Financial and Managerial Accounting, 8e (Wild)
Appendix D Lean Principles and Accounting
1) Only manufacturers use the lean business model.
2) Days’ payable outstanding measures how long, on average, a company takes to pay its
creditors.
3) Lean manufacturers generally have more transactions to record and use more accounts than
manufacturers using traditional processes.
4) Value streams include all activities needed to create customer value.
5) Work in process inventory reflects a delay in getting products to customers, which is
considered wasteful by lean businesses.
6) Kang Co. reports work in process inventory of $1,085 and cost of goods sold of $56,575.
Days’ sales in work in process inventory is:
A) 6 days
B) 5 days
C) 4 days
D) 7 days
E) 8 days
7) The triple bottom line focus on the “planet” works to reduce waste by striving for:
A) Closed-loop supply chain.
B) Increased profits.
C) Improved working conditions.
D) Automated processes.
E) Lower inventory levels.
8) Beake Company has 15 days’ sales in work in process inventory based on the current year’s
cost of goods sold of $11,315. What is Beake’s work in process inventory?
A) $310
B) $470
C) $350
D) $465
E) $510
9) Singh Company manufacturers wheelchairs. Each wheelchair requires $325 of raw materials
and $780 of conversion costs. Each wheelchair is sold for $1,500. Last month Singh completed
35 wheelchairs and sold 32 wheelchairs. The ending balance in finished goods inventory is:
A) $3,500.
B) $1,105.
C) $3,315.
D) $4,315.
E) $4,420.
10) Lean principles include all of the following except:
A) Pull production
B) Large batch sizes
C) Zero waste
D) Value streams
E) Zero defects
11) Vell Inc. uses lean principles to reduce cycle time. Through production improvements the
process time was reduced from 4.5 days to 2 days. Inspection time is 0.25 days. Strategic
rearrangement of the production area reduced move time to 0.1 days. Wait time was 3 days, but
due to improved scheduling and ordering has been reduced by 2.25 days. Total cycle time for
Vell after the improvements is:
A) 7.6 days.
B) 2.75 days
C) 5.35 days
D) 2.0 days
E) 3.1 days
12) Vista Company has 25 days’ payable outstanding based on the current year’s cost of goods
sold of $11,315. What is Vista’s balance in accounts payable?
A) $775
B) $870
C) $750
D) $675
E) $810
13) Alvi reports ending work in process inventory of $341 and cost of goods sold of $11,315.
Compute days’ sales in work in process inventory.
A) 10 days
B) 11 days
C) 15 days
D) 8 days
E) 17 days
14) If work in process inventory is $900 and cost of goods sold is $16,425, what is days’ sales in
work in process inventory?
A) 21 days
B) 6 days
C) 5 days
D) 20 days
E) 18 days
15) If accounts payable is $1,116 and cost of goods sold is $11,315, what is days’ payable
outstanding?
A) 30 days
B) 45 days
C) 36 days
D) 33 days
E) 40 days
16) Haupt Inc. manufacturers water pumps. Each pump requires $155 of raw materials and $315
of conversion costs. Each pump is sold for $725. Last month Haupt produced and sold 69 pumps.
The journal entry to record cost of goods sold would include:
A) Debit to accounts receivable of $32,430.
B) Credit to sales of $32,430.
C) Debit to cost of goods sold of $32,430.
D) Credit to cost of goods sold of $50,025.
E) Debit to sales of $50,025.
17) A company reports ending accounts payable of $1,440 and cost of goods sold of $11,680.
Compute days’ payable outstanding.
A) 39 days
B) 45 days
C) 36 days
D) 35 days
E) 41 days
18) Challenges of using push production include all of the following except:
A) Increased risk of obsolescence.
B) More defects.
C) Increased storage costs.
D) Production occurs just-in-time.
E) Stock-outs and lost sales.
19) Greun Company has 11 days’ sales in work in process inventory based on the current year’s
cost of goods sold of $11,680. What is Greun’s work in process inventory?
A) $352
B) $422
C) $350
D) $465
E) $310
20) A company reports ending accounts payable of $1,271 and cost of goods sold of $11,315.
Compute days’ payable outstanding.
A) 30 days
B) 45 days
C) 36 days
D) 33 days
E) 41 days
21) Haupt Inc. manufacturers water pumps. Each pump requires $155 of raw materials and $315
of conversion costs. Each pump is sold for $725. Last month Haupt produced and sold 69 pumps.
