Question 1

A firm using a backflush costing system will always use actual costs rather than standard costs.

Accepted Answer

A) True 
 B)False  False

Question 2

Bathurst Engineering Ltd makes extensive use of financial performance reports for each of its departments.Most departments have been reporting favourable cost variances with the company's current inventory system.However,management is concerned about the overall performance of the purchasing department.For example,the following information is for the purchasing of materials for a product the company has been manufacturing for several years:
 $$\begin{array} { | l | l | l | l | } 
\hline \text { Purchase Year } & \text { Quantity Used } & \begin{array} { l } 
\text { Average } \
\text { Inventory }
\end{array} & \text { Price Variance } \
\hline 2013 & 00000 & 12000 & \$ 1000 \mathrm {~F} \
\hline 2014 & 90000 & 22500 & 10000 \mathrm {~F} \
\hline 2015 & 30000 & 30000 & 12000 \mathrm {~F} \
\hline 2016 & 75000 & 18750 & 30000 \mathrm { U } \
\hline 2017 & 31000 & 27000 & 3000 \mathrm {~F} \
\hline 2018 & 37000 & 34800 & 9750 \mathrm {~F} \
\hline
\end{array}$$ 
Required:
a.Calculate the inventory turnover for each year.Can any conclusions be drawn for a yearly comparison of the purchase price variance and the inventory turnover?
b.Identify problems likely to be caused by evaluating purchasing only on the basis of the purchase price variance.
c.What recommendations will improve the evaluation process?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

a.
 $$\begin{array} { | l | l | l | l | l | } 
\hline \text { Year } & \text { Quantity used } & & \text { Average inventory } & \text { Turnover } \
\hline 2013 & 60000 & \text { divided by } & 12000 & 5.0 \
\hline 2014 & 90000 & \text { divided by } & 22500 & 4.0 \
\hline 2015 & 90000 & \text { divided by } & 30000 & 3.0 \
\hline 2016 & 75000 & \text { divided by } & 18750 & 4.0 \
\hline 2017 & 31000 & \text { divided by } & 27000 & 3.0 \
\hline 2018 & 37000 & \text { divided by } & 34800 & 2.5 \
\hline
\end{array}$$ 
Favourable purchase prices appear to be associated with decreases in inventory turnover and increases in average inventory levels.Decreases in inventory turnover are a possible signal of the build-up of excess inventory.Excess inventory will reduce return on investment of the company and the above information indicates a need for a just-in-time inventory system.
b.To achieve quantity discounts and favourable materials price variances,purchasing may be ordering excess inventory,thereby increasing subsequent storage,obsolescence,and handling costs.To obtain a low price,purchasing may be ordering from a supplier whose goods have inferior quality which may,in turn,lead to increased inspection,rework,and perhaps dissatisfied customers.
c.It appears that two approaches may help improve the situation.First,consider the change to a just-in-time inventory system that would greatly improve the inventory turnover and reduce the amount of inventory carried.Secondly,additional measures should be used in the evaluation of the purchasing department.Either different financial measures should be used or the addition of non-financial measures should be implemented.

Question 3

The implications of JIT and backflush costing systems for activity-based costing systems include:

Accepted Answer

A) more of the costs are direct 
B) overhead cost allocations are reduced 
C) Neither of these answers are correct. 
D) Both A and B are correct. 
A) more of the costs are direct 
B) overhead cost allocations are reduced 
C) Neither of these answers are correct. 
D) Both A and B are correct. D

Question 4

What are five features of a just-in-time manufacturing system?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

A just-in-time (JIT)system has many posi

Question 5

The planning,organising,and controlling activities that focus on the flow of materials into,through,and from the organisation is called inventory management.
Variant question

Accepted Answer

A) True 
 B)False

Question 6

Answer the following questions using the information below:
The Katoomba Furniture company produces a specialty dining table,and has the following information available concerning its inventory items:
 $\begin{array}{ll}
\text { Relevant ordering costs per purchase order } & \$ 250 \
\text { Relevant carrying costs per year: } & \
\text { Required annual return on investment } & 10 \% \
\text { Required other costs per year } & \$ 14.00
\end{array}$
 Annual demand is 1000 tables per year.The purchase price per table is $1600.
-What are the relevant total costs at the economic order quantity (EOQ)?

Accepted Answer

A) $3500 
B) $1000 
C) $9328 
D) $1500 
A) $3500 
B) $1000 
C) $9328 
D) $1500

Question 7

The Economic Order Quantity decreases with carrying costs,and increases with demand and ordering costs.
Variant question

Accepted Answer

A) True 
 B)False

Question 8

In managing inventory,the costs that result when features and characteristics of a product or service are not in conformance with the specifications are known as:

Accepted Answer

A) inspection costs. 
B) design costs. 
C) costs of quality. 
D) purchasing costs. 
A) inspection costs. 
B) design costs. 
C) costs of quality. 
D) purchasing costs.

