Question 1

Of the following, which best illustrates a non-value-added activity?

Accepted Answer

Non-value-added activities are those that do not add value to the product or service from the customer's perspective. The movement of materials from one workstation to another does not enhance the product's value; it is simply a logistical necessity that does not contribute directly to the product's worth in the eyes of the customer.

Question 2

For a business that has implemented lean manufacturing processes, the adoption of lean accounting is primarily intended:

Accepted Answer

Lean accounting is primarily intended to more accurately report the financial performance of a company by aligning accounting practices with the lean manufacturing processes. This approach focuses on reducing waste and improving efficiency, which in turn provides a more accurate picture of financial performance.

Question 3

A lean accounting approach organizes cost information by:

Accepted Answer

Lean accounting typically organizes cost information by value stream, not by traditional categories like product, department, or cost center. This approach aligns with lean manufacturing principles, focusing on the flow of value to the customer.

Question 4

Under a lean accounting approach, costs that are not directly traceable to the activities and outcomes of a value stream are:

Accepted Answer

Under a lean accounting approach, costs that are not directly traceable to the activities and outcomes of a value stream are charged against revenues as they are incurred, rather than being allocated to inventory or absorbed using predetermined overhead rates. This approach aims to provide a more accurate reflection of the costs associated with generating revenue.

Question 5

A core concept of lean accounting is that the selling prices of a company's products and/or services are a function of:

Accepted Answer

Lean accounting emphasizes understanding and reducing waste in the production process, focusing on the value provided to the customer rather than just the cost of production. It suggests that selling prices should reflect the value proposition of a product or service to the customer, rather than being primarily based on production costs, competition, or profit targets.

Question 6

Among other products, Bendix Company produces automotive brake pads in its Bowling Green, Ky., factory. In a lean accounting system, which of the following manufacturing costs would Bendix charge to the brake pads produced?

Accepted Answer

In a lean accounting system, direct costs such as raw materials used in the production of specific products are charged directly to those products. Indirect costs like insurance, property taxes, and utilities are typically not directly charged to specific products.

Question 7

Activity-based management (ABM) refers to the set of methods intended to control activities so as to:

Accepted Answer

Activity-based management (ABM) is a comprehensive approach that focuses on managing activities to achieve performance goals, enhance customer value, and improve profitability, thus encompassing all the options listed.

Question 8

Activity-based management (ABM) relies on which of the following for its major source of data?

Accepted Answer

Activity-based management (ABM) primarily relies on data from an activity-based costing (ABC) system. ABC provides detailed information on the costs associated with specific activities, which is crucial for ABM's focus on managing activities to improve value to customers and profitability.

Question 9

When a business has entered into the decline phase of its life cycle, activity-based management (ABM) is primarily used to:

Accepted Answer

The answer of When a business has entered into the...

Question 10

Unlike traditional budgets that are focused on resources consumed by a company or cost center, activity-based budgeting (ABB) places emphasis on:

Accepted Answer

Activity-based budgeting (ABB) focuses on the work or activities that resources will accomplish for the company, rather than just the resources consumed or costs. This approach aims to link the expenditure of resources to the activities and services provided, allowing for more accurate and efficient budgeting.

Question 11

Of the following innovative approaches to the organization of work, which emphasizes the resources that define current limits on the rate of output of goods and/or services?

Accepted Answer

The Theory of Constraints emphasizes identifying and managing the resources that currently limit the rate of output of goods or services, focusing on systematically improving those constraints to enhance overall performance.

Question 12

Adirondack Designs, Inc., produces wooden furniture in a sequential process involving four departments: cutting, assembly, finishing, and packaging. Labor time available in the finishing department exerts a limiting constraint on the output of the company. According to the Theory of Constraints, the pace of production for the entire system would be set by:

Accepted Answer

The Theory of Constraints posits that the pace of production for the entire system is determined by its bottleneck, which in this case is the finishing department, as it has a limiting constraint on output.

Question 13

Adirondack Designs, Inc., produces wooden furniture in a sequential process involving four departments: cutting, assembly, finishing, and packaging. Limited labor time available in the finishing department exerts a limiting constraint on the output of the company. According to the Theory of Constraints, optimal use of the time available in the finishing department requires:

Accepted Answer

The Theory of Constraints focuses on maximizing throughput by optimizing the performance of the bottleneck, in this case, the finishing department. Producing the product with the largest contribution margin per hour of time available in the finishing department ensures the most efficient use of the constrained resource to maximize profits.

Question 14

Adirondack Designs, Inc., produces wooden furniture in a sequential process involving four departments: cutting, assembly, finishing, and packaging. Labor time available in the finishing department exerts a limiting constraint on the output of the company. According to the Theory of Constraints, process improvements should be confined solely to:

Accepted Answer

The Theory of Constraints focuses on identifying and improving the bottleneck or limiting constraint in a process to increase output. Since the finishing department is identified as the limiting constraint, process improvements should be focused there to enhance overall productivity.

Question 15

Classic Cars, Inc., produces reproduction parts for older automobiles in a sequential process involving four departments: cutting, shaping, painting and finishing, and packaging. Labor time available in the shaping department exerts a limiting constraint on the output of the company. A principal aim of just-in-time management at Classic Cars would be to balance the flow of work through the four departments so as to:

Accepted Answer

Just-in-time (JIT) management focuses on reducing inventories and improving the efficiency of production processes. By balancing the flow of work, Classic Cars aims to minimize the accumulation of both raw material and finished goods inventories, aligning with JIT principles.

Question 16

Presario Inc. recently installed just-in-time production and purchasing systems. If Presario's experience is similar to that of other companies, Presario will likely:

Accepted Answer

Just-in-time (JIT) production and purchasing systems typically lead to a reduction in the number of suppliers. This is because companies focus on building stronger relationships with fewer suppliers to ensure timely and reliable delivery of materials, which is crucial for the success of JIT systems.

Question 17

Just-in-time management systems often employ what is called "backflush costing." Under this accounting approach, work-in-process inventories are valued at:

Accepted Answer

Backflush costing simplifies the accounting process by eliminating the need to track work-in-process inventories, effectively valuing them at zero. This method is aligned with just-in-time systems that minimize inventory levels.

Question 18

The practice called "backflush costing" only charges cost to a unit of product when:

Accepted Answer

Backflush costing charges cost to a unit of product when it leaves a just-in-time (JIT) cell, aligning with JIT manufacturing principles where costs are allocated at the end of the production process rather than at each stage.

Question 19

Throughput time is most likely to be minimized in a production system organized:

Accepted Answer

Just-in-time management methods focus on reducing waste and improving efficiency, which minimizes throughput time by ensuring that materials and products move quickly through the production process.

Question 20

Just-in-time management reduces total throughput time by:

Accepted Answer

Just-in-time management reduces total throughput time by eliminating non-value-added activities such as "queue" and "move" activities, streamlining the workflow and reducing delays.

Quiz 8: Setting Process Expectations