Deck 15: Lean Accounting and Productivity Measurement

Question 1

Customer value is the difference between what a customer receives and what they give up.

Answer 1

True

Question 2

Lean manufacturing is concerned with eliminating waste in manufacturing processes.

Answer 2

True

Question 3

Value-stream costing reports the actual revenues and actual costs on a weekly basis for each value stream.

Answer 3

True

Question 4

Partial measures allow managers to focus on the use of the total production and are easily interpreted.

Question 5

Operational partial measures are difficult to interpret by those within an organization.

Question 6

The two lean accounting approaches are average-costing and value-stream cost reporting.

Question 7

Changes in product-costing and operational control approaches are crucial to a value-stream based lean manufacturing system.

Question 8

Implementing the value-stream structure requires an increase in employees.

Question 9

Employee empowerment is a major difference between traditional and lean environments.

Question 10

A Box Scorecard is used by the lean control system to compare operational, capacity, and financial figures

Question 11

Profile measurement provides a series of profiles for all operational measures.

Question 12

The value stream focuses on just value-added activities.

Question 13

Technical efficiency is concerned with a given input using no more than needed output.

Question 14

The disadvantage of using partial measures in isolation is that it can be misleading.

Question 15

Productivity measurement is a quantitative assessment of increases or decreases in productivity.

Question 16

The productivity measure of all inputs simultaneously is called total productivity measurement.

Question 17

Allocating efficiency chooses the least costly, technically efficient combination of inputs.

Question 18

Profit-linked productivity measurement involves the measuring of the amount of profit related to productivity change.

Question 19

Productivity is concerned with the efficiency of input usage in producing output.

Question 20

Lean manufacturing adds value by reducing labor costs.

Question 21

Which of the following is NOT a characteristic of a lean manufacturing system?

A)delivery of the right product in the right quantity
B)zero defect
C)delivery of product the exact time a customer needs it
D)all of the above

Question 22

Maximizing customer value, on-demand production, and zero setup times are realized in the pursuit of __________ .

Question 23

The accounting approach designed to support and encourage lean manufacturing is called __________ accounting.

Question 24

The difference between the total profit change and the profit-linked productivity change is called the __________ component.

Question 25

Identifying value streams may be accomplished by using a two-dimensional matrix where __________ are listed on one dimension, and __________ on a second dimension.

Question 26

Lean manufacturing is best defined as

A)an operating approach that reports on the effectiveness of the management of the organization.
B)an operating approach designed to eliminate waste and maximize customer value.
C)an operating approach that is designed to analyze the activities of the organization.
D)an operating approach that is designed to compute variances between expectations and actual performance.

Question 27

Which is NOT a benefit of lean manufacturing?

A)increased productivity
B)reduced lead times
C)reduced direct labor costs
D)reductions in inventory

Question 28

Which of the following is true of a lean manufacturing system?

A)It results in a major reduction of inventories and productivity.
B)It helps to increase efficiency by allowing a minimum tolerable level of defects in products.
C)It allows managers to maximize customer value but results in increased manufacturing costs.
D)It allows managers to eliminate waste, reduce costs, and reduce lead times.

Question 29

A difference between Toyota's lean manufacturing system and Ford's lean enterprise system is

A)Toyota incorporated employee empowerment, team structure, cellular manufacturing, small batches, and reduced setup times as integral pieces of their system.
B)Toyota was not structured to deal with product variety.
C)Toyota valued process over employees.
D)Low volume products were not compatible with either system.

Question 30

__________ allocation is the only allocation used regularly in a value stream cost assignment.

Question 31

The achievement of __________ efficiency and __________ efficiency is the point of total productive efficiency.

Question 32

The quantitative assessment of productivity changes is called __________ measurement.

Question 33

The point at which technical and allocative efficiency are achieved is called __________ efficiency.

Question 34

In a lean environment, many overhead costs are assigned to products as directly __________ costs.

