Question : Objective 20.5 1) A push-through system that manufactures finished goods for : 1217088

Objective 20.5

1) A push-through system that manufactures finished goods for inventory on the basis of demand forecasts is referred to as:

A) just-in-time purchasing

B) materials requirements planning

C) relevant total costs

D) economic order quantity

2) 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 is referred to as:

A) just-in-time purchasing

B) materials requirements planning

C) relevant total costs

D) economic order quantity

3) The management accountant aids in MRP by:

A) doing journal entries as requested

B) preparing plant appropriation requests

C) maintaining accurate records of inventory and its costs

D) contacting vendors to make sure they can deliver the materials in time

4) A “push-through” system, often described as a just-in-time system, emphasizes simplicity and close coordination among work centers.

5) Costs of setting up a production run are analogous to ordering costs in the Economic Order Quantity (EOQ) model.

6) A “demand-pull” system, often described as a materials requirement planning system, focuses first on the forecasted amount and timing of finished goods and then determines the demand for materials components and subassemblies at each of the prior stages of production.

7) Just-in-time (JIT) production, is a “demand-pull” manufacturing system that manufactures each component in a production line as soon as, and only when, needed by the next step in the production line.

8) Just-in-time systems are similar to materials requirement planning systems in that both systems are demand-pull systems.

9) Kretzinger Company makes extensive use of financial performance reports for each of its departments. Although most departments have been reporting favorable cost variances with the company’s current inventory system, management is concerned about the overall performance of the purchasing department. For example, the following information is for the purchasing of materials for a product the company has been manufacturing for several years:

Purchase Year

Quantity Used

Average Inventory

Price Variance

20X1

40,000

8,000

$ 1,000 F

20X2

60,000

15,000

10,000 F

20X3

60,000

20,000

12,000 F

20X4

50,000

12,500

20,000 U

20X5

54,000

18,000

8,000 F

20X6

58,000

23,200

9,500 F

Required:

a.Compute the inventory turnover for each year. Can any conclusions be drawn for a yearly comparison of the purchase price variance and the inventory turnover?

b.Identify problems likely to be caused by evaluating purchasing only on the basis of the purchase price variance.

c.What recommendations will improve the evaluation process?

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.