spring 06 solution

spring 06 solution - ACCOUNTANCY 321 Spring 2006 EXAM II...

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ACCOUNTANCY 321 Spring, 2006 EXAM II Solution I. A. (1) The best control to prevent a stock room clerk from stealing inventory items is to have the clerks enter and exit work through a controlled door or gate. Many organizations require employees to enter through one door or one gate where a security guard controls the flow of people and checks the packages they bring to and from work. Such a check would discourage an employee from even thinking about stealing. It is also very effective in catching a theft if one is attempted. (2) having the storeroom in a physically secure area, (3) periodically counting the inventory, and reconciling the physical count with the quantity recorded in the accounting records. B. (1) The best control to prevent a production employee from stealing work-in- process inventory is to have the production employees enter and exit work through a controlled door or gate. By doing this and by having a security guard control the flow of people and check the packages they bring to and from work, employees are discouraged from even thinking about stealing. It is also very effective in catching a theft if one is attempted. (2) don’t leave partially processed inventory in an aisle where it is easily accessible to all employees. A route tag should accompany each batch of work-in-process that identifies the required processing steps. As soon as the partially processed inventory completes one processing step it should be immediate moved to the next step or to finished goods inventory. Production should be planned and integrated so there is not a lot of work-in-process and items in process do not wait for long period of time before they are processed further. C. (1) Each processing event should check product quality as it is performed . If the check shows a deviation in quality that is greater than a predefined acceptable variation, the production process should be stopped and the problem located and corrected before any more units are processed. (2) product quality can be checked at the beginning of the next process before the next process is started, (3) periodic checks can be made by process control individuals or by machines set up to automatically check the quality. 1
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D. The inconsistency between containers and lids could be caused by errors in removing items from inventory when they are used in the production process; it also could be created by errors in adding items purchased and received to the inventory records (The inventory system is set up to account for containers and lids separately but people probably think of the containers and lids as one unit. Thus, when they use containers in work-in-process they remove the quantity
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This note was uploaded on 01/06/2010 for the course ACCTG 321 taught by Professor Will during the Spring '08 term at San Diego State.

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spring 06 solution - ACCOUNTANCY 321 Spring 2006 EXAM II...

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