Managerial Accounting 14th Edition Warren Test Bank Download

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Chapter 12 - Lean Manufacturing and Activity Analysis
1. Lean manufacturing focuses on reducing time, cost, and poor quality in processes.
a. True
b. False
ANSWER: True
DIFFICULTY: Bloom's: Remembering
Easy
LEARNING OBJECTIVES: MANG.WARD.18.12-01 - 12-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.11 - Strategic Planning
BUSPROG: Analytic
2. The lean philosophy views inventory as a necessary buffer to protect against process problems.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
Bloom's: Remembering
BUSPROG: Analytic
3. The lean manufacturing philosophy views inventory as an unnecessary waste of resources.

a. True
b. False
ANSWER: True
DIFFICULTY: Easy
BUSPROG: Analytic
4. In the lean principles philosophy, unexpected downtime is the result of unreliable processes.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
BUSPROG: Analytic
5. Lead time is the process time between start and completion.

a. True
b. False
Copyright Cengage Learning. Powered by Cognero. Page 1
ANSWER: True
DIFFICULTY: Easy
BUSPROG: Analytic
6. All lead times are considered to be value-added lead time.

a. True
b. False
ANSWER: False
DIFFICULTY: Easy
BUSPROG: Analytic
7. Lead time includes both value-added time and non-value-added time.

a. True
b. False
ANSWER: True
DIFFICULTY: Easy
BUSPROG: Analytic
8. Lead time reduction can be a cost-saving goal for any processed item.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
BUSPROG: Analytic
9. Reducing wait time is not linked to reducing inventory.

a. True
b. False
ANSWER: False
DIFFICULTY: Easy
BUSPROG: Analytic
10. Reducing wait time is directly linked to reducing inventory.

a. True
b. False
ANSWER: True
DIFFICULTY: Easy
BUSPROG: Analytic
11. Lean manufacturing favors organizing work around products rather than around processes.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
BUSPROG: Analytic
12. Lean manufacturing favors organizing work around processes rather than around products.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
BUSPROG: Analytic
13. Employee involvement in a product-oriented factory emphasizes employee teams, rather than individual employees.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
BUSPROG: Analytic
14. A setup is the time required to prepare an operation for a new production run.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
BUSPROG: Analytic
15. Long setups and large batch sizes result in smaller inventories.
a. True
b. False
ANSWER: False
DIFFICULTY: Moderate
BUSPROG: Analytic
16. Within-batch wait time increases total lead time.

a. True
b. False
ANSWER: True
DIFFICULTY: Easy
BUSPROG: Analytic
17. Large batch sizes increase lead time.

a. True
b. False
ANSWER: True
DIFFICULTY: Easy
BUSPROG: Analytic
18. Lean manufacturing is also called make-to-stock manufacturing.

a. True
b. False
ANSWER: False
DIFFICULTY: Easy
BUSPROG: Analytic
19. Lean manufacturing is also called make-to-order manufacturing.

a. True
b. False
ANSWER: True
DIFFICULTY: Easy
BUSPROG: Analytic
20. A make-to-order company matches its production schedules to actual customer orders.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
BUSPROG: Analytic
21. Make-to-order companies produce mainly to stock inventory.

a. True
b. False
ANSWER: False
DIFFICULTY: Easy
BUSPROG: Analytic
22. Make-to-order companies typically produce in small batch sizes.

a. True
b. False
ANSWER: True
DIFFICULTY: Easy
BUSPROG: Analytic
23. Maximum effectiveness and efficiency are reached when the lean philosophy is used mainly by manufacturers.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
BUSPROG: Analytic
24. Maximum effectiveness and efficiency are reached when the lean philosophy is used by both manufacturers and their
suppliers.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
BUSPROG: Analytic
25. A process-oriented layout segments production facilities into functional departments.

a. True
b. False
ANSWER: True
DIFFICULTY: Easy
BUSPROG: Analytic
26. In a push manufacturing system, raw materials are released to production based on forecasted demand.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
BUSPROG: Analytic
27. In a push manufacturing system, raw materials are released to production based on actual customer orders.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
BUSPROG: Analytic
28. In a pull manufacturing system, raw materials are released to production based on actual customer orders.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
BUSPROG: Analytic
29. In a pull manufacturing system, raw materials are released to production based on forecasted demand.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
BUSPROG: Analytic
30. Setups are a significant time-consuming activity in traditional production environments.

