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Accounting Information Systems, 7e

SOLUTIONS FOR CHAPTER 15


Discussion Questions
DQ15-1

This chapter discusses the complexities of competing in a highly competitive


global manufacturing environment. Discuss how enterprise systems can help an
organization streamline its processes and become more competitive.

ANS.

The following factors were discussed in the chapter:


This answer should probably begin with a discussion of the issues facing
manufacturers in the global economy. Based on the Deloitte and Touche survey
discussed in the text, manufacturing organizations are under pressures to do the
following:

Reduce costs throughout the value chain.

Pursue lucrative markets and channels.

Develop new, innovative products more quickly.

Organizations that successfully accomplish these goals have the following:

Improved internal business processes in the areas of customers, products, and


supply chains

Better uses of technology to increase integration within and between these


three areas (customers, products, and supply chains)

Better general capabilities in the areas of collaboration, flexibility, visibility,


and technology

Enterprise systems help achieve these three goals by doing the following:

Enterprise systems help to streamline business processes in the areas


mentioned by providing better information for decision making and by
helping to automate processing of information.

Enterprise systems add-ons, including customer resource management, supply


chain management, and product lifecycle management, help better integrate
within each of the three areas and between them by providing a more
comprehensive view of data.

Enterprise systems facilitate collaboration through sharing of data. They


increase flexibility and visibility by making data available across the
organization, and they allow for much greater technological integration
through systems and data integration.

Solutions for Chapter 15

Enterprise systems specifically help out in the four key areas discussed as
important for achieving the three goals as follows:

Product innovation: Enterprise systems assure that changes made in


engineering can be automatically incorporated into production, decreasing the
time to market for new innovations. Product lifecycle management further
enhances communication and decreases time to market.

Production process innovation: Enterprise systems are vital in managing


efficient control of production as well as for gathering useful information
throughout the production process.

Supply chain management: Enterprise systems provide the information about


suppliers to conduct effective supply chain management and facilitate
available-to-promise planning and capable-to-promise planning. Enterprise
systems also facilitate supply chain management by enabling e-business
connections between the organization and its suppliers and customers.

Management accounting: Enterprise systems facilitate both activity-based


costing and lifecycle costing by gathering a greater variety of information
through automated techniques such as shop floor control and by making this
information more readily available.

DQ15-2

What industry do you believe is a leader in enterprise systems implementations?


Discuss what you think are the major contributing reasons for that leadership.

ANS.

One possible answer to the question is the automotive industry, where


manufacturers produce very complex products using highly automated processes.
They must coordinate a large number of suppliers on a global scale. The result is a
strong need for the technologies described in this chapter to manage their
integrated production processes. As discussed at the beginning of the chapter,
automotive manufacturers feel strong pressures to reduce lifecycle costs, expand
their value chain into new markets, and increase the speed of innovation to
compete with new market entrants on a global scale.

DQ15-3

Table 15.1 presents a summary of trends in cost management and cost accounting
that have occurred over the past two decades.
a. Which trends do you consider most significant? Explain your answer.

ANS.

As discussed in the chapter text, the move toward more accurate and detailed cost
information that cuts across the value chain and across the life of the product
presents a significant trend toward focusing on the use of cost information to
strategically manage the enterprise. This information takes the form of activitybased costing and lifecycle costing. The following trends from Table 15.1 might
also be cited as the most significant:

Direct charging of overhead costs will challenge the cost accountant to


develop new methods for collecting and charging cost data.

Accounting Information Systems, 7e

The increased emphasis on managing, rather than just reporting, costs places
the cost accountant in a different, and much more important, position in the
manufacturing organization.

To effectively utilize a new cost category, direct technology, a cost accountant


must understand the manufacturing application of the technology.

Cost accounting has been a fairly stable discipline. The need for flexible cost
processes, real-time data capture, direct technology costs, and so on will
change the nature and rate of change of the cost accounting discipline.

