Question 1

Lean Principles

Bright Night, Inc., manufactures light bulbs. Its purchasing policy requires that the purchasing agents place each quarter's purchasing requirements out for bid. This is because the Purchasing Department is evaluated solely by its ability to get the lowest purchase prices. The lowest bidder receives the order for the next quarter (90 working days).

To make its bulb products, Bright Night requires 61,200 pounds of glass per quarter. Bright Night received two glass bids for the third quarter, as follows:

• Central Glass Company:$28.00 per pound of glass. Delivery schedule: 61,200 (680 lbs. x 90 days) pounds at the beginning of July to last for 3 months.
• Ithaca Glass Company:$28.15 per pound of glass. Delivery schedule: 680 pounds per working day (90 days in the quarter).

Bright Night accepted Central Glass Company's bid because it was the low-cost bid.

1.A manufacturing company gets quotes from each supplier and allocates the purchase order to the company which quotes the lowest price with the expected quality. Is this process effective in long run? Identify reason that supports the answer.

1. Yes
2. No

ab

Reason:

1. The policy is effective as it lowers the cost of purchase.
2. The policy considers the quoted price, and the quality of the product is ignored.
3. The policy of the company is not practically viable as it is not building long-term relationships with its suppliers. The reputation of the company may be affected.
4. Supplier relationships are not required as the products are purchased for the quarter alone.

abcd

2.A manufacturing company gets quotes from each supplier and allocates the purchase order to the company which quotes the lowest price with the expected quality. Are there any additional costs that are involved in bulk purchase for the quarter? Identify reason that supports the answer.

1. Yes
2. No

ab

Reason:

1. The cost of storage, obsolescence, material management and wastages are ignored in this concept.
2. The cost of storage, obsolescence, material management and wastages are included in the purchase cost computation.
3. The cost related to quality can be compensated as the price of the material is low.
4. The responsibility of the manager is to get the lowest bid for the product and all other information is irrelevant.

abcd

3. Considering only inventory financing costs, what is the additional cost per pound of Central Glass Company's bid if the annual cost of money is 8%? (Hint:Determine the average value of glass inventory held for the quarter and multiply by the quarterly interest charge, then divide by the number of pounds.)Round to the nearest cent. $fill in the blank 5 per lb.

Question 2

Lead Time

Sound Tek Inc. manufactures electronic stereo equipment. The manufacturing process includes printed circuit (PC) board assembly, final assembly, testing, and shipping. In the PC board assembly operation, a number of individuals are responsible for assembling electronic components into printed circuit boards. Each operator is responsible for soldering components according to a given set of instructions. Operators work on batches of 50 printed circuit boards. Each board requires 4 minutes of board assembly time. After each batch is completed, the operator moves the assembled boards to the final assembly area. This move takes 12 minutes to complete.

The final assembly for each stereo unit requires 19 minutes and is also done in batches of 50 units. A batch of 50 stereos is moved into the test building, which is across the street. The move takes 20 minutes. Before conducting the test, the test equipment must be set up for the particular stereo model. The test setup requires 30 minutes. The units wait while the setup is performed. In the final test, the 50-unit batch is tested one at a time. Each test requires 11 minutes. The completed batch, after all testing, is sent to shipping for packaging and final shipment to customers. A complete batch of 50 units is sent from testing to shipping. The Shipping Department is located next to testing. Thus, there is no move time between these two operations. Packaging and labeling require 8 minutes per unit.

1. Determine the amount of value-added and non-value-added lead time and the value-added ratio in this process for an average stereo unit in a batch of 50 units. Categorize the non-value-added time into wait and move time. Round the percentage to one decimal place.

Value-added lead time		fill in the blank 1 min.
Non-value-added lead time:
	Wait time lead time	fill in the blank 2 min.
	Move time lead time	fill in the blank 3 min.
Total non-value-added lead time		fill in the blank 4 min.
Total lead time		fill in the blank 5 min.
Value-added ratio (as a percent)		fill in the blank 6%

2. Move time in this process could best be reduced by:

a. Doing nothing.

b. Changing the layout from a process orientation to a product orientation.

c. Increasing batch sizes.

d. Eliminating the testing step.

e. Hiring more workers.

abcde

Question 3

Lean Principles

The chief executive officer (CEO) of Cobalt 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.

1. A philosophy that focuses on reducing time, cost, poor quality and uncertainty from a process.
2. An inventory reduction method.
3. Producing based on the sales.
4. 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.

1. The plan of introducing a lean manufacturing system may be effective to avoid inventory.
2. The plan of introducing a lean manufacturing system may increase the productivity of the company.
3. 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.
4. Implementing a lean manufacturing system leads to increased cost of manufacturing.

Question 4

Process Activity Analysis

The Brite Beverage Company bottles soft drinks into aluminum cans. The manufacturing process consists of three activities:

1. Mixing:water, sugar, and beverage concentrate are mixed.
2. Filling:mixed beverage is filled into 12-oz. cans.
3. Packaging:properly filled cans are boxed into cardboard "fridge packs."

The activity costs associated with these activities for the period are as follows:

Mixing	$577,000
Filling	511,000
Packaging	102,000
Total	$1,190,000

The activity costs do not include materials costs, which are ignored for this analysis. Each can is expected to contain 12 ounces of beverage. Thus, after being filled, each can is automatically weighed. If a can is too light, it is rejected, or "kicked," from the filling line prior to being packaged. The primary cause of kicks is heat expansion. With heat expansion, the beverage overflows during filling, resulting in underweight cans.