The journal entry to apply conversion costs to production would include:
A) Debit to work in process inventory of $21,735.
B) Credit to sales of $21,735.
C) Debit to cost of goods sold of $31,735.
D) Credit to work in process inventory of $21,735.
E) Debit to accounts payable of $31,735.
22) Which of the following is the correct formula for calculating cycle time?
A) Process time + inspection time − move time − wait time.
B) Process time − inspection time + move time + wait time.
C) Process time + inspection time + move time + wait time.
D) Process time − inspection time − move time − wait time.
E) Process time + inspection time + move time − wait time.
23) Which of the following statements is correct concerning the elements of cycle time?
A) Move time is the time spent moving (1) raw materials from storage to production and (2)
goods in process from one factory location to another factory location.
B) Inspection time is the time spent producing the product.
C) Process time is considered non-value-added time.
D) Wait time is considered value-added time.
E) Cycle efficiency is the ratio of non-value-added time to total cycle time.
24) Using the information below, compute cycle time:
Process time
6.0
hours
Inspections time
0.5
hours
Move time
0.6
hours
Wait time
0.9
hours
Storage time
72.0
hours
A) 7.5 hours.
B) 6.5 hours.
C) 8.0 hours.
D) 80.0 hours.
E) 7.1 hours.
25) Vista Company’s has 32 days’ payable outstanding based on the current year’s cost of goods
sold of $11,315. What is Vista’s balance in accounts payable?
A) $975
B) $870
C) $950
D) $998
E) $992
26) Singh Company manufacturers wheelchairs. Each wheelchair requires $325 of raw materials
and $780 of conversion costs. Each wheelchair is sold for $1,500. Last month Singh started 38
wheelchairs and completed 35 wheelchairs. The beginning balance in work in process inventory
is zero. The ending balance in work in process inventory is:
A) $2,340.
B) $1,105.
C) $925.
D) $1,315.
E) $975.
27) Using the information below, compute cycle efficiency:
Process time
6.0
hours
Inspections time
0.5
hours
Move time
0.6
hours
Wait time
0.9
hours
Storage time
72.0
hours
A) 93.8%.
B) 81.3%.
C) 100.0%.
D) 75.0%.
E) 88.8%.
28) Suza Inc. is a lean manufacturer of snow blowers. Each snow blower requires $300 of raw
materials. Estimated conversion costs to produce 4,000 units in this year are $600,000. During
the first six months of this year Suza produced 300 snow blowers and sold 280. Each snow
blower is sold for $900.
Required
1. Compute the conversion rate per snow blower.
2. Prepare journal entries to record (a) the purchase of raw materials on credit, (b) applied
conversion costs to production, (c) sale of snow blowers on credit, and (d) cost of goods sold and
finished goods inventory.
15
29) Pena Company is a lean manufacturer of dishwashers. Each dishwasher requires $140 of
raw materials. Pena budgets $330,000 of conversion costs and 1,100 productions hours for the
next year. Each dishwasher requires 1.5 production hours. Pena started 730 dishwashers
during the year, completed 700, and sold 680. Each dishwasher is sold for $750. Actual
conversion costs equal applied conversion costs.
Required
1. Prepare the journal entries to record (a) the purchase of raw materials to produce 730 units on
credit, (b) applied conversion costs to the production of 700 units, (c) actual conversion costs of
$315,000 (credit “Various Accounts”), (d) sale of 680 units on credit, and (e) ending inventory
and cost of goods sold.
2. Compute the ending balances of Work in Process Inventory, Finished Goods Inventory, and
Conversion Costs. Assume each account has a zero beginning balance.
30) Management of Duane Company is implementing lean principles to improve cycle
efficiency. The following information is compiled from the current process and the anticipated
process using lean principles.
Activity
Traditional
Lean
Process time
8 hours
8 hours
Inspection time
2 hours
0.5 hours
Move time
4 hours
1 hour
Wait time
2 hours
0.5 hours
Required
1. Compute the total amount of non-value added time under the traditional process.
2. Compute the total amount of non-value added time under the proposed lean process.
3. Compute the cycle efficiency under the traditional process.
4. Compute the cycle efficiency under the proposed lean process.