Some cost trends that might fly in the face of what has been learned in
traditional cost accounting classes include the following:

Shift from direct labor to some other basis for charging overhead.
Although direct labor is becoming a less important cost component, many
firms cling to direct labor as a method for applying overhead. Automation
costs (a fixed cost) or time spent in a production step are often cited as
more meaningful bases for allocating overhead.

Shift away from standard costs to actual costs.

Shift away from job order to process costing.

Accumulating noncost statistical informationsuch as defect ratesin


addition to pure financial data

Shift away from full-absorption costing as inventories become less


important.

b. The first footnote to Table 15.1 indicates that there are additional cause-andeffect relationships that could be shown between the items in the right column
and those in the left column. Give several examples (with explanations) of
those other relationships.
ANS.

Other than the relationships shown in Table 15.1, the following relationships
might be described:

Real-time data captured on the factory floor will be required to effectively


monitor automated factories.

Cell throughput time might be a factor in managing the shorter product life
cycle.

Statistical data might be useful in making decisions in the new shorter life
cycle.

Factory automation has contributed to the trend away from job order to
process systems.

Automated information processes include reporting capabilities to assist


strategic planning and decision making.

Solutions for Chapter 15

DQ15-4

A company cannot implement a just-in-time (JIT) process without making a


heavy investment in computer resources. Do you agree? Discuss fully.

ANS.

Overall, dont agree. JIT processes generally do not require sophisticated


computer resources. In fact, some JIT processes are implemented using the
kanban card as the media for routing production orders and collecting data. This
takes the place of many of the sophisticated routines involved in the
Manufacturing Resource Planning process (both materials requirements planning
and capacity requirements planning). The only area where more sophisticated
resources are needed is in relation to communicating materials requirements and
production schedules to suppliers. Here, JIT may require the use of more
sophisticated methods, such as EDI, which assure that accurate, timely
information is available for shipping materials just-in-time. Further, an
examination of Exhibits 15.1 and 15.2 will disclose that much of the JIT approach
is philosophical and does not require sophisticated computer technology. For
example, an organization can achieve zero defects without complicated computer
support.

DQ15-5

A company cannot implement manufacturing resource planning (MRP) without


making a heavy investment in computer resources. Do you agree? Discuss fully.

ANS.

Agreed. MRPs three main componentsmaterial requirements planning,


capacity requirements planning, and cash flow planningeach involve complex
computations and manipulation of large amounts of data and large files. These
computations and data and file manipulations require significant computational
power. For example, to prepare the time-phased order requirements, the
information process must access the finished goods, raw materials, open purchase
orders, manufacturing orders data, the bill of materials, and parts master data, and
then perform the necessary computations to prepare the planned order.

DQ15-6

A company cannot implement a flexible manufacturing process (FMS) without


making a heavy investment in computer resources. Do you agree? Discuss fully.

ANS.

Agreed. An examination of Figure 15.1 should reveal that most of the flexible
manufacturing components are, by definition, computerized. For example,
engineering designs, routing master records, and the bill of materials are
automatically called to run machines and route parts. Additionally, shop floor
control involves a number of activities specifically designed to automatically
collect data.

DQ15-7

A main goal of just-in-time (JIT) is zero inventories.


a. Assuming your company does not aspire to JIT and has $1,000,000 in raw
materials in stock, identify cost that may be incurred to maintain the inventory
level.

ANS.

a. The cost of carrying inventory may include incremental taxes, insurance,


spoilage, warehouse space, security, labor to move and maintain, and so on.

Accounting Information Systems, 7e

b. Now assume that you implement JIT, and your raw materials in stock drop to
zero. Explain how you expect this change to impact your income statement
and balance sheet.
ANS.

b. On the surface, the costs in part a evaporate, but, in typical JIT environments,
the supplier is required to maintain a certain level of inventory. By doing this,
it is likely that raw material prices will increase, unless the vendor can save in
other areas (or chooses to reduce profits). Assets on the balance sheet should
decline. Expenses, related to carrying cost of raw materials, should be
eliminated (in a true JIT), whereas cost of goods sold may rise because of an
increase in expenses to the suppliers.