Question 35

The component which provides a server or vector of separate and distinct partial operational measures is called __________ measurement.

Question 36

The __________ is used by the lean control system to compare operational, capacity, and financial metrics.

Question 37

An assessment of productive efficiency for all inputs combined is called __________ measurement.

Question 38

The worth of one or more features of a product for which customers are willing to pay is called __________ .

Question 39

The departments or cells that contain all the related operations needed to produce a family of products are called __________ .

Question 40

The process of producing output efficiently using the least amount of inputs is called __________ .

Question 41

Reducing the time it takes to configure equipment to produce a different product is an example of

A)cellular manufacturing.
B)batch processing.
C)reduced setup/changeover times.
D)value flow stream.

Question 42

The departments or cells which contain all the operations in close proximity that are needed to produce a family of products.

A)Manufacturing cells
B)Value stream cells
C)Batch departments
D)Plant departments

Question 43

There are two basic types of non-value added activities. They are

A)activities avoidable in the long run and activities unavoidable in the short run due to current technology or production methods.
B)activities avoidable in the short run and activities unavoidable in the long run due to current technology or production methods.
C)activities unavoidable in the short run due to current technology and activities avoidable due to production methods.
D)activities avoidable in the short run and activities unavoidable in the short run due to current technology or production methods.

Question 44

The following information relates to Lancashire Manufacturing: To produce a unit of product: $\begin{array}{ll}\text { Mixing dep artment } & 3 \text { minutes per unit } \\\text { Colding department } & 5 \text { minutes per unit } \\\text { Casting department } & 7 \text { minutes per unit } \\\text { Finishing department } & 4 \text { minutes per unit }\end{array}$ There is a wait time of 8 minutes before the mixing department begins a batch, 5 minutes between the mixing and molding departments, a move and pre-wait between molding and casting of 10 minutes, and a move and pre-wait between the casting and finishing departments of 12 minutes.
Which area represents the bottleneck operation?

A)finishing
B)casting
C)molding
D)mixing

Question 45

In a traditional manufacturing setup

A)there is significant move and wait time.
B)organization is by function into departments.
C)products are produced in large batches.
D)all of the above.

Question 46

The following information relates to Cranmore Manufacturing: To produce a unit of product: $\begin{array}{ll}\text { Cutting department } & 5 \text { minutes per unit } \\\text { Wel ding department } & 8 \text { minutes per unit } \\\text { Polishing department } & 3 \text { minutes per unit } \\\text { Finishing department } & 4 \text { minutes per unit }\end{array}$ There is a wait time of 5 minutes before the cutting department begins a batch, 15 minutes between the cutting and welding departments, a move and pre-wait between welding and polishing of 12 minutes, and a move and pre-wait between the polishing and finishing departments of 8 minutes.
If Cranmore produces in batches of 10 units, how much time would have elapsed by the time the 10th unit is produced under a manufacturing cell environment (assuming the cell is processing continuously)?

A)60 minutes
B)65 minutes
C)150 minutes
D)some other amount

Question 47

The new product value stream focuses on

A)developing new products for new customers.
B)providing current products to current customers.
C)providing current products to new customers and new products to new customers.
D)the production, sale, and delivery of products.

Question 48

The worth of one or more features of a product for which the customer is willing to pay is defined as:

A)Value
B)Quality
C)Efficiency
D)Innovation

Question 49

The order fulfillment value stream focuses on

A)developing new products for new customers.
B)providing current products to current customers.
C)providing current products to new customers and new products to new customers.
D)the production, sale, and delivery of products.

Question 50

In a demand-pull system

A)production is triggered by a forecast.
B)production is triggered by a customer order.
C)production is triggered by a vendor shipment.
D)production is triggered by an economic reorder point.

Question 51

The methodologies and concepts adopted by just-in-time (JIT) manufacturing is very similar to:

A)traditional manufacturing.
B)lean manufacturing.
C)functional-based manufacturing.
D)activity-based manufacturing.

