Deck 18: Inventory and Production Management

Question 1

Profit maximization is the major focus of value engineering.

Answer 1

False

Question 2

In a just-in-time (JIT) environment, quality is determined continually during the manufacturing process.

Answer 2

True

Question 3

In a just-in-time (JIT) environment, quality is determined at quality control checkpoints in the manufacturing process.

Answer 3

False

Question 4

In a just-in-time (JIT) environment, end-of-period variance analysis and reporting does not occur.

Question 5

In a just-in-time (JIT) environment, design changes may be made at any time during the production process.

Question 6

Target costing is most frequently used in the development stage of a product.

Question 7

In a push system of production control, inventory is produced in anticipation of customer or work center demand.

Question 8

Virtual reality has been used increasingly in the product design stage.

Question 9

Fixed factory overhead is typically the production cost least likely to be minimized in the short run.

Question 10

Kaizen costing is most often applied to new products.

Question 11

The product life cycle has a significant impact on costs and profits.

Question 12

Efficient inventory management relies largely on cost-minimization strategies.

Question 13

An organization's value chain can aid in the reduction of non-value added activities.

Question 14

Cost minimization is the major focus of value engineering.

Question 15

In a just-in-time (JIT) environment, design changes must be made early in the production process.

Question 16

In a pull system of production control, inventory is produced in anticipation of customer or work center demand.

Question 17

In a just-in-time (JIT) environment, the optimal situation is to have only one vendor for any given item.

Question 18

An investment in inventory yields a return when it is sold to a third party.

Question 19

Purchases of inventory create a continuous cash outflow each period.

Question 20

In a just-in-time (JIT) environment, machines and workers are often rearranged into manufacturing cells.

Question 21

The theory that the flow of goods through a production process cannot be at a faster rate than the slowest constraint in the process is known as ________________________________________.
or

Question 22

Making only those items in demand by customers and making those items without waste is referred to as ______________________________.

Question 23

A system of producing inventory where goods are produced only when needed by a customer or work center is referred to as a _________________________.

Question 24

Economic order quantity (EOQ) is compatible with just-in-time systems.

Question 25

A method of product costing that develops an allowable product cost by estimating what the market will pay for a product with specific characteristics is referred to as ______________________________.

Question 26

Backflush costing requires fewer allocations than traditional accounting methods.

Question 27

Which of the following is not an ordering cost?

A) cost of receiving inventory
B) cost of preparing the order
C) cost of payment for inventory ordered
D) cost of storing the inventory

Question 28

The EOQ formula can be modified to calculate the number of units that should be manufactured in a production run.

Question 29

A formula that indicates the optimal number of units to order is referred to as __________________________________________________.
or

Question 30

When a flexible manufacturing system (FMS) is used, worker tasks are more diverse than under a traditional manufacturing system.

Question 31

Bottlenecks in a production process will cause other parts of the process to experience idle time.

Question 32

An artificial, computer-generated environment in which the user has the impression of being a part of the environment is referred as ______________________________.

Question 33

The cooperative strategic planning, controlling, and problem solving activities conducted by a company and its vendors and customers to generate efficient and effective transfers of goods and services is referred to as __________________________________________________.

Question 34

Lean manufacturing and just-in-time (JIT) systems are both concerned with reduction of inventory levels.

Question 35

The quoted price for inventory minus discounts plus shipping charges is referred to as the ______________________________.

Question 36

A search for various feasible combinations of resources and methods that will increase functionality and reduce costs is referred to as ______________________________.

Question 37

A costing method that involves ongoing efforts for continuous improvement to reduce product costs, increase product quality and improve the production process after manufacturing activities have begun is referred to as ______________________________.

Question 38

The interrelationships between an organization and its suppliers and customers are collectively referred to as a(n) _________________________.

Question 39

When a flexible manufacturing system (FMS) is used, response time to needs of the market is slower than under a traditional manufacturing system.

Question 40

A system of inventory production where goods are produced in anticipation of customer orders is referred to as a _________________________.

Question 41

In which of the following stages of the product life cycle would operating losses not be expected?

A) growth
B) development
C) introduction
D) decline

Question 42

Projected sales price minus a reasonable profit equals

A) the standard cost.
B) contribution margin.
C) projected Cost of Goods Sold.
D) target cost.

Question 43

Most studies have indicated that what percent of a product's total life-cycle costs are determined in the development/design stage?

A) 60%-70%
B) 70%-80%
C) 80%-90%
D) 90%-95%

Question 44

Ongoing efforts to reduce costs, increase product quality, and/or improve production process once manufacturing has begun is known as

A) cost management.
B) kaizen costing.
C) target costing.
D) life-cycle costing.

Question 45

In the introduction stage of a product's life-cycle, which of the following type of costs typically may create losses rather than profits?

A) advertising
B) assembly
C) design
D) overhead

Question 46

Product profit margins are typically judged on a

A) yes yes
B) yes no
C) no yes
D) no no

Question 47

The cost of receiving inventory is regarded as

A) an ordering cost.
B) a carrying cost.
C) a purchasing cost.
D) a cost of not carrying goods in stock.

Question 48

In which life-cycle stage are product quality improvements and stable selling prices likely to occur?

A) introduction
B) growth
C) maturity
D) decline

Question 49

Kaizen means

A) doing it the Japanese way.
B) continuous improvement.
C) employee empowerment.
D) implementation of a centralized organizational structure.

Question 50

From a cost management view, research and development cost represents

A) a life-cycle investment
B) a period expense.
C) an unearned revenue.
D) a risk reserve.