a. True
b. False
ANSWER: True
DIFFICULTY: Easy
BUSPROG: Analytic
31. In a lean environment, raw materials are delivered less frequently than in a traditional environment.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
BUSPROG: Analytic
32. In a lean environment, raw materials are delivered more frequently than in a traditional environment.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
BUSPROG: Analytic
33. In a lean environment, process problems are more visible than they are in a traditional environment.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
BUSPROG: Analytic
34. Under the lean production concept, employees are better utilized if they are experts in one operation rather than
wasting time training them to learn various production operations.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
BUSPROG: Analytic

35. One inherent risk to using lean philosophy is that companies are at higher risk of inventory shortage during volatile
times such as strikes, weather, etc. than when using the traditional philosophy.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
BUSPROG: Analytic
36. In a lean environment, process problems are less visible than they are in a traditional environment.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
BUSPROG: Analytic
37. Employee involvement does not include performing any indirect manufacturing functions.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
BUSPROG: Analytic
38. Push manufacturing is also referred to as make-to-order processing.

a. True
b. False
ANSWER: False
DIFFICULTY: Easy
BUSPROG: Analytic
39. Push manufacturing (made-to-stock) is a traditional approach to manufacturing.

a. True
b. False
ANSWER: True
DIFFICULTY: Easy
BUSPROG: Analytic
40. In a lean environment, operations only respond to customer orders.

a. True
b. False
ANSWER: True
DIFFICULTY: Easy
BUSPROG: Analytic
41. Which of the following is an example of value-added time?

a. Processing time
b. Wait time during inspection
c. Wait time in inventory
d. Both B and C
ANSWER: a
DIFFICULTY: Easy
BUSPROG: Analytic
42. Which of the following results in long lead time?

a. long setup times
b. large batch sizes
c. large inventories
d. all of the above
ANSWER: b
DIFFICULTY: Easy
BUSPROG: Analytic
43. The lean philosophy attempts to reduce setup times, which will:
a. increase batch sizes
b. not affect batch sizes
c. increase within-batch wait time
d. decrease within-batch wait time
ANSWER: d
BUSPROG: Analytic
44. What do lean manufacturers demand from their vendors?

a. High quality materials
b. Low cost materials
c. On-time deliveries
d. All of the above
ANSWER: d
DIFFICULTY: Easy
BUSPROG: Analytic
45. How are the objectives of lean manufacturing achieved?

a. Product-oriented production layout
b. Employee involvement
c. Supplier partnering
d. All of the above
ANSWER: d
DIFFICULTY: Easy
BUSPROG: Analytic
46. Which of the following is (are) objective(s) of lean manufacturing?

a. eliminating waste
b. increasing inventory levels
c. increased production speed
d. all of the above
ANSWER: a
DIFFICULTY: Easy
BUSPROG: Analytic
47. Inventory reduction is a ____ principle.

a. lean
b. traditional processing
c. economic
d. wait time
ANSWER: a
DIFFICULTY: Easy
BUSPROG: Analytic
48. Set up time is disregarded as an improvement priority under the ____ manufacturing concept.
a. traditional
b. lean
c. total quality management
d. product cost
ANSWER: a
DIFFICULTY: Easy
BUSPROG: Analytic
49. ____ manufacturing philosophy emphasizes quality and zero defects.

a. Traditional
b. Lean
c. Zero-Based
d. Chinese
ANSWER: b
DIFFICULTY: Easy
BUSPROG: Analytic
50. ____ manufacturing deals with several suppliers in hopes of finding the best price.
a. Traditional

b. Lean
c. Economic
d. Productivity improvement
ANSWER: a
DIFFICULTY: Easy
BUSPROG: Analytic
51. Lean manufacturing philosophy reduces all of the following except

a. inventory
b. setup time
c. lead time
d. conversion costs
ANSWER: d
DIFFICULTY: Easy
BUSPROG: Analytic
52. Traditional manufacturing emphasizes all of the following except

a. team oriented employee involvement
b. process-oriented layout
c. push manufacturing
d. cost accumulation by department
ANSWER: a
DIFFICULTY: Easy
BUSPROG: Analytic
53. Which of the following is considered non-value-added lead time?

