Chapter 7—The Conversion Cycle
TRUE/FALSE
1. The philosop philosophy hy of customer customer satisfactio satisfaction n permeates permeates the world-cl world-class ass firm. firm. ANS: T 2. Reports generated generated by the cost cost accounting accounting system include performance reports reports and budget reports. reports. ANS: T . The cost account accounting ing system system authori!es authori!es the release release of raw materials materials into into productio production. n. ANS: " #. $atch processing processing creates a homogeneous homogeneous product product through a continuous continuous series series of standard procedures. ANS: " %. The bill of materials specifies the the types and &uantities &uantities of the raw materials and subassemblies subassemblies used in producing a single single unit of finished product. product. ANS: T '. A purchase re&uisition re&uisition authori!es authori!es the store(eeper to to release materials materials to indi)iduals or wor( centers centers in the production process. ANS: " *. The SA+ R, system system organi!es organi!es business business processes processes into four categories: categories: financial financial logistics logistics human human resources and business process support. ANS: T . The ob/ecti)e ob/ecti)e of the 0conomic rder rder uantity model is to reduce total in)entory in)entory costs by minimi!ing minimi!ing carrying costs and ordering costs. ANS: T 3. The wor(-in-process wor(-in-process file is the subsidiary subsidiary ledger ledger for the wor(-in-process wor(-in-process control account. ANS: T 14. 5o)e tic(ets tic(ets authori authori!e !e the store(eep store(eeper er to release release materials materials to wor( centers. centers. ANS: " 11. An operating characteristic of of modern manufacturing manufacturing firms is that labor is replaced replaced with capital so that the firm can be more efficient and therefore more competiti)e. ANS: T
12. 6omputer 7ntegrated 7ntegrated 5anufacturing 5anufacturing focuses focuses on reducing the comple8ity comple8ity of the physical physical manufacturing manufacturing layout of the shop floor. ANS: " 1. The only ob/ecti ob/ecti)e )e of the 9ust-7n-T 9ust-7n-Time ime philosop philosophy hy is to reduce in)ent in)entory ory le)els. le)els. ANS: " 1#. Accounting in a world-class manufacturing en)ironment emphasi!es standard cost and )ariance )ariance analysis. ANS: " 1%. 7dentifying cost dri)ers dri)ers is an essential essential step in implementing implementing the 9ust-7n-Time 9ust-7n-Time philosophy. philosophy. ANS: " 1'. A world world class class information information system system produces produces )ery )ery little little paper. paper. ANS: T 1*. 7nternal control control procedures procedures are )irtually identical in a world-class manufacturing en)ironment and in a traditional manufacturing en)ironment. ANS: " 1. 7n a world-class world-class company company all acti)ities from ac&uisition of raw materials materials to selling selling the final product product form a chain of customers.; ANS: T 13. The two subsystems of a traditional traditional con)ersion con)ersion cycle are the production production system system and the the deli)ery system. ANS: " 24. 5anufacturing resources planning planning <5R+ 77= 77= has e)ol)ed into into electronic electronic resource planning <0R+=. ANS: " MULTIPLE CHICE
1. >hich item does not descri describe be a worldworld-clas classs company company?? a. the goal goal of a world world-clas -classs company company is to delight delight its its customer customerss b. customers in a world-class world-class company are e8ternal departments departments only c. world-clas world-classs companie companiess wor( wor( in in cross-fu cross-functi nctional onal teams d. a world-cl world-class ass company company has has a flat flat organi!a organi!ationa tionall structur structuree ANS: $ 2. >hich subsy subsystem stem is not a part part of the the product production ion system? system?
a. b. c. d.
