Deck 18: Responsibility Accounting, Performance Evaluation and Transfer Pricing

Question 1

Newcastle Company has determined the following costs are associated with one of its products. $E = E$ conomic order quantity (EOQ)
$\mathrm { Q } =$ Annual quantity used in units $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ 3000
$P =$ Cost of placing one order ( $( £ )$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ 10
$C = A$ nnual cost of carrying one unit in stock (£) $\quad$ 0.8

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If the cost of placing an order is increased to £15 and the annual quantity used in units increases to 4,000 units, the economic order quantity (EOQ) is

A)387 units.
B)435 units.
C)450 units.
D)109 units.

Answer 1

387 units.

Question 2

Newcastle Company has determined the following costs are associated with one of its products. $E = E$ conomic order quantity (EOQ)
$\mathrm { Q } =$ Annual quantity used in units $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ 3000
$P =$ Cost of placing one order ( $( £ )$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ 10
$C = A$ nnual cost of carrying one unit in stock (£) $\quad$ 0.8

-
If the cost of placing an order is increased to £15 the economic order quantity (EOQ) is

A)335 units.
B)305 units.
C)310 units.
D)250 units.

Answer 2

335 units.

Question 3

Norwich Company has determined the following costs are associated with one of its products. $E = E$ conomic order quantity (EOQ)
$\mathrm { Q } =$ Annual quantity used in units $\quad$ $\quad$ $\quad$ $\quad$$\quad$ 4800
$P =$ Cost of placing one order (f) $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ 3
$\mathrm { C } = \mathrm { A }$ nnual cost of carrying one unit in stock (E) $\quad$ 8


-
If the annual cost of carrying one unit in stock is increased to £10 and the cost of placing one order is reduced to £2 the economic order quantity (EOQ) is

A)47 units.
B)46 units.
C)44 units.
D)89 units.

Answer 3

44 units.

Question 4

Chelsea Company has determined the following costs are associated with one of its products. $\begin{array}{ll}\text { Lead time (weeks) } & 9 \\\text { Average weekly usage (units) } & 70 \\\text { Maximum weekly us age (units) } & 90\end{array}$

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The safety stock is

A)220 units.
B)206 units.
C)300 units.
D)180 units.

Question 5

The plant layout under JIT emphasises

A)a functional approach in which machines performing the same function are grouped together.
B)a product approach in which all machines needed in the production of a particular product are grouped together.
C)a customer approach in which all machines are grouped according to the customers they primarily serve.
D)a contractual approach in which the processing of certain subassemblies is performed by a small number of independent machine shops under contract to the manufacturing company.

Question 6

Newcastle Company has determined the following costs are associated with one of its products. $E = E$ conomic order quantity (EOQ)
$\mathrm { Q } =$ Annual quantity used in units $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ 3000
$P =$ Cost of placing one order ( $( £ )$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ 10
$C = A$ nnual cost of carrying one unit in stock (£) $\quad$ 0.8

-
If the cost of placing an order is increased to £15 and the annual quantity used in units decreases to 2,500 units the economic order quantity (EOQ) is

A)335 units.
B)315 units.
C)320 units.
D)306 units.

Question 7

Norwich Company has determined the following costs are associated with one of its products. $E = E$ conomic order quantity (EOQ)
$\mathrm { Q } =$ Annual quantity used in units $\quad$ $\quad$ $\quad$ $\quad$$\quad$ 4800
$P =$ Cost of placing one order (f) $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ 3
$\mathrm { C } = \mathrm { A }$ nnual cost of carrying one unit in stock (E) $\quad$ 8


-
If the annual cost of carrying one unit in stock is increased to £10 the economic order quantity (EOQ) is

A)67 units.
B)56 units.
C)54 units.
D)89 units.

