Chapter 26: Exercises

Exercise D-1: Lean Business Model Identify each as Lean (L) or Traditional (T): 1. 2. 3. 4. 5. 6. The process produces standard goods, with no customization: T Production begins with a sales forecast: T The process uses push production in large batch sizes: T Production occurs in value streams: L The production process begins when a customer makes an order: L Raw materials are delivered just-in-time for production to begin: L Exercise D-2: Lean Accounting Prepare journal entries for each transaction under lean accounting. 1. Purchased $22,500 of raw materials on credit: Debit Work in Process Inventory Credit Accounts Payable $22,500 $22,500 2. Applied conversion costs of $67,500: Debit Work in Process Inventory Credit Conversion Costs $67,500 $67,500 3. Incurred actual conversion costs of $67,500: Debit Conversion Costs Credit Various Accounts $67,500 $67,500 4. Sold $120,000 of goods on credit: Debit Accounts Receivable Credit Sales $120,000 $120,000 5. Recorded cost of goods sold of $90,000: Debit Cost of Goods Sold Credit Work in Process Inventory $90,000 $90,000 Exercise D-3: Lean Accounting for Robo-Pool 1. Purchase of raw materials on credit: o Raw materials cost: $225 per unit × 120 units = $27,000 Debit Work in Process Inventory Credit Accounts Payable $27,000 $27,000 2. Applied conversion costs to production: o Conversion cost: $375 per unit × 120 units = $45,000 Debit Work in Process Inventory Credit Conversion Costs $45,000 $45,000 3. Sold 120 units on credit: o Sales: $700 per unit × 120 units = $84,000 Debit Accounts Receivable Credit Sales $84,000 $84,000 4. Record cost of goods sold: o Cost per unit: $225 + $375 = $600 o COGS for 120 units: $600 × 120 = $72,000 Debit Cost of Goods Sold Credit Work in Process Inventory $72,000 $72,000 Exercise D-4: Lean Accounting with Inventory for Robo-Pool 1. Purchase of raw materials on credit: Debit Work in Process Inventory Credit Accounts Payable $27,000 $27,000 2. Applied conversion costs to production: Debit Work in Process Inventory Credit Conversion Costs $45,000 $45,000 3. Sold 100 units on credit: o Sales: $700 per unit × 100 units = $70,000 Debit Accounts Receivable Credit Sales $70,000 $70,000 4. Record cost of goods sold and ending inventory: o COGS for 100 units: $600 × 100 = $60,000 o Finished goods inventory for 20 units: $600 × 20 = $12,000 Debit Cost of Goods Sold Debit Finished Goods Inventory $60,000 $12,000 Credit Work in Process Inventory $72,000 Exercise D-5: Conversion Cost Rate 1. Budgeted conversion costs: $48,000 2. Budgeted production hours: 600 • Conversion Cost Rate per Hour: Conversion Cost Rate per Hour=48,000600=80 per hour • Conversion Cost per Unit: Conversion Cost per Unit=80×2=160 per unit Exercise D-6: Cycle Time and Cycle Efficiency for Oakwood Company 1. Compute Cycle Time (CT): o Cycle Time = Sum of process, inspection, move, and wait times. 2. Compute Cycle Efficiency (CE): Cycle Efficiency=Value-Added Time (Process Time)Total Cycle Time 3. Adjusted Cycle Efficiency (if move time is reduced by 1 day and wait time by 2 days): o Calculate new cycle efficiency with the adjusted cycle time values. Exercise D-7: Cycle Time and Cycle Efficiency for Best Ink 1. Compute Cycle Time (CT): o Cycle Time = Sum of all times. 2. Compute Cycle Efficiency (CE): Cycle Efficiency=Process TimeCycle Time 3. Adjusted Cycle Efficiency (if inspection and wait times are reduced): o Use adjusted inspection and wait times to compute the new cycle efficiency. Exercise D-8: Cycle Time Components for T-Shirts Given data, compute each component: 1. 2. 3. 4. 5. Value-Added Time: Process time. Inspection Time: Time for quality checks. Move Time: Time taken to transfer between processes. Wait Time: Idle time waiting between stages. Cycle Time (CT): Sum of all time components. Exercise D-9: Cycle Efficiency for Traditional and Lean Approaches 1. Cycle Efficiency (Traditional): Cycle Efficiency=Process TimeTotal Cycle Time 2. Cycle Efficiency (Lean): Use adjusted times under lean conditions to calculate the new efficiency. Exercise D-10 & D-11: Days’ Sales in Work in Process Inventory 1. Days’ Sales in Work in Process Inventory: Days’ Sales in WIP=(WIP InventoryCOGS)×365 2. Effect of Inventory Reduction: Recalculate with 20% reduction to estimate days’ sales improvement. Exercise D-12 & D-13: Costs of Quality and Cost of Quality Report 1. Classify Quality Costs: o Inspecting raw materials: Appraisal o Training lean business practices: Prevention o Product recalls: External Failure o Warranty claims: External Failure o Equipment maintenance: Prevention o Scrap of defective materials: Internal Failure 2. Prepare Cost of Quality Report: Total and categorize costs into prevention, appraisal, internal failure, and external failure. Exercise D-14 & D-15: Days’ Payable Outstanