Professional Documents
Culture Documents
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
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
4. In the lean principles philosophy, unexpected downtime is the result of unreliable processes.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom's: Remembering
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
8. Lead time reduction can be a cost-saving goal for any processed item.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom's: Remembering
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
11. Lean manufacturing favors organizing work around products rather than around processes.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom's: Remembering
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
12. Lean manufacturing favors organizing work around processes rather than around products.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
Bloom's: Remembering
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
13. Employee involvement in a product-oriented factory emphasizes employee teams, rather than individual employees.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: MANG.WARD.18.12-01 - 12-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.11 - Strategic Planning
Copyright Cengage Learning. Powered by Cognero. Page 3
Chapter 12 - Lean Manufacturing and Activity Analysis
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
Bloom's: Remembering
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
15. Long setups and large batch sizes result in smaller inventories.
a. True
b. False
ANSWER: False
DIFFICULTY: Moderate
Bloom's: Remembering
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
20. A make-to-order company matches its production schedules to actual customer orders.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom's: Remembering
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
23. Maximum effectiveness and efficiency are reached when the lean philosophy is used mainly by manufacturers.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
Bloom's: Remembering
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
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
Bloom's: Remembering
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
26. In a push manufacturing system, raw materials are released to production based on forecasted demand.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom's: Remembering
Copyright Cengage Learning. Powered by Cognero. Page 6
Chapter 12 - Lean Manufacturing and Activity Analysis
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
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
Bloom's: Remembering
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
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
Bloom's: Remembering
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
29. In a pull manufacturing system, raw materials are released to production based on forecasted demand.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
Bloom's: Remembering
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
31. In a lean environment, raw materials are delivered less frequently than in a traditional environment.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
Bloom's: Remembering
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
32. In a lean environment, raw materials are delivered more frequently than in a traditional environment.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom's: Remembering
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
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
Bloom's: Remembering
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
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
Bloom's: Remembering
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
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
Bloom's: Remembering
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
37. Employee involvement does not include performing any indirect manufacturing functions.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
Bloom's: Remembering
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
43. The lean philosophy attempts to reduce setup times, which will:
Copyright Cengage Learning. Powered by Cognero. Page 10
Chapter 12 - Lean Manufacturing and Activity Analysis
a. increase batch sizes
b. not affect batch sizes
c. increase within-batch wait time
d. decrease within-batch wait time
ANSWER: d
DIFFICULTY: Moderate
Bloom's: Remembering
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
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
Bloom's: Remembering
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
50. ____ manufacturing deals with several suppliers in hopes of finding the best price.
a. Traditional
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
DIFFICULTY: Moderate
Bloom's: Remembering
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
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.
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
Bloom's: Remembering
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
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
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
Copyright Cengage Learning. Powered by Cognero. Page 15
Chapter 12 - Lean Manufacturing and Activity Analysis
(c) giving employees additional authority and responsibility
(d) product-oriented layout
(e) increased set-up time
ANSWER: b, c, d
DIFFICULTY: Easy
Bloom's: Remembering
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
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:
Value-added lead time: 10 + 7 = 17
Non-value-added lead time:
Move time 5
Within batch wait time [17 min. × (15 – 1)] 238
Total lead time 260
New:
Value-added lead time: 8 + 7 = 15
Non-value-added lead time:
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%
DIFFICULTY: Moderate
Bloom's: Applying
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
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
Copyright Cengage Learning. Powered by Cognero. Page 16
Chapter 12 - Lean Manufacturing and Activity Analysis
DIFFICULTY: Bloom's: Remembering
Moderate
LEARNING OBJECTIVES: MANG.WARD.18.12-02 - 12-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.11 - Strategic Planning
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
DIFFICULTY: Moderate
Bloom's: Remembering
LEARNING OBJECTIVES: MANG.WARD.18.12-02 - 12-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.11 - Strategic Planning
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
Bloom's: Remembering
LEARNING OBJECTIVES: MANG.WARD.18.12-02 - 12-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.11 - Strategic Planning
BUSPROG: Analytic
65. In a lean system, the work in process and raw materials inventory accounts are combined.
a. True
b. False
ANSWER: True
DIFFICULTY: Bloom's: Remembering
Moderate
LEARNING OBJECTIVES: MANG.WARD.18.12-02 - 12-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.11 - Strategic Planning
