
D)Each of the answers, A, B, and C are correct.

Question 78

Standard costs are the:

A)Responsibility of production accountants.
B)Expected costs based on required resources.
C)Costs normally paid for a component.
D)Prices the customer is expected to pay upon sale.

Question 79

_________________ involves the automated scheduling of production orders and movement of materials in the production process.

A)Computer-integrated manufacturing systems CIMs)
B)Computer aided design CAD)
C)Material resource planning MRP)
D)Computer aided manufacturing CAM)

Question 80

The reconciliation of time sheets with production reports for work-in-process and finished inventories minimizes the related risk of all of the following EXCEPT:

A)Omitted or duplicate payroll transactions
B)Timing issues
C)Incorrect amounts
D)Lost or stolen inventory