Question 52

The following information relates to Lancashire Manufacturing: To produce a unit of product: Mixing dep artment $\quad 3$ minutes per unit
Mol ding department $\quad 5$ minutes per unit
Casting department $\quad 7$ minutes per unit
Finishing department $\quad 4$ minutes per unit There is a wait time of 8 minutes before the mixing department begins a batch, 5 minutes between the mixing and molding departments, a move and pre-wait between molding and casting of 10 minutes, and a move and pre-wait between the casting and finishing departments of 12 minutes.
How long does it take to produce a batch of 20 units under a traditional manufacturing approach?

A)380 minutes
B)415 minutes
C)35 minutes
D)none of the above

Question 53

The following information relates to Lancashire Manufacturing: To produce a unit of product: $\begin{array}{ll}\text { Mixing dep artment } & 3 \text { minutes per unit } \\\text { Colding department } & 5 \text { minutes per unit } \\\text { Casting department } & 7 \text { minutes per unit } \\\text { Finishing department } & 4 \text { minutes per unit }\end{array}$ There is a wait time of 8 minutes before the mixing department begins a batch, 5 minutes between the mixing and molding departments, a move and pre-wait between molding and casting of 10 minutes, and a move and pre-wait between the casting and finishing departments of 12 minutes.
What is the production rate?

A)8.6 units per hour
B)7 units per hour
C)21 units per hour
D)19 units per hour

Question 54

Identification of a "value stream," pursuit of perfection, and making value flow without interruption are examples of

A)total quality management.
B)activity-based costing.
C)principles of lean thinking.
D)Kanban processing.

Question 55

The value stream

A)is made up of all activities, both value-added and non-value-added, required to bring a product group or service from its starting point to a finished product in the hands of the customer.
B)is made up value-added activities required to bring a product group or service from its starting point to a finished product in the hands of the customer.
C)is where the production stream is triggered by forecast.
D)is a series of steps designed to set target costs.

Question 56

In cellular manufacturing, cells are dedicated to:

A)produce families of similar products.
B)set the benchmark for measuring changes in productive efficiency.
C)decrease the processing time of the slowest department.
D)assess the nature of overall productivity change.

Question 57

Which of the following is true of the two-dimensional matrix with respect to lean manufacturing?

A)It compares actual operational and financial metrics with budgeted metrics.
B)It focuses on measuring the move and wait time of a batch of products.
C)It has products on one dimension and quality indicators on a second dimension.
D)It is one of the ways to identify the value stream of a product.

Question 58

The processing department can produce one unit every 5 minutes and is the last department before the finishing department. Under traditional manufacturing where a batch equals 10 units, how long will it be before the first unit in the batch can move from the processing department to the finishing department?

A)5 minutes
B)50 minutes
C)10 minutes
D)not enough information is given

Question 59

The following information relates to Lancashire Manufacturing: To produce a unit of product: $\begin{array}{ll}\text { Mixing dep artment } & 3 \text { minutes per unit } \\\text { Colding department } & 5 \text { minutes per unit } \\\text { Casting department } & 7 \text { minutes per unit } \\\text { Finishing department } & 4 \text { minutes per unit }\end{array}$ There is a wait time of 8 minutes before the mixing department begins a batch, 5 minutes between the mixing and molding departments, a move and pre-wait between molding and casting of 10 minutes, and a move and pre-wait between the casting and finishing departments of 12 minutes.
How long would it take to process the first unit of a 20-unit batch under a cellular manufacturing setup?

A)21 minutes
B)12 minutes
C)19 minutes
D)60 minutes

Question 60

The following information relates to Cranmore Manufacturing: To produce a unit of product: $\begin{array}{ll}\text { Cutting department } & 5 \text { minutes per unit } \\\text { Wel ding department } & 8 \text { minutes per unit } \\\text { Polishing department } & 3 \text { minutes per unit } \\\text { Finishing department } & 4 \text { minutes per unit }\end{array}$ There is a wait time of 5 minutes before the cutting department begins a batch, 15 minutes between the cutting and welding departments, a move and pre-wait between welding and polishing of 12 minutes, and a move and pre-wait between the polishing and finishing departments of 8 minutes.
What is the cycle time of operation?