directing directing the mo)emen mo)ementt of wor( through through the the proces processs determining raw material material re&uirements author authori!i i!ing ng wor( wor( to to be be perf perform ormed ed monitorin monitoring g the flow flow of cost cost information information relate related d to product production ion
ANS: @ . The purpo purpose se of the cost cost accoun accounting ting system system is to a. produc producee informa informatio tion n for in)ent in)entory ory )alua )aluatio tion n b. authori!e release of raw materials materials c. direct direct the mo)em mo)ement ent of of wor(wor(-in in-pr -proce ocess ss d. determ determine ine materi material al re&u re&uire iremen ments ts ANS: A #. >hich process process creates a homogeneous homogeneous product product through through a continuous series of standard procedures? procedures? a. batch pr process b. ma(e-to-order process c. cont contin inuo uous us pro proce cess ss d. none none of the the abo abo)e )e ANS: 6 %. An e8ample e8ample of a continuo continuous us process process is is the produc production tion of a. wedd weddin ing g in)it in)itat atio ions ns b. mil( products c. /et aircraft d. all all of of th the abo abo)e )e ANS: $ '. All of the follow following ing are charact characterist eristics ics of batch batch processin processing g e8cept e8cept a. each each item item in the batch batch is simila similar r b. batches are produced in accordance with detailed customer specifications specifications c. batches batches are produc produced ed to replenish replenish depleted depleted in)ent in)entory ory le)els le)els d. setting setting up and retool retooling ing is re&uired re&uired for for different different batches batches ANS: $ *. >hen determinin determining g which which items items to produce produce a firm must must (now (now a. last last year years s prod produc ucti tion on le) le)el el b. raw material in)entory in)entory le)els c. the the stan standa dard rd cos costt of the the item item d. the the sal sales es fore foreca cast st ANS: @ . The produc productio tion n sche schedul dulee is is a. the e8pect e8pected ed demand demand for for the firm firmss finishe finished d goods goods for a gi)en gi)en year year b. the formal plan and authority authority to begin production production c. a descriptio description n of the type type and &uantity &uantity of raw materi materials als and subasse subassembli mblies es used to produ produce ce a single unit of finished product d. the se&uence se&uence of operat operations ions during during manufac manufacturi turing ng ANS: $
3. A mo)e o)e tic tic(e (ett a. is the the formal formal plan and authority authority to begin begin productio production n b. specifies the materials and and production re&uired re&uired for each batch c. record recordss the the wor( wor( done done in in each each wor( wor( cent center er d. authori!es authori!es the the store(ee store(eeper per to release release materia materials ls to wor( wor( centers centers ANS: 6 14. The internal internal control control significa significance nce of the e8cess e8cess materials materials re&uisi re&uisition tion is that that it a. indicates indicates the amount amount of material material released released to to wor( wor( centers centers b. identifies materials used in production that that e8ceed the standard amount amount allowed c. indicates indicates the standa standard rd &uanti &uantities ties re&uired re&uired for for product production ion d. documents documents the the return to to raw materials materials in)ento in)entory ry of unused unused producti production on materials materials ANS: $ 11. 11. 7n)entory 7n)entory control control perform performss all of the followi following ng tas(s tas(s e8cept e8cept it a. pro)ides pro)ides productio production n planning planning and control control with with the in)entory in)entory status status report report of finished finished goods goods b. updates the raw material in)entory in)entory records c. prepares prepares a materi materials als re&ui re&uisitio sition n for each produc production tion batch batch d. records records the completed completed produc production tion as an increa increase se to finished finished goods goods in)ento in)entory ry ANS: 6 12. The store( store(eeper eeper releases releases raw raw materia materials ls based based on on the a. prod produc ucti tion on sche schedu dule le b. materials re&uisition re&uisition c. wor( order d. bill bill of mate materi rial alss ANS: $ 1. >hich of the the following following