DQ15-8

Without redrawing the figure, discuss the changes that would occur in Figure15.7
if the company used an actual costing process instead of a standard cost process.

ANS.

Note: Although the question specifically states that Figure 15.7 is not to be
redrawn, your understanding of the following solution will be improved if you
review it in conjunction with the solution to P15-8, which shows the redrawn
Figure 15.7.
Changes in process inputs:

A single RM issue notice reflecting the actual materials issued (and the actual
cost of those materials) would replace the following flows in Figure 15.7:

Standard RM issue notice

Excess RM issue notice

RM returned notice

Job time tickets and at least a final completed move ticket would continue to
be process inputs.

Changes in process outputs:

In the absence of a standard cost process, there would be no variance reports


to managers or variance updates to the General Ledger process.

A data flow called GL actual costs update would replace the flow, GL
standard cost update.

The flow, GL cost of goods completed update, would remain but would now
notify the General Ledger process of the actual (not standard) cost of the jobs
completed and transferred to finished goods.

Because finished goods inventories are not carried at standard costs, an


additional flow would run to the Inventory process to notify it of the actual
cost of the jobs completed and transferred to finished goods.

Solutions for Chapter 15

Changes in process data:

The Standard Cost master data and General Ledger master data would not
appear in the process.

The other three files would continue, but two of them would change as
follows:

The Work in Process inventory data would reflect actual materials used,
actual direct labor incurred, and applied manufacturing overhead.

The Budgets master data would be the source of predetermined overhead


rates that the process would use to apply overhead to work in process.

Changes in system processes:

The five process bubbles shown in Figure 15.7 would be replaced by the
following processes:

1.0 Record RM cost

2.0 Distribute manufacturing labor

3.0 Apply manufacturing overhead

4.0 Report WIP costs incurred

5.0 Close manufacturing orders and compute actual unit costs.

DQ15-9

Discuss how the inventory control process goals support the production planning
process and the risks to the production process if such controls are not in place.
Do not limit your discussion to loses from fraud.

ANS.

As organizations struggle to remain competitive in a global manufacturing


environment and to enhance their effectiveness and efficiency, inventory control
becomes critical. If inventory levels are too high, an organization risks being left
holding nonusable products or materials (and the related losses). On the other
hand, if inventory levels are too low, then manufacturing processes can be brought
to a standstill due to a lack of materials, or customer demands may not be met due
to stock outages of finished goods. Inventory levels may vary based on theft,
waste, obsolescence, improper recording of usage, and other factors. When actual
materials or finished goods quantities are not accurately reported, this problem
can impact both an organizations capability to maintain adequate stock levels and
the costs that must be absorbed into finished goods cost and the resulting product
pricing.

