Question 1

The time required to get equipment, tools, and materials ready to start production is referred to as:

Accepted Answer

Setup time is the time required to prepare equipment, tools, and materials to begin production. Manufacturing lead time refers to the entire time required to create and deliver a product, while pass-through time refers to the time it takes for a product to move through a system or process. Therefore, the best choice is A, setup time.

Question 2

A financial benefit of a just-in-time system is that inventory carrying costs are reduced.

Accepted Answer

Just-in-time system helps in reducing inventory carrying costs by ensuring that goods are produced or received only when they are needed, which reduces the need for storage space, handling, and tracking. This results in lower inventory carrying costs for the company.

Question 3

Kretzinger Company makes extensive use of financial performance reports for each of its departments. Although most departments have been reporting favorable cost variances with the company's current inventory system, management is concerned about the overall performance of the purchasing department. For example, the following information is for the purchasing of materials for a product the company has been manufacturing for several years:
  Required:
a. Compute the inventory turnover for each year. Can any conclusions be drawn for a yearly comparison of the purchase price variance and the inventory turnover?
b. Identify problems likely to be caused by evaluating purchasing only on the basis of the purchase price variance.
c. What recommendations will improve the evaluation process?

Accepted Answer

The answer of Kretzinger Company makes extensive use of financial...

Question 4

The time from when an order is received by manufacturing until it becomes a finished good is referred to as:

Accepted Answer

Manufacturing lead time refers to the time taken from the receipt of an order until the finished product is ready. It includes all the process times including processing, assembly, testing, and transportation, etc.

Question 5

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 is referred to as:

Accepted Answer

The description given matches the characteristics of a just-in-time (JIT) system, where the production of each component is triggered by the demand of the next step in the production line. This approach aims to reduce waste and inventory costs while improving efficiency and flexibility. Materials requirements planning (MRP) is a method used to calculate and plan for the required raw materials and components needed for production. Relevant total costs refer to the overall costs associated with a decision, including both direct and indirect costs. Economic order quantity (EOQ) is a model used to determine the ideal order quantity and reorder point to minimize inventory costs while ensuring sufficient supply.

Question 6

A "demand-pull" system, often described as a materials requirement planning system, focuses first on the forecasted amount and timing of finished goods and then determines the demand for materials components and subassemblies at each of the prior stages of production.

Accepted Answer

A "demand-pull" system is not the same as a materials requirement planning (MRP) system. Demand-pull focuses on actual demand to trigger production, while MRP is a "push" system based on forecasts.

Question 7

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 based on various factors such as quality, reliability, delivery time, and flexibility, in addition to price. Price alone is not the primary selection criterion.

Question 8

Just-in-time (JIT)production, is a "demand-pull" manufacturing system that manufactures each component in a production line as soon as, and only when, needed by the next step in the production line.

Accepted Answer

JIT production is indeed a demand-pull manufacturing system that produces each component only when needed by the next step in production. This approach helps to reduce waste in manufacturing and improve efficiency.

Question 9

An Enterprise Resource Planning (ERP)System comprises a single database that collects data and feeds it into software applications supporting all of a company's business activities.

Accepted Answer

An ERP system is designed to integrate and streamline all areas of business operations by providing a single, central repository for all data, allowing for improved communication and collaboration among departments.

Question 10

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

Accepted Answer

Manufacturing cells are a type of production system where all the equipment and resources needed to manufacture a specific product are grouped together in one location. This can lead to increased efficiency, reduced lead times, and improved quality. Materials requirements planning is a way to manage inventory and ensure that materials are available when needed, but it does not encompass all the equipment used in production. Total quality management is a philosophy and set of practices aimed at continuously improving quality, but it does not specifically refer to equipment. Economic order quantity is a formula used to determine the optimal order quantity for materials, but it does not pertain to equipment either.

Question 11

All of the following are potential financial benefits of just-in-time EXCEPT:

Accepted Answer

While just-in-time can provide several financial benefits, reducing the risk of obsolescence is not necessarily one of them. In fact, if inventory levels are kept very low, there may be a greater risk of stock becoming outdated before it can be sold. Therefore, option C is not a potential financial benefit of just-in-time. The other options (A, B, and D) are all potential financial benefits of just-in-time, as they can help to reduce costs and increase efficiency.

Question 12

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 13

A "push-through" system, often described as a just-in-time system, emphasizes simplicity and close coordination among work centers.

Accepted Answer

A "push-through" system is not the same as a just-in-time system. Just-in-time is a "pull" system that focuses on reducing inventory and producing only what is needed, when it is needed, emphasizing simplicity and coordination.

Question 14

Minnesota Ore Company mines iron ore for production into various metal products. During recent years, the company has had large fluctuations in its inventories of metal ingots. Much of the volatility of the inventory levels is due to the variability of demand by the company's largest customers, automobile manufacturers. For large orders, the company has the technology to quickly shift production from one product to another.
Required:
Explain how the company can improve its inventory control system and give the advantages of whatever you recommend.

Accepted Answer

The answer of Minnesota Ore Company mines iron ore for...

Question 15

One DISADVANTAGE of an enterprise resource planning (ERP)system is:

Accepted Answer

ERP systems often require customization to fit the needs of the user, which can be time-consuming and costly. The other choices are not accurate disadvantages of ERP systems. Standard costing systems can be used with ERP systems, they are in accordance with GAAP, and they can actually decrease lead times when purchasing materials from suppliers.

Question 16

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 17

Costs of setting up a production run are analogous to ordering costs in the Economic Order Quantity (EOQ)model.

Accepted Answer

In both cases, there is a fixed cost associated with setting up or ordering, which includes tasks such as preparing equipment, arranging materials, and coordinating labor. These costs are incurred each time a production run or order is initiated and are independent of the size of the run or order. Therefore, reducing the frequency of setups or orders can help minimize the total cost of production or inventory management.

Question 18

Just-in-time systems are similar to materials requirement planning systems in that both systems are demand-pull systems.

Accepted Answer

Just-in-time (JIT) systems are demand-pull systems, while materials requirement planning (MRP) systems are typically demand-push systems.

Question 19

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):

Accepted Answer

An enterprise requirements planning (ERP) system is designed to integrate and coordinate all of an organization's business processes and data into a single, comprehensive database. This database feeds information into software applications that support various business functions, such as finance, inventory management, supply chain management, customer relationship management, and human resources. Unlike the other options, an ERP system is comprehensive and covers all areas of the business, not just one specific function.

Question 20

The management accountant aids in MRP by:

Accepted Answer

Maintaining accurate records of inventory and its costs is an essential role for the management accountant in aiding Material Requirements Planning (MRP). MRP is a system that relies heavily on accurate inventory information, which the management accountant is responsible for managing. Options A and B do not relate to MRP, and option D is typically the responsibility of the purchasing department.

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