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Exam 27: Lean Principles, Lean Accounting, and Activity Analysis

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Question 51

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Lean manufacturing is also called make-to-stock manufacturing.

A) True
B) False

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Question 52

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Under a lean environment, employees have the responsibility and authority to

A) purchase inventory.
B) determine output amounts.
C) make decisions about operations, rather than waiting for management.
D) make engineering changes.

E) A) and B)
F) A) and C)

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Question 53

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Schedule of Activity Costs $\begin{array}{|l|l|}\hline \text { Quality Control Activities } & \text { Activity Cost } \\\hline \text { Product testing } & \$ 55,000 \\\hline \text { Assessing vendor quality } & 26,000 \\\hline \text { Recalls } & 18,000 \\\hline \text { Rework } & 29,000 \\\hline \text { Scrap disposal } & 8,000 \\\hline \text { Product design } & 30,000 \\\hline \text { Training machine operators } & 46,000 \\\hline \text { Warranty work } & 12,000 \\\hline \text { Process audits } & 22,000 \\\hline\end{array}$ -A quality control activity analysis indicated the following four activity costs of a hotel.

Accounting for lean operations requires fewer transactions because

Identify the following quality control activities as either value-added or non-value-added. -Finished goods inspection

In a lean environment, the journal entry to record conversion costs would include a debit to the manufacturing overhead control account.

Schedule of Activity Costs $\begin{array}{|l|l|}\hline \text { Quality Control Activities } & \text { Activity Cost } \\\hline \text { Product testing } & \$ 55,000 \\\hline \text { Assessing vendor quality } & 26,000 \\\hline \text { Recalls } & 18,000 \\\hline \text { Rework } & 29,000 \\\hline \text { Scrap disposal } & 8,000 \\\hline \text { Product design } & 30,000 \\\hline \text { Training machine operators } & 46,000 \\\hline \text { Warranty work } & 12,000 \\\hline \text { Process audits } & 22,000 \\\hline\end{array}$ -From the above schedule, calculate the external failure costs.

Extreme Wreaths, Inc. makes wreaths in batch sizes of 15 at a time. The cutting & assembly process takes 10 minutes per wreath, and the decorating process time is 7 minutes per wreath. It takes 5 minutes to move the wreaths from the cutting & assembly process to the decorating process. In a effort to improve the lead time, the company has tried reducing the batch size to 10 units. The new process is as follows: cutting & assembly process - 8 minutes. The decorating process is still 7 minutes per wreath. It takes 5 minutes to move the wreaths from the cutting & assembly process to the decorating process. a) Compute the value-added, non-value-added, and the total lead time of the wreath process for both the old and the new manufacturing process. b) Compute the value-added ratio for both the old and new process. Round to the nearest decimal.

Schedule of Activity Costs $\begin{array}{|l|l|}\hline \text { Quality Control Activities } & \text { Activity Cost } \\\hline \text { Frocess audits } & \$ 50,000 \\\hline \text { Training of machine operators } & 28,000 \\\hline \text { Frocessing returned products } & 19,000 \\\hline \text { Scrap processing disposal) } & 25,000 \\\hline \text { Rework } & 8,000 \\\hline \text { Freventative maintenance } & 30,000 \\\hline \text { Froduct design } & 46,000 \\\hline \text { Warranty work } & 12,000 \\\hline \text { Finished goods inspection } & 23,000 \\\hline\end{array}$ -From the above schedule of activity costs, determine the external failure costs.

Costs of failing to control quality include prevention costs and external failure costs.

Push manufacturing is also referred to as make-to-order processing.

Reducing wait time is not linked to reducing inventory.

Which of the following drives work-in-process inventory levels higher?

The Bright Lamp Company has budgeted its conversion cost for the small lamp production as $85,000 for 1,300 production hours. Each unit produced by the cell requires 15 minutes of process time. During the month, 3,800 units are manufactured in the cell. The estimated material cost is $18 per unit. Provide the following journal entries. a) Materials are purchased to produce 4,000 units. b) Conversion costs are applied to 3,800 units of production. Please round to nearest cent.)c) 3,650 units are placed into finished goods.

Long setups and large batch sizes result in smaller inventories.

From the foregoing information, determine the amount of the conversion costs charged to Raw and In Process Inventory during August.

In a pull manufacturing system, raw materials are released to production based on actual customer orders.

Conan Electronics Corporation manufactures and assembles electronic motor drives for video cameras. The company assembles the motor drives for several accounts. The process consists of a lean cell for each customer. The following information relates only to one customer's lean cell. For the year, planned labor and overhead was $80,000,000; materials costs, $25 per unit. Planned production included 9,600 hours to produce 76,800 motor drives. Actual production for the month of August was 5,200 units, and motor drives shipped amounted to 5,040 units. From the foregoing information, determine the budgeted cell conversion cost per hour.

In a lean system, indirect labor is traced directly to product cells.

Lean manufacturing favors organizing work around processes rather than around products.