Accounting Information Systems, 7e

Problems
Bill of Materials
Master
Product Design

1.1
Determine
Product
Description
Parts master
data

New parts needs

1.2
Add
descriptions
for new
parts

Product
descriptions

1.3
Determine
Product
Routing

Work center
needs
Routing
M aster
Work Center
Master
1.4
Add new
work
centers

FIGURE SM-15.1

Problem 15-1 solution

Solutions for Chapter 15

M aster
production
schedule

Time-phased
order requirements
schedule

Bill of materials
master

3.1
Explode
Bills of
M aterials

Materials
Needs
3.2
Develop
Time-phased
order
requirements

Parts
master

RM /WIP
inventory
status

Purchase
Needs
Open purchase
order data
3.3
Generate
Purchase
Requisitions

Key:
RM = Raw materials
WIP = Work in process

FIGURE SM-15.2

Problem 15-2 solution

Purchase
requisitions

Accounting Information Systems, 7e

Routing
master

Work center
master

Master
Production
Schedule

Time-phased
order
requirements

4.1
Obtain
capacity
information

Work center
status

Employee/
Payroll Master
Data
Details of machine
and labor capacity
and needs

Detailed
production
plan

4.2
Release MOs,
move tickets
and materials
requisitions

4.3
Update
schedules

Manufacturing
Orders

KEY
MO = Manufacturing orders

FIGURE SM-15.3

Problem 15-3 solution

M ove
tickets

Raw materials
requisitions

10

Solutions for Chapter 15

WIP
Inv entory
Status

Routing
M aste r

shows

associate d
with

associated
With

Associate d
with

Bill of
Mate rials
M aste r

Employe e/
Payroll
Maste r Data

Lists

associated
with

Parts Maste r

Job Time
Record

associate d
with

FG Inv entory
Status

lists

Maste r
Production
Schedule

are for

Manufacturing
Orde rs

associated
with

Work Ce nter
M aste r

issue d
for

is for

lists

are for
are for
RM
Issue/Re turn
Notices

M ove
Tickets
list

has

Parts M aster
Work Ce nter
Status

FIGURE SM-15.4

Problem 15-4 solution

Time Phased
Order
Re quirements
Sche dule

list

Raw
Materials
Re quisitions

Accounting Information Systems, 7e

Work progress
data

5.1
Capture
move ticket
data

5.2
Update MO
and work
center
status

Move
tickets

Work center
status

5.3
Update work
center
status and
close MO

Manufacturing
Orders

5.4
Process
Employee
Time

Labor Time
Finished goods
inventory status

Job Time
Records
Material Use
data
5.5
Process
RM Issues/
Returns

KEY
MO = Manufacturing orders
RM = Raw materials
Note: The order of steps 5.4 and 5.5
within the process is unimportant.

FIGURE SM-15.5

Problem 15-5 solution

RM issue/
return notices

11

12

Solutions for Chapter 15

P15-6 ANS.

For solution, see Figure SM-15.6 (Note).


Note: The flowcharts assume the following:

P15-7 ANS.

A standard cost variance report is prepared only once a month; the report
includes the direct materials usage, direct labor, and manufacturing overhead
variances.

The variances data in Figure SM-15.6 stores the computed variances until they
are reported periodically.

a. For solution, see Figure SM-15.7.


b. For solution, see Figures SM-15.8 and 15.9 (Notes).
Notes: The following notes should be considered when reviewing Figures SM15.8 and 15.9:

P15-8 ANS.

All inventory data (i.e., RM, WIP, and FG) are carried at standard costs.

The RM price variance is isolated and reported when raw materials are
purchased (i.e., received) rather than later when the materials are issued.

See notes b and c (pg. 560) in Figure 15.7 in Chapter 15 for a description of
certain flows entering bubble 7.0 in Figure SM-15.9.

For solution, see Figure SM-15.10. In addition, see the solution to DQ15-8 for a
description of the differences between Figure 15.7 in Chapter 15 and Figure SM15.10.

Accounting Information Systems, 7e

Cost Accounting De partme nt

Computer

From DCRP

Notification of
manufacturing order
re le ase d to production

Cre ate WIP


inv e ntory re cord
Cre ate WIP
inv e ntory record

From production
work ce nte rs

WIP
inv e ntory
re cord
scree n

Comple te d
mov e ticke t

Ke y comple te d
mov e ticke t

M ove ticke t
scree n
From inv e ntory
control

Standard raw
materials
re quisitions

Ke y comple te d
raw mate rials
re quisitions

Raw
materials
re quisition
scre en

WIP
inv e ntory
M aste r data

Update WIP for


standard labor
and ov erhe ad

Update WIP for


standard cost of
raw mate rials

Print standard
costs applie d
notification

Standard costs
applie d
notification

NOTE: The process continue s


on page 2 of the flowchart

KEY
FG = Finishe d goods
MO = Manufacturing orders

FIGURE SM-15.6

Standard
costs
M aste r data

Problem 15-6, solution flowchart, page 1

To ge neral
ledger proce ss

13

14

Solutions for Chapter 15

Cost Accounting Department


From inventory
control

Excess raw
materials issue
notice

Computer

Calculate RM
usage variance

NOTE: There would


be a screen output at
each key-entry step.

