Question 1

Just-in-time purchasing requires ________.

Accepted Answer

A)   larger and less frequent purchase orders
B)   smaller and less frequent purchase orders
C)   smaller and more frequent purchase orders
D)   larger and more frequent purchase orders C

Question 2

Answer the following questions using the information below:
Games R Us manufactures various games. For March, there were no beginning inventories of direct materials and no beginning or ending work in process. Conversion costs is the only indirect manufacturing cost category currently used. Journal entries are recorded when materials are purchased and when conversion costs are allocated under backflush costing.
 $\begin{array}{lr}
\text { Conversion costs - March } & \$ 400,000 \
\text { Direct materials purchased - March } & \$ 1,070,000 \
\text { Units produced - March } & 58,800 \
\text { Units sold - March } & 41,800
\end{array}$
-Which of the following journal entries properly records the purchase of direct materials?

Accepted Answer

A)   Accounts Payable Control $1,070,000 Inventory: Raw and In-Process Control$1,070,000\begin{array} { l  } 	ext {Accounts Payable Control }&\$1,070,000 \ 	ext { Inventory: Raw and In-Process Control}&\$1,070,000 \\end{array}Accounts Payable Control  Inventory: Raw and In-Process Control​$1,070,000$1,070,000​  
B)   Inventory: Raw and In-Process Control $1,070,000Accounts Pavable Control$1,070,000\begin{array} { l  } 	ext {Inventory: Raw and In-Process Control }&\$1,070,000 \ 	ext {Accounts Pavable Control}&\$ 1,070,000\\end{array}Inventory: Raw and In-Process Control Accounts Pavable Control​$1,070,000$1,070,000​  
C)   Inventory: Raw and In-Process Control $1,070,000Conversion Costs $1,070,000\begin{array} { l  } 	ext {Inventory: Raw and In-Process Control }&\$1,070,000 \ 	ext {Conversion Costs }&\$1,070,000 \\end{array}Inventory: Raw and In-Process Control Conversion Costs ​$1,070,000$1,070,000​  
D)    Conversion Costs$1,070,000 Inventory: Raw and In-Process Control$1,070,000\begin{array} { l  } 	ext { Conversion Costs}&\$1,070,000 \ 	ext { Inventory: Raw and In-Process Control}&\$1,070,000 \\end{array} Conversion Costs Inventory: Raw and In-Process Control​$1,070,000$1,070,000​    B

Question 3

The supply chain describes the flow of goods,services,and information from the initial sources of materials and services to the delivery of products to consumers,regardless of whether those activities occur in the same company or in other companies.

Accepted Answer

A) True 
 B)False  True

Question 4

The EOQ model is solved using calculus but the key intuition is that relevant total costs are minimized when relevant ordering costs equal relevant carrying costs.

Accepted Answer

A) True 
 B)False

Question 5

The only product of a company has an annual demand of 14,000 units.The cost of placing an order is $70 and the cost of carrying one unit in inventory for one year is $20.
Required:
Determine the economic order quantity.

Accepted Answer

The answer of The only product of a company has...

Question 6

Which of the following statements is true of relevant inventory costs?

Accepted Answer

A)   The salaries paid to clerks, stock keepers, and materials handlers are relevant carrying costs if they are unaffected by changes in inventory levels.
B)   The costs of expediting an order from a supplier are relevant incremental costs of stockouts.
C)   Warehouse rent, warehouse workers' salaries and costs of insurance, that change with the quantity of inventory held are irrelevant carrying costs.
D)   Those ordering costs that change with the number of orders placed are irrelevant ordering costs.

Question 7

Which of the following statements best defines manufacturing cycle time in a JIT production system?

Accepted Answer

A)   the time from when raw materials is received until it becomes a finished good
B)   the time from when an order is received until it becomes a finished good
C)   the time from when raw materials is received until it is delivered to the customers
D)   the time from when an order is received until it is delivered to the customers

Question 8

Answer the following questions using the information below:
Globe Inc. is a distributor of DVDs. DVD Mart is a local retail outlet which sells blank and recorded DVDs. DVD Mart purchases tapes from Globe at $25.00 per DVD; DVDs are shipped in packages of 60. Globe pays all incoming freight, and DVD Mart does not inspect the DVDs due to Globe's reputation for high quality. Annual demand is 312,000 DVDs at a rate of 6,000 DVDs per week. DVD Mart earns 15% on its cash investments. The purchase-order lead time is one week. The following cost data are available:
 $\begin{array} { l  }
 \text { Relevant ordering costs per purchase order}&\$114.50 \ \text {arrying costs per package per year: }& \
 \text {Relevant insurance, materials handling, }& \ \text {breakage, etc., per year }&\$4.50 \
\end{array}$

-What are the annual relevant ordering costs?

Accepted Answer

A)   $9,057
B)   $7,157
C)   $8,266
D)   $7,121

Question 9

Answer the following questions using the information below:
The following information applies to Krynton Corp. which supplies microscopes to laboratories throughout the country. Krynton purchases the microscopes from a manufacturer which has a reputation for very high quality in its manufacturing operation.
 $\begin{array}{lr}
\text { Annual demand (weekly demand }=1 / 52 \text { of annual demand) } & 13,000 \text { units } \
\text { Orders per year as per EOQ model } & 13 \
\text { Lead time in days } & 15 \text { days } \
\text { Annual relevant carrying costs } & \$ 2,600
\end{array}$
-If Premium Company has a safety stock of 480 units and the average daily demand is 60 units,how many days can be covered if the shipment from the supplier is delayed by 4 days?

Accepted Answer

A)   8 days
B)   4 days
C)   12 days
D)   7 days

Question 10

Minnesota Ore Company mines iron ore for production into various metal products.During recent years,the company has had large fluctuations in its inventories of metal ingots.Much of the volatility of the inventory levels is due to the variability of demand by the company's largest customers,automobile manufacturers.For large orders,the company has the technology to quickly shift production from one product to another.
Required:
Explain how the company can improve its inventory control system and give the advantages of whatever you recommend.

Accepted Answer

The answer of Minnesota Ore Company mines iron ore for...

Question 11

Answer the following questions using the information below:
Globe Inc. is a distributor of DVDs. DVD Mart is a local retail outlet which sells blank and recorded DVDs. DVD Mart purchases tapes from Globe at $25.00 per DVD; DVDs are shipped in packages of 60. Globe pays all incoming freight, and DVD Mart does not inspect the DVDs due to Globe's reputation for high quality. Annual demand is 312,000 DVDs at a rate of 6,000 DVDs per week. DVD Mart earns 15% on its cash investments. The purchase-order lead time is one week. The following cost data are available:
 $\begin{array} { l  }
 \text { Relevant ordering costs per purchase order}&\$114.50 \ \text {arrying costs per package per year: }& \
 \text {Relevant insurance, materials handling, }& \ \text {breakage, etc., per year }&\$4.50 \
\end{array}$

-How many deliveries will be made during each time period?

Accepted Answer

A)   72.19 deliveries
B)   60.11 deliveries
C)   89.23 deliveries
D)   52.18 deliveries

Question 12

Which of the following statements best defines backflush costing system?

Accepted Answer

A)   an integrated costing system covering a company's accounting, distribution, manufacturing, purchasing, human resources, and other functions
B)   a costing system that omits recording some of the journal entries relating to the stages from the purchase of direct materials to the sale of finished goods
C)   a push-through system in which each component in a production line is produced immediately as needed by the next step in the production line
D)   a costing system that comprises a single database that collects data and feeds it into software applications supporting all of a company's business activities

Question 13

Vision Enterprises manufactures converter boxes for high definition TVs.All processing is initiated when an order is received.For March there were no beginning inventories.Conversion Costs and Direct Materials are the only manufacturing cost accounts.Direct Materials are purchased under a just-in-time system.Backflush costing is used with a finished goods trigger point.Additional information is as follows:
 $$\begin{array} { | l | r | } 
\hline \text { Actual conversion costs } & \$ 435,000 \
\hline \text { Standard materials costs per unit } & 115 \
\hline \text { Standard conversion cost per unit } & 85 \
\hline \text { Units produced } & 7,900 \
\hline \text { Units sold } & 7,600 \
\hline
\end{array}$$ Required:
Record all journal entries for the monthly activities related to the above transactions if backflush costing is used.

Accepted Answer

The answer of Vision Enterprises manufactures converter boxes for high...

Question 14

Which of the following is a disadvantage of an enterprise resource planning (ERP)system?