Question 51

Cost tables are databases that provide information on which of the following?

A) design specifications
B) manufacturing processes
C) impact on product costs when different inputs resources are used
D) all of the above

Question 52

For product life cycle costing, R&D costs are

A) expensed as incurred.
B) capitalized and allocated over the life cycle.
C) deducted as period costs.
D) charged to specific departments as incurred.

Question 53

A ____ system of production control is paced by product demand.

A) EOQ
B) ABC
C) push
D) pull

Question 54

Life-cycle costing is especially important in which of the following types of companies?

A) yes yes yes yes
B) no yes yes no
C) yes no no yes
D) yes no yes yes

Question 55

Approximately what percentage of future product costs is determined in the development stage of the product life cycle?

A) 30%
B) 50%
C) 70%
D) 90%

Question 56

An important focus in product life cycle costing is

A) the activity base.
B) the target cost.
C) the cost driver.
D) variable costs.

Question 57

During which stage of the product life cycle will a company witness the highest profit?

A) development
B) maturity
C) growth
D) decline

Question 58

The process that determines an allowable product cost while setting market price and allowing for an acceptable profit margin is known as

A) target costing.
B) product life cycle costing.
C) activity-based costing.
D) responsibility costing.

Question 59

Which of the following fluctuate over the product life cycle?

A) sales price per unit
B) the types of costs that are incurred
C) product profitability
D) all of the above

Question 60

The peak level of unit sales will occur in which stage of the product life cycle?

A) growth
B) maturity
C) decline
D) introduction

Question 61

If life-cycle costs exceed the target cost of a product, managers will strive to reduce

A) the cost of special orders.
B) the level of activities that are non-value-added.
C) product variety.
D) period costs.

Question 62

Kaizen costing helps to

A) reduce product costs of products in the design and development stage.
B) keep the target cost as the primary focus after a product enters production.
C) keep profit margin relatively stable as product price declines over the product life cycle.
D) reduce the cost of engineering change orders during each stage of the product life cycle.

Question 63

In a JIT system, the quality of each product begins with

A) a company's vendors.
B) employees.
C) inspection of finished goods inventory.
D) a good product warranty.

Question 64

Striving for flexibility in the number of products that can be produced in a short period of time is characteristic of

A) EOQ systems.
B) push systems in general.
C) JIT.
D) pull systems in general.

Question 65

Which of the following statements is false concerning electronic data interchange?

A) Electronic data interchange (EDI) is essential in a pull system.
B) One of the benefits realized by EDI organizations is a faster processing of transactions.
C) Electronic data interchange is essential in a push system.
D) Electronic data interchange refers to computer-to-computer exchange of information.

Question 66

Target costing

A) can be applied to services if they are sufficiently uniform.
B) can be applied to services only if they are automated.
C) can be applied to services that are performed in a manufacturing environment.
D) cannot be applied to services.

Question 67

The projected sales price for a new product (which is still in the development stage of the product life cycle) is $50. The company has estimated the life-cycle cost to be $30 and the first-year cost to be $60. On this type of product, the company requires a $12 per unit profit. What is the target cost of the new product?

A) $30
B) $38
C) $42
D) $60

Question 68

Kaizen costing is used for which of the following types of products?

A) yes yes
B) no yes
C) no no
D) yes no

Question 69

____ is a "pull" system of production and inventory control.

A) EDI
B) EOQ
C) JIT
D) ABC

Question 70

Reducing inventory to the lowest possible levels is a major focus of

A) JIT.
B) push inventory systems.
C) EOQ.
D) ABC.

Question 71

Reducing setup time is a major aspect of

A) all push inventory systems.
B) the determination of safety stock quantities.
C) a JIT system.
D) an EOQ system.

Question 72

When JIT is implemented, which of the following changes in the accounting system would not be expected?

A) fewer cost allocations
B) elimination of standard costs
C) combining labor and overhead into one product cost category
D) combing raw material and materials in work-in-process into one product cost category

Question 73

JIT is a philosophy concerned with

A) when to do something.
B) how to do something.
C) where to do something.
D) how much of something should be done.

Question 74

Value engineering seeks to obtain increased

A) product life-cycle and reduced direct labor inputs.
B) planning team membership and reduced time-to-market.
C) product performance ratio and reduced substitute goods.
D) product functionality and reduced costs.

Question 75

Which of the following costing methods is the most effective in controlling a product's total life-cycle cost?

A) kaizen costing
B) target costing
C) standard costing
D) process costing

Question 76

Which of the following formulas is the best representation of the concept of target costing?

A) target cost + profit margin = selling price
B) selling price - target cost = profit margin
C) selling price - profit margin = target cost
D) target cost - standard cost = profit margin

Question 77

A mandate to reduce costs, increase product quality, and/or improve production processes through continuous improvement is known as

A) kaizen costing.
B) activity-based costing.
C) the theory of constraints.
D) mass customization.

Question 78

Just-in-time (JIT) inventory systems

A) result in a greater number of suppliers for each production process.
B) focus on a "push" type of production system.
C) can only be used with automated production processes.
D) result in inventories being either greatly reduced or eliminated.

Question 79

Successful product development should include

A) kaizen costing.
B) value engineering.
C) kanban implementation.
D) all of the above.

Question 80

Which approaches to costing should be associated with each of the following life-cycle stages?

A) Kaizen Target Standard
B) Target Standard Kaizen
C) Target Kaizen Standard
D) Kaizen Standard Target