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Unformatted text preview: CHAPTER 27 (FIN MAN); CHAPTER 12 (MAN) COST MANAGEMENT FOR JUST-IN-TIME ENVIRONMENTS EYE OPENERS 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 or- ders. As a result, finished goods, work in process, and materials inventories are min- imized. Make to order manufacturing re- quires a high degree of flexibility and insigni- ficant 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. With supply chain management, long-term relationships are established with suppliers and customers to improve quality, cost, and delivery. Traditional relationships are usually focused on reducing price through supplier or customer competitive bidding. Thus, the traditional supplier and customer relation- ship can be very short-term oriented (until a better deal comes along). 8. Patients with common health problems are placed together on a floor (product-focused layout). Centralized services, such as X rays, are distributed to the floors. Cross- trained caregivers provide care, rather than many different spets . 9. A just-in-time environment will result in few- er (or no) work in process control points. As a result, there are no in-process transac- tions into and out of work in process invent- ory 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. 10. 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....
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This note was uploaded on 10/12/2010 for the course ACCT 116B taught by Professor Rivers during the Spring '09 term at City.
- Spring '09