Question 9

Placing smaller purchase orders with suppliers is a principle defining a Just-in-time inventory system: .
Variant question

Accepted Answer

A) True 
 B)False

Question 10

Tamworth Country Music sells 250 DVDs per week.Purchase-order lead time is 1.5 weeks and the economic-order quantity is 550 units.What is the reorder point?

Accepted Answer

A) 1125 units 
B) 375 units 
C) 750 units 
D) 250 units 
A) 1125 units 
B) 375 units 
C) 750 units 
D) 250 units

Question 11

Backflush costing is a costing system that omits recording some or all of the journal entries relating to the stages from purchase of direct materials to the sales of finished goods.

Accepted Answer

A) True 
 B)False

Question 12

A push-through system that manufactures finished goods for inventory on the basis of demand forecasts is referred to as:

Accepted Answer

A) just-in-time purchasing. 
B) economic order quantity (EOQ). 
C) materials requirements planning. 
D) relevant total costs. 
A) just-in-time purchasing. 
B) economic order quantity (EOQ). 
C) materials requirements planning. 
D) relevant total costs.

Question 13

In managing inventory,what are the costs that result when a company holds an inventory of goods for sale,known as?
Variant question

Accepted Answer

A) Interest costs 
B) Opportunity costs 
C) Purchasing costs 
D) Carrying costs 
A) Interest costs 
B) Opportunity costs 
C) Purchasing costs 
D) Carrying costs

Question 14

In managing inventory,what are the costs of goods acquired from suppliers including incoming freight or transportation costs known as?
Variant question

Accepted Answer

A) Carrying costs 
B) Ordering costs 
C) Stockout costs 
D) Purchasing costs 
A) Carrying costs 
B) Ordering costs 
C) Stockout costs 
D) Purchasing costs

Question 15

Which type of companies would benefit from backflush costing? Companies ______:
Variant question

Accepted Answer

A) that require audit trails. 
B) whose inventories vary from period to period. 
C) which have fast manufacturing lead times. 
D) Both A and B are correct. 
A) that require audit trails. 
B) whose inventories vary from period to period. 
C) which have fast manufacturing lead times. 
D) Both A and B are correct.

Question 16

The annual relevant carrying costs of inventory consist of incremental costs plus the opportunity cost of capital.

Accepted Answer

A) True 
 B)False

Question 17

What are the principles of lean accounting? Are there any limitations? Discuss.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

Lean accounting is a costing method that

Question 18

Taronga Toys sells stuffed wombats.Products Inc.manufactures many different stuffed animals.Taronga Toys orders 10 400 wombats per year,200 per week,at $35 per koala.The manufacturer covers all shipping costs.Taronga Toys earns 10% on its cash investments.The purchase-order lead time is 3 weeks.Taronga Toys sells 185 wombats per week.The following data are available (based on management's estimates):
Variant question
Estimated ordering costs per purchase order $\quad \$ 10$ 
Estimated insurance, materials handling, breakage, 
and so on, per year $\$ 3$ 
Actual ordering costs per order $\$ 15$
Using the estimated amounts above,what is the economic order quantity (EOQ)?

Accepted Answer

A) 119 stuffed wombats 
B) 335 stuffed wombats 
C) 325 stuffed wombats 
D) 273 stuffed wombats 
A) 119 stuffed wombats 
B) 335 stuffed wombats 
C) 325 stuffed wombats 
D) 273 stuffed wombats

Question 19

An inventory item of Nullabor Manufacturing has an average daily demand of 20 units with a maximum daily demand of 24 units.The economic order quantity (EOQ)is 200 units.Without safety stocks,the reorder point is 50 units.Safety stocks are set at 94 units.
Required:
a.Determine the reorder point with safety stocks.
b.Determine the maximum inventory level.
c.Determine the average lead time.
d.Determine the maximum lead time.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

a.
 \[\begin{array} { | l | l | } 
\hlin

Question 20

The economic order quantity (EOQ)model solely guides just-in-time purchasing.
Variant question

Accepted Answer

A) True 
 B)False

A firm using a backflush costing system will always use actual costs rather than standard costs.

