5 EX 27 13 ALGO eBook Show Me How Question Content Area Lean Accounting Power Audio Inc manufactures audio speakers Each speaker requires $108 per unit of direct materials The speaker manufacturing assembly cell includes the following estimated costs for the period Line Item Description Amount Labor $60,270 Depreciation 8,090 Supplies 2,940 Power 2,200 Total cell costs for the period $73,500 The operating plan calls for 175 operating hours for the period Each speaker requires 12 minutes of cellprocesstime The unit selling price for each speaker is $292 During the period, the following transactions occurred Purchased materials to produce 425 speaker units Applied conversion costs to production of 405 speaker units Completed and transferred 385 speaker units to finished goods Sold 370 speaker units There were no inventories at the beginning of the period Question Content Area a Journalize the summary transactions (1) (4) for the period Round the per unit cost to the nearest cent and use in subsequent computations If an amount box does not require an entry, leave it blank Transaction Account Debit Credit 1 Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory Select Select Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory Select Select 2 Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory Select Select Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory Select Select 3 Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory Select Select Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory Select Select 4 Sale Accounts ReceivableConversion CostsCost of Goods SoldFinished Goods InventorySales Select Select Accounts ReceivableConversion CostsCost of Goods SoldFinished Goods InventorySales Select Select 4 Cost Accounts ReceivableConversion CostsCost of Goods SoldFinished Goods InventorySales Select Select Accounts ReceivableConversion CostsCost of Goods SoldFinished Goods InventorySales Select Select Question Content Area b Determine the ending balance of raw and in process inventory and finished goods inventory Raw and In Process Inventory, ending balancefill in the blank 1 of 2$ Finished Goods Inventory, ending balancefill in the blank 2 of 2$ 6 EX 27 15 ALGO eBook Show Me How Question Content Area Cost of Qualityand Value Added Non Value Added Reports for a Service Company Seven Seas Inc provides cable TV and Internet service to the local community The activities and activity costs of Seven Seas are identified Question Content Area a Identify the cost of quality classification for each activity and whether the activity is value added or non value added Quality Control Activities Activity Cost Quality Cost Classification VA NVA Classification Billing error correction $31,300 fill in the blank 1 of 18 AppraisalExternal failureInternal failurePrevention fill in the blank 2 of 18 Non value addedValue added Cable signal testing 98,600 fill in the blank 3 of 18 AppraisalExternal failureInternal failurePrevention fill in the blank 4 of 18 Non value addedValue added Reinstalling service (installed incorrectly the first time) 67,300 fill in the blank 5 of 18 AppraisalExternal failureInternal failurePrevention fill in the blank 6 of 18 Non value addedValue added Repairing satellite equipment 40,600 fill in the blank 7 of 18 AppraisalExternal failureInternal failurePrevention fill in the blank 8 of 18 Non value addedValue added Repairing underground cable connections to the customer 20,400 fill in the blank 9 of 18 AppraisalExternal failureInternal failurePrevention fill in the blank 10 of 18 Non value addedValue added Replacing old technology cable with higher quality cable 119,400 fill in the blank 11 of 18 AppraisalExternal failureInternal failurePrevention fill in the blank 12 of 18 Non value addedValue added Replacing old technology signal switches with higher quality switches 136,400 fill in the blank 13 of 18 AppraisalExternal failureInternal failurePrevention fill in the blank 14 of 18 Non value addedValue added Responding to customer home repair requests 37,600 fill in the blank 15 of 18 AppraisalExternal failureInternal failurePrevention fill in the blank 16 of 18 Non value addedValue added Training employees 28,400 fill in the blank 17 of 18 AppraisalExternal failureInternal failurePrevention fill in the blank 18 of 18 Non value addedValue added Total activity cost $580,000 Question Content Area b MAKE a cost of quality report Assume that sales are $2,320,000 If required, round percentages to one decimal place Quality Cost Classification Quality Cost Percent of Total Quality Cost Percent of Total Sales Prevention $Prevention Prevention Prevention Appraisal Appraisal Appraisal Appraisal Internal failure Internal failure Internal failure Internal failure External failure External failure External failure External failure Total $Total Total Total Question Content Area c MAKE a value added non value added analysis If required, round percentages to one decimal place Category Amount Percent Value added $Value added Value added Non value added Non value added Non value added Total $Total Total Question Content Area d What percentage of total costs of quality are considered to be value added 17 0 49 0 66 0 None of these options are correct 7 EX 27 17 ALGO eBook Show Me How Question Content Area ProcessActivity Analysisfor a Service Company Statewide Insurance Company has a process for making payments on insurance claims as follows An activity analysis revealed that the cost of these activities was as follows Line Item Description Amount Receiving claim $102,600 Adjusting claim 444,600 Paying claim 136,800 Total $684,000 This process includes only the cost of processing the claim payments, not the actual amount of the claim payments The adjusting activity involves verifying and estimating the amount of the claim and is variable to the number of claims adjusted The process received, adjusted, and paid 7,600 claims during the period All claims were treated identically in this process To improve the cost of this process, management has determined that claims should be segregated into two categories Claims under $1,000 and claims greater than $1,000 claims under $1,000 would not be adjusted but would be accepted upon the insured's evidence of claim Claims above $1,000 would be adjusted It is estimated that 75 of the claims are under $1,000 and would thus be paid without adjustment It is also estimated that the additional effort to segregate claims would add 10 to the receiving claim activity cost Question Content Area a Develop a table showing the percent of individual activity cost to the total process cost Round the percents to the nearest whole number, if required Activity Cost Percent of Total Process Receiving claim $Receiving claim Receiving claim Adjusting claim Adjusting claim Adjusting claim Paying claim Paying claim Paying claim Total $Total Total Question Content Area b Determine the average total process cost per claim payment, assuming 7,600 total claims Round to the nearest whole dollar fill in the blank 1 of 1$ per paid claim Question Content Area c MAKE a table showing the changes in the activity costs as a result of the changes proposed by management Round to one decimal place, if required If an amount is zero, leave the entry box blank Use the minus sign to indicate an additional cost in the last column Activities Activity Cost Prior to Improvement Activity Cost After Improvement Activity Cost Saving Receiving claim $Receiving claim $Receiving claim $Receiving claim Adjusting claim Adjusting claim Adjusting claim Adjusting claim Paying claim Paying claim Paying claim Paying claim Totals $Totals $Totals $Totals Question Content Area d Estimate the average cost per claim payment, assuming that the changes proposed by management are enacted for 7,600 total claims Round to the nearest cent fill in the blank 1 of 1$ per paid claim 8 EX 27 11 ALGO eBook Show Me How Question Content Area Lean Accounting Westgate Inc uses a lean manufacturing strategy to manufacture DVR (digital video recorder) players The company manufactures DVR players through a single product cell The budgetedconversion costfor the year is $1,137,300 for 2,230 production hours Each unit requires 20 minutes of cellprocesstime During March, 780 DVR players were manufactured in the cell The materials cost per unit is $79 The following summary transactions took place during March Materials were purchased for March production Conversion costs were applied to production 780 DVR players were assembled and placed in finished goods 740 DVR players were sold for $441 per unit Question Content Area a Determine the budgeted cell conversion cost per hour If required, round to the nearest dollar fill in the blank 1 of 1$ per hour b Determine the budgeted cell conversion cost per unit If required, round to the nearest dollar fill in the blank 1 of 1$ per unit Question Content Area c Journalize the summary transactions (1) (4) for March If an amount box does not require an entry, leave it blank Transaction Account Debit Credit 1 Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory Select Select Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory Select Select 2 Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory Select Select Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory Select Select 3 Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory Select Select Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory Select Select 4 Sale Accounts ReceivableConversion CostsCost of Goods SoldFinished Goods InventorySales Select Select Accounts ReceivableConversion CostsCost of Goods SoldFinished Goods InventorySales Select Select 4 Cost Accounts ReceivableConversion CostsCost of Goods SoldFinished Goods InventorySales Select Select Accounts ReceivableConversion CostsCost of Goods SoldFinished Goods InventorySales Select Select 9 EX 27 12 ALGO eBook Show Me How Question Content Area Lean Accounting Modern Lighting Inc manufactures lighting fixtures, using lean manufacturing methods Style Omega has a materials cost per unit of $28 The budgetedconversion costfor the year is $156,000 for 2,600 production hours A unit of Style Omega requires 20 minutes of cell production time The following transactions took place during June Materials were acquired to assemble 940 Style Omega units for June Conversion costs were applied to 940 Style Omega units of production 870 units of Style Omega were completed in June 820 units of Style Omega were sold in June for $90 per unit Question Content Area a Determine the budgeted cell conversion cost per hour