a. packing
b. moving from process to process
c. converting raw materials to finished product
d. all of the above
ANSWER: b
DIFFICULTY: Easy
BUSPROG: Analytic
54. 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.
ANSWER: c
BUSPROG: Analytic
55. Which of the following drives work-in-process inventory levels higher?

a. Machine breakdowns
b. Production rate losses
c. Rework processes
d. All of the above
ANSWER: d
DIFFICULTY: Easy
BUSPROG: Analytic
56. Which of the following is characteristic of a lean production layout?

a. Decentralized maintenance and small production batches
b. Decemtralized maintenance and organization around processes
c. Organization around processes and small production batches
d. Large production batches and organization around processes.
ANSWER: a
DIFFICULTY: Easy
BUSPROG: Analytic
57. In a lean environment, process problems are more visible than they are in a traditional environment because:
a. inventories are maintained at higher levels.
b. process problems cause production to shut down immediately.

c. the push manufacturing system leads to increased inventory level.
d. the lack of work in process inventory creates problems.
ANSWER: b
DIFFICULTY: Easy
BUSPROG: Analytic
58. Examples of transforming a traditional manufacturing environment to a lean environment is to do all of the following
except
a. form partnerships with reliable suppliers.
b. reorganize operational processes to organized product lines.
c. train employees to perform various operations.
d. increase raw materials to produce more, thereby increasing finished goods inventory.
ANSWER: d
DIFFICULTY: Easy
BUSPROG: Analytic
59. Christmas Express makes wreaths in batch sizes of 12. The cutting & assembly process takes 8 minutes per wreath
and the decorating process time is 10 minutes per wreath. It takes 12 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.
(b) Compute the value-added ratio. Round to the nearest decimal.
ANSWER: (a)
Value-added lead time: 8 + 10 = 18
Non-value-added lead time:
Move time 12
Within-batch wait time [18 × (12 – 1)] 198
Total lead time 228
(b) Value-added ratio = 18 / 228 = 7.9%

Bloom's: Applying
BUSPROG: Analytic
60. Which of the following are features of the lean manufacturing system?
(a) maintaining excess inventory to ensure that products will always be available
(b) cross training of employees
(c) giving employees additional authority and responsibility
(d) product-oriented layout
(e) increased set-up time
ANSWER: b, c, d
DIFFICULTY: Easy
BUSPROG: Analytic
61. 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.
ANSWER: (a) Old:
Move time 5
Within batch wait time [17 min. × (15 – 1)] 238
Total lead time 260
New:
Move time 5
Within batch wait time [15 min. × (10 – 1)] 135
Total lead time 155
(b)
Value-added ratio (old process) = 17 / 260 = 6.5%
Value-added ratio (new process) = 15 / 155 = 9.7%
Bloom's: Applying
BUSPROG: Analytic
62. A lean nonmanufacturing process can be accomplished by consolidating, in one area, all of the services provided to a
customer.
a. True
b. False
ANSWER: True
Moderate
BUSPROG: Analytic
63. A college would like to increase enrollment by streamlining the enrollment process. Which of the following would not
fall in line with the college goal?
a. Reduce the requirements necessary to enroll.
b. Relocate counselors, academic advisors, and financial aid specialists for a major to a central location.
c. Cross-train counselors, academic advisors, and financial aid specialists.
d. All of these choices would fall in line with the college goal.
ANSWER: d
BUSPROG: Analytic
64. A local college is aggressively working to reduce the time it takes students to enroll for each semester. Which of the
following changes would not help achieve this goal?
a. Counselors are specializing in common degree plans
b. One application is good at the community college and at the transferring university
c. A one stop area includes admissions, advising, registration and student ID’s
d. Having more number of staff to help facilitate admission process
ANSWER: a
DIFFICULTY: Easy
BUSPROG: Analytic
65. In a lean system, the work in process and raw materials inventory accounts are combined.
a. True
b. False
ANSWER: True
Moderate
BUSPROG: Analytic
66. In a lean system, there are more transactions to record than there are in a traditional system.
a. True
b. False
ANSWER: False
Easy
BUSPROG: Analytic
67. In a lean system, there are fewer transactions to record than there are in a traditional system.
a. True
b. False
ANSWER: True
Easy
BUSPROG: Analytic
68. In a lean system, direct labor is included in conversion costs.

a. True
b. False
ANSWER: True
Easy
BUSPROG: Analytic
69. In a lean system, indirect labor is traced directly to product cells.