BUSPROG: Analytic
66. In a lean system, there are more transactions to record than there are in a traditional system.
Copyright Cengage Learning. Powered by Cognero. Page 17
Chapter 12 - Lean Manufacturing and Activity Analysis
a. True
b. False
ANSWER: False
DIFFICULTY: Bloom's: Remembering
Easy
LEARNING OBJECTIVES: MANG.WARD.18.12-02 - 12-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.11 - Strategic Planning
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
DIFFICULTY: Bloom's: Remembering
Easy
LEARNING OBJECTIVES: MANG.WARD.18.12-02 - 12-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.11 - Strategic Planning
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
Copyright Cengage Learning. Powered by Cognero. Page 18
Chapter 12 - Lean Manufacturing and Activity Analysis
DIFFICULTY: Bloom's: Remembering
Easy
LEARNING OBJECTIVES: MANG.WARD.18.12-02 - 12-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.11 - Strategic Planning
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
DIFFICULTY: Bloom's: Remembering
Easy
LEARNING OBJECTIVES: MANG.WARD.18.12-02 - 12-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.11 - Strategic Planning
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
DIFFICULTY: Bloom's: Remembering
Easy
LEARNING OBJECTIVES: MANG.WARD.18.12-02 - 12-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.11 - Strategic Planning
BUSPROG: Analytic
73. A nonfinancial measure is operating information that has not been translated into dollars.
a. True
b. False
ANSWER: True
DIFFICULTY: Bloom's: Remembering
Easy
LEARNING OBJECTIVES: MANG.WARD.18.12-02 - 12-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.11 - Strategic Planning
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
Copyright Cengage Learning. Powered by Cognero. Page 19
Chapter 12 - Lean Manufacturing and Activity Analysis
DIFFICULTY: Bloom's: Remembering
Moderate
LEARNING OBJECTIVES: MANG.WARD.18.12-02 - 12-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.11 - Strategic Planning
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
DIFFICULTY: Bloom's: Remembering
Moderate
LEARNING OBJECTIVES: MANG.WARD.18.12-02 - 12-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.11 - Strategic Planning
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
DIFFICULTY: Bloom's: Remembering
Moderate
LEARNING OBJECTIVES: MANG.WARD.18.12-02 - 12-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.11 - Strategic Planning
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
DIFFICULTY: Bloom's: Remembering
Moderate
LEARNING OBJECTIVES: MANG.WARD.18.12-02 - 12-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.11 - Strategic Planning
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
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
Accounts Payable 36,000
c. Finished Goods 36,000
Accounts Payable 36,000
d. Raw Materials Inventory 36,000
Accounts Payable 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
Accounts Payable 36,000
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
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
LEARNING OBJECTIVES: MANG.WARD.18.12-02 - 12-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.11 - Strategic Planning
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
DIFFICULTY: Bloom's: Applying
Moderate
LEARNING OBJECTIVES: MANG.WARD.18.12-02 - 12-02
ACCREDITING STANDARDS: ACCT.IMA.07 - Cost Management
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
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)
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)
Add: Material cost per unit 28
Total manufacturing cost per unit $296
Production costs transferred to Cost of Goods Sold during August = Manufacturing cost
per unit × Units shipped during August = $296 × 1,380 units = $408,480
DIFFICULTY: Bloom's: Applying
Moderate
LEARNING OBJECTIVES: MANG.WARD.18.12-02 - 12-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.11 - Strategic Planning
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
DIFFICULTY: Bloom's: Remembering
Easy
LEARNING OBJECTIVES: MANG.WARD.18.12-02 - 12-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.11 - Strategic Planning
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)
Raw and In Process Inventory 72,000
Accounts Payable 72,000
(b)
Raw and In Process Inventory 62,130
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
Raw and In Process Inventory 125,378
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
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
Copyright Cengage Learning. Powered by Cognero. Page 27
Chapter 12 - Lean Manufacturing and Activity Analysis
DIFFICULTY: Bloom's: Applying
Easy
LEARNING OBJECTIVES: MANG.WARD.18.12-02 - 12-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.11 - Strategic Planning
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
DIFFICULTY: Bloom's: Applying
Moderate
LEARNING OBJECTIVES: MANG.WARD.18.12-02 - 12-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.11 - Strategic Planning
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
Accounts Payable 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
Raw and In Process Inventory 190,650
(d)
