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

Lean accounting is a costing method that supports creating value for the customer by costing the entire value stream, NOT individual products or departments, thereby eliminating waste in the accounting process.

In a backflush-costing system, no record of work in process appears in the accounting records.

A trigger point refers to the inventory level at which a reorder is generated.

The time required to get equipment, tools, and materials ready to start production is referred to as:

The reorder point is simplest to compute when:

Relevant opportunity cost of capital is the return forgone by investing capital in inventory rather than elsewhere.

The costs that result from theft of inventory are:

The purchase-order lead time is the:

The simplest version of the Economic Order Quantity model incorporates only ordering costs, carrying costs, and purchasing costs into the calculation.

The costs that result when features and characteristics of a product or service are NOT in conformance with the specifications are:

Answer the following questions using the information below: The following information applies to Labs Plus, which supplies microscopes to laboratories throughout the country. Labs Plus purchases the microscopes from a manufacturer which has a reputation for very high quality in its manufacturing operation. -What is the reorder point?

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

The "flush" in backflush refers to the fact that there are no variances in a backflush costing system using standard costs.

Just-in-time purchasing is guided solely by the economic order quantity.

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):

Costs of setting up a production run are analogous to ordering costs in the Economic Order Quantity (EOQ)model.

Answer the following questions using the information below: The following information applies to Labs Plus, which supplies microscopes to laboratories throughout the country. Labs Plus purchases the microscopes from a manufacturer which has a reputation for very high quality in its manufacturing operation. -What is the economic order quantity assuming each order was made at the economic-order-quantity amount?

All inventory costs are available in financial accounting systems.

For supply item ABC, Andrews Company has been ordering 125 units based on the recommendation of the salesperson who calls on the company monthly. A new purchasing agent has been hired by the company who wants to start using the economic-order-quantity method and its supporting decision elements. She has gathered the following information: Required: Determine the EOQ, average inventory, orders per year, average daily demand, reorder point, annual ordering costs, and annual carrying costs.

Answer the following questions using the information below: Owen-King Company sells optical equipment. Lens Company manufactures special glass lenses. Owen-King Company orders 5,200 lenses per year, 100 per week, at $20 per lens. Lens Company covers all shipping costs. Owen-King Company earns 30% on its cash investments. The purchase-order lead time is 2.5 weeks. Owen-King Company sells 125 lenses per week. The following data are available: -What is the reorder point?