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Chapter 27(12): Lean Principles, Lean Accounting, and Activity Analysis
104.
Which of the following is not an external failure cost?
a.
warranty work
b.
processing returned merchandise
c.
rework
d.
correcting invoice errors
105.
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.
106.
Which of the following is a value-added activity?
a.
scrap processing
b.
rework
c.
preventive maintenance
d.
warranty work
107.
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.
108.
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.
109.
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
110.
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.
111.
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.
(b)
Compute Part X2's budgeted cell conversion cost per unit. Round to the nearest
cent.
112.
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.
113.
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.
114.
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.
Chapter 27(12): Lean Principles, Lean Accounting, and Activity Analysis
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
Product design
30,000
Training machine operators
46,000
Warranty work
12,000
Process audits
22,000
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.
117.
From the above schedule, calculate the internal failure costs.
118.
From the above schedule, calculate the external failure costs.
119.
From the above schedule, compute the percentage of non-value-added activities.
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.
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.
Chapter 27(12): Lean Principles, Lean Accounting, and Activity Analysis
Identity the following by their type of quality cost.
a.
Preventive costs
b.
Appraisal costs
c.
Internal failure costs
d.
External failure costs
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.27-04 - 27-04
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.11 - Strategic Planning
BUSPROG: Analytic
122.
Scrap
123.
Recalls
124.
Warranty work
125.
Testing
126.
Vendor quality
127.
Returned merchandise
128.
Preventive machine maintenance
129.
Operator training
Chapter 27(12): Lean Principles, Lean Accounting, and Activity Analysis
Identify the following quality control activities as either value-added or non-value-added.
a.
Value-added
b.
Non-value-added
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.27-04 - 27-04
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.11 - Strategic Planning
BUSPROG: Analytic
130.
Scrap material
131.
Processing returned materials
132.
Rework
133.
Finished goods inspection
134.
Preventive machine maintenance
135.
Customer service calls
136.
Design engineering
137.
Materials inspection