Standard
costs MD

Calculate labor
variances
Raw materials
returned notice

Variances
data

WIP
inventory
MD

Print monthly
variance reports

Calculate MO
variances

Enter excess
quantities

General
ledger
MD

3
From production
work centers

Job time
tickets

Key actual
hours worked

At end of each
accounting period

2
Variance
report

Key menu option


to compute M O
variances

To general
ledger process
To production
control supervisor

To various
managers

Budgets
MD

Standard
costs MD

Cost of goods
completed notice
Final completed
move ticket

KEY
Close inventory
record and compute
standard cost of
goods completed

From production
work centers
Close M O

FIGURE SM-15.6

Problem 15-6, solution flowchart, page 2

WIP
inventory
MD

M D = M aster data
M O = M anufacturing order
RM = Raw materials
WIP = Work in process

Accounting Information Systems, 7e

Production
work
centers

RM variance
report

Move
ticket
data

DL variance
report
MOH variances
re port

Job time
data
Final move
ticket data

GL standard
costs applied
update

Standard
cost
accounting
process

GL RM
variances
update

Standard RM
issue notice

GL DL
variances update

Excess RM
issue notice

Inv entory
process

GL M OH
variances
update

RM returne d
notice

GL cost of goods
completed update

KEY
RM = Raw materials
DL = Dire ct labor
MOH = M anufacturing ov erhead

FIGURE SM-15.7

Various
mangers

Problem 15-7, part a solution

General
ledge r
process

15

16

Solutions for Chapter 15

Purchasing
process
AP/CD
proce ss

DCRP
proce ss

RM purchase price
variance re port
RM receipt
notification

Various
mangers

RM quantity
variance
report

RM payable
inventory
notification

DL variance s
report
M OH variances
report

Standard RM
requisition
Excess RM
requisition
RM returned
notice

Production
work
centers

GL RM re ceive d
update
Standard cost accounting
process

Comple ted move


ticket

Job time tickets


Final comple ted
move ticket

KEY
DCRP = Detailed capacity requirements planning
DL = Direct labor
M OH = M anufacturing overhead
RM = Raw materials

FIGURE SM-15.8

Problem 15-7, part b solutioncontext diagram

GL RM purchase
price variance update
GL standard costs
applied update

GL RM quantity
v ariance update

Gl DL
variances
update
GL M OH variance
update
Gl cost of goods
complete d update

General
ledger
proce ss

Accounting Information Systems, 7e

Purchasing
process

General
ledger
process
RM re ceipt GL RM
notification rece ive d
update

AP/CD
process

RM payable
inv entory
notification

Work in process
inve ntory
6.0
Close
manufacturing
orders

Standard cost
maste r data

1.0
Record
rece ipt of
RM

FG master
data

GL cost of goods
completed update
(de bit FG, credit WIP)

KEY
DCRP = De tailed
capacity
re quirements
planning
DL = Direct labor
FG = Finishe d goods
M OH = M anufacturing
ove rhead
RM = Raw materials
Std. = Standard
UC = Unit cost
WIP = Work in
Process

Gl DL
v ariances
update
Final completed
move ticke t

RM master
data

2.0
Isolate
purchase
price
variance

GL RM purchase
price variance
update

Employee
master data
(Std. cost of
goods rece iv ed)

RM purchase price
variance report

Job time
tickets

(Actual hourly
pay rate s)
Various
managers

RM master
data

Production
work
centers

5.0
Compute DL
variance s
Work in process
inventory data

Gene ral le dge r


master data
DL v ariance
report

Budge ts
master data

General
ledger
process

GL standard
costs update

3.0
Record
standard costs
applie d to
WIP

Standard RM
Requisition
Completed
move ticket
DCRP
process

FIGURE SM-15.9

Production
work
centers

Standard cost
master data
Exce ss RM
requisition
RM re turned
notice

RM master
data

Problem 15-7, part b solutionlevel 0 DFD

RM quantity
variance report

4.0
Compute RM
quantity
variance
Gl RM
quantity
variance
update

Various
mange rs

M OH
variances
report

7.0
Compute
M OH
variances

GL M OH
v ariances
update

Ge neral
ledger
proce ss

Standard cost
master data

Work in proce ss
inve ntory data

17

18

Solutions for Chapter 15

Production
work
ce nte rs
Inve ntory
process

General
le dge r
proce ss
Final comple te d
move ticket

RM issue
notice

GL cost of goods
completed update
5.0
Close manufacturing orders
and compute
unit costs

1.0
Record
RM code

Jobs
comple te d
notice

WIP inve ntory


data

b
Employe e
master data
a

Inve ntory
process

2.0
Distribute
manufacturing
labor

Job time
tickets

d
Indirect labor
costs
4.0
Re port
WIP costs
incurred

Production
work
ce nters

General
ledge r
process

3.0
Apply MO

GL actual
costs update

NOTES:
a - Actual pay rate s
b - DL hours and cost
c - DL hours
d - Predetermine d overhead rates
e - Applied MOH
f - Actual costs (RM, DL, applie d M OH)
KEY:
DL = Dire ct labor
MOH = M anufacturing ove rhead
RM = Raw mate rials
WIP = Work in proce ss

FIGURE SM-15.10 Problem 15-8 solution

Budge ts
maste r data

Accounting Information Systems, 7e

19

P15-9 a. ANS. The following assumptions were made in solving part a:


(1) All variances are unfavorable (i.e., actual costs exceed standard), resulting in
debits to the variance accounts. If, on the other hand, actual costs were less
than standard costs, the variances would be favorable and would be recorded
by credits to the variance accounts.
(2) The RM price variance is recorded when the materials are purchased.
Therefore, the RM inventory account is carried at standard prices; and entry 2
reflects only the RM quantity (usage) variance.
(3) The entry to pay the factory workers debited the Payroll Clearing account with
the actual gross pay (actual hours worked times actual rates per hour).
(4) The MOH Control account is debited with actual MOH incurred. The
company uses a two-variance method for overhead and records those
variances once a month (see entry 4). If, instead, the company used three
variances for overhead, the MOH budget variance in entry 4 would be
analyzed into its spending and efficiency variance components; the capacity
variance would be the same as in entry 4.
Debit
1. GL standard costs applied update:
a. WIP inventory (SQ*SP)
RM inventory
b. WIP inventory (SH*SR)
Payroll clearing account
c. WIP inventory (SQ*SR)
MOH control account
2. GL RM variances update: (see notes 1 and 2 above)
RM quantity (usage) variance
RM inventory
3. GL DL variances update: (see the preceding Notes 1 and 2)
DL rate variance
DL efficiency variance
Payroll clearing account
4. GL MOH variances update: (see the preceding Notes 1 and 2)
MOH budget variance
MOH capacity (volume) variance
MOH control account
5. GL cost of goods completed update:
FG inventory
WIP inventory

Credit

(SQ*SP)
(SH*SR)
(SQ*SR)
(Note A)
(Note A)
(Note B)
(Note C)
XXXX
(Note D)
(Note E)
XXXX
(Note F)
(Note F)

20

Solutions for Chapter 15

Notes:
A - (AQ-SQ)*SP.
B - (AR-SR)*AH.
C - (AH-SH)*SR.
D - MOH incurred minus the standard budget allowed for output actually achieved.
E - The standard budget allowed for output actually achieved minus the MOH charged to WIP in
entry 1 c.
F - Quantity completed at standard cost to produce.
Key:
DL = Direct labor

MOH = Manufacturing overhead

RM = Raw materials

WIP = Work in process

FG = Finished goods
AQ = Actual quantity

SQ = Standard quantity

AP = Actual price per unit of RM

SP = Standard price per unit of RM

AH = Actual DL hours

SH = Standard DL hours

AR = Actual pay rate per hour

SR = Standard pay rate per hour

b. ANS.