a. True
b. False
ANSWER: True
Easy
BUSPROG: Analytic
70. A backflush accounting system uses work in process inventories as control points between each process step.
a. True
b. False
ANSWER: False
Easy
BUSPROG: Analytic
71. Financial accounting information is used more often for long-term operating decisions and nonfinancial information is
used more often for day-to-day decisions.
a. True
b. False
ANSWER: True
Easy
BUSPROG: Analytic
72. Nonfinancial accounting information is used more often for long-term operating decisions than is financial
information.
a. True
b. False
ANSWER: False
Easy
BUSPROG: Analytic
73. A nonfinancial measure is operating information that has not been translated into dollars.
a. True
b. False
ANSWER: True
Easy
BUSPROG: Analytic
74. In a lean environment, the journal entry to record raw materials purchases would include a credit to the raw materials
inventory account.
a. True
b. False
ANSWER: False
Moderate
BUSPROG: Analytic
75. In a lean environment, the journal entry to record raw materials purchases would include a debit to the raw and in
process inventory account.
a. True
b. False
ANSWER: True
Moderate
BUSPROG: Analytic
76. In a lean environment, the journal entry to record conversion costs would include a debit to the raw and in process
inventory account.
a. True
b. False
ANSWER: True
Moderate
BUSPROG: Analytic
77. In a lean environment, the journal entry to record conversion costs would include a debit to the manufacturing
overhead control account.
a. True
b. False
ANSWER: False
Moderate
BUSPROG: Analytic
78. The budgeted cell conversion cost rate is very similar to the predetermined factory rate because both include only
factory overhead costs.
a. True
b. False

ANSWER: False
Moderate
BUSPROG: Analytic
79. Which of the following is characteristic of the lean system?

a. Fewer work in process account transactions.
b. Work in process and raw materials accounts combined.
c. Elimination of the direct labor account.
d. All of the above.
ANSWER: d
Easy
BUSPROG: Analytic
80. Which of the following is characteristic of the traditional cost system?

a. Many work in process account transactions.
b. Reliance on financial performance measures.
c. Many process control points.
ANSWER: d
Easy
BUSPROG: Analytic
81. Which of the following is an example of a nonfinancial measure?

a. lead time
b. setup time
c. units scrapped
d. all of the above
ANSWER: d
Easy
BUSPROG: Analytic

82. Which of the following is best suited to providing timely and focused performance information?
a. nonfinancial information
b. financial accounting information
c. cost accounting information
d. variance analysis
ANSWER: a
Easy
BUSPROG: Analytic
83. Squirrel Co. operates in a lean manufacturing environment. For June production, Squirrel purchased 6,000 units of
raw materials at $6.00 per unit on account. The journal entry required to record this transaction is:
a. Raw and In Process Inventory 36,000
Accounts Payable 36,000
b. Cost of Goods Manufactured 36,000
c. Finished Goods 36,000
d. Raw Materials Inventory 36,000
ANSWER: a
RATIONALE: Amount of material charged to Raw and In Process Inventory = Number of units
purchased × Price per unit = 6,000 units × $6 = $36,000
Raw and In Process Inventory 36,000

Moderate
BUSPROG: Analytic
84. Kilbuck Manufacturing operates in a lean manufacturing environment. Kilbuck’s actual conversion costs for the
month of May follow:
Direct and indirect labor $150,000
Machine depreciation 85,000
Maintenance and supplies 60,000
Total conversion costs $295,000
The journal entry to record May's conversion costs will include:
a. a credit to Work in Process Inventory
b. a debit to Raw Materials Inventory
c. a credit to Raw and In Process Inventory
d. a debit to Raw and In Process Inventory

ANSWER: d
Moderate
BUSPROG: Analytic
85. 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.
a. $8,025
b. $800
c. $7,200
d. $8,333
ANSWER: d
RATIONALE: Budgeted cell conversion cost per hour = Budgeted conversion cost / Planned hours of
production = $80,000,000 / 9,600 hours = $8,333
DIFFICULTY: Bloom's: Applying
Moderate
BUSPROG: Analytic
Sifton 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 coming year. Projected labor and overhead, $7,370,000;
materials costs, $28 per unit. Planned production included 4,000 hours to produce 27,500 motor drives. Actual production
for August was 1,600 units, and motor drives shipped amounted to 1,380 units.
86. From the foregoing information, determine the budgeted cell conversion cost per unit.
a. $240.00
b. $268.00
c. $296.00
d. $1,842.50
ANSWER: b
RATIONALE: Budgeted cell conversion cost per unit = Budgeted conversion cost / Planned units of
production = $7,370,000 / 27,500 units = $268
Moderate
ACCREDITING STANDARDS: ACCT.IMA.07 - Cost Management
BUSPROG: Analytic