Question 8

Norwich Company has determined the following costs are associated with one of its products. $E = E$ conomic order quantity (EOQ)
$\mathrm { Q } =$ Annual quantity used in units $\quad$ $\quad$ $\quad$ $\quad$$\quad$ 4800
$P =$ Cost of placing one order (f) $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ 3
$\mathrm { C } = \mathrm { A }$ nnual cost of carrying one unit in stock (E) $\quad$ 8


-
If the annual cost of carrying one unit in stock is increased to £10 and the cost of placing one order is increased to £5 the economic order quantity (EOQ) is

A)69 units.
B)78 units.
C)41 units.
D)77 units.

Question 9

Norwich Company has determined the following costs are associated with one of its products. $E = E$ conomic order quantity (EOQ)
$\mathrm { Q } =$ Annual quantity used in units $\quad$ $\quad$ $\quad$ $\quad$$\quad$ 4800
$P =$ Cost of placing one order (f) $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ 3
$\mathrm { C } = \mathrm { A }$ nnual cost of carrying one unit in stock (E) $\quad$ 8


-
The Economic order quantity (EOQ) is

A)1100 units.
B)1500 units.
C)2300 units.
D)2250 units.

Question 10

Norwich Company has determined the following costs are associated with one of its products. $E = E$ conomic order quantity (EOQ)
$\mathrm { Q } =$ Annual quantity used in units $\quad$ $\quad$ $\quad$ $\quad$$\quad$ 4800
$P =$ Cost of placing one order (f) $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ 3
$\mathrm { C } = \mathrm { A }$ nnual cost of carrying one unit in stock (E) $\quad$ 8


-
If the cost of carrying one unit in stock is increased to £4 and the annual quantity used in units increases to 20,000 units the economic order quantity (EOQ) is

A)1225 units.
B)568 units.
C)1235 units.
D)1866 units.

Question 11

Norwich Company has determined the following costs are associated with one of its products. $E = E$ conomic order quantity (EOQ)
$\mathrm { Q } =$ Annual quantity used in units $\quad$ $\quad$ $\quad$ $\quad$$\quad$ 4800
$P =$ Cost of placing one order (f) $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ 3
$\mathrm { C } = \mathrm { A }$ nnual cost of carrying one unit in stock (E) $\quad$ 8


-
If the cost of carrying one unit in stock is increased to £4 the economic order quantity (EOQ) is

A)1003 units.
B)1974 units.
C)1061 units.
D)2510 units.

Question 12

Chelsea Company has determined the following costs are associated with one of its products. $\begin{array}{ll}\text { Lead time (weeks) } & 12 \\\text { Average weekly usage (units) } & 120 \\\text { Maximum weekly us age (units) } & 140\end{array}$

-
The safety stock is

A)240 units.
B)206 units.
C)300 units.
D)150 units.

Question 13

Newcastle Company has determined the following costs are associated with one of its products. $E = E$ conomic order quantity (EOQ)
$\mathrm { Q } =$ Annual quantity used in units $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ 3000
$P =$ Cost of placing one order ( $( £ )$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ 10
$C = A$ nnual cost of carrying one unit in stock (£) $\quad$ 0.8

-
If the cost of placing an order is increased to £15 and the annual quantity used in units decreases to 2,000 units the economic order quantity (EOQ) is

A)274 units.
B)215 units.
C)450 units.
D)106 units.

Question 14

Norwich Company has determined the following costs are associated with one of its products. $E = E$ conomic order quantity (EOQ)
$\mathrm { Q } =$ Annual quantity used in units $\quad$ $\quad$ $\quad$ $\quad$$\quad$ 4800
$P =$ Cost of placing one order (f) $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ 3
$\mathrm { C } = \mathrm { A }$ nnual cost of carrying one unit in stock (E) $\quad$ 8


-
If the annual cost of carrying one unit in stock is increased to £10 and the cost of placing one order is increased to £6 the economic order quantity (EOQ) is

A)69 units.
B)18 units.
C)76 units.
D)70 units.