If required, round to the nearest cent fill in the blank 1 of 1$ per hour b Determine the budgeted cell conversion cost per unit If required, round to the nearest cent fill in the blank 1 of 1$ per unit Question Content Area c Journalize the summary transactions (1) (4) for June If required, round your answers to one decimal place If an amount box does not require an entry, leave it blank Transaction Account Debit Credit 1 Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory Select Select Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory Select Select 2 Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory Select Select Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory Select Select 3 Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory Select Select Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory Select Select 4 Sale Accounts ReceivableConversion CostsCost of Goods SoldFinished Goods InventorySales Select Select Accounts ReceivableConversion CostsCost of Goods SoldFinished Goods InventorySales Select Select 4 Cost Accounts ReceivableConversion CostsCost of Goods SoldFinished Goods InventorySales Select Select Accounts ReceivableConversion CostsCost of Goods SoldFinished Goods InventorySales Select Select Print 1 EX 27 01 eBook Learning Objective 1 Question Content Area Lean Principles The chief executive officer (CEO) of Platinum Inc just read an article written by a business professor at Harvard University describing the benefits of the lean philosophy The CEO issued the following statement after reading the article This company will become a lean manufacturing company Presently, we have too much inventory To become lean, we need to eliminate the excess inventory Therefore, I want all employees to begin reducing inventories until we make products just in time Thank you for your cooperation a Lean manufacturing is Identify the statement that suits the above situation a A philosophy that focuses on reducing time, cost, poor quality and uncertainty from a process b An inventory reduction method c Producing based on the sales d Improving productivity ignoring the quality and other aspects abcd b A CEO of a company suddenly commands that the company will become lean manufacturing company due to increased inventory Identify the statement that suits the situation a The plan of introducing a lean manufacturing system may be effective to avoid inventory b The plan of introducing a lean manufacturing system may increase the productivity of the company c The CEO of the company has not given any action plans and the inventories created are not because of the production excess alone It may even due to poor quality of the product d Implementing a lean manufacturing system leads to increased cost of manufacturing abcd 2 EX 27 02 eBook Question Content Area Lean as a Strategy The American textile industry has moved much of its operations offshore in the pursuit of lower labor costs Textile imports have risen from under 5 of all textile production in the early 1960s to over 95 today Offshore manufacturers make long runs of standard mass market apparel items These are then brought to the United States in container ships, requiring significant time between original order and delivery As a result, retail customers must accurately forecast market demands for imported apparel items A textile retailer wishes to match the trend in the market and bring in new products before the competitor introduces the same Whom should he approach and identify the reason for your answer a Domestic manufacturer b Offshore manufacturer ab Reason a Domestic manufacturers can be reached quickly and make small batches of orders which will be delivered within the short time b Offshore manufacturers are cheap and large quantities can be ordered c Offshore manufacturers are not the trend setters and the fashion may not be same to order a large quantity at a time d None of the above a and cb and cc and dd 3 EX 27 03 eBook Question Content Area Lean Principles Drip Wear Inc manufactures various styles of men's casual wear Shirts are cut and assembled by a workforce that is paid by piece rate This means that they are paid according to the amount of work completed during a period of time To illustrate, if the piece rate is $0 10 per sleeve assembled, and the worker assembles 800 sleeves during the day, then the worker would be paid $80 (800 $0 10) for the day's work The company is considering adopting a lean manufacturing philosophy by organizing work cells around various types of products and employing pull manufacturing However, no change is expected in the compensation policy On this point, the manufacturing manager stated the following Piecework compensation provides an incentive to work fast Without it, the workers will just goof off and expect a full day's pay We can't pay straight hourly wagesat least not in this industry A garment company was following piece rate system for its employees and suddenly lean manufacturing system was introduced The company wishes to continue with the same piece rate system Identify the statement that suits the given situation a A piece rate system is an effective system to improve productivity and it also supports the philosophy of lean manufacturing b A piece rate system is a traditional method that is not suitable for the lean manufacturing system Because the piece rate system increases the inventory rather than efficiency c A piece rate system makes the employees specialized in the job d A piece rate system is more effective to support the market demand 4 EX 27 04 eBook Question Content Area Lead TimeAnalysis Fuzzy Pals Inc manufactures toy stuffed animals The direct labor time required to cut, sew, and stuff a toy is 8 minutes per unit The company makes two types of stuffed toysa lion and a bear The lion is assembled in lot sizes of 40 units per batch, while the bear is assembled in lot sizes of 10 units per batch Since each product has direct labor time of 8 minutes per unit, management has determined that the lead time for each product is 8 minutes a Lead time includes , , and a Value added time, wait time and other non value added time b Production time, packing time and value added time c Idle time, direct labor hours, and wait time d None of the above abcd b A toy manufacturing unit produces two types of products and the labor time for each product is 10 minutes The batch size of product A is 40 units and batch size of product B is 8 units The company considers the lead time of the products to be equal to the labor hours Is this decision correct Support your answer by selecting the reason a Yes b No ab Reason a Lead time of the product includes value added time, idle time and other non value added time b Labor time and lead time adds value to the product c Lead time and labor time are one and the same with different names d None of the above abcd 5 EX 27 13 ALGO eBook Show Me How Question Content Area Lean Accounting Power Audio Inc manufactures audio speakers Each speaker requires $108 per unit of direct materials The speaker manufacturing assembly cell includes the following estimated costs for the period Line Item Description Amount Labor $60,270 Depreciation 8,090 Supplies 2,940 Power 2,200 Total cell costs for the period $73,500 The operating plan calls for 175 operating hours for the period Each speaker requires 12 minutes of cellprocesstime The unit selling price for each speaker is $292 During the period, the following transactions occurred Purchased materials to produce 425 speaker units Applied conversion costs to production of 405 speaker units Completed and transferred 385 speaker units to finished goods Sold 370 speaker units There were no inventories at the beginning of the period Question Content Area a Journalize the summary transactions (1) (4) for the period Round the per unit cost to the nearest cent and use in subsequent computations If an amount box does not require an entry, leave it blank Transaction Account Debit Credit 1 Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory Select Select Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory Select Select 2 Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory Select Select Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory Select Select 3 Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory Select Select Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory Select Select 4 Sale Accounts ReceivableConversion CostsCost of Goods SoldFinished Goods InventorySales Select Select Accounts ReceivableConversion CostsCost of Goods SoldFinished Goods InventorySales Select Select 4 Cost Accounts ReceivableConversion CostsCost of Goods SoldFinished Goods InventorySales Select Select Accounts ReceivableConversion CostsCost of Goods SoldFinished Goods InventorySales Select Select Question Content Area b Determine the ending balance of raw and in process inventory and finished goods inventory Raw and In Process Inventory, ending balancefill in the blank 1 of 2$ Finished Goods Inventory, ending balancefill in the blank 2 of 2$ 6 EX 27 15 ALGO eBook Show Me How Question Content Area Cost of Qualityand Value Added Non Value Added Reports for a Service Company Seven Seas Inc provides cable TV and Internet service to the local community The activities and activity costs of Seven Seas are identified Question Content Area a Identify the cost of quality classification for each activity and whether the activity is value added or non value added Quality Control Activities Activity Cost Quality Cost Classification VA NVA Classification Billing error correction $31,300 fill in the blank 1 of 18 AppraisalExternal failureInternal failurePrevention fill in the blank 2 of 18 Non value addedValue added Cable signal testing 98,600 fill in the blank 3 of 18 AppraisalExternal failureInternal failurePrevention fill in the blank 4 of 18 Non value addedValue added Reinstalling service (installed incorrectly the first time) 67,300 fill in the blank 5 of 18 AppraisalExternal failureInternal failurePrevention fill in the blank 6 of 18 Non value addedValue added Repairing satellite equipment 40,600 fill in the blank 7 of 18 AppraisalExternal failureInternal failurePrevention fill in the blank 8 of 18 Non value addedValue added Repairing underground cable connections to the customer 20,400 fill in the blank 9 of 18 AppraisalExternal failureInternal failurePrevention fill in the blank 10 of 18 Non value addedValue added Replacing old technology cable with higher quality cable 119,400 fill in the blank 11 of 18 AppraisalExternal failureInternal