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

Which of the following is not a reason why a company would adopt JIT purchasing practices?

Shrinkage is measured by adding (a)the cost of the inventory recorded on the books in the absence of theft and other incidents just mentioned,and (b)the cost of inventory when physically counted.

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

If Premium Company has a safety stock of 480 units and the average daily demand is 68 units,how many days can be covered if the shipment from the supplier is delayed by 4 days?

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

Proponents of lean accounting argue that the lack of individual product cost information is irrelevant because most decisions about products are made at the product line level making value stream costs more relevant than product 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 $0.95 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 162,520 golf balls at a rate of 3591 balls per week.Martin's Golf Supplies earns 12% on its cash investments.The purchase-order lead time is one week.The following cost data are available: Purchasing at the EOQ recommended level,what are the relevant total costs? (Round costs to the nearest cent and quantities to the nearest whole number.Your answer might be slightly different from the best answer due to rounding. )

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

The Jarvis Corporation produces bucket loader assemblies for the tractor industry.The product has a long term life expectancy.Jarvis has a traditional manufacturing and inventory system.Jarvis is considering the installation of a just-in-time inventory system to improve its cost structure.In doing a full study using its manufacturing engineering team as well as consulting with industry JIT experts and the main vendors and suppliers of the components Jarvis uses to manufacture the bucket loader assemblies,the following incremental cost-benefit relevant information is available for analysis: The Jarvis cost of investment capital hurdle rate is 15%. One time cost to rearrange the shop floor to create the manufacturing cell workstations is $275,000. One time cost to retrain the existing workforce for the JIT required skills is $60,000. Anticipated defect reduction is 40%.Currently there is a cost of quality defect assessment listed as $150,000 per year. The setup time for each of the existing functions will be reduced by 67%.Currently the forecast for setup costs are $225,000 per year. Jarvis will expect to save $200,000 per year in carrying costs as a result of having a lower inventory. The suppliers will require a 15% premium over the current level of prices in order to position themselves to supply the material on a smaller and more frequent schedule.Currently the materials purchases are $1,500,000 per year. Required: Determine whether it is in the best interest of Jarvis Corporation to install a JIT system.

Which of the following statements best defines an enterprise resource planning (ERP)system?