Accepted Answer

A)   The use of standard costing systems is not allowed in an ERP system.
B)   Shifting manufacturing and distribution plans rapidly in response to changes in supply and demand is not possible in an ERP system.
C)   The ERP systems must often be customized to fit the strategic needs of the user.
D)   The ERP system increases lead times when purchasing material from a different supplier.

Question 15

Traditional normal and standard costing systems use ________.

Accepted Answer

A)   backflush costing
B)   delayed costing
C)   variable tracking
D)   sequential tracking

Question 16

Companies that have low manufacturing lead time usually find that a version of backflush costing will report cost numbers totally different to what a sequential costing approach would report.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following statements best defines a materials requirements planning system?

Accepted Answer

A)   a demand-pull system in which each component in a production line is produced immediately as needed by the next step in the production line
B)   a push-through system that manufactures finished goods for inventory on the basis of demand forecasts
C)   a demand-pull system that manufactures finished goods for inventory on the basis of demand forecasts
D)   a push-through system in which each component in a production line is produced immediately as needed by the next step in the production line

Question 18

Which of the following costs is a relevant inventory stockout cost under EOQ decision model?

Accepted Answer

A)   The costs of obsolescence and costs of insurance that change with the quantity of inventory held.
B)   The return forgone by investing capital in inventory rather than elsewhere.
C)   The lost contribution margin on sales forgone as a result of customer dissatisfaction due to unavailability of goods.
D)   The costs of storage space owned that cannot be used for other profitable purposes when inventories decrease.

Question 19

Which of the following costs is a relevant inventory carrying cost under EOQ decision model?

Accepted Answer

A)   The lost contribution margin on future sales forgone as a result of customer dissatisfaction in product quality.
B)   The lost contribution margin on sales forgone because of the shortage of inventory.
C)   The costs of storage space owned that cannot be used for other profitable purposes when inventories decrease.
D)   The costs of receiving and inspecting inventory and moving the inventories to the warehouses.

Question 20

Answer the following questions using the information below:
Vision Company manufactures digital cameras. For May, there were no beginning inventories of direct materials and no beginning or ending work-in -process. Conversion costs is the only indirect manufacturing cost category currently used. Journal entries are recorded when materials are purchased and when units are sold.
 $\begin{array}{lr}
\text { Conversion costs - May } & \$ 100,625 \
\text { Direct materials purchased - May } & \$ 253,575 \
\text { Units produced - May } & 80,500 \text { units } \
\text { Units sold - May } & 77,500 \text { units } \
\text { Selling price } & \$ 20 \text { each }
\end{array}$
-Which of the following journal entries would be recorded when units are sold for the month under backflush costing? ?

Accepted Answer

A)   Cost of Goods Sold $341,000 Inventory: Raw and In-Process$341,000\begin{array} { l  } 	ext {Cost of Goods Sold }&\$341,000 \ 	ext { Inventory: Raw and In-Process}&\$341,000 \\end{array}Cost of Goods Sold  Inventory: Raw and In-Process​$341,000$341,000​  
B)   Cost of Goods Sold $341,000 Inventory Control $244,125Conversion Costs Allocated $96,875\begin{array} { l  } 	ext {Cost of Goods Sold }&\$341,000 \ 	ext { Inventory Control }&\$244,125 \ 	ext {Conversion Costs Allocated }&\$96,875 \\end{array}Cost of Goods Sold  Inventory Control Conversion Costs Allocated ​$341,000$244,125$96,875​  
C)   Inventory Inventory Control $244,125 Conversion Costs Allocated $96,875Cost of Goods Sold $341,000\begin{array} { l  } 	ext {Inventory Inventory Control  }&\$244,125 \ 	ext { Conversion Costs Allocated }&\$96,875 \ 	ext {Cost of Goods Sold }&\$341,000 \\end{array}Inventory Inventory Control  Conversion Costs Allocated Cost of Goods Sold ​$244,125$96,875$341,000​  
D)    Cost of Goods Sold$354,200Inventory: Raw and In-Process $253,575Conversion Costs Allocated $96,875\begin{array} { l  } 	ext { Cost of Goods Sold}&\$ 354,200\ 	ext {Inventory: Raw and In-Process }&\$253,575\ 	ext {Conversion Costs Allocated }&\$96,875 \\end{array} Cost of Goods SoldInventory: Raw and In-Process Conversion Costs Allocated ​$354,200$253,575$96,875​

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