is not an assumpti assumption on of the 0conomic 0conomic rder rder uantity uantity model? model? a. demand demand for for the produ product ct is (nown (nown with with cert certain ainty ty b. total cost per year year of placing orders is fi8ed c. lead lead time time is (now (nown n and and is is const constant ant d. there there are are no no &uan &uantity tity discou discount ntss ANS: $ 1#. "irms hold safety safety stoc( stoc( to compensat compensatee for for a. mathematica mathematicall wea(ness wea(nesses es of the the 0conomi 0conomicc rder rder uantity uantity model b. )ariations in lead time time or daily demand c. fluctu fluctuati ations ons in carryi carrying ng costs costs d. uncertainty uncertainty in the the estim estimation ation of orderi ordering ng costs costs ANS: $ 1%. >hat is the economic economic order &uantity &uantity if the the annual demand is 14444 14444 units units set up cost of placing placing each order is B and the holding cost per unit per year is B2? a. 1*# b. 12 c. 2#% d. none none of the the abo abo)e )e ANS: A
1'. 7f the daily daily demand demand is #4 units units and the lead lead time time is 12 days the the reorder reorder point is a. %2 units b. # units c. #4 units d. none none of the the abo abo)e )e ANS: 6 1*. 1*. >hich >hich stat stateme ement nt is is not not corre correct? ct? a. general general ledger ledger creates a new new cost record record upon upon receipt receipt of a wor( order order from product production ion planning and control control b. cost accounting updates updates the cost record with with data gathered from the materials materials re&uisition c. general general ledger ledger posts summary summary inform information ation about about the the manufacturi manufacturing ng process process based based on a /ournal )oucher prepared prepared by cost accounting d. cost accounti accounting ng computes computes )ariances )ariances and applie appliess o)erhead o)erhead to indi)idual indi)idual cost cost records records ANS: A 1. >hich of the following following is not not a category of critical success success factors in most manufacturing companies? a. produ roduct ct &uali uality ty b. customer ser)ice c. re)e re)enu nuee gen gener erat atio ion n d. reso resour urce ce mana managem gemen entt ANS: 6 13. 6omputer 6omputer integrated integrated manufact manufacturing uring groups groups all of the following following technolo technologies gies e8cept e8cept a. robotics b. materials re&uirements planning planning c. automa automated ted stor storage age and and retri retrie)a e)all system systemss d. comp comput uter er aide aided d des desig ign n ANS: $ 24. The SA+ R, system pro)ides pre-defined pre-defined modules modules to support support business business processes in the all all of the the following categories e8cept a. hum uman an reso resour urce cess b. business process support support c. strategic d. financial ANS: 6 21. >hich situat situation ion )iolates )iolates the segrega segregation tion of functio functions ns control control procedure? procedure? a. production production planning planning and control control is located located apart apart from from the wor( wor( centers centers b. in)entory control control maintains custody of of in)entory items c. cost accoun accounting ting has custody custody of and ma(es ma(es entries entries on cost cost records records d. wor( centers centers record record direct direct labor labor on /ob /ob tic(e tic(ets ts ANS: $ 22. All of the the following following are internal internal control procedures that that should be in place place in the con)ersion cycle e8cept a. calculati calculation on and analys analysis is of direct direct material material and direct direct labor labor )ariance )ariancess b. retention of e8cess materials materials by wor( centers
c. physic physical al count count of of in)ent in)entory ory item itemss on hand hand d. limited limited access access to to raw materia materiall and finis finished hed goods goods in)ent in)entories ories ANS: $ 2. 