failurePrevention fill in the blank 12 of 18 Non value addedValue added Replacing old technology signal switches with higher quality switches 136,400 fill in the blank 13 of 18 AppraisalExternal failureInternal failurePrevention fill in the blank 14 of 18 Non value addedValue added Responding to customer home repair requests 37,600 fill in the blank 15 of 18 AppraisalExternal failureInternal failurePrevention fill in the blank 16 of 18 Non value addedValue added Training employees 28,400 fill in the blank 17 of 18 AppraisalExternal failureInternal failurePrevention fill in the blank 18 of 18 Non value addedValue added Total activity cost $580,000 Question Content Area b MAKE a cost of quality report Assume that sales are $2,320,000 If required, round percentages to one decimal place Quality Cost Classification Quality Cost Percent of Total Quality Cost Percent of Total Sales Prevention $Prevention Prevention Prevention Appraisal Appraisal Appraisal Appraisal Internal failure Internal failure Internal failure Internal failure External failure External failure External failure External failure Total $Total Total Total Question Content Area c MAKE a value added non value added analysis If required, round percentages to one decimal place Category Amount Percent Value added $Value added Value added Non value added Non value added Non value added Total $Total Total Question Content Area d What percentage of total costs of quality are considered to be value added 17 0 49 0 66 0 None of these options are correct 7 EX 27 17 ALGO eBook Show Me How Question Content Area ProcessActivity Analysisfor a Service Company Statewide Insurance Company has a process for making payments on insurance claims as follows An activity analysis revealed that the cost of these activities was as follows Line Item Description Amount Receiving claim $102,600 Adjusting claim 444,600 Paying claim 136,800 Total $684,000 This process includes only the cost of processing the claim payments, not the actual amount of the claim payments The adjusting activity involves verifying and estimating the amount of the claim and is variable to the number of claims adjusted The process received, adjusted, and paid 7,600 claims during the period All claims were treated identically in this process To improve the cost of this process, management has determined that claims should be segregated into two categories Claims under $1,000 and claims greater than $1,000 claims under $1,000 would not be adjusted but would be accepted upon the insured's evidence of claim Claims above $1,000 would be adjusted It is estimated that 75 of the claims are under $1,000 and would thus be paid without adjustment It is also estimated that the additional effort to segregate claims would add 10 to the receiving claim activity cost Question Content Area a Develop a table showing the percent of individual activity cost to the total process cost Round the percents to the nearest whole number, if required Activity Cost Percent of Total Process Receiving claim $Receiving claim Receiving claim Adjusting claim Adjusting claim Adjusting claim Paying claim Paying claim Paying claim Total $Total Total Question Content Area b Determine the average total process cost per claim payment, assuming 7,600 total claims Round to the nearest whole dollar fill in the blank 1 of 1$ per paid claim Question Content Area c MAKE a table showing the changes in the activity costs as a result of the changes proposed by management Round to one decimal place, if required If an amount is zero, leave the entry box blank Use the minus sign to indicate an additional cost in the last column Activities Activity Cost Prior to Improvement Activity Cost After Improvement Activity Cost Saving Receiving claim $Receiving claim $Receiving claim $Receiving claim Adjusting claim Adjusting claim Adjusting claim Adjusting claim Paying claim Paying claim Paying claim Paying claim Totals $Totals $Totals $Totals Question Content Area d Estimate the average cost per claim payment, assuming that the changes proposed by management are enacted for 7,600 total claims Round to the nearest cent fill in the blank 1 of 1$ per paid claim 8 EX 27 11 ALGO eBook Show Me How Question Content Area Lean Accounting Westgate Inc uses a lean manufacturing strategy to manufacture DVR (digital video recorder) players The company manufactures DVR players through a single product cell The budgetedconversion costfor the year is $1,137,300 for 2,230 production hours Each unit requires 20 minutes of cellprocesstime During March, 780 DVR players were manufactured in the cell The materials cost per unit is $79 The following summary transactions took place during March Materials were purchased for March production Conversion costs were applied to production 780 DVR players were assembled and placed in finished goods 740 DVR players were sold for $441 per unit Question Content Area a Determine the budgeted cell conversion cost per hour If required, round to the nearest dollar fill in the blank 1 of 1$ per hour b Determine the budgeted cell conversion cost per unit If required, round to the nearest dollar fill in the blank 1 of 1$ per unit Question Content Area c Journalize the summary transactions (1) (4) for March If an amount box does not require an entry, leave it blank Transaction Account Debit Credit 1 Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory Select Select Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory Select Select 2 Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory Select Select Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory Select Select 3 Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory Select Select Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory Select Select 4 Sale Accounts ReceivableConversion CostsCost of Goods SoldFinished Goods InventorySales Select Select Accounts ReceivableConversion CostsCost of Goods SoldFinished Goods InventorySales Select Select 4 Cost Accounts ReceivableConversion CostsCost of Goods SoldFinished Goods InventorySales Select Select Accounts ReceivableConversion CostsCost of Goods SoldFinished Goods InventorySales Select Select 9 EX 27 12 ALGO eBook Show Me How Question Content Area Lean Accounting Modern Lighting Inc manufactures lighting fixtures, using lean manufacturing methods Style Omega has a materials cost per unit of $28 The budgetedconversion costfor the year is $156,000 for 2,600 production hours A unit of Style Omega requires 20 minutes of cell production time The following transactions took place during June Materials were acquired to assemble 940 Style Omega units for June Conversion costs were applied to 940 Style Omega units of production 870 units of Style Omega were completed in June 820 units of Style Omega were sold in June for $90 per unit Question Content Area a Determine the budgeted cell conversion cost per hour If required, round to the nearest cent fill in the blank 1 of 1$ per hour b Determine the budgeted cell conversion cost per unit If required, round to the nearest cent fill in the blank 1 of 1$ per unit Question Content Area c Journalize the summary transactions (1) (4) for June If required, round your answers to one decimal place If an amount box does not require an entry, leave it blank Transaction Account Debit Credit 1 Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory Select Select Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory Select Select 2 Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory Select Select Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory Select Select 3 Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory Select Select Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory Select Select 4 Sale Accounts ReceivableConversion CostsCost of Goods SoldFinished Goods InventorySales Select Select Print 1 EX 27 01 eBook Learning Objective 1 Question Content Area Lean Principles The chief executive officer (CEO) of Platinum Inc just read an article written by a business professor at Harvard University describing the benefits of the lean philosophy The CEO issued the following statement after reading the article This company will become a lean manufacturing company Presently, we have too much inventory To become lean, we need to eliminate the excess inventory Therefore, I want all employees to begin reducing inventories until we make products just in time Thank you for your cooperation a Lean manufacturing is Identify the statement that suits the above situation a A philosophy that focuses on reducing time, cost, poor quality and uncertainty from a process b An inventory reduction method c Producing based on the sales d Improving productivity ignoring the quality and other aspects abcd b A CEO of a company suddenly commands that the company will become lean manufacturing company due to increased inventory Identify the statement that suits the situation a The plan of introducing a lean manufacturing system may be effective to avoid inventory b The plan of introducing a lean manufacturing system may increase the productivity of the company c The CEO of the company has not given any action plans and the inventories created are not because of the production excess alone It may even due to poor quality of the product d Implementing a lean manufacturing system leads to increased cost of manufacturing abcd 2 EX 27 02 eBook Question Content Area Lean as a Strategy The American textile industry has moved much of its operations offshore in the pursuit of lower labor costs Textile imports have risen from under 5 of all textile production in the early 1960s to over 95 today Offshore manufacturers make long runs of standard mass market apparel items These are then brought to the United States in container ships, requiring significant time between original order and delivery As a result, retail customers must accurately forecast market demands for imported apparel items A textile retailer wishes to match the trend in the market and bring in new products before the competitor introduces the same Whom should he approach and identify the reason for your answer a Domestic manufacturer b Offshore manufacturer ab Reason a Domestic manufacturers can be reached quickly and make small batches of orders which will be delivered within the short time b Offshore manufacturers are cheap and large quantities can be ordered c Offshore manufacturers are not the trend setters and the fashion may not be same to order a large quantity at a time d None of the above a and cb and cc and dd 3 EX 27 03 eBook Question Content Area Lean Principles