Exam 20: Inventory Management, Just-in-Time, and Simplified Costing Methods

Which of the following statements best defines a materials requirements planning system?

The costs that result when a company runs out of a particular item for which there is a customer demand are ________.

Which of the following statements best defines setup time?

Companies that utilize backflush costing typically prorate underallocated or overallocated conversion costs between work-in-process, finished goods, and cost of goods sold.

The purchase-order lead time is the ________.

Vision Company manufactures digital cameras. For May, there were no beginning inventories of direct materials and no beginning or ending work-in -process. Conversion costs is the only indirect manufacturing cost category currently used. Journal entries are recorded when materials are purchased and when units are sold. Which of the following journal entries properly reflects the purchase of materials under backflush costing?

Traditional normal and standard costing systems usually use 4 trigger points to record the flow of costs through the production system. Such costing is called ________.

The EOQ model is solved using calculus but the key intuition is that relevant total costs are minimized when relevant ordering costs equal relevant carrying costs.

Short Grass Incorporated is a distributor of golf balls. Martin's Golf Supplies is a local retail outlet which sells golf balls. Martin's purchases the golf balls from Short Grass Incorporated at $1.15 per ball; the golf balls are shipped in cartons of 72. Short Grass Incorporated pays all incoming freight, and Martin's Golf Supplies does not inspect the balls due to Short Grass' reputation for high quality. Annual demand is 158,520 golf balls at a rate of 3891 balls per week. Martin's Golf Supplies earns 8% on its cash investments. The purchase-order lead time is one week. The following cost data are available: What is the economic order quantity? (Round costs to the nearest cent and quantities to the nearest whole number.)

The Allianz Company produces a specialty wood furniture product, and has the following information available concerning its inventory items: Annual demand is 30,000 packages per year. The purchase price per package is $53. Which of the following statements is true of Allianz's EOQ system costs?

Among different types of costs associated with inventory, the costs of obtaining purchase approvals are ________.

Successful implementation of a JIT production system and effective accomplishments of its goals should result in a decrease in the inventory turnover ratio and a decrease in the number of days of inventory on hand.

Vision Company manufactures digital cameras. For May, there were no beginning inventories of direct materials and no beginning or ending work-in -process. Conversion costs is the only indirect manufacturing cost category currently used. Journal entries are recorded when materials are purchased and when units are sold. If the two trigger points are completion of good finished units of product and sale of finished goods, which of the following entries would be used to record cost of finished units completed under backflush costing? (Round intermediate calculations to the nearest cent and final calculations to the nearest dollar.)

Which of the following terms is defined as the time required to get equipment, tools, and materials ready to start production?

Delinz Company sells 115 hams per week. Purchase-order lead time is 6 weeks and the economic-order quantity is 210 hams. What is the reorder point?

Carrying costs only include those costs that are entered into the financial accounting system and do not include the opportunity cost of the investment tied up in inventory.

A "push-through" system, often described as a materials requirement planning system, focuses first on the forecasted amount and timing of finished goods and then determines the demand for materials components and subassemblies at each of the prior stages of production.

What are the implications of JIT and backflush costing systems for activity-based costing (ABC) systems?

Which of the following is the correct mathematical expression to calculate annual relevant ordering costs?

Which of the following is a disadvantage of an enterprise resource planning (ERP) system?