87. From the foregoing information, determine the manufacturing cost per unit.
a. $240.00
b. $268.00
c. $296.00
d. $1,870.50
ANSWER: c
RATIONALE: Cell conversion cost per unit = Budgeted conversion cost / Planned units of
$268
production
($7,370,000 / 27,500 units)
Add: Material cost per unit 28
Total manufacturing cost per unit $296
Moderate
BUSPROG: Analytic
88. From the foregoing information, determine the amount of the conversion costs charged to Raw and In Process
Inventory during August.
a. $369,840
b. $408,480
c. $428,800
d. $473,600
ANSWER: c
RATIONALE: Budgeted cell conversion cost per unit = Budgeted conversion cost / Planned units of
production = $7,370,000 / 27,500 units = $268 per unit
The amount of the conversion costs charged to Raw and In Process Inventory during
August = Actual units produced during August × Budgeted cell conversion cost per unit
= 1,600 units × $268 = $428,800

Moderate
BUSPROG: Analytic
89. From the foregoing information, determine the production costs transferred to Finished Goods during August.
a. $369,840
b. $408,480
c. $428,800
d. $473,600
ANSWER: d
RATIONALE: Cell conversion cost per unit = Budgeted conversion cost / Planned units of production $268
($7,370,000/27,500 units)


Production costs transferred to Finished Goods during August = Manufacturing cost per unit
× Actual production during August = $296 × 1600 units = $473,600

Moderate
ACCREDITING STANDARD ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
S: ACCT.IMA.11 - Strategic Planning
BUSPROG: Analytic
90. From the foregoing information, determine the production costs transferred to Cost of Goods Sold during August.
a. $369,840
b. $408,480
c. $428,800
d. $473,600
ANSWER: b
RATIONALE: Cell conversion cost per unit = Budgeted conversion cost / Planned units of
$268
production
($7,370,000 / 27,500 units)
Production costs transferred to Cost of Goods Sold during August = Manufacturing cost
per unit × Units shipped during August = $296 × 1,380 units = $408,480
Moderate
BUSPROG: Analytic
91. Accounting for lean operations requires fewer transactions because

a. large batches of inventory are combined in a smaller number of transactions.
b. costs are accumulated in one department and then transferred to the next department.
c. combined material and conversion costs are transferred to finished goods.
d. costs are transferred from department to department allowing for better controls in costs.
ANSWER: c
Easy
BUSPROG: Analytic
92. Which of the following results in fewer transactions in lean accounting?

a. all manufacturing costs are combined in one account called Raw and In Process Inventory.
b. the distinction between direct and indirect costs is eliminated.
c. there is less movement of inventory between departments.
ANSWER: d
Moderate
BUSPROG: Analytic
93. The budgeted cell conversion cost rate includes which of the following?
a. only factory overhead
b. only direct labor and direct materials
c. direct labor, direct materials, and factory overhead
d. only direct labor and factory overhead
ANSWER: d
Easy
BUSPROG: Analytic
94. 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.
ANSWER:
(a)
(b)
Conversion Costs 62,130
[($85,000 / 1,300 hours) × (15 min / 60 min)] = $16.35
$16.35 x 3,800 = $62,130
(c)
Finished Goods Inventory 125,378

Challenging
BUSPROG: Analytic
95. Axelgold Company produces parts for the auto industry. Part X2 is machined in Department #1, which has the
following budgeted conversion costs:
Labor $330,000
Depreciation 32,000
Maintenance 12,000
Supplies 26,000
Total $400,000
All costs are driven by machine hours. Total possible hours for the year are 2,800. It takes .03 hours to machine one unit
of Part X2.
(a) Compute Department #1's budgeted cell conversion cost rate for the current year.
Round to the nearest cent.
Compute Part X2's budgeted cell conversion cost per unit. Round to the nearest
(b)
cent.
ANSWER: (a) Budgeted cell conversion cost rate = $400,000 / 2,800 hours
= $142.86 per machine hour
(b) Part X2 machine hours 0.03 hrs. per unit