A)60 minutes
B)20 minutes
C)35 minutes
D)16 minutes

Question 61

With multiple products in a value stream, unit cost will increase if

A)more units are shipped than produced.
B)more units are produced than shipped.
C)average conversion cost is used instead of total average cost.
D)none of the above.

Question 62

In calculating product costs for a value stream with multiple products, average product costs are a good estimate of individual product costs if

A)the products are similar and consume resources in approximately the same proportion.
B)the product mix is relatively stable.
C)the products are homogenous.
D)all of the above.

Question 63

Which of the following is NOT a limitation of a value stream cost assignment?

A)Initially, it may not be possible to allocate all the people needed in a value stream to that stream exclusively.
B)There will always be some individuals whose related costs will remain outside of any particular value stream.
C)A value stream is usually organized around a family of products.
D)Having a value stream for each product is not practical.

Question 64

In the calculation of product costs for value streams with multiple products, units shipped instead of units produced is used as the denominator because

A)it reduces conversion costs assigned to the value stream.
B)it motivates managers to reduce inventories.
C)units shipped are always greater than units produced.
D)units shipped is not used.

Question 65

Which of the following is NOT considered a major source of waste?

A)waiting
B)joint products
C)overproduction of goods not needed
D)defective products

Question 66

The formula "Total value-stream cost of period / Units shipped in period" is used to calculate _____.

A)value-stream product cost
B)value-stream operational cost
C)value-stream period cost
D)value-stream financialcost

Question 67

The following information relates to Cranmore Manufacturing: To produce a unit of product: Cutting department $\quad 5$ minutes per unit
Wel ding department $\quad 8$ minutes per unit
Polishing department $\quad 3$ minutes per unit
Finishing department $\quad 4$ minutes per unit There is a wait time of 5 minutes before the cutting department begins a batch, 15 minutes between the cutting and welding departments, a move and pre-wait between welding and polishing of 12 minutes, and a move and pre-wait between the polishing and finishing departments of 8 minutes.
What is the production rate?

A)12 units per hour
B)20 units per hour
C)15 units per hour
D)7.5 units per hour

Question 68

Which of the following is true of non-value-added activities?

A)These activities are a source of waste in the value stream of a product.
B)These activities are identified only after the finished goods reaches final customers.
C)These activities result from adopting new technology for the production process.
D)These activities ensure that no rework is required as the final product has zero-defects.

Question 69

The JIT solution

A)requires carrying materials inventory in order to lower the cost of inventory without production delays.
B)requires selection of vendors based on lowest cost alone.
C)exploits supplier linkages by negotiating long-term contracts with a few chosen suppliers located closest to the production facility and establishing more supplier involvement.
D)requires a solid forecast to push production.

Question 70

The only allocation used regularly in a value stream cost assignment is

A)facilities.
B)depreciation.
C)maintenance.
D)setup costs.

Question 71

If a facility has costs of $100,000 per year and 20,000 square feet, and if 19,000 square feet are absorbed by the value streams, what happens to the unabsorbed cost of the remaining 1,000 feet?

A)allocated to all the value streams based on proportionate square foot usage
B)assigned to all value streams equally
C)absorbed by the largest value stream
D)deducted from revenue as a separate item

Question 72

The pursuit of perfection is realized in

A)zero setup times.
B)producing on demand.
C)maximizing customer value.
D)all of the above.

Question 73

In a lean environment, many overhead costs are assigned to

A)products using driver tracing.
B)products as directly traceable costs.
C)products using allocation methods.
D)costs using plantwide overhead rates.

Question 74

Why might labor costs be reduced in a value stream system?