Question 15

Norwich Company has determined the following costs are associated with one of its products. $E = E$ conomic order quantity (EOQ)
$\mathrm { Q } =$ Annual quantity used in units $\quad$ $\quad$ $\quad$ $\quad$$\quad$ 4800
$P =$ Cost of placing one order (f) $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ 3
$\mathrm { C } = \mathrm { A }$ nnual cost of carrying one unit in stock (E) $\quad$ 8


-
If the annual cost of carrying one unit in stock is increased to £10 and the cost of placing one order is increased to £4 the economic order quantity (EOQ) is

A)62 units.
B)66 units.
C)4 units.
D)77 units.

Question 16

Norwich Company has determined the following costs are associated with one of its products. $E = E$ conomic order quantity (EOQ)
$\mathrm { Q } =$ Annual quantity used in units $\quad$ $\quad$ $\quad$ $\quad$$\quad$ 4800
$P =$ Cost of placing one order (f) $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ 3
$\mathrm { C } = \mathrm { A }$ nnual cost of carrying one unit in stock (E) $\quad$ 8


-
If the cost of carrying one unit in stock is increased to £4 and the annual quantity used in units decreases to 10,000 units the economic order quantity (EOQ) is

A)652 units.
B)332 units.
C)900 units.
D)866 units.

Question 17

Norwich Company has determined the following costs are associated with one of its products. $E = E$ conomic order quantity (EOQ)
$\mathrm { Q } =$ Annual quantity used in units $\quad$ $\quad$ $\quad$ $\quad$$\quad$ 4800
$P =$ Cost of placing one order (f) $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ 3
$\mathrm { C } = \mathrm { A }$ nnual cost of carrying one unit in stock (E) $\quad$ 8


-
If the cost of carrying one unit in stock is increased to £4 and the annual quantity used in units decreases to 14,000 units the economic order quantity (EOQ) is

A)1222 units.
B)1122 units.
C)1000 units.
D)1025 units.

Question 18

Newcastle Company has determined the following costs are associated with one of its products. $E = E$ conomic order quantity (EOQ)
$\mathrm { Q } =$ Annual quantity used in units $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ 3000
$P =$ Cost of placing one order ( $( £ )$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ 10
$C = A$ nnual cost of carrying one unit in stock (£) $\quad$ 0.8

-
If the cost of placing an order is reduced to £6 the economic order quantity (EOQ) is

A)100 units.
B)274 units.
C)212 units.
D)250 units.

Question 19

The reorder point is

A)925 units.
B)700 units.
C)1320 units.
D)810 units.

Question 20

Norwich Company has determined the following costs are associated with one of its products. $E = E$ conomic order quantity (EOQ)
$\mathrm { Q } =$ Annual quantity used in units $\quad$ $\quad$ $\quad$ $\quad$$\quad$ 4800
$P =$ Cost of placing one order (f) $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ 3
$\mathrm { C } = \mathrm { A }$ nnual cost of carrying one unit in stock (E) $\quad$ 8


-
The Economic order quantity (EOQ) is

A)10 units.
B)74 units.
C)60 units.
D)25 units.

Question 21

Improving manufacturing flow lines is not relevant or required when introducing a JIT system

Question 22

Stock ordering costs are incurred each time a stock is ordered

Question 23

Firms will not usually outsource for one of the following reasons:

A)Access specialist expertise.
B)To seek the ideal solution.
C)To speed up set up.
D)To concentrate on core operations.

Question 24

Chelsea Company has determined the following costs are associated with one of its products. $\begin{array}{ll}\text { Lead time (weeks) } & 11 \\\text { Average weekly usage (units) } & 100 \\\text { Maximum weekly us age (units) } & 120\end{array}$

-
The safety stock is

A)220 units.
B)206 units.
C)300 units.
D)150 units.