Conversion cost rate $142.86 per hour
Budgeted cell conversion cost per unit $ 4.29 per unit

Moderate
BUSPROG: Analytic
96. Alaskan Pattern Company makes dressmakers' patterns using a machine that stamps the pattern outline onto tissue
paper. The stamping center produced 40,000 patterns in August, with a machine time per pattern of 20 seconds. Annual
budgeted cell conversion costs were as follows:
Maintenance and supplies $1,650,000
Depreciation 700,000
Supporting labor 825,000
Total $3,175,000
Alaskan planned 2,500 total machine hours for the year.
Calculate Alaskan's budgeted cell conversion cost rate for the year.
ANSWER: Budgeted cell conversion cost rate
= Total conversion costs / Available annual hours
= $3,175,000 / 2,500 hours
= $1,270 per machine hour
Easy
BUSPROG: Analytic
97. Peters Manufacturing Co. operates in a lean manufacturing environment. The company had scheduled production of
95,000 units during February in its Y12 cell. Actual February production totaled 88,200 units. Peters had budgeted
conversion costs for February totaling $900,000 and budgeted production hours totaling 2,000.
Compute Peters' budgeted cell conversion cost per unit for Cell Y12.
ANSWER: Budgeted cell conversion cost per unit
= Budgeted conversion costs / Planned units
= $900,000 / 95,000 units
= $9.47 per unit
Moderate
BUSPROG: Analytic
98. The Kwanika Co. operates in a lean manufacturing environment. During its first year of operations, Kwanika budgeted
for 40,000 hours in the production of 100,000 units in its cell X-22. Material costs were $7 per unit. Cell X-22 conversion
costs were budgeted for the year as follows:
Direct and indirect labor $ 900,000
Machine depreciation 125,000
Maintenance and supplies 375,000
Utilities 225,000
Total $1,625,000
During January, material for 8,400 units was purchased on account. There were 8,200 units manufactured and 8,000 were
sold shipped to customers for $35 each. Journalize: (a) the material purchases; (b) the application of conversion costs; (c)
the transfer from work in process to finished goods; and (d) the sales (were made on account) and associated cost of goods
sold for the month of January.
ANSWER: (a)
Raw and In Process Inventory (8,400 × $7) 58,800
(b)
Raw and In Process Inventory (8,200 × $16.25) 133,250
Conversion Costs 133,250
(c)
Finished Goods Inventory (8,200 × $23.25) 190,650
(d)
Accounts Receivable (8,000 × $35) 280,000
Sales 280,000
Cost of Goods Sold (8,000 × $23.25) 186,000

Finished Goods Inventory 186,000
Moderate
BUSPROG: Analytic
99. Costs of controlling quality include prevention costs and internal failure costs.
a. True
b. False
ANSWER: False
Easy
BUSPROG: Analytic
100. Prevention costs and appraisal costs are considered costs of controlling quality.
a. True
b. False
ANSWER: True
Easy
BUSPROG: Analytic
101. Costs of failing to control quality include prevention costs and external failure costs.
a. True
b. False
ANSWER: False
Easy
BUSPROG: Analytic
102. It is easier to quantify costs of controlling quality than the costs of failing to control quality.
a. True
b. False
ANSWER: True
Moderate
BUSPROG: Analytic
103. By spending more in costs of controlling quality, the costs of failing to control quality will decrease.
a. True
b. False
ANSWER: True
Moderate
BUSPROG: Analytic
Schedule of Activity Costs

Quality Control Activities Activity Cost
Process audits $50,000
Training of machine operators 28,000
Processing returned products 19,000
Scrap processing (disposal) 25,000
Rework 8,000
Preventative maintenance 30,000
Product design 46,000
Warranty work 12,000
Finished goods inspection 23,000
104. From the above schedule of activity costs, determine the total activity cost.
a. $62,000
b. $179,000
c. $94,000
d. $241,000
ANSWER: d
RATIONALE: Process audits $ 50,000
Processing returned products 19,000
Rework 8,000
Total activity costs $241,000