Drip Wear Inc manufactures various styles of men's casual wear Shirts are cut and assembled by a workforce that is paid by piece rate This means that they are paid according to the amount of work completed during a period of time To illustrate, if the piece rate is $0 10 per sleeve assembled, and the worker assembles 800 sleeves during the day, then the worker would be paid $80 (800 $0 10) for the day's work The company is considering adopting a lean manufacturing philosophy by organizing work cells around various types of products and employing pull manufacturing However, no change is expected in the compensation policy On this point, the manufacturing manager stated the following Piecework compensation provides an incentive to work fast Without it, the workers will just goof off and expect a full day's pay We can't pay straight hourly wagesat least not in this industry A garment company was following piece rate system for its employees and suddenly lean manufacturing system was introduced The company wishes to continue with the same piece rate system Identify the statement that suits the given situation a A piece rate system is an effective system to improve productivity and it also supports the philosophy of lean manufacturing b A piece rate system is a traditional method that is not suitable for the lean manufacturing system Because the piece rate system increases the inventory rather than efficiency c A piece rate system makes the employees specialized in the job d A piece rate system is more effective to support the market demand 4 EX 27 04 eBook Question Content Area Lead TimeAnalysis Fuzzy Pals Inc manufactures toy stuffed animals The direct labor time required to cut, sew, and stuff a toy is 8 minutes per unit The company makes two types of stuffed toysa lion and a bear The lion is assembled in lot sizes of 40 units per batch, while the bear is assembled in lot sizes of 10 units per batch Since each product has direct labor time of 8 minutes per unit, management has determined that the lead time for each product is 8 minutes a Lead time includes , , and a Value added time, wait time and other non value added time b Production time, packing time and value added time c Idle time, direct labor hours, and wait time d None of the above abcd b A toy manufacturing unit produces two types of products and the labor time for each product is 10 minutes The batch size of product A is 40 units and batch size of product B is 8 units The company considers the lead time of the products to be equal to the labor hours Is this decision correct Support your answer by selecting the reason a Yes b No ab Reason a Lead time of the product includes value added time, idle time and other non value added time b Labor time and lead time adds value to the product c Lead time and labor time are one and the same with different names d None of the above abcd 5 EX 27 13 ALGO eBook Show Me How Question Content Area Lean Accounting Power Audio Inc manufactures audio speakers Each speaker requires $108 per unit of direct materials The speaker manufacturing assembly cell includes the following estimated costs for the period Line Item Description Amount Labor $60,270 Depreciation 8,090 Supplies 2,940 Power 2,200 Total cell costs for the period $73,500 The operating plan calls for 175 operating hours for the period Each speaker requires 12 minutes of cellprocesstime The unit selling price for each speaker is $292 During the period, the following transactions occurred Purchased materials to produce 425 speaker units Applied conversion costs to production of 405 speaker units Completed and transferred 385 speaker units to finished goods Sold 370 speaker units There were no inventories at the beginning of the period Question Content Area a Journalize the summary transactions (1) (4) for the period Round the per unit cost to the nearest cent and use in subsequent computations If an amount box does not require an entry, leave it blank Transaction Account Debit Credit 1 Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory Select Select Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory Select Select 2 Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory Select Select Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory Select Select 3 Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory Select Select Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory Select Select 4 Sale Accounts ReceivableConversion CostsCost of Goods SoldFinished Goods InventorySales Select Select Accounts ReceivableConversion CostsCost of Goods SoldFinished Goods InventorySales Select Select 4 Cost Accounts ReceivableConversion CostsCost of Goods SoldFinished Goods InventorySales Select Select Accounts ReceivableConversion CostsCost of Goods SoldFinished Goods InventorySales Select Select Question Content Area b Determine the ending balance of raw and in process inventory and finished goods inventory Raw and In Process Inventory, ending balancefill in the blank 1 of 2$ Finished Goods Inventory, ending balancefill in the blank 2 of 2$ 6 EX 27 15 ALGO eBook Show Me How Question Content Area Cost of Qualityand Value Added Non Value Added Reports for a Service Company Seven Seas Inc provides cable TV and Internet service to the local community The activities and activity costs of Seven Seas are identified Question Content Area a Identify the cost of quality classification for each activity and whether the activity is value added or non value added Quality Control Activities Activity Cost Quality Cost Classification VA NVA Classification Billing error correction $31,300 fill in the blank 1 of 18 AppraisalExternal failureInternal failurePrevention fill in the blank 2 of 18 Non value addedValue added Cable signal testing 98,600 fill in the blank 3 of 18 AppraisalExternal failureInternal failurePrevention fill in the blank 4 of 18 Non value addedValue added Reinstalling service (installed incorrectly the first time) 67,300 fill in the blank 5 of 18 AppraisalExternal failureInternal failurePrevention fill in the blank 6 of 18 Non value addedValue added Repairing satellite equipment 40,600 fill in the blank 7 of 18 AppraisalExternal failureInternal failurePrevention fill in the blank 8 of 18 Non value addedValue added Repairing underground cable connections to the customer 20,400 fill in the blank 9 of 18 AppraisalExternal failureInternal failurePrevention fill in the blank 10 of 18 Non value addedValue added Replacing old technology cable with higher quality cable 119,400 fill in the blank 11 of 18 AppraisalExternal failureInternal failurePrevention fill in the blank 12 of 18 Non value addedValue added Replacing old technology signal switches with higher quality switches 136,400 fill in the blank 13 of 18 AppraisalExternal failureInternal failurePrevention fill in the blank 14 of 18 Non value addedValue added Responding to customer home repair requests 37,600 fill in the blank 15 of 18 AppraisalExternal failureInternal failurePrevention fill in the blank 16 of 18 Non value addedValue added Training employees 28,400 fill in the blank 17 of 18 AppraisalExternal failureInternal failurePrevention fill in the blank 18 of 18 Non value addedValue added Total activity cost $580,000 Question Content Area b MAKE a cost of quality report Assume that sales are $2,320,000 If required, round percentages to one decimal place Quality Cost Classification Quality Cost Percent of Total Quality Cost Percent of Total Sales Prevention $Prevention Prevention Prevention Appraisal Appraisal Appraisal Appraisal Internal failure Internal failure Internal failure Internal failure External failure External failure External failure External failure Total $Total Total Total Question Content Area c MAKE a value added non value added analysis If required, round percentages to one decimal place Category Amount Percent Value added $Value added Value added Non value added Non value added Non value added Total $Total Total Question Content Area d What percentage of total costs of quality are considered to be value added 17 0 49 0 66 0 None of these options are correct 7 EX 27 17 ALGO eBook Show Me How Question Content Area ProcessActivity Analysisfor a Service Company Statewide Insurance Company has a process for making payments on insurance claims as follows An activity analysis revealed that the cost of these activities was as follows Line Item Description Amount Receiving claim $102,600 Adjusting claim 444,600 Paying claim 136,800 Total $684,000 This process includes only the cost of processing the claim payments, not the actual amount of the claim payments The adjusting activity involves verifying and estimating the amount of the claim and is variable to the number of claims adjusted The process received, adjusted, and paid 7,600 claims during the period All claims were treated identically in this process To improve the cost of this process, management has determined that claims should be segregated into two categories Claims under $1,000 and claims greater than $1,000 claims under $1,000 would not be adjusted but would be accepted upon the insured's evidence of claim Claims above $1,000 would be adjusted It is estimated that 75 of the claims are under $1,000 and would thus be paid without adjustment It is also estimated that the additional effort to segregate claims would add 10 to the receiving claim activity cost Question Content Area a Develop a table showing the percent of individual activity cost to the total process cost Round the percents to the nearest whole number, if required Activity Cost Percent of Total Process Receiving claim $Receiving claim Receiving claim Adjusting claim Adjusting claim Adjusting claim Paying claim Paying claim Paying claim Total $Total Total Question Content Area b Determine the average total process cost per claim payment, assuming 7,600 total claims Round to the nearest whole dollar fill in the blank 1 of 1$ per paid claim Question Content Area c MAKE a table showing the changes in the activity costs as a result of the changes proposed by management Round to one decimal place, if required If an amount is zero, leave the entry box blank Use the minus sign to indicate an additional cost in the last column Activities Activity Cost Prior to Improvement Activity Cost After Improvement Activity Cost Saving Receiving claim $Receiving claim $Receiving claim $Receiving claim Adjusting claim Adjusting claim Adjusting claim Adjusting claim Paying claim Paying claim Paying claim Paying claim Totals $Totals $Totals $Totals Question Content Area d Estimate the average cost per cla

