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

A system that emphasizes lean production techniques, low quantities of inventory, and close coordination among production workstations is called ________.

A demand-pull system in which each component in a production line is produced immediately as needed by the next step in the production line is referred to as ________.

The annual relevant carrying costs of inventory consists of the sum of the ________.

The optimal safety stock level is the quantity of safety stock that minimizes the sum of the annual relevant ________.

The accounting procedures in a backflush-costing system strictly adhere to Generally Accepted Accounting Principles (GAAP).

Picture Company has one particular product that has an annual demand of 5,000 units. Total manufacturing costs per unit total $50. Ordering costs for the product total $60 per purchase order. Currently, the carrying costs per unit are 25% of manufacturing costs. Required: Determine the economic manufacturing order quantity.

Which of the following costs is a relevant inventory carrying cost of carrying inventory?

In lean accounting environments, it is critical that work-in-process and finished goods accounting be accurate for accurate financial accounting and pricing decisions.

The Controller of Nip-it-in-the-Bud Inc. has studied the possibility of implementing a JIT production system. The annual incremental retooling costs of the JIT system is projected to be about $67,000 however, the new system will lower insurance costs by $10,000 and storage costs will drop by $20,000 a year as the company will be able to reuse warehouse space for other strategic purposes. In addition, material handling costs will drop by $10,000 a year and because of a resulting increase in quality and faster delivery, the company's contribution margin on the product will increase by $2.00 on annual sales of 20,000 units. Required: Calculate the net incremental benefit of the JIT system implementation.

Which of the following statements best defines a just-in-time production system?

Just-in-time systems are similar to materials requirement planning systems as both systems are demand-pull systems.

Which of the following statements is true of costs associated with goods for sale?

A system that comprises a single database that collects data and feeds it into software applications supporting all of a company's business activities is known as a(n) ________.

A positive aspect of backflush costing is the presence of the visible audit trail.

To comply with GAAP, backflush cost numbers can be adjusted by recording a journal entry.

Discuss considerations that should be fully taken into account when developing inventory related relevant costs for use in an economic order quantity (EOQ) model.

The following information applies to Krynton Corp. which supplies microscopes to laboratories throughout the country. Krynton purchases the microscopes from a manufacturer which has a reputation for very high quality in its manufacturing operation. Assuming each order was made at the economic order quantity amount, what is the cost of placing an order?

The optimal safety-stock level is the quantity of safety stock that minimizes the sum of annual relevant stockout and ordering costs.

Corry Corporation manufactures filters for cars, vans, and trucks. A backflush costing system is used and standard costs for a filter are as follows: Filters are scheduled for production only after orders are received, and are shipped immediately upon completion. This results in product costs being charged directly to cost of goods sold. In December, 3,000 filters were produced and shipped. Materials were purchased at a cost of $8,450 and actual conversion costs of $13,650 were recorded. Required: Prepare journal entries to record December's costs for the production of the filters.

Which of the following statements best defines manufacturing cells?