In addition to the following solution, see the assumptions in part a previously and
the Key in the solution to part a.

(1) The following entry would be made to record the purchase of RM:
Debit
RM inventory
(AQ*SP)
RM purchase price variance
(NOTE 1)
Accounts payable

Credit

(AQ*AP)

(2) The following pair of entries would be made to record the sale of goods and related cost of
goods sold:
Debit
Credit
Accounts receivable
XXXX
Sales
XXXX
Cost of goods sold
(NOTE 2)
FG inventory
(NOTE 2)

Accounting Information Systems, 7e

21

(3) Annually, the variance accounts would be closed to cost of goods sold (Note 3) through the
following entry:

Cost of goods sold


RM purchase price variance
RM quantity (usage) variance
DL rate variance
DL efficiency variance
MOH budget variance
MOH capacity (volume) variance

Debit
XXXX

Credit
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX

Notes:
1 - (AP-SP)*AQ.
2 - For standard cost of goods sold.
3 - Alternatively, the variance accounts might be allocated to inventory accounts and cost of
goods sold.
P15-10 ANS. The analysis should be structured to address the three areas of concern:
effectiveness of operations, efficiency of operations, and resource security
objectives. First, recognize that effectiveness will be hampered by increased risk
of stock outs, a limited capability to work in a just-in-time environment, and the
increased difficulty of identifying other warehouses that may have required goods.
Efficiency will also be hampered as stock reordering becomes more labor
intensive. Physical security is less of a concern other than the risk of not
recognizing at an early stage problems with theft and/or spoilage.
As such, the focus of revised control plans should be on controls that enhance
efficiency and effectiveness. These control plans could include a broad range of
approaches but, at a minimum, should address issues related to maintaining
sufficient short periods between counts for the records to be effective in
supporting the inventory ordering and distribution process. Efficiency issues
should be sure to address the means by which counts can be taken at a minimum
cost and at reasonable intervals so as not to exceed necessary costs but also to
assure adequate maintenance of stock levels.
P15-11 ANS. a. The main concepts conveyed by lean manufacturing include the following:

Perfect first-time quality

Waste minimization

Continuous improvement

Pull processing

Flexibility

22

Solutions for Chapter 15

This philosophy of lean manufacturing obviously overlaps with the integrated


production process in terms of the shared goals to reduce waste, continuously
improve the production process by collecting feedback and information from all
points in the process, and to promote flexibility, for instance, by implementing
flexible manufacturing systems in the case of the IPP. However, lean
manufacturing does emphasize a level of quality and customer-demand oriented
pull processing that is not so strongly emphasized in the modern IPP.
b. Many of these publications argue that traditional cost accounting reports were
developed to present an accurate view of the company to outsiders and
werent designed to help managers run their operations better. Well designed
accounting systems should mitigate that concern. There are many conceptual
parallels between the current trends in cost accounting and lean accounting:
Both advocate categorizing costs in a cellular fashion. Lean accounting
principles further recommend companies organize them by value stream,
which includes everything an entity does in creating value for a customer
that it can reasonably associate with a product or product line.
The trend in cost accounting today is toward the reduction of wastes. The
same can be said for lean accounting. Inventory valuation changes under
lean accounting, however. Because of the focus on producing only to meet
customer demand, inventories tend to be much lower than in traditional
manufacturing operations.
P15-12 ANS. The answers to this problem will vary widely based on the companies selected.
We anticipate the student solutions to include many factors, but at some level,
their discussion should include some of the key characteristics of successful
global companies, identified early in the chapter. These include the following:

Improved internal business processes in the areas of customers, products, and


supply chains

Better use of technology to increase integration within and between these


three areas (customers, products, and supply chains)

Better general capabilities in the areas of collaboration, flexibility, visibility,


and technology

P15-13 ANS. The answer will vary based on the company selected, although each student
should address the points provided in the text of the question.