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5.EX.27.13.ALGO eBook Show Me How Question Content Area Lean Accounting Power Audio Inc. manufactures audio speakers. Each speaker requires $108 per unit of direct materials.

5.EX.27.13.ALGO

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Question Content Area

Lean Accounting

Power Audio Inc. manufactures audio speakers. Each speaker requires $108 per unit of direct materials. The speaker manufacturing assembly cell includes the following estimated costs for the period:

Line Item Description	Amount
Labor	$60,270
Depreciation	8,090
Supplies	2,940
Power	2,200
Total cell costs for the period	$73,500

The operating plan calls for 175 operating hours for the period. Each speaker requires 12 minutes of cellprocesstime. The unit selling price for each speaker is $292. During the period, the following transactions occurred:

Purchased materials to produce 425 speaker units.
Applied conversion costs to production of 405 speaker units.
Completed and transferred 385 speaker units to finished goods.
Sold 370 speaker units.

There were no inventories at the beginning of the period.

Question Content Area

a. Journalize the summary transactions (1)-(4) for the period.Round the per unit cost to the nearest cent and use in subsequent computations.If an amount box does not require an entry, leave it blank.

Transaction	Account	Debit	Credit
1.	Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory	- Select -	- Select -
	Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory	- Select -	- Select -
2.	Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory	- Select -	- Select -
	Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory	- Select -	- Select -
3.	Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory	- Select -	- Select -
	Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory	- Select -	- Select -
4. Sale	Accounts ReceivableConversion CostsCost of Goods SoldFinished Goods InventorySales	- Select -	- Select -
	Accounts ReceivableConversion CostsCost of Goods SoldFinished Goods InventorySales	- Select -	- Select -
4. Cost	Accounts ReceivableConversion CostsCost of Goods SoldFinished Goods InventorySales	- Select -	- Select -
	Accounts ReceivableConversion CostsCost of Goods SoldFinished Goods InventorySales	- Select -	- Select -

Question Content Area

b. Determine the ending balance of raw and in process inventory and finished goods inventory. Raw and In Process Inventory, ending balancefill in the blank 1 of 2$ Finished Goods Inventory, ending balancefill in the blank 2 of 2$

6.EX.27.15.ALGO

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Question Content Area

Cost of Qualityand Value-Added/Non-Value-Added Reports for a Service Company

Seven Seas Inc. provides cable TV and Internet service to the local community. The activities and activity costs of Seven Seas are identified.