Question 25

SSCs may sometimes be treated as profit centres

Question 26

Benefits of a JIT system include increased working capital

Question 27

Benefits of a JIT system include reduced throughput time

Question 28

New technology does not offer new ways for companies to optimize working capital

Question 29

Chelsea Company has determined the following costs are associated with one of its products. $\begin{array}{ll}\text { Lead time (weeks) } & 4 \\\text { Average weekly usage (units) } & 50 \\\text { Maximum weekly us age (units) } & 65\end{array}$

-
The reorder point is

A)25 units.
B)160 units.
C)260 units.
D)52 units.

Question 30

A company adopting JIT would

A)produce large batches of products in order to recover the costs associated with setups.
B)attempt to reduce setup time.
C)adopt a functional plant layout in order to enhance production flexibility.
D)provide training to workers that would allow such workers to become highly specialized on a single machine.

Question 31

Chelsea Company has determined the following costs are associated with one of its products. $\begin{array}{ll}\text { Lead time (weeks) } & 4 \\\text { Average weekly usage (units) } & 50 \\\text { Maximum weekly us age (units) } & 65\end{array}$

-
The safety stock is

A)45 units.
B)60 units.
C)3 units.
D)50 units.

Question 32

JIT emphasises the importance of reducing stock

Question 33

Chelsea Company has determined the following costs are associated with one of its products. $\begin{array}{ll}\text { Lead time (weeks) } & 11 \\\text { Average weekly usage (units) } & 100 \\\text { Maximum weekly us age (units) } & 120\end{array}$

-
The reorder point is

A)1125 units.
B)1600 units.
C)1320 units.
D)322 units.

Question 34

An ERP does not require integrated client-server technology

Question 35

A key concept of the Just-In-Time is

A)the raw materials, work in process, and finished goods inventories of manufacturing companies act as buffers so that operations can proceed smoothly even if suppliers are late with deliveries or a department is unable to operate for a brief period due to breakdowns or other reasons.
B)the use of many suppliers in order to ensure rapid delivery of materials for production.
C)the maintenance of a stock of raw materials so that defective materials can be replaced quickly in order to maintain a high rate of productivity.
D)inventories are costly to carry and create operational problems.

Question 36

Work in progress stock consist of units of product that are only partially complete and will require further work before they are ready for sale to a customer

Question 37

ERP represents a process-oriented information system based on value chain thinking

Question 38

Chelsea Company has determined the following costs are associated with one of its products. $\begin{array}{ll}\text { Lead time (weeks) } & 12 \\\text { Average weekly usage (units) } & 120 \\\text { Maximum weekly us age (units) } & 140\end{array}$

-
The reorder point is

A)1125 units.
B)1600 units.
C)1680 units.
D)322 units.

Question 39

The flow of goods through a JIT system is based on

A)each work station working at its maximum possible rate of output.
B)processing goods in large batch sizes rather than less economical small batches.
C)maintaining a stockpile of raw materials in anticipation of errors in production.
D)producing to meet customer demand with no buildup of inventory at any point in the production process.

Question 40

Firms will not usually outsource for one of the following reasons

A)as a response to constraints
B)to cut costs
C)to free up staff
D)get closer to the customer

Question 41

Normal costing measures do not work where there are bottlenecks.

Question 42

Discuss the advantages and disadvantages of benchmarking. Why has it been so successful?

Question 43

Explain how the lean production techniques fit into the various Management Accounting philosophies outlined in the chapter.

Question 44

Outline what is meant by the plan-do-act cycle.

Question 45

What is the solution to the silo mentality mentioned in chapter 18, page 746, and how would it work?

Question 46

Discuss the process of the Business Process Re-engineering.

Question 47

Outsourcing part of your business is something that will always lead to success.

Question 48

Outsourcing the finance function is a thing that many firms have tried to do.

Question 49

List as many as you can of the typical quality costs.

Question 50

"The big question today is how to measure human capital and the soft skills." Discuss.