This process begins by mixing and filling 8,840,000 cans during the period, of which only 8,500,000 cans are actually packaged. 340,000 cans are rejected due to underweight kicks.

A process improvement team has determined that cooling the cans prior to filling them will reduce the number of overflows due to expansion. After this improvement, the number of kicks is expected to decline from 340,000 cans to 85,000 cans, thus increasing the number of filled cans to 8,755,000 [8,500,000 + (340,000 - 85,000)].

a. Determine the total activity cost per packaged can under present operations.Round to the nearest cent. $fill in the blank 1 per can

b. Determine the amount of increased packaging activity costs from the expected improvements. $fill in the blank 2

c. Determine the expected total activity cost per packaged can after improvements.Round to three decimal places. $fill in the blank 3 per can

Question 5

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

Three Rivers Inc. provides cable TV and Internet service to the local community. The activities and activity costs of Three Rivers are identified as follows:

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	Value-Added/ Non-Value-Added Classification
Billing error correction	$64,400		AppraisalExternal failureInternal failurePrevention	Non-value-addedValue-added
Cable signal testing	121,800		AppraisalExternal failureInternal failurePrevention	Non-value-addedValue-added
Reinstalling service (installed incorrectly the first time)	138,400		AppraisalExternal failureInternal failurePrevention	Non-value-addedValue-added
Repairing satellite equipment	26,100		AppraisalExternal failureInternal failurePrevention	Non-value-addedValue-added
Repairing underground cable connections to the customer	41,800		AppraisalExternal failureInternal failurePrevention	Non-value-addedValue-added
Replacing old technology cable with higher quality cable	168,100		AppraisalExternal failureInternal failurePrevention	Non-value-addedValue-added
Replacing old technology signal switches with higher quality switches	192,100		AppraisalExternal failureInternal failurePrevention	Non-value-addedValue-added
Responding to customer home repair requests	77,300		AppraisalExternal failureInternal failurePrevention	Non-value-addedValue-added
Training employees	40,000		AppraisalExternal failureInternal failurePrevention	Non-value-addedValue-added
Total activity cost	$870,000

b. A cost of quality report. Assume that sales are $4,350,000. If required, round percentages to one decimal place.

Quality Cost Classification	Quality Cost	Percent of Total Quality Cost	Percent of Total Sales
Prevention	$fill in the blank 2386c707ff9d031_1	fill in the blank 2386c707ff9d031_2%	fill in the blank 2386c707ff9d031_3%
Appraisal	fill in the blank 2386c707ff9d031_4	fill in the blank 2386c707ff9d031_5%	fill in the blank 2386c707ff9d031_6%
Internal failure	fill in the blank 2386c707ff9d031_7	fill in the blank 2386c707ff9d031_8%	fill in the blank 2386c707ff9d031_9%
External failure	fill in the blank 2386c707ff9d031_10	fill in the blank 2386c707ff9d031_11%	fill in the blank 2386c707ff9d031_12%
Total	$fill in the blank 2386c707ff9d031_13	fill in the blank 2386c707ff9d031_14%	fill in the blank 2386c707ff9d031_15%

c. A value-added/non-value-added analysis.

Category	Amount	Percent
Value-added	$fill in the blank e08776fd706e035_1	fill in the blank e08776fd706e035_2%
Non-value-added	fill in the blank e08776fd706e035_3	fill in the blank e08776fd706e035_4%
Total	$fill in the blank e08776fd706e035_5	fill in the blank e08776fd706e035_6%

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

46.0%14.0%60.0%None of these options are correct.

Question 6

Pareto chart

Meagher Solutions Inc. manufactures memory chips for personal computers. An activity analysis was conducted, and the following activity costs were identified with the manufacture and sale of memory chips:

Activities	Activity Cost
Correct shipment errors		$158,000
Disposing of scrap	115,000
Emergency equipment maintenance	112,000
Employee training	66,000
Final inspection	89,000
Inspecting incoming materials	68,000
Preventive equipment maintenance	31,000
Processing customer returns	101,000
Scrap reporting	48,000
Supplier development	14,000
Warranty claims	198,000
Total activity cost	$1,000,000

This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the question below.

Open spreadsheet

Choose the correct Pareto chart of these activities below.

The correct chart is

chart Achart Bchart Cchart D

Question 7

Lean Accounting

Vintage Audio Inc. manufactures audio speakers. Each speaker requires $92 per unit of direct materials. The speaker manufacturing assembly cell includes the following estimated costs for the period:

Speaker assembly cell, estimated costs:
Labor	$23,910
Depreciation	3,210
Supplies	1,170
Power	870
Total cell costs for the period	$29,160

The operating plan calls for 135 operating hours for the period. Each speaker requires 20 minutes of cell process time. The unit selling price for each speaker is $249. During the period, the following transactions occurred:

1. Purchased materials to produce 435 speaker units.
2. Applied conversion costs to production of 415 speaker units.
3. Completed and transferred 395 speaker units to finished goods.
4. Sold 380 speaker units.

There were no inventories at the beginning of the period.

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.

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 -

b. Determine the ending balance of raw and in process inventory and finished goods inventory.

Raw and In Process Inventory, ending balance	$fill in the blank 93a7c9f9f050f99_1
Finished Goods Inventory, ending balance	$fill in the blank 93a7c9f9f050f99_2