Exam 11: Strategic Cost Management

Accounting is simplified in the JIT system by the use of backflush costing.

Life-cycle cost management emphasizes

Prior to installing a JIT system, Grindstone Company used machine hours to assign maintenance costs to its three products of 4-inch, 6-inch, and 9-inch insulation. The maintenance costs totaled $432,000 per year. The machine hours used by each product and the quantity produced of each product are as follows: After installing JIT, three manufacturing cells were created and the cell workers were trained to performmaintenance. Maintenance costs for the three cells still totaled $432,000; however, these costs are now traceable to each cell.

A firm that has implemented JIT had the following transactions: 1) Materials were purchased on account for $40,000. 2) Materials were placed into production. 3) Actual direct labor costs were $6,000. 4) Actual overhead costs were $40,000. 5) Conversion costs applied were $42,000. 6) All work was completed for the month. 7) All completed work was sold. 8) The variance is recognized. Which of the following would NOT be an entry under the backflush system, assuming the second trigger point is the completion of goods?

A firm that has implemented JIT had the following transactions: 1. Materials were purchased on account for $50,000. 2. Materials were placed into production. 3. Actual direct labor costs were $10,000. 4. Actual overhead costs were $40,000. 5. Conversion costs applied were $34,000. 6. All work was completed for the month. 7. All completed work was sold. 8. The variance is recognized. Required: a. Provide the journal entries for the above transactions assuming the traditional approach was used. b. Provide the journal entries for a backflush system assuming the second trigger point is the point when goods are completed.

Which of the following is NOT a trait of a traditional manufacturing system?

Target costing provides a method for reducing costs by exploiting customer and supplier linkages.

Prior to installing a JIT system, Clarendon Company used machine hours to assign maintenance costs to its three products of 6-inch, 8-inch, and 11-inch insulation. The maintenance costs totaled $400,000 per year. The machine hours used by each product and the quantity produced of each product are as follows: After installing JIT, three manufacturing cells were created and the cell workers were trained to perform Maintenance. Maintenance costs for the three cells still totaled $400,000; however, these costs are now traceable to each cell. Cell, 6-inch $100,000 Cell, 8-inch 120,000 Cell, 11-inch 180,000 After installing JIT, the maintenance cost per roll of 11-inch insulation would be

In activity-based costing, supplier costs

The following transactions take place after the implementation of JIT: 1) Materials were purchased on account for $75,000. 2) Materials were placed into production. 3) Actual direct labor costs were $16,000. 4) Actual overhead costs were $30,000. 5) Conversion costs applied were $52,000. 6) All work was completed for the month. 7) All completed work was sold. 8) The variance is recognized. What will be the entry to record material placed into production using the traditional approach?

Figure 11-1 Ambrosia Corp. is a manufacturer of equipment used in manufacturing. It currently produces a product with 30 parts but through redesign has reduced the number of parts to 9. Then current activity capacity and demand for the 30 unit configuration and expected activity demand for the 9 part configuration are provided below: Materials usage has a rate of $6 per part and no fixed costs. Assembly has a rate of $20 per labor hour with no fixed component. Purchasing requires clerks that can process 5,000 purchase orders. Each clerk earns $40,000 per year. There is also a $1 per order processing cost. -Refer to Figure 11-1. If 10,000 units are being produced and the sales price is $500, what is the new sales price if the cost savings are passed on to the consumer?

The period of time when sales increase at an increasing rate is called the:

Fast & Furious Company recently implemented a JIT system and is considering implementing a backflush costing system. Following are the transactions for the first quarter of the year. 1. purchased raw materials on account for $525,000 2. all materials were received and placed into production 3. actual labor costs of $75,000 were incurred 4. actual overhead costs of $425,000 were incurred 5. conversion costs of $480,000 were applied to production as conversion costs are recognized quarterly 6. all work was completed for the month 7. all completed work was sold 8. the difference between applied costs and actual costs was determined Required: 1. Prepare journal entries using variation 2 of backflush costing. 2. Prepare journal entries using variation 4 of backflush costing.

Prior to installing a JIT system, Grindstone Company used machine hours to assign maintenance costs to its three products of 4-inch, 6-inch, and 9-inch insulation. The maintenance costs totaled $432,000 per year. The machine hours used by each product and the quantity produced of each product are as follows: After installing JIT, three manufacturing cells were created and the cell workers were trained to perform Maintenance. Maintenance costs for the three cells still totaled $432,000; however, these costs are now traceable to each cell. The maintenance cost per roll of 4-inch insulation before JIT is installed would be

Exploiting internal linkages involves the assessment of management reliability.

the difference between what the customer receives and gives up is the .

In a job-order setting using JIT, repetitive business is separated from unique orders.

The structure for a JIT environment is a vastly complicated process costing system.

A major difference between traditional and JIT environments is the degree of responsibility given to workers in the organization.

Accounting for the cost accounting cycle in a JIT environment is simplified by using costing.