Easy
BUSPROG: Analytic
105. From the above schedule of activity costs, determine the non-value-added costs.
a. $30,000
b. $50,000
c. $64,000
d. $85,000
ANSWER: c
RATIONALE: Processing returned products $19,000
Rework 8,000
Non-value-added costs $64,000

Moderate
BUSPROG: Analytic
106. From the above schedule of activity costs, determine the value-added costs.
a. $177,000
b. $191,000
c. $156,000
d. $104,000
ANSWER: a
RATIONALE: Process audits $ 50,000
$177,000

Moderate
BUSPROG: Analytic
107. From the above schedule of activity costs, determine the internal failure costs.
a. $37,000
b. $25,000
c. $8,000
d. $33,000
ANSWER: d
RATIONALE: Scrap processing (disposal) $25,000
Rework 8,000
Internal failure costs $33,000

Challenging
BUSPROG: Analytic
108. From the above schedule of activity costs, determine the external failure costs.
a. $39,000
b. $19,000
c. $12,000
d. $31,000
ANSWER: d
RATIONALE: Processing returned products $19,000
Warranty
12,000
work
External
$31,000
failure costs

Challenging
BUSPROG: Analytic
109. From the above schedule of activity costs, determine the appraisal costs.
a. $50,000
b. $23,000
c. $73,000
d. $104,000
ANSWER: c
RATIONALE: Process audits $50,000
Appraisal costs $73,000

Challenging
BUSPROG: Analytic
110. From the above schedule of activity costs, determine the prevention costs.
a. $30,000
b. $74,000
c. $76,000
d. $104,000
ANSWER: d
RATIONALE: Training of machine operators $ 28,000
Preventative
30,000
maintenance
Product
46,000
design
Prevention
$104,000
costs

Challenging
BUSPROG: Analytic
111. Which of the following is not a prevention cost?

a. preventive maintenance
b. operator training
c. design engineering
d. testing finished products
ANSWER: d
Easy
BUSPROG: Analytic
112. Which of the following is not an external failure cost?

a. warranty work
b. processing returned merchandise
c. rework
d. correcting invoice errors
ANSWER: c
Easy
BUSPROG: Analytic
113. Which of the following statements best describes the relationship among the costs of quality?
a. Spending more on prevention and appraisal costs will reduce the total overall costs of quality.
b. Spending more on prevention and appraisal costs will increase the total overall costs of quality.
c. Adequate spending on prevention and appraisal costs will eliminate all internal and external failure costs.
d. The amount spent on prevention and appraisal costs has no impact on the amount spent on internal and
external failure costs.
ANSWER: a
Moderate
BUSPROG: Analytic
114. Which of the following is a value-added activity?

a. scrap processing
b. rework
c. preventive maintenance
d. warranty work
ANSWER: c
Easy
BUSPROG: Analytic
Schedule of Activity Costs

Quality Control Activities Activity Cost
Product testing $55,000
Assessing vendor quality 26,000
Recalls 18,000
Rework 29,000
Scrap disposal 8,000
Training machine operators 46,000
Process audits 22,000
115. From the above schedule, calculate the (a) value-added and (b) non-value-added costs.

ANSWER:
(a)
(b)
Moderate
BUSPROG: Analytic
116. From the above schedule, calculate the (a) prevention and (b) appraisal costs.
ANSWER:
(a)
(b)
Moderate
BUSPROG: Analytic
117. From the above schedule, calculate the internal failure costs.
ANSWER:
Moderate
BUSPROG: Analytic
118. From the above schedule, calculate the external failure costs.
ANSWER:
Moderate
BUSPROG: Analytic
119. From the above schedule, compute the percentage of non-value-added activities.
ANSWER: Non-Value-Added Costs / Total Costs

Moderate
BUSPROG: Analytic
120. Connally Company’s payroll department required that every time card be checked twice to ensure pay accuracy. The
company has 1,000 employees and has determined that the checks cost the company $8,000 per year. They have decided
to change this policy and only check those names which appear on the exceptions report and a random check on the entire
payroll. Currently only 15% of the payroll is evaluated each payroll. Determine the inspection activity cost per employee
on the 1,000 employees both before and after the improvement.
ANSWER: Inspection activity before improvement: $8,000 / 1,000 employees = $8 per employee
Inspection activity after improvement: ($8,000 × 15%) / 1,000 employees = $1.20 per
employee
Moderate
BUSPROG: Analytic
121. A quality control activity analysis indicated the following four activity costs of a hotel.
Verifying credit card information $40,000

