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Unformatted text preview: CHAPTER 26 (FIN MAN); CHAPTER 11 (MAN) COST MANAGEMENT FOR JUST-IN-TIME ENVIRONMENTS CLASS DISCUSSION QUESTIONS 1. Just-in-time processing is a philosophy that focuses on reducing time, cost, and poor quality within manufacturing processes. The result of these efforts is a reduction in in- ventory levels. 2. Move time and wait time in inventory. 3. A product-oriented layout can be designed to minimize materials movements and re- duce (or eliminate) setup time. As a result, a product-oriented layout should have a short- er lead time than a process-oriented layout. 4. Long setup times lead to large production runs (batch sizes) in order to amortize the cost of the setup. Large batch sizes result in larger inventories, which in turn lead to long wait times. Thus, long setup times can lead directly to long lead times. 5. Pull or "make to order" manufacturing re- quires the manufacturer to build product only as it is needed for actual customer orders. As a result, finished goods, work in process, and materials inventories are minimized. Make to order manufacturing requires a high degree of flexibility and insignificant setup costs. 6. Product defects can cause additional costs and unpredictability in the process in the form of scrap, rework, record keeping, and inspection. In addition, product defects can cause a process to shut down, because there is very little work in process inventory to keep the next (downstream) operations running. Thus, a just-in-time manufacturer would wish to eliminate the negative con- sequences of product defects. 7. Under supplier partnering, long-term rela- tionships are established with suppliers to improve quality, cost, and delivery. Tradi- tional relationships are usually focused on reducing price through supplier competitive bidding. Thus, the traditional supplier rela- tionship can be very short-term oriented (un- til a better "deal" comes along). 8. A just-in-time environment will result in fewer (or no) work in process control points. As a result, there are no in-process transactions into and out of work in process inventory locations throughout the process. The just- in-time cost accounting system, termed backflush accounting, “pulls” cost from com- pleted production, rather than “pushed” through the plant, using materials requisi- tions or production orders. 9. The raw and in process inventory account combines the materials and work in process inventories because the materials are often introduced directly into the process. Thus, the materials are not recorded in a separate materials account before being introduced to work in process because there is no materi- als inventory. 10. Direct labor and indirect labor activities be- come combined in a just-in-time environ- ment. Employees perform both direct and in- direct labor tasks. In addition, direct labor can be a small part of the cost of producing product. As such, the direct labor is included as overall conversion cost (much like in a process cost system).process cost system)....
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This note was uploaded on 05/03/2008 for the course ACCT 1B taught by Professor Llorente during the Spring '08 term at CSU Fullerton.
- Spring '08