2. +roces +rocesss simpli simplific ficati ation on focus focuses es on a. using using 6omputer 6omputer Numerical Numerical 6ontrolle 6ontrolled d machines machines which stand stand alone alone within within a traditional traditional setting b. completely automating automating the manufacturing en)ironment en)ironment c. reducing reducing the comple8 comple8ity ity of the physical physical manufac manufacturi turing ng layout layout of the shop shop floor floor d. organi!i organi!ing ng the the process process into into functional functional department departmentss ANS: 6 2#. A manufacturing process process that is organi!ed organi!ed into group technology technology cells utili!ing no human labor is called a. isla island ndss of tec techn hnol olog ogy y b. process simplification simplification c. 6omput 6omputer er 7nte 7ntegra grated ted 5anufa 5anufactu cturin ring g d. trad tradit itio iona nall manu manufa fact ctur urin ing g ANS: 6 2%. An e8ampl e8amplee of autom automation ation of manufact manufacturing uring design design is a. 6ompu 6ompute terr Aide Aided d 0ngin 0nginee eeri ring ng b. Automated Storage and Retrie)al Systems c. 6ompu 6ompute terr Nume Numeri rica call 6ont 6ontro roll d. robotics ANS: A 2'. An e8ample e8ample of autom automation ation of manufact manufacturing uring planning planning is is a. 6ompu 6ompute terr Aide Aided d 0ngin 0nginee eeri ring ng b. Automated Storage and Retrie)al Systems c. 5ateri 5aterials als Re&uir Re&uireme ements nts +lanni +lanning ng d. 6ompu 6ompute terr Numer Numeric ical al 6ont 6ontro roll ANS: 6 2*. "irms implem implement ent a 9ust-7n 9ust-7n-Ti -Time me in)ento in)entory ry approach approach to to a. reduc reducee in)es in)estm tment ent in in)ent in)entori ories es b. determine the optimum optimum in)entory le)el using using the 0 model c. camouf camouflag lagee prod produc uctio tion n proble problems ms d. ensure ensure o)er o)erpro produc ducti tion on of of in)en in)entory tory ANS: A 2. 6haracteri 6haracteristic sticss of 9ust-7n-Tim 9ust-7n-Timee manufacturin manufacturing g include all of the followin following g e8cept a. push push manu manufa fact ctur urin ing g b. !ero defects c. reduc reduced ed setu setup p time time and and smal smalll lot lot si!es si!es d. reli reliab able le )end )endor orss ANS: A 23. The cost cost of poor poor &uality &uality includes includes all of the the followin following g e8cept e8cept
a. b. c. d.
cost of of re rewor( warranty claims sche schedu duli ling ng dela delay ys procee proceeds ds from from the the sale sale of of scra scrap p
ANS: @ 4. 4. A fle8i fle8ible ble manu manufac factur turing ing syste system m a. create createss b bott ottlen lenec( ec(ss in in the the proc process ess b. leads to an us; )ersus them; them; attitude among wor(ers wor(ers c. shortens shortens the phys physical ical distance distance between between acti)itie acti)itiess d. is organ organi!e i!ed d along along funct function ional al lines lines ANS: 6 1. @eficiencies of of the traditional traditional cost accounting information information system system include all of the the following e8cept a. an empha emphasis sis on fin financ ancial ial perfor performan mance ce b. inaccurate cost allocations allocations c. an emph emphas asis is on on stan standa dard rd cos costs ts d. immediate immediate feedbac( feedbac( about about de)iatio de)iations ns from from the the norm norm ANS: @ 2. 2. >hich >hich stat stateme ement nt is is not not corre correct? ct? a. an acti)ity acti)ity dri)er dri)er is is a means means to measure measure the acti) acti)ity ity used used by the the cost ob/ect ob/ect b. cost ob/ect describes describes the wor( performed in a firm c. acti acti)i )iti ties es caus causee cos costs ts d. cost cost ob/ect ob/ectss create create a dema demand nd for acti acti)i )itie tiess ANS: $ . "irms are are adopting adopting Acti)ity Acti)ity $ased $ased 6ostin 6osting g
tradit traditional ional firms firms informa information tion reporting reporting pro)ides pro)ides financia financially lly orient oriented ed informati information on relating relating to to operation operationss presents detailed information information about acti)ities acti)ities shows shows the allocat allocation ion of costs costs first first to to acti)ities acti)ities and and then then to cost cost ob/ects ob/ects identi identifie fiess noness nonessent ential ial acti) acti)iti ities es
ANS: A %. Types Types of informatio information n pro)ided pro)ided by Acti)i Acti)ity ty $ased 6osting 6osting include include a. a descriptio description n of the singl singlee acti)ity acti)ity dri)er dri)er used used for o)erhead o)erhead applicatio application n b. the dollar )alue of the direct material usage )ariance )ariance c. identi identific ficati ation on of cost cost dri) dri)ers ers d. details details of the the componen components ts of the the single single o)erhea o)erhead d cost cost pool pool ANS: 6