A)The elimination of the need for any specialized skilled employees such as industrial engineers or production schedulers.
B)The labor costs of industrial engineers and production schedulers can be pooled and allocated to the value streams.
C)Some of the workers can be cross-trained to perform value-added activities within the value stream.
D)none of the above.

Question 75

The document used by the lean control system that compares operational, capacity, and financial metrics with prior week performances and with a future desired state is called:

A)balanced scorecard
B)profit analysis worksheet
C)box scorecard
D)performance improvement plan

Question 76

Which of the following is true in regards to a lean accounting system?

A)The cost of people with specialized skills, such as industrial engineers, are allocated to all manufacturing cells based on an activity driver.
B)Workers are multiskilled and responsible for setting up equipment, maintaining equipment, and operating equipment.
C)Implementing a value stream system will require more workers.
D)Workers are highly skilled in one specialized area or activity and are not expected to spend time on other value-added activities.

Question 77

Based on the following information: $\begin{array}{lrrrrr}&\text { Materials }&\text { Wages }&\text { Machining }&\text { Other }&\text { Total cost }\\\text { Order Processing}&\$28,000& & &&28,000\\\text { Purchasing } & 43,000 & & && 43,000 \\\text { Cutting } & \$ 160,000 & 36,000 & \$ 33,000 & \$ 8,000 & 237,000 \\\text { Forming } & 57,500 & 49,000 & 22,000 & 12,000 & 140,500 \\\text { Finishing } & 42,500 & 28,000 & 5,000 & & 75,500 \\\text { Testing } & & 30,000 & & & 30,000\\\text { Packaging and }\\\text { shipping }&&10,000&&&10,000\\\text { Invoicing }&&6,000&&&6,000\\\hline\text { Totals }&\$260,000&\$230,000&\$60,000&\$20,000&\$570,000\end{array}$

$\begin{array}{ll}\text { Part } A & 2,005 \text { units } \\\text { Part Q } & 4,100 \text { units } \\\text { Total } & 6.105 \text { units }\end{array}$ What is the product cost based on total average conversion cost? (Round to nearest cent.)

A)$100.56
B)$48.32
C)$36.04
D)$50.78

Question 78

Emphasis on departmental efficiency by a firm:

A)causes non-bottleneck departments to over-produce and build work-in-process inventories.
B)eliminates wasteful activities involved in production as end product is produced in batches.
C)is a critical component of a lean accounting system.
D)motivates managers to reduce inventories.

Question 79

Which of the following is a reason traditional costing approaches may NOT work in a lean manufacturing environment?

A)Standard costing variances encourage overproduction.
B)Distorted product costs may conceal the outcome of success of a lean system.
C)Traditional operational controls work against demand-pull systems.
D)all of the above.

Question 80

Based on the following information: $\begin{array}{lrrrrr}&\text { Materials }&\text { Wages }&\text { Machining }&\text { Other }&\text { Total cost }\\\text { Order Processing}&\$28,000& & &&28,000\\\text { Purchasing } & 43,000 & & && 43,000 \\\text { Cutting } & \$ 160,000 & 36,000 & \$ 33,000 & \$ 8,000 & 237,000 \\\text { Forming } & 57,500 & 49,000 & 22,000 & 12,000 & 140,500 \\\text { Finishing } & 42,500 & 28,000 & 5,000 & & 75,500 \\\text { Testing } & & 30,000 & & & 30,000\\\text { Packaging and }\\\text { shipping }&&10,000&&&10,000\\\text { Invoicing }&&6,000&&&6,000\\\hline\text { Totals }&\$260,000&\$230,000&\$60,000&\$20,000&\$570,000\end{array}$

$\begin{array}{ll}\text { Part } A & 2,005 \text { units } \\\text { Part Q } & 4,100 \text { units } \\\text { Total } & 6.105 \text { units }\end{array}$ What is the product cost based on total average cost? (Round to nearest cent.)

A)$54.05
B)$42.59
C)$48.32
D)$93.37