Question Content Area

a. Identify the cost of quality classification for each activity and whether the activity is value-added or non-value-added.

Quality Control Activities	Activity Cost	Quality Cost Classification	VA/NVA Classification
Billing error correction	$31,300	fill in the blank 1 of 18 AppraisalExternal failureInternal failurePrevention	fill in the blank 2 of 18 Non-value-addedValue-added
Cable signal testing	98,600	fill in the blank 3 of 18 AppraisalExternal failureInternal failurePrevention	fill in the blank 4 of 18 Non-value-addedValue-added
Reinstalling service (installed incorrectly the first time)	67,300	fill in the blank 5 of 18 AppraisalExternal failureInternal failurePrevention	fill in the blank 6 of 18 Non-value-addedValue-added
Repairing satellite equipment	40,600	fill in the blank 7 of 18 AppraisalExternal failureInternal failurePrevention	fill in the blank 8 of 18 Non-value-addedValue-added
Repairing underground cable connections to the customer	20,400	fill in the blank 9 of 18 AppraisalExternal failureInternal failurePrevention	fill in the blank 10 of 18 Non-value-addedValue-added
Replacing old technology cable with higher quality cable	119,400	fill in the blank 11 of 18 AppraisalExternal failureInternal failurePrevention	fill in the blank 12 of 18 Non-value-addedValue-added
Replacing old technology signal switches with higher quality switches	136,400	fill in the blank 13 of 18 AppraisalExternal failureInternal failurePrevention	fill in the blank 14 of 18 Non-value-addedValue-added
Responding to customer home repair requests	37,600	fill in the blank 15 of 18 AppraisalExternal failureInternal failurePrevention	fill in the blank 16 of 18 Non-value-addedValue-added
Training employees	28,400	fill in the blank 17 of 18 AppraisalExternal failureInternal failurePrevention	fill in the blank 18 of 18 Non-value-addedValue-added
Total activity cost	$580,000

Question Content Area

b. MAKE a cost of quality report. Assume that sales are $2,320,000.If required, round percentages to one decimal place.

Quality Cost Classification	Quality Cost	Percent of Total Quality Cost	Percent of Total Sales
Prevention	$Prevention	Prevention%	Prevention%
Appraisal	Appraisal	Appraisal%	Appraisal%
Internal failure	Internal failure	Internal failure%	Internal failure%
External failure	External failure	External failure%	External failure%
Total	$Total	Total%	Total%

Question Content Area

c. MAKE a value-added/non-value-added analysis.If required, round percentages to one decimal place.

Category	Amount	Percent
Value-added	$Value-added	Value-added%
Non-value-added	Non-value-added	Non-value-added%
Total	$Total	Total%

Question Content Area

d. What percentage of total costs of quality are considered to be value-added?

17.0%49.0%66.0%None of these options are correct.

7.EX.27.17.ALGO

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Question Content Area

ProcessActivity Analysisfor a Service Company

Statewide Insurance Company has a process for making payments on insurance claims as follows:

An activity analysis revealed that the cost of these activities was as follows:

Line Item Description	Amount
Receiving claim	$102,600
Adjusting claim	444,600
Paying claim	136,800
Total	$684,000

This process includes only the cost of processing the claim payments, not the actual amount of the claim payments. The adjusting activity involves verifying and estimating the amount of the claim and is variable to the number of claims adjusted.

The process received, adjusted, and paid 7,600 claims during the period. All claims were treated identically in this process.

To improve the cost of this process, management has determined that claims should be segregated into two categories. Claims under $1,000 and claims greater than $1,000: claims under $1,000 would not be adjusted but would be accepted upon the insured's evidence of claim. Claims above $1,000 would be adjusted. It is estimated that 75% of the claims are under $1,000 and would thus be paid without adjustment. It is also estimated that the additional effort to segregate claims would add 10% to the "receiving claim" activity cost.

Question Content Area

a. Develop a table showing the percent of individual activity cost to the total process cost.Round the percents to the nearest whole number, if required.

Activity	Cost	Percent of Total Process
Receiving claim	$Receiving claim	Receiving claim%
Adjusting claim	Adjusting claim	Adjusting claim%
Paying claim	Paying claim	Paying claim%
Total	$Total	Total%

Question Content Area

b. Determine the average total process cost per claim payment, assuming 7,600 total claims.Round to the nearest whole dollar. fill in the blank 1 of 1$ per paid claim

Question Content Area

c. MAKE a table showing the changes in the activity costs as a result of the changes proposed by management.Round to one decimal place, if required.If an amount is zero, leave the entry box blank. Use the minus sign to indicate an additional cost in the last column.

Activities	Activity Cost Prior to Improvement	Activity Cost After Improvement	Activity Cost Saving
Receiving claim	$Receiving claim	$Receiving claim	$Receiving claim
Adjusting claim	Adjusting claim	Adjusting claim	Adjusting claim
Paying claim	Paying claim	Paying claim	Paying claim
Totals	$Totals	$Totals	$Totals

Question Content Area

d. Estimate the average cost per claim payment, assuming that the changes proposed by management are enacted for 7,600 total claims.Round to the nearest cent. fill in the blank 1 of 1$ per paid claim

8.EX.27.11.ALGO

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Question Content Area

Lean Accounting

Westgate Inc. uses a lean manufacturing strategy to manufacture DVR (digital video recorder) players. The company manufactures DVR players through a single product cell. The budgetedconversion costfor the year is $1,137,300 for 2,230 production hours. Each unit requires 20 minutes of cellprocesstime. During March, 780 DVR players were manufactured in the cell. The materials cost per unit is $79. The following summary transactions took place during March:

Materials were purchased for March production.
Conversion costs were applied to production.
780 DVR players were assembled and placed in finished goods.
740 DVR players were sold for $441 per unit.

Question Content Area

a. Determine the budgeted cell conversion cost per hour.If required, round to the nearest dollar. fill in the blank 1 of 1$ per hour

b. Determine the budgeted cell conversion cost per unit.If required, round to the nearest dollar. fill in the blank 1 of 1$ per unit

Question Content Area

c. Journalize the summary transactions (1)-(4) for March. If an amount box does not require an entry, leave it blank.

Transaction	Account	Debit	Credit
1.	Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory	- Select -	- Select -
	Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory	- Select -	- Select -
2.	Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory	- Select -	- Select -
	Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory	- Select -	- Select -
3.	Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory	- Select -	- Select -
	Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory	- Select -	- Select -
4. Sale	Accounts ReceivableConversion CostsCost of Goods SoldFinished Goods InventorySales	- Select -	- Select -
	Accounts ReceivableConversion CostsCost of Goods SoldFinished Goods InventorySales	- Select -	- Select -
4. Cost	Accounts ReceivableConversion CostsCost of Goods SoldFinished Goods InventorySales	- Select -	- Select -
	Accounts ReceivableConversion CostsCost of Goods SoldFinished Goods InventorySales	- Select -	- Select -

9.EX.27.12.ALGO

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Question Content Area

Lean Accounting

Modern Lighting Inc. manufactures lighting fixtures, using lean manufacturing methods. Style Omega has a materials cost per unit of $28. The budgetedconversion costfor the year is $156,000 for 2,600 production hours. A unit of Style Omega requires 20 minutes of cell production time. The following transactions took place during June:

Materials were acquired to assemble 940 Style Omega units for June.
Conversion costs were applied to 940 Style Omega units of production.
870 units of Style Omega were completed in June.
820 units of Style Omega were sold in June for $90 per unit.