Customer service training 20,000
Discounting room rates due to poor customer service 16,000
Correcting charges to customer invoices 8,000
Total $84,000
Sales are $750,000 for the year. Prepare a cost of quality report.
ANSWER:
Cost of Quality Report
Quality Cost Percent of Total Percent of
Classification Quality Cost Quality Cost Total Sales
Prevention $20,000 23.8% 2.7%
Appraisal 40,000 47.6% 5.3%
Internal Failure 16,000 19.1% 2.1%
External Failure 8,000 9.5% 1.1%
$84,000 100.0% 11.2%

Moderate
BUSPROG: Analytic
Identity the following by their type of quality cost.

a. Preventive costs
b. Appraisal costs
c. Internal failure costs
d. External failure costs
Easy
BUSPROG: Analytic
122. Scrap
ANSWER: c
123. Recalls
ANSWER: d
124. Warranty work

ANSWER: d
125. Testing
ANSWER: b
126. Vendor quality

ANSWER: a
127. Returned merchandise

ANSWER: d
128. Preventive machine maintenance

ANSWER: a
129. Operator training

ANSWER: a
Identify the following quality control activities as either value-added or non-value-added.

a. Value-added
b. Non-value-added
Easy
BUSPROG: Analytic
130. Scrap material

ANSWER: b
131. Processing returned materials

ANSWER: b
132. Rework
ANSWER: b

Managerial Accounting 14th Edition Warren Test Bank

133. Finished goods inspection
ANSWER: a
134. Preventive machine maintenance

ANSWER: a
135. Customer service calls

ANSWER: b
136. Design engineering

ANSWER: a
137. Materials inspection

ANSWER: a
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3. The lean manufacturing philosophy views inventory as an unnecessary waste of resources.

5. Lead time is the process time between start and completion.

6. All lead times are considered to be value-added lead time.

7. Lead time includes both value-added time and non-value-added time.

9. Reducing wait time is not linked to reducing inventory.

10. Reducing wait time is directly linked to reducing inventory.

16. Within-batch wait time increases total lead time.

17. Large batch sizes increase lead time.

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

19. Lean manufacturing is also called make-to-order manufacturing.

21. Make-to-order companies produce mainly to stock inventory.

22. Make-to-order companies typically produce in small batch sizes.

25. A process-oriented layout segments production facilities into functional departments.

30. Setups are a significant time-consuming activity in traditional production environments.

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

39. Push manufacturing (made-to-stock) is a traditional approach to manufacturing.

40. In a lean environment, operations only respond to customer orders.

41. Which of the following is an example of value-added time?

42. Which of the following results in long lead time?

44. What do lean manufacturers demand from their vendors?

45. How are the objectives of lean manufacturing achieved?

46. Which of the following is (are) objective(s) of lean manufacturing?

47. Inventory reduction is a ____ principle.

49. ____ manufacturing philosophy emphasizes quality and zero defects.

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51. Lean manufacturing philosophy reduces all of the following except

52. Traditional manufacturing emphasizes all of the following except

53. Which of the following is considered non-value-added lead time?

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

56. Which of the following is characteristic of a lean production layout?

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(b) Value-added ratio = 18 / 228 = 7.9%

68. In a lean system, direct labor is included in conversion costs.

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

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79. Which of the following is characteristic of the lean system?

80. Which of the following is characteristic of the traditional cost system?

81. Which of the following is an example of a nonfinancial measure?

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DIFFICULTY: Bloom's: Remembering

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DIFFICULTY: Bloom's: Applying

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Add: Material cost per unit 28

DIFFICULTY: Bloom's: Applying

91. Accounting for lean operations requires fewer transactions because

92. Which of the following results in fewer transactions in lean accounting?

DIFFICULTY: Bloom's: Applying

(b) Part X2 machine hours 0.03 hrs. per unit

DIFFICULTY: Bloom's: Applying

Cost of Goods Sold (8,000 × $23.25) 186,000

Schedule of Activity Costs

DIFFICULTY: Bloom's: Applying

DIFFICULTY: Bloom's: Applying

DIFFICULTY: Bloom's: Applying

DIFFICULTY: Bloom's: Applying

DIFFICULTY: Bloom's: Applying

DIFFICULTY: Bloom's: Applying