The implications of JIT and backflush costing systems for activity-based costing systems include:

What are five features of a just-in-time manufacturing system? _ _

The planning,organising,and controlling activities that focus on the flow of materials into,through,and from the organisation is called inventory management. Variant question

The Economic Order Quantity decreases with carrying costs,and increases with demand and ordering costs. Variant question

In managing inventory,the costs that result when features and characteristics of a product or service are not in conformance with the specifications are known as:

Placing smaller purchase orders with suppliers is a principle defining a Just-in-time inventory system: . Variant question

Tamworth Country Music sells 250 DVDs per week.Purchase-order lead time is 1.5 weeks and the economic-order quantity is 550 units.What is the reorder point?

Backflush costing is a costing system that omits recording some or all of the journal entries relating to the stages from purchase of direct materials to the sales of finished goods.

A push-through system that manufactures finished goods for inventory on the basis of demand forecasts is referred to as:

In managing inventory,what are the costs that result when a company holds an inventory of goods for sale,known as? Variant question

In managing inventory,what are the costs of goods acquired from suppliers including incoming freight or transportation costs known as? Variant question

Which type of companies would benefit from backflush costing? Companies ______: Variant question

The annual relevant carrying costs of inventory consist of incremental costs plus the opportunity cost of capital.

What are the principles of lean accounting? Are there any limitations? Discuss. _ _

The economic order quantity (EOQ)model solely guides just-in-time purchasing. Variant question

Management Accounting in Context

Different Costs for Different Purposes

Determining How Costs Behave

Costvolumeprofit Analysis

Estimating the Cost of Producing Services

Estimating the Costs of Products and Inventory

Target Costing, Managing Activities and Managing Capacity

Activity-Based Management and Activity-Based Costing

Pricing and Customer Profitability

Decision Making and Relevant Information

Budgeting, Management Control and Responsibility Accounting

Flexible Budgets, Direct Cost Variances and Management Control

Flexible Budgets, Overhead Cost Variances and Management Control

Allocation of Support-Department Costs, Common Costs and Revenues

Strategy Formation, Strategic Control and the Balanced Scorecard

Quality, Time and the Balanced Scorecard

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing and Multinational Considerations

Performance Measurement, Compensation and Multinational Considerations

Measuring and Reporting Sustainability

Filters

Exam 17: Inventory Management, Just-In-Time and Simplified Costing Methods

A firm using a backflush costing system will always use actual costs rather than standard costs.

The implications of JIT and backflush costing systems for activity-based costing systems include:

What are five features of a just-in-time manufacturing system? _____________________________________________________________________________________________ _____________________________________________________________________________________________

The planning,organising,and controlling activities that focus on the flow of materials into,through,and from the organisation is called inventory management. Variant question

The Economic Order Quantity decreases with carrying costs,and increases with demand and ordering costs. Variant question

In managing inventory,the costs that result when features and characteristics of a product or service are not in conformance with the specifications are known as:

Placing smaller purchase orders with suppliers is a principle defining a Just-in-time inventory system: . Variant question

Tamworth Country Music sells 250 DVDs per week.Purchase-order lead time is 1.5 weeks and the economic-order quantity is 550 units.What is the reorder point?

Backflush costing is a costing system that omits recording some or all of the journal entries relating to the stages from purchase of direct materials to the sales of finished goods.

A push-through system that manufactures finished goods for inventory on the basis of demand forecasts is referred to as:

In managing inventory,what are the costs that result when a company holds an inventory of goods for sale,known as? Variant question

In managing inventory,what are the costs of goods acquired from suppliers including incoming freight or transportation costs known as? Variant question

Which type of companies would benefit from backflush costing? Companies ______: Variant question

The annual relevant carrying costs of inventory consist of incremental costs plus the opportunity cost of capital.

What are the principles of lean accounting? Are there any limitations? Discuss. _____________________________________________________________________________________________ _____________________________________________________________________________________________

The economic order quantity (EOQ)model solely guides just-in-time purchasing. Variant question

Management Accounting in Context

Different Costs for Different Purposes

Determining How Costs Behave

Costvolumeprofit Analysis

Estimating the Cost of Producing Services

Estimating the Costs of Products and Inventory

Target Costing, Managing Activities and Managing Capacity

Activity-Based Management and Activity-Based Costing

Pricing and Customer Profitability

Decision Making and Relevant Information

Budgeting, Management Control and Responsibility Accounting

Flexible Budgets, Direct Cost Variances and Management Control

Flexible Budgets, Overhead Cost Variances and Management Control

Allocation of Support-Department Costs, Common Costs and Revenues

Strategy Formation, Strategic Control and the Balanced Scorecard

Quality, Time and the Balanced Scorecard

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing and Multinational Considerations

Performance Measurement, Compensation and Multinational Considerations

Measuring and Reporting Sustainability

Filters

What are five features of a just-in-time manufacturing system? _ _

What are the principles of lean accounting? Are there any limitations? Discuss. _ _