Question Content Area

a. Determine the budgeted cell conversion cost per hour.If required, round to the nearest cent. fill in the blank 1 of 1$ per hour

b. Determine the budgeted cell conversion cost per unit.If required, round to the nearest cent. fill in the blank 1 of 1$ per unit

Question Content Area

c. Journalize the summary transactions (1)-(4) for June.If required, round your answers to one decimal place.If an amount box does not require an entry, leave it blank.

Transaction	Account	Debit	Credit
1.	Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory	- Select -	- Select -
	Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory	- Select -	- Select -
2.	Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory	- Select -	- Select -
	Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory	- Select -	- Select -
3.	Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory	- Select -	- Select -
	Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory	- Select -	- Select -
4. Sale	Accounts ReceivableConversion CostsCost of Goods SoldFinished Goods InventorySales	- Select -	- Select -
	Accounts ReceivableConversion CostsCost of Goods SoldFinished Goods InventorySales	- Select -	- Select -
4. Cost	Accounts ReceivableConversion CostsCost of Goods SoldFinished Goods InventorySales	- Select -	- Select -
	Accounts ReceivableConversion CostsCost of Goods SoldFinished Goods InventorySales	- Select -	- Select -

1.EX.27.01

eBook

Learning Objective 1

Question Content Area

Lean Principles

The chief executive officer (CEO) of Platinum Inc. just read an article written by a business professor at Harvard University describing the benefits of the lean philosophy. The CEO issued the following statement after reading the article:

This company will become a lean manufacturing company. Presently, we have too much inventory. To become lean, we need to eliminate the excess inventory. Therefore, I want all employees to begin reducing inventories until we make products "just in time." Thank you for your cooperation.

a.Lean manufacturing is ____. Identify the statement that suits the above situation. a. A philosophy that focuses on reducing time, cost, poor quality and uncertainty from a process. b. An inventory reduction method. c. Producing based on the sales. d. Improving productivity ignoring the quality and other aspects.

abcd

b.A CEO of a company suddenly commands that the company will become lean manufacturing company due to increased inventory. Identify the statement that suits the situation. a. The plan of introducing a lean manufacturing system may be effective to avoid inventory. b. The plan of introducing a lean manufacturing system may increase the productivity of the company. c. The CEO of the company has not given any action plans and the inventories created are not because of the production excess alone. It may even due to poor quality of the product. d. Implementing a lean manufacturing system leads to increased cost of manufacturing.

abcd

2.EX.27.02

eBook

Question Content Area

Lean as a Strategy

The American textile industry has moved much of its operations offshore in the pursuit of lower labor costs. Textile imports have risen from under 5% of all textile production in the early 1960s to over 95% today. Offshore manufacturers make long runs of standard mass-market apparel items. These are then brought to the United States in container ships, requiring significant time between original order and delivery. As a result, retail customers must accurately forecast market demands for imported apparel items.

A textile retailer wishes to match the trend in the market and bring in new products before the competitor introduces the same. Whom should he approach and identify the reason for your answer. a. Domestic manufacturer. b. Offshore manufacturer.

Reason: a. Domestic manufacturers can be reached quickly and make small batches of orders which will be delivered within the short time. b. Offshore manufacturers are cheap and large quantities can be ordered. c. Offshore manufacturers are not the trend setters and the fashion may not be same to order a large quantity at a time. d. None of the above.

a and cb and cc and dd

3.EX.27.03

eBook

Question Content Area

Lean Principles

Drip Wear Inc. manufactures various styles of men's casual wear. Shirts are cut and assembled by a workforce that is paid by piece rate. This means that they are paid according to the amount of work completed during a period of time. To illustrate, if the piece rate is $0.10 per sleeve assembled, and the worker assembles 800 sleeves during the day, then the worker would be paid $80 (800 $0.10) for the day's work.

The company is considering adopting a lean manufacturing philosophy by organizing work cells around various types of products and employing pull manufacturing. However, no change is expected in the compensation policy. On this point, the manufacturing manager stated the following:

"Piecework compensation provides an incentive to work fast. Without it, the workers will just goof off and expect a full day's pay. We can't pay straight hourly wagesat least not in this industry."

A garment company was following piece rate system for its employees and suddenly lean manufacturing system was introduced. The company wishes to continue with the same piece rate system. Identify the statement that suits the given situation.

a.A piece rate system is an effective system to improve productivity and it also supports the philosophy of lean manufacturing.

b.A piece rate system is a traditional method that is not suitable for the lean manufacturing system. Because the piece rate system increases the inventory rather than efficiency.

c.A piece rate system makes the employees specialized in the job.

d.A piece rate system is more effective to support the market demand.

4.EX.27.04

eBook

Question Content Area

Lead TimeAnalysis

Fuzzy Pals Inc. manufactures toy stuffed animals. The direct labor time required to cut, sew, and stuff a toy is 8 minutes per unit. The company makes two types of stuffed toysa lion and a bear. The lion is assembled in lot sizes of 40 units per batch, while the bear is assembled in lot sizes of 10 units per batch. Since each product has direct labor time of 8 minutes per unit, management has determined that the lead time for each product is 8 minutes.

a.Lead time includes ___, ___, and ___. a. Value-added time, wait time and other non-value-added time. b. Production time, packing time and value-added time. c. Idle time, direct labor hours, and wait time. d. None of the above.

abcd

b.A toy manufacturing unit produces two types of products and the labor time for each product is 10 minutes. The batch size of product A is 40 units and batch size of product B is 8 units. The company considers the lead time of the products to be equal to the labor hours. Is this decision correct? Support your answer by selecting the reason. a. Yes b. No

Reason: a. Lead time of the product includes value-added time, idle time and other non-value-added time. b. Labor time and lead time adds value to the product. c. Lead time and labor time are one and the same with different names. d. None of the above.

abcd

5.EX.27.13.ALGO

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Question Content Area

Lean Accounting

Power Audio Inc. manufactures audio speakers. Each speaker requires $108 per unit of direct materials. The speaker manufacturing assembly cell includes the following estimated costs for the period:

Line Item Description	Amount
Labor	$60,270
Depreciation	8,090
Supplies	2,940
Power	2,200
Total cell costs for the period	$73,500

Purchased materials to produce 425 speaker units.
Applied conversion costs to production of 405 speaker units.
Completed and transferred 385 speaker units to finished goods.
Sold 370 speaker units.

There were no inventories at the beginning of the period.

Question Content Area

Transaction	Account	Debit	Credit
1.	Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory	- Select -	- Select -
	Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory	- Select -	- Select -
2.	Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory	- Select -	- Select -
	Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory	- Select -	- Select -
3.	Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory	- Select -	- Select -
	Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory	- Select -	- Select -
4. Sale	Accounts ReceivableConversion CostsCost of Goods SoldFinished Goods InventorySales	- Select -	- Select -
	Accounts ReceivableConversion CostsCost of Goods SoldFinished Goods InventorySales	- Select -	- Select -
4. Cost	Accounts ReceivableConversion CostsCost of Goods SoldFinished Goods InventorySales	- Select -	- Select -
	Accounts ReceivableConversion CostsCost of Goods SoldFinished Goods InventorySales	- Select -	- Select -

Question Content Area

6.EX.27.15.ALGO

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Question Content Area

Cost of Qualityand Value-Added/Non-Value-Added Reports for a Service Company

Seven Seas Inc. provides cable TV and Internet service to the local community. The activities and activity costs of Seven Seas are identified.

