Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Appendix D
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Appendix D
Lean Principles and Accounting
QUESTIONS
1. The three key principles of the lean business model are: Production occurs in value
2. Push production begins with a sales forecast. Goods are produced and pushed into
3. Three common problems of push production include the production of goods that
4. Supply chain management is the control of materials, information, and finances as
they move between suppliers, manufacturers, and customers.
5. In a closed-loop supply chain, products are built using renewable resources or
7. Setup time is the amount of time taken to prepare a process. Examples of setup time
include time spent starting and calibrating machines.
9. Lean accounting systems use Finished Goods Inventory accounts only if, at the end
of an accounting period, some completed units remain unsold.
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Appendix D
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11. Value-added time is the portion of cycle time spent on activities that add value to
12. Cycle efficiency is the ratio of value-added time divided by total cycle time. The
closer cycle efficiency is to 1, the more of a company’s time is spent on value-added
13. Yes. Samsung can use cycle time and cycle efficiency to measure operating
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Appendix D
QUICK STUDIES
Quick Study D-1 (5 minutes)
1. T (Traditional) 2. L (Lean) 3. L (Lean)
Quick Study D-2 (10 minutes)
Quick Study D-3 (5 minutes)
Work in Process Inventory …………………………………….
28,000
28,000
Quick Study D-4 (5 minutes)
1.
Work in Process Inventory …………………………………….
43,600
43,600
2. Conversion Costs ………………………………………….
43,600
43,600
Quick Study D-5 (5 minutes)
1.
Accounts Receivable …………………………………………….
16,800
16,800
11,760
11,760
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Appendix D
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Quick Study D-6 (10 minutes)
1.
Cash ……………………………………………………………………..
33,250
Sales ………………………………………………………………..
33,250
25,110
1,860
Quick Study D-7 (5 minutes)
Quick Study D-8 (10 minutes)
1.
2.
Work in Process Inventory ………………………..
40,625
Conversion Costs ……………………………….
40,625
Quick Study D-9 (15 minutes)
a.
Process time ……………………………………………………………………
15.0 minutes
Move time ………………………………………………………………………..
Wait time …………………………………………………………………………
Manufacturing cycle time …………………………………………………
60.0 minutes
Manufacturing cycle efficiency (15.0 min./ 60.0 min.) ………..
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Appendix D
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Quick Study D-10 (10 minutes)
a.
Process time ……………………………………………………………………
2.10 days
Inspection time ………………………………………………………………..
0.50 days
Move time ………………………………………………………………………..
0.75 days
Wait time …………………………………………………………………………
0.15 days
d.
Manufacturing cycle efficiency (2.1 days/3.5 days) ……………
Quick Study D-11 (5 minutes)
Quick Study D-12 (5 minutes)
Quick Study D-13 (5 minutes)
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Appendix D
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EXERCISES
Exercise D-1 (10 minutes)
Exercise D-2 (15 minutes)
1.
Work in Process Inventory ……………………………………..
22,500
22,500
2.
Work in Process Inventory ……………………………………..
67,500
67,500
3.
Conversion Costs ………………………………………………….
67,500
67,500
4.
Accounts Receivable ……………………………………………..
120,000
120,000
5.
Cost of Goods Sold ………………………………………………..
90,000
90,000
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Appendix D
Exercise D-3 (15 minutes)
1.
Work in Process Inventory ……………………………………..
27,000
27,000
2.
Work in Process Inventory ……………………………………..
45,000
45,000
3.
Accounts Receivable ……………………………………………..
84,000
84,000
4.
Cost of Goods Sold ………………………………………………..
72,000
72,000
Exercise D-4 (15 minutes)
1.
Work in Process Inventory …………………………………
27,000
27,000
2.
Work in Process Inventory …………………………………
45,000
45,000
3.
Accounts Receivable …………………………………………
70,000
70,000
4.
Finished Goods Inventory ………………………………….
Cost of Goods Sold ……………………………………………
12,000
60,000
72,000
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Appendix D
Exercise D-5 (15 minutes)
1.
Work in Process Inventory …………………………………
17,600
Accounts Payable …………………………………………
17,600
2.
Work in Process Inventory …………………………………
72,000
Conversion Costs ………………………………………….
72,000
3.
Accounts Receivable …………………………………………
128,000
Sales …………………………………………………………….
128,000
4.
Cost of Goods Sold ……………………………………………
89,600
Work in Process Inventory …………………………….
89,600
Exercise D-6 (15 minutes)
1.
Process time ……………………………………………………………………
6.0 days
0.8 days
Move time ……………………………………………………….……………….
3.2 days
Wait time …………………………………………………………………………
Cycle time ……………………………………………………………………….
2.
Cycle efficiency (6.0 days/ 15.0 days) ……………………………….
3. If move time is reduced by 1.2 days and wait time is reduced by 2.8
Exercise D-7 (15 minutes)
1.
Process time ……………………………………………………………………
16.0 hours
Move time ……………………………………………………….……………….
Wait time …………………………………………………………………………
21.5 hours
Manufacturing cycle time …………………………………………………
50.0 hours
2.
Cycle efficiency (16.0 hours/ 50.0 hours) …………………………..
0.32
This means that Best Ink is spending 32% of its time in value–added
3. To increase manufacturing cycle efficiency to 0.80, Best Ink must
reduce the total manufacturing cycle time to 20 hours without changing
Exercise D-8 (15 minutes)
a.
Value-added time = Process time (18 + 8 + 10) ………………….
36 minutes
12 minutes
e.
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Appendix D
Exercise D-9 (20 minutes)
Activity
(a) Traditional
(b) Lean
Process time ……………………………………………………………………
(18+8+10) 36 minutes
(18+8+10) 36 minutes
Move time ……………………………………………………….……………….
Wait time …………………………………………………………………………
Cycle time ……………………………………………………………………….
Exercise D-10 (10 minutes)
1. and 2.
$ thousands
Current
Prior
WIP Inventory, end of year ………………………
$ 81,000
$ 94,000
$ 1,967,000
$ 1,800,000
Exercise D-11 (10 minutes)
1.
$ thousands
Current Year
WIP Inventory, end of year …………………
$ 233,476
$ 4,453,776
2. Revised days’ sales in work in process inventory = ($233,476 x 0.95) x 365
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Appendix D
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Exercise D-11 (continued)
Exercise D-12 (10 minutes)
1. and 2.
$ thousands
Current Year
Prior Year
Accounts payable, end of year ……………
$ 312,842
$ 253,491
3. Days’ payable outstanding decreased by 1 day from the prior year.
Exercise D-13 (10 minutes)
1.
$ millions
Current Year
Accounts payable, end of year ……………
$ 1,931
$ 28,164
Days’ payable* (rounded)……………………
2. Revised days’ payable outstanding = ($1,931 x 0.92) x 365
$28,164
= 23 days (rounded)
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Appendix D
D-12
Exercise D-14 (10 minutes)
1. Apple’s use of energy from renewable sources increased during the
current year (from 93% to 96%).
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Appendix D
PROBLEMS
Problem D-1 (25 minutes)
1. Conversion cost = $800,000/2,000 = $400 per mower
2. Journal entries
a.
Work in Process Inventory …………………………………….
150,000
Accounts Payable ……………………………………………..
150,000
Purchased materials on credit. [$250 x 600]
Work in Process Inventory …………………………………….
240,000
Conversion Costs …………………………..…………………
240,000
c.
Accounts Receivable …………………………………………….
Sales ………………………………………………………………..
580,000
Work in Process Inventory ………………………………..
390,000
Record inventory [$650 x 20] and cost of goods
sold [$650 x 580].
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Appendix D
Problem D-2 (25 minutes)
1. Journal entries
a.
Work in Process Inventory …………………………………….
344,000
Accounts Payable ……………………………………………..
344,000
Purchased materials on credit. [$4,300 x 80]
Work in Process Inventory …………………………………….
637,500
Conversion Costs …………………………..…………………
637,500
Conversion Costs …………………………..……………………..
637,500
Various Accounts ……………………………………………..
637,500
960,000
d.
Accounts Receivable …………………………………………….
Sales ………………………………………………………………..
Record sales on credit. [$15,000 x 68]
1,020,000
1,020,000
2. Ending balances
Work in Process Inventory = $0 + $344,000 + $637,500 – $960,000 = $21,500.
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Appendix D
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Problem D-3 (25 minutes)
Traditional approach
Inspection time ………………………………………………………………..
4 hours
Move time ……………………………………………………….……………….
6 hours
Wait time …………………………………………………………………………
1.
2.
Manufacturing cycle efficiency (24 hours/36 hours*) …………
0.67
Lean approach
Inspection time ………………………………………………………………..
4 hours
Move time ……………………………………………………….………………
3 hours
3.
8 hours
4.
Manufacturing cycle efficiency (24 hours/32 hours*) …………
0.75
*Total cycle time = 8 hours + 24 hours.
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Appendix D