Accounts Receivable (8,000 × $35) 280,000
Sales 280,000
99. Costs of controlling quality include prevention costs and internal failure costs.
a. True
b. False
ANSWER: False
DIFFICULTY: Bloom's: Remembering
Easy
LEARNING OBJECTIVES: MANG.WARD.18.12-03 - 12-03
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.11 - Strategic Planning
BUSPROG: Analytic
100. Prevention costs and appraisal costs are considered costs of controlling quality.
a. True
b. False
ANSWER: True
DIFFICULTY: Bloom's: Remembering
Easy
LEARNING OBJECTIVES: MANG.WARD.18.12-03 - 12-03
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.11 - Strategic Planning
BUSPROG: Analytic
101. Costs of failing to control quality include prevention costs and external failure costs.
a. True
b. False
ANSWER: False
DIFFICULTY: Bloom's: Remembering
Easy
LEARNING OBJECTIVES: MANG.WARD.18.12-03 - 12-03
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.11 - Strategic Planning
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
DIFFICULTY: Bloom's: Remembering
Moderate
Copyright Cengage Learning. Powered by Cognero. Page 29
Chapter 12 - Lean Manufacturing and Activity Analysis
LEARNING OBJECTIVES: MANG.WARD.18.12-03 - 12-03
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.11 - Strategic Planning
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
DIFFICULTY: Bloom's: Remembering
Moderate
LEARNING OBJECTIVES: MANG.WARD.18.12-03 - 12-03
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.11 - Strategic Planning
BUSPROG: Analytic
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
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
Total activity costs $241,000
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
Scrap processing (disposal) 25,000
Rework 8,000
Warranty work 12,000
Non-value-added costs $64,000
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
Training of machine operators 28,000
Preventative maintenance 30,000
Product design 46,000
Finished goods inspection 23,000
$177,000
107. From the above schedule of activity costs, determine the internal failure costs.
Copyright Cengage Learning. Powered by Cognero. Page 31
Chapter 12 - Lean Manufacturing and Activity Analysis
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
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
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
Finished goods inspection 23,000
Appraisal costs $73,000
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
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
DIFFICULTY: Bloom's: Remembering
Moderate
LEARNING OBJECTIVES: MANG.WARD.18.12-03 - 12-03
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.11 - Strategic Planning
BUSPROG: Analytic
115. From the above schedule, calculate the (a) value-added and (b) non-value-added costs.
116. From the above schedule, calculate the (a) prevention and (b) appraisal costs.
ANSWER:
(a)
(b)
DIFFICULTY: Bloom's: Applying
Moderate
LEARNING OBJECTIVES: MANG.WARD.18.12-03 - 12-03
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.11 - Strategic Planning
BUSPROG: Analytic
117. From the above schedule, calculate the internal failure costs.
ANSWER:
DIFFICULTY: Bloom's: Applying
Moderate
LEARNING OBJECTIVES: MANG.WARD.18.12-03 - 12-03
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.11 - Strategic Planning
BUSPROG: Analytic
118. From the above schedule, calculate the external failure costs.
ANSWER:
DIFFICULTY: Bloom's: Applying
Moderate
LEARNING OBJECTIVES: MANG.WARD.18.12-03 - 12-03
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.11 - Strategic Planning
BUSPROG: Analytic
119. From the above schedule, compute the percentage of non-value-added activities.
ANSWER: Non-Value-Added Costs / Total Costs
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
DIFFICULTY: Bloom's: Applying
Moderate
LEARNING OBJECTIVES: MANG.WARD.18.12-03 - 12-03
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.11 - Strategic Planning
BUSPROG: Analytic
121. A quality control activity analysis indicated the following four activity costs of a hotel.
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%
122. Scrap
ANSWER: c
123. Recalls
ANSWER: d
125. Testing
ANSWER: b
132. Rework
ANSWER: b