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Exam 27: Lean Principles, Lean Accounting, and Activity Analysis

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Question 1

True/False

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Employee involvement in a product-oriented factory emphasizes employee teams, rather than individual employees.

A) True
B) False

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Question 2

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Identify the following quality control activities as either value-added or non-value-added. -Materials inspection

A) Value-added
B) Non-value-added

C) A) and B)
D) undefined

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Question 3

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Which of the following statements best describes the relationship among the costs of quality?

Alaskan Pattern Company makes dressmakers' patterns using a machine that stamps the pattern outline onto tissue paper. The stamping center produced 40,000 patterns in August, with a machine time per pattern of 20 seconds. Annual budgeted cell conversion costs were as follows: $\begin{array}{lc}\text { Maintenance and supplies } & \$ 1,650,000 \\\text { Depreciation } & 700,000 \\\text { Supporting labor } & 825,000 \\\text { Total }&\$3,175,000\end{array}$ Alaskan planned 2,500 total machine hours for the year. Calculate Alaskan's budgeted cell conversion cost rate for the year.

Schedule of Activity Costs $\begin{array}{|l|l|}\hline \text { Quality Control Activities } & \text { Activity Cost } \\\hline \text { Product testing } & \$ 55,000 \\\hline \text { Assessing vendor quality } & 26,000 \\\hline \text { Recalls } & 18,000 \\\hline \text { Rework } & 29,000 \\\hline \text { Scrap disposal } & 8,000 \\\hline \text { Product design } & 30,000 \\\hline \text { Training machine operators } & 46,000 \\\hline \text { Warranty work } & 12,000 \\\hline \text { Process audits } & 22,000 \\\hline\end{array}$ -Connally Company's payroll department required that every time card be checked twice to ensure pay accuracy. The company has 1,000 employees and has determined that the checks cost the company $8,000 per year. They have decided to change this policy and only check those names which appear on the exceptions report and a random check on the entire payroll. Currently only 15% of the payroll is evaluated each payroll. Determine the inspection activity cost per employee on the 1,000 employees both before and after the improvement.

Schedule of Activity Costs $\begin{array}{|l|l|}\hline \text { Quality Control Activities } & \text { Activity Cost } \\\hline \text { Frocess audits } & \$ 50,000 \\\hline \text { Training of machine operators } & 28,000 \\\hline \text { Frocessing returned products } & 19,000 \\\hline \text { Scrap processing disposal) } & 25,000 \\\hline \text { Rework } & 8,000 \\\hline \text { Freventative maintenance } & 30,000 \\\hline \text { Froduct design } & 46,000 \\\hline \text { Warranty work } & 12,000 \\\hline \text { Finished goods inspection } & 23,000 \\\hline\end{array}$ -From the above schedule of activity costs, determine the internal failure costs.

Squirrel Co. operates in a lean manufacturing environment. For June production, Squirrel purchased 6,000 units of raw materials at $6.00 per unit on account. The journal entry required to record this transaction is:

Inventory reduction is a principle.

Identity the following by their type of quality cost. -Operator training

Under the lean production concept, employees are better utilized if they are experts in one operation rather than wasting time training them to learn various production operations.

Which of the following is considered non-value-added lead time?

In a lean environment, raw materials are delivered less frequently than in a traditional environment.

Costs of controlling quality include prevention costs and internal failure costs.

In a lean environment, process problems are more visible than they are in a traditional environment because:

Financial accounting information is used more often for long-term operating decisions and nonfinancial information is used more often for day-to-day decisions.

Schedule of Activity Costs $\begin{array}{|l|l|}\hline \text { Quality Control Activities } & \text { Activity Cost } \\\hline \text { Product testing } & \$ 55,000 \\\hline \text { Assessing vendor quality } & 26,000 \\\hline \text { Recalls } & 18,000 \\\hline \text { Rework } & 29,000 \\\hline \text { Scrap disposal } & 8,000 \\\hline \text { Product design } & 30,000 \\\hline \text { Training machine operators } & 46,000 \\\hline \text { Warranty work } & 12,000 \\\hline \text { Process audits } & 22,000 \\\hline\end{array}$ -From the above schedule, calculate the a) value-added and b) non-value-added costs.

The budgeted cell conversion cost rate includes which of the following?

Identify the following quality control activities as either value-added or non-value-added. -Preventive machine maintenance

A setup is the time required to prepare an operation for a new production run.

Identity the following by their type of quality cost. -Warranty work