'. '. >hich >hich stat stateme ement nt is is not not corre correct? ct? a. the benchma benchmar( r( approach approach compares compares (ey acti) acti)ities ities with with similar similar acti)it acti)ities ies in other other firms b. critical success factors factors include product and process process &uality c. the A$6 A$6 model includes includes two two perspecti)e perspecti)es: s: an allocatio allocation n of cost perspecti) perspecti)ee and a process perspecti)e d. in world-clas world-classs manufacturin manufacturing g firms &uality &uality control control acti)iti acti)ities es at the end of the process process are essential ANS: @ *. All of the followin following g are documents documents in batch batch process process production production systems systems e8cept e8cept a. prod produc ucti tion on sche schedu dule le b. route sheet c. mate materi rial alss re&u re&uis isit itio ion n d. purch urchaase order rder ANS: @ . Transaction Transaction authori!ation authori!ation occurs in a traditional traditional manufacturing manufacturing en)ironment en)ironment in all of the the following following ways e8cept a. production production planning planning and control control initiate initiatess producti production on with with a wor( order order b. mo)ement of the wor( through through the production process process follows the the mo)e tic(et c. the sales sales departm department ent modifie modifiess wor( orders orders to match match change changess in demand demand d. the materials materials re&uisi re&uisition tion authori authori!es !es the store(ee store(eeper per to release release materials materials to the wor( wor( centers centers ANS: 6 3. 5anufacturing fle8ibility incorporates four characteristics. characteristics. These include include all of the following e8cept a. high high prod produc uctt &ual &ualit ity y b. high in)entory le)els le)els c. automa automatio tion n of manu manufac factur turing ing proc process esses es d. phys physical ical reorgani! reorgani!ation ation of produc production tion facilities facilities ANS: $ #4. The stages stages of the automation automation conti continuum nuum are
1. >hich type type of manufacturing creates a homogeneous product through through a continuous series of standard procedures? ANS: continuous process manufacturing
2. >hat inform information ation is containe contained d in the bill bill of materi materials als <$5=? <$5=? ANS: The $5 specifies the types and &uantities of raw materials and subassemblies used in producing a single unit of finished product. . >hat is the differ difference ence between between a materials materials re&uisiti re&uisition on and a purchase purchase re&uisiti re&uisition? on? ANS: A materials re&uisition authori!es the store(eeper to release materials and subassemblies to the production process. process. A purchase re&uisition re&uisition authori!es the purchasing purchasing department to place place an order with an e8ternal )endor to ac&uire goods or ser)ices. #. Cist one authori!a authori!ation tion control control in the traditional traditional manufact manufacturing uring en)ironm en)ironment. ent. ANS: wor( orders prepared by production planning and controlD mo)e tic(ets signed by the foremanD materials re&uisitions and e8cess materials re&uisitions %. 08plain 08plain how 9ust-7n 9ust-7n-Tim -Timee in)entory in)entory affects affects setup setup time time and lot si!e. si!e. ANS: 7n a 9ust-7n-Time process setup time should be reduced as much as possible ideally to !ero and lot si!es should be )ery small to ensure a continuous flow of product through the process. '. >hat is is one benefi benefitt of the the fle8ible fle8ible produc production tion system? system? ANS: A fle8ible production system shortens the physical distance between acti)ities reducing setup time processing time handling handling costs and in)entories. in)entories. *. Cist two two disad)ant disad)antages ages of using using a tradition traditional al cost accoun accounting ting system. system. ANS: 6ost allocations may be inaccurateD there is a time lag in reportingD information is reported in financial termsD there is an emphasis on standard cost. . 7n Acti)i Acti)ity ty $ased 6ostin 6osting g what is the the term used used to refer to the the wor( perform performed ed by a firm? ANS: an acti)ity 3. 7n Acti)i Acti)ity ty $ased 6osting 6osting the acti)ity acti)ity cost is assigned assigned to the the cost ob/ect ob/ect by means of EEEEEEEEEEEEEEEEEEEEEEEEE EEEEEEEEEEEEEEEEEEEEEEEEEE. E. ANS: an acti)ity hen a process is benchmar(ed (ey acti)ities are compared to similar acti)ities performed elsewhere in the firm or in other firms.
