Chapter 7: The Conversion Cycle All of the following are characteristics of

batch processing except:

True or False a. each item in the batch is similar
b. batches are produced in
1. The objective of the Economic accordance with detailed
Order Quantity model is to reduce customer specifications
total inventory costs by minimizing c. batches are produced to replenish
carry costs and ordering costs. depleted inventory levels
True d. setting up and retooling is required for
different batches
2. Move tickets authorize the
storekeeper to release materials to The productions schedule is:
work centers. False a. the expected demand for the firm's
3. Computer Integrated finished goods for a given year
Manufacturing focuses on reducing b. the formal plan and authority to
begin production
the complexity of the physical
c. a description of the type and quantity
manufacturing layout of the shop of raw materials and subassemblies
floor. False used to produce a single unit of
4. The two subsystems of a traditional finished product.
conversion cycle are the production d. the sequence of operations during
system and the delivery system. manufacturing
False A move ticket
5. ABC assigns cost to cost objects a. is the formal plan and authority to
based on their use of activities. begin production
True b. specifies the materials and production
6. The complexities of ABC have required for each batch
c. records the work done in each
caused many firms to abandon this
work center
method in favor of a simpler d. authorizes the storekeeper to release
accounting model called value materials to workcenters
stream accounting. True
7. A company’s value stream includes Inventory control performs all of the
all steps in a process, both following tasks except it:
a. provides production planning and
essential and non-essential, for control with the inventory status
which the customer is willing to report of finished goods
pay. False b. updates the raw material inventory
8. Lean manufacturing evolved from records
the Toyota Production System c. prepares a materials requisition
for each production batch
(TPS), which is based on the just-in-
d. records the completed production as
time (JIT) production model. True an increase to finished goods
9. The cost accounting system inventory
authorizes the release of raw
materials into production. False Which of the following is not an assumption
10. Batch processing creates a of the Economic Order Quantity Model?
a. demand for the product is known with
homogeneous product through a
certainty
continuous series of standard b. total cost per year of placing
procedures. False orders is fixed
c. lead time is known and is constant
Multiple Choice d. there are no quantity discounts
If the daily demand is 40 units and the lead d. computer aided design
time is 12 days, the reorder point is:
a. 52 units Which situation violates the segregation of
b. 48 units functions control procedures?
c. 480 units a. production planning and control is
d. none of the above located apart from the work centers
b. inventory control maintains
custody of inventory items
c. cost accounting has custody of and
makes entries on cost records
A manufacturing process that is organized d. work centers record direct labor on job
into group technology cells utilizing no tickets
human labor is called: Firms implement a Just-In-Time inventory
a. islands of technology approach to:
b. process simplification a. reduce investment in inventories
c. Computer Integrated b. determine the optimum inventory
Manufacturing level using the EOQ model
d. traditional manufacturing c. camouflage production problems
d. ensure overproduction of inventory
An example of automation of manufacturing Which statement describes the evolution of
design is: enterprise systems?
a. Computer Aided Engineering a. MRP evolved directly from ERP
b. Automated Storage and Retrieval b. MRP II evolved from MRP and MRP
Systems II evolved into ERP
c. Computer Numerical Control c. ERP evolved into MRP and MRP
d. Robotics evolved into MRP II
d. None of the above is true
An example of automation of manufacturing
planning is: Which of the following statements regarding
a. Computer Aided Engineering traditional accounting are true?
b. Automated Storage and Retrieval a. Traditional accounting does not
Systems provide managers in a JIT setting with
c. Materials Requirements Planning timely information
d. Computer Numerical control b. The measurement principle tends to
ignore standards other than money
Characteristics of Just-In-Time manufacturing c. Overhead allocations may lead to cost
include all of the following except: distortions
a. push manufacturing d. All of the above are true
b. zero defects statements
c. reduced setup time and small lot sizes e. A and B are true but C is not true
d. reliable vendors
Which of the following is NOT a problem
The cost of poor quality includes all of the associated with standard cost accounting?
following except: a. Standard costing motivates
a. cost of rework management to produce large batches
b. warranty claims of products and build inventory
c. scheduling delays b. Applying standard costing leads to
d. proceeds from the sale of scrap product cost distortions in a lean
environment
Computer integrated manufacturing groups c. Standard costing data are associated
all of the following technologies except: with excessive time lags that reduce
a. robotics its usefulness
b. materials requirements planning d. The financial orientation of standard
c. automated storage and retrieval costing may promote bad decisions
systems
 e. All of the above are problems with e. cost accounting computes variances
standard costing and applies overhead to individual
cost records
Which of the following is NOT a principle of
lean manufacturing? Which of the following would not be included
a. Products are pushed from the as a value stream cost?
production and to the customer a. Labor costs of employees who simply
b. All activities that do not add value and transport the product from cell to cell.
maximize the use of scarce resources b. Labor costs of employees who design
must be eliminated the product.
c. Achieve high inventory turnover rate c. A charge per square foot for the value
d. A lean manufacturing firm must have stream production facility including
established and cooperative cost of rent and building maintenance.
relationships with vendors d. All of the above are value stream
e. All of the above are lean costs
manufacturing principles

The fundamental EOQ model

a. Provides for fluctuating lead times All of the following are internal control
during reorder cycles procedures that should be in place in the
b. is relatively insensitive to errors in conversion cycle except
demand procurement costs, and a. calculation and analysis of direct
carrying costs material and direct labor variances
c. Focuses on the trade-off between b. retention of excess materials by
production costs and carrying work centers
costs c. physical count of inventory items on
d. Is stochastic in nature hand
e. Is best used in conjunction with a d. limited access to raw material and
periodic inventory system finished goods inventories

Which of the following descriptions is not The storekeeper releases raw materials
correct? based on the
a. The routing sheet shows the a. production schedule
manufacturing path for a particular b. materials requisition
product c. work order
b. Bill of materials shows the cost of d. bill of materials
producing a single unit
c. Move ticket authorizes the movement Firms hold safety stock to compensate for
of a batch from one department to a. mathematical weaknesses of the
another Economic Order Quantity model
d. Materials requisition authorizes the b. variations in lead time or daily
store-keeper to release materials. demand
c. fluctuations in carrying costs
Which statement is not correct? d. uncertainty in the estimation of
a. general ledger creates a new cost ordering costs
record upon receipt of a work
order from production planning What is the economic order quantity if the
and control annual demand is 10,000 units, set up cost
b. cost accounting updates the cost of placing
record with data gathered from the each order is $3 and the holding cost per
materials requisition unit per year is $2?
c. general ledger posts summary a. 174
information about the manufacturing b. 123
process based on a journal voucher c. 245
prepared by cost accounting d. none of the above
Which process creates a homogeneous
product through a continuous series of
standard
procedures?
a. batch process
b. make-to-order process
c. continuous process
d. none of the above

An example of a continuous process is the

production of
a. wedding invitations
b. milk products
c. jet aircraft
d. all of the above