Question Content Area

a. Identify the cost of quality classification for each activity and whether the activity is value-added or non-value-added.

Quality Control Activities	Activity Cost	Quality Cost Classification	VA/NVA Classification
Billing error correction	$31,300	fill in the blank 1 of 18 AppraisalExternal failureInternal failurePrevention	fill in the blank 2 of 18 Non-value-addedValue-added
Cable signal testing	98,600	fill in the blank 3 of 18 AppraisalExternal failureInternal failurePrevention	fill in the blank 4 of 18 Non-value-addedValue-added
Reinstalling service (installed incorrectly the first time)	67,300	fill in the blank 5 of 18 AppraisalExternal failureInternal failurePrevention	fill in the blank 6 of 18 Non-value-addedValue-added
Repairing satellite equipment	40,600	fill in the blank 7 of 18 AppraisalExternal failureInternal failurePrevention	fill in the blank 8 of 18 Non-value-addedValue-added
Repairing underground cable connections to the customer	20,400	fill in the blank 9 of 18 AppraisalExternal failureInternal failurePrevention	fill in the blank 10 of 18 Non-value-addedValue-added
Replacing old technology cable with higher quality cable	119,400	fill in the blank 11 of 18 AppraisalExternal failureInternal failurePrevention	fill in the blank 12 of 18 Non-value-addedValue-added
Replacing old technology signal switches with higher quality switches	136,400	fill in the blank 13 of 18 AppraisalExternal failureInternal failurePrevention	fill in the blank 14 of 18 Non-value-addedValue-added
Responding to customer home repair requests	37,600	fill in the blank 15 of 18 AppraisalExternal failureInternal failurePrevention	fill in the blank 16 of 18 Non-value-addedValue-added
Training employees	28,400	fill in the blank 17 of 18 AppraisalExternal failureInternal failurePrevention	fill in the blank 18 of 18 Non-value-addedValue-added
Total activity cost	$580,000

Question Content Area

b. MAKE a cost of quality report. Assume that sales are $2,320,000.If required, round percentages to one decimal place.

Quality Cost Classification	Quality Cost	Percent of Total Quality Cost	Percent of Total Sales
Prevention	$Prevention	Prevention%	Prevention%
Appraisal	Appraisal	Appraisal%	Appraisal%
Internal failure	Internal failure	Internal failure%	Internal failure%
External failure	External failure	External failure%	External failure%
Total	$Total	Total%	Total%

Question Content Area

c. MAKE a value-added/non-value-added analysis.If required, round percentages to one decimal place.

Category	Amount	Percent
Value-added	$Value-added	Value-added%
Non-value-added	Non-value-added	Non-value-added%
Total	$Total	Total%

Question Content Area

d. What percentage of total costs of quality are considered to be value-added?

17.0%49.0%66.0%None of these options are correct.

7.EX.27.17.ALGO

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Question Content Area

ProcessActivity Analysisfor a Service Company

Statewide Insurance Company has a process for making payments on insurance claims as follows:

An activity analysis revealed that the cost of these activities was as follows:

Line Item Description	Amount
Receiving claim	$102,600
Adjusting claim	444,600
Paying claim	136,800
Total	$684,000

The process received, adjusted, and paid 7,600 claims during the period. All claims were treated identically in this process.

Question Content Area

a. Develop a table showing the percent of individual activity cost to the total process cost.Round the percents to the nearest whole number, if required.

Activity	Cost	Percent of Total Process
Receiving claim	$Receiving claim	Receiving claim%
Adjusting claim	Adjusting claim	Adjusting claim%
Paying claim	Paying claim	Paying claim%
Total	$Total	Total%

Question Content Area

b. Determine the average total process cost per claim payment, assuming 7,600 total claims.Round to the nearest whole dollar. fill in the blank 1 of 1$ per paid claim

Question Content Area

Activities	Activity Cost Prior to Improvement	Activity Cost After Improvement	Activity Cost Saving
Receiving claim	$Receiving claim	$Receiving claim	$Receiving claim
Adjusting claim	Adjusting claim	Adjusting claim	Adjusting claim
Paying claim	Paying claim	Paying claim	Paying claim
Totals	$Totals	$Totals	$Totals

Question Content Area

d. Estimate the average cost per claim payment, assuming that the changes proposed by management are enacted for 7,600 total claims.Round to the nearest cent. fill in the blank 1 of 1$ per paid claim

8.EX.27.11.ALGO

eBook

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Question Content Area

Lean Accounting

Materials were purchased for March production.
Conversion costs were applied to production.
780 DVR players were assembled and placed in finished goods.
740 DVR players were sold for $441 per unit.

Question Content Area

a. Determine the budgeted cell conversion cost per hour.If required, round to the nearest dollar. fill in the blank 1 of 1$ per hour

b. Determine the budgeted cell conversion cost per unit.If required, round to the nearest dollar. fill in the blank 1 of 1$ per unit

Question Content Area

c. Journalize the summary transactions (1)-(4) for March. If an amount box does not require an entry, leave it blank.

Transaction	Account	Debit	Credit
1.	Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory	- Select -	- Select -
	Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory	- Select -	- Select -
2.	Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory	- Select -	- Select -
	Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory	- Select -	- Select -
3.	Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory	- Select -	- Select -
	Accounts PayableConversion CostsCost of Goods SoldFinished Goods InventoryRaw and In Process Inventory	- Select -	- Select -
4. Sale	Accounts ReceivableConversion CostsCost of Goods SoldFinished Goods InventorySales	- Select -	- Select -
	Accounts ReceivableConversion CostsCost of Goods SoldFinished Goods InventorySales	- Select -	- Select -
4. Cost	Accounts ReceivableConversion CostsCost of Goods SoldFinished Goods InventorySales	- Select -	- Select -
	Accounts ReceivableConversion CostsCost of Goods SoldFinished Goods InventorySales	- Select -	- Select -

9.EX.27.12.ALGO

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Question Content Area

Lean Accounting

Materials were acquired to assemble 940 Style Omega units for June.
Conversion costs were applied to 940 Style Omega units of production.
870 units of Style Omega were completed in June.
820 units of Style Omega were sold in June for $90 per unit.

Question Content Area

a. Determine the budgeted cell conversion cost per hour.If required, round to the nearest cent. fill in the blank 1 of 1$ per hour

b. Determine the budgeted cell conversion cost per unit.If required, round to the nearest cent. fill in the blank 1 of 1$ per unit

Question Content Area

c. Journalize the summary transactions (1)-(4) for June.If required, round your answers to one decimal place.If an amount box does not require an entry, leave it blank.

5.EX.27.13.ALGO eBook Show Me How Question Content Area Lean Accounting Power Audio Inc. manufactures audio speakers. Each speaker requires $108 per unit of direct materials.

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