11. 11. +ro)ide +ro)ide a specifi specificc e8ample e8ample of source source data automation automation.. ANS: bar coding magnetic in( character recognition electronic electronic strip optical optical character recognition 12. 7n a traditional manufacturing en)ironment cost accounting accounting pro)ides pro)ides independent independent )erification )erification of what information? >hat are the benefits? ANS: 6ost accounting reconciles materials and labor usage from the materials re&uisitions and /ob tic(ets with prescribed standards and identifies significant departures. Such )ariance analysis is important for control of the manufacturing process. 1. Fow are cost structures structures fundamentally fundamentally different different between between the traditional and 675 en)ironments? ANS: 7n the traditional manufacturing en)ironment direct labor is a much larger component of total manufacturing costs than in the 675 en)ironment. )erhead on the other hand is a far more significant element of cost in ad)anced technology manufacturing. 1#. >hat are are the (ey segregat segregation ion of duties duties issues issues in the con)ersi con)ersion on cycle? cycle? ANS: 7n)entory control must be separated from raw materials and finished goods custody. 6ost accounting must be separate from the wor( centers. General ledger must be separate from other accounting functions. 1%. Traditional Traditional accounting accounting assumes assumes that products cause costs. costs. A$6 A$6 assumes that EEEEEEEEEEEEEEE EEEEEEEEEEEEEEEEE EE cause costs. ANS: acti)ities 1'. @ifferent @ifferentiate iate between between essenti essential al and non-essen non-essential tial acti)it acti)ities. ies. ANS: 0ssential acti)ities add )alue to the organi!ation either through adding )alue to the customer or to the organi!ation. organi!ation. Non-essential acti)ities do not add )alue. 1*. Name the the underly underlying ing assumpti assumptions ons of of the 97T 97T method method.. ANS: Hero defects !ero setups small lot si!es !ero in)entories !ero lead times I reliable )endors and team attitude. 1. >hat documen documentt signals signals the completi completion on of the product production ion process? process? ANS: The receipt by cost accounting of the last mo)e tic(et for a batch from the wor( center signals the completion of the production process. 13. >hat document document triggers the beginning beginning of the the cost accounting accounting process process for a gi)en production production run? ANS:
The wor( order from the production planning and control department triggers the cost accounting process. 24. Name fi)e fi)e documents documents associa associated ted with with batch produc production tion systems systems.. ANS: Sales forecast production schedule bill of materials route sheet wor( order mo)e tic(et and materials re&uisition. ESSA#
1. >hat are the the accounting accounting implicati implications ons when when a firm mo)es toward toward world-clas world-classs status? status? ANS: >hen a firm mo)es toward world-class status changes will be re&uired in accounting techni&ues techni&ues in information reporting and in the integration of the information system. >orld-class >orld-class companies will apply accounting techni&ues li(e Acti)ity Acti)ity $ased 6osting to obtain impro)ed cost information in order to ma(e better decisions concerning pricing product mi8 and product and process design. 7nformation will be de)eloped to help managers understand and e)aluate manufacturing acti)ities identify and eliminate nonessential acti)ities identify cost dri)ers and establish lin(s between performance measures and decision decision ma(ing. "inally "inally firms will implement information systems that integrate financial and nonfinancial information using software li(e the 5anufacturing Resource +lanning 77. "irms will maintain an electronic lin( with e8ternal parties by implementing 0lectronic @ata 7nterchange <0@7=. 2. 6ontrast the the treatment of in)entories in)entories in the traditional traditional manufacturing manufacturing en)ironment en)ironment and the world-class manufacturing en)ironment. ANS: 7n the traditional manufacturing en)ironment in)entories in)entories are used to reduce or eliminate bac( orders. The goal in the traditional en)ironment is to minimi!e the cost of holding in)entory and the costs of ordering or manufacturing in)entory. in)entory. 7n a world-class manufacturing en)ironment the 9ust-7n-Time 9ust-7n-Time <97T= in)entory system is often implemented. 7n)entories are (ept to the absolute minimum. 7n)entories arri)e in small &uantities from )endors se)eral times per day. 7n)entory is pulled; through the manufacturing processD there are no batches of partially completed completed products throughout throughout the production production process. The The 97T in)entory concept concept assumes: !ero defects !ero setup time small lot si!es !ero in)entories !ero lead time and reliable r eliable )endors. . @iscuss the the (ey segregation segregation of duties that that should e8ist in the traditional traditional manufacturing manufacturing en)ironment. en)ironment. ANS: +roduction planning and control should be separate from the wor( centers. 7n)entory control which maintains accounting records for raw materials
The general ledger hat are the the four categories categories of business processes processes as defined as modules by SA+ R,? R,? 08plain. ANS: "inancial: The financial modules include include the financial accounting module module that collects financial data for both internal and e8ternal reporting the controlling module for reporting and controlling costs the fi8ed asset management module that supports the management of fi8ed leased and real corporate assets and the ability to respond to interacti)e re&uests. Cogistics: The logistics modules support support manufacturing by means of an a)ailable-to-promise a)ailable-to-promise module to respond to customer in&uiries sales and distribution module to handle order entry and order status a product planning module for forecasting and additional additional modules modules for materials management ser)ice ser)ice calls and plant maintenance. Fuman resources: This module supports supports management of employees including hiring hiring wor( scheduling and payroll processing. $usiness process support: Two Two types of modules handle wor(flow and industry specific acti)ities. %. Fow can a world-c world-class lass inform information ation system system yield yield a paperless paperless en)iro en)ironment nment?? ANS: Traditional Traditional paper flow can be essentially eliminated in a world-class information system en)ironment. Sa)ings occur by eliminating printing handling filing of paper documents and data entry errors. +art of the benefit comes from source data automation using technologies such as bar coding hat >hat are some of the benefits? ANS: The benefits include: impro)ed customer ser)ice reduced in)entory in)estment increased producti)ity producti)ity impro)ed cash flow flow assistance in achie)ing long-term long-term strategic goals help in in managing changes and fle8ibility in the production process.
3. The 9ust-7n-Time 9ust-7n-Time <97T= approach approach to in)entories is regarded as a great ad)ance in in)entory in)entory management. There are si8 assumptions that underlie 97T. @iscuss @iscuss three. ANS: 9ust-7n-Time 9ust-7n-Time <97T= manufacturing is a model which fosters in)entory reduction and e)en elimination. 7t is based on the following assumptions: >7+ and finished goods. The presence of e8cessi)e Zero defects are assumed for raw materials >7+ defects would re&uire e8tra in)entory as security. Zero setup time is desired because set-up time is not producti)e. Small lot sizes permit high machine utili!ation. Zero inventories inventories reduce the in)estment that can be utili!ed elsewhere. Zero lead times times and reliable vendors are re&uired to ha)e the materials a)ailable when needed. A team attitude is re&uired of all employees. 14. The te8t discus discusses ses the e)ils e)ils of in)entory in)entory.; .; >hat >hat are they? >hy are are they e)il?; e)il?; ANS: 7n)entories cost money. They represent an in)estment. They need to be insured and stored both of which cost money. 7n)entories can become obsolete o)er time. 7n)entories camouflage production problemsKif problemsKif a cushion e8ists orders can be filled e)en if production is slowed slowed or stopped due to difficulties. difficulties. >illingness >illingness to maintain in)entories can precipitate o)erproductionKif an organi!ation is willing to ha)e high stoc( and if any an y incenti)es e8ist to produceKrewards etc. e8cess in)entory may be produces without ade&uate demand. 11. Automation of manufacturing manufacturing can be )iewed as a progression beginning with the the traditional traditional manufacturing en)ironment. >hat are the stages? >hat distinguishes distinguishes them? ANS: Automation of the manufacturing process can be )iewed as a gradual progression. The stages are: Traditional manufacturing which consists of many different types of machines that re&uire a lot of setup time each controlled by a single operator. The >7+ follows a circuitous route through the different operations. Islands of technology technology in which stand alone islands employ computer numerical controlled <6N6= machines that can perform multiple operations with less human in)ol)ementKless set up time.
ph ysical layout. Groups of 6N6 machines Process simplification simplification which reduces the comple8ity of the physical are arranged in cells to produce an entire part from start to finish. No human in)ol)ement in a cell. Computer integrated manufacturing manufacturing <675=Ka completely automated en)ironment which employs automated storage and retrie)al systems
12. Fow can a firm control against e8cessi)e e8cessi)e &uantities &uantities of raw materials being used in the manufacturing manufacturing process. ANS: The use of standard costs pro)ides a type t ype of access control. $y specifying the &uantities of material authori!ed for each product the firm limits usage. To obtain obtain e8cess &uantities re&uires special authori!ation and e8cess materials re&uisitions. 1. 08plain 08plain the the relations relationship hip between between 5R+ 5R+ 5R+77 5R+77 and 0R+ 0R+..
ANS: 5anufacturing resources planning <5R+ 77= is an e8tension of a simpler concept still in use called materials re&uirements planning <5R+=. 5R+ is an automated )ersion of a traditional production planning and control control process. n the other other hand 5R+ 77 is a reengineering reengineering techni&ue that that integrates se)eral business processes. 5R+ 77 is not confined to the management of in)entory. in)entory. 7t is both a system and a philosophy for coordinating the acti)ities of the entire firm. As such 5R+ 77 has e)ol)ed into the large suites of software called enterprise reso$rce plannin% &ERP' systems. These huge commercial pac(ages support the information needs of the entire organi!ation organi!ation not /ust the manufacturing functions. An An 0R+ can calculate resource re&uirements schedule production manage changes to product configurations allow for future planned changes in products and monitor shop floor production. 7n addition the 0R+ pro)ides order entry cash receipts procurement and cash disbursement functions along with full financial and managerial reporting capability. capability. 1#. 08plain 08plain how 6A@ can contrib contribute ute to a firms firms mo)e toward toward world-clas world-classs status. status. ANS: +roduct design has been re)olutioni!ed through 6A@ technology. technology. Ad)anced 6A@ systems can design both product and process process simultaneously. simultaneously. Thus aided by 6A@ management management can e)aluate the technical technical feasibility of the product and determine its manufacturability.; manufacturability.; 6A@ technology greatly shortens the time frame between initial and final design. This allows firms to ad/ust their production &uic(ly to changes in mar(et demand. 7t also allows them to respond to customer re&uests for uni&ue products. The 6A@ systems 0@7 interface permits the world-class manufacturer to share its product design specifications with its )endors and customers. This communications lin( also allows the world-class manufacturer to recei)e product design specifications electronically electronically from its customers and suppliers for its re)iew. 1%. 08plain 08plain how 6A5 can contribu contribute te to a firms mo)e mo)e toward toward world-clas world-classs status. status. ANS: 6omputer-aided manufacturing manufacturing <6A5= focuses on the shop floor and the use of computers co mputers to control the physical manufacturing process. The ob/ecti)e behind 6A5 is to replace labor through automation. 6A5 systems monitor and control the production process and routing through the use of process control numerical numerical control and robotics robotics e&uipment. A world-class manufacturer manufacturer will deri)e se)eral benefits from deploying a 6A5 system: impro)ed process producti)ity impro)ed cost and time estimates impro)ed process monitoring impro)ed process &uality &uality decreased setup times and reduced labor costs. 1'. 08plain 08plain why traditio traditional nal cost allocat allocation ion methods methods fail in a 675 en)ironme en)ironment. nt. ANS: Traditional Traditional accounting systems do not accurately trace costs to products and processes. ne conse&uence of new technologies is a changed relationship between direct labor and o)erhead costs. 7n the traditional manufacturing en)ironment en)ironment direct labor is a much larger component of total manufacturing costs than in the 675 en)ironment. )erhead on the other hand is a far more significant element of cost in ad)anced technology manufacturing. 7n this setting traditional cost accounting procedures are inade&uate. "or traditional allocations to be correct a direct relationship between labor and technology technology needs to e8ist. e8ist. 7n 675 this relationship is diametric rather than complementary. complementary. >hen the cost pool is large and the allocation method ambiguous any miscalculation in assigning labor is magnified many times in the calculation of o)erhead. 1*. 1*. 08plai 08plain n how 97T 97T can reduc reducee in)ento in)entory ry.. ANS:
Jnder the 97T approach in)entories arri)e in small &uantities from )endors se)eral times per day /ust in time; to go into production. 97T supports a pull manufacturing manufacturing process. As production capacity upstream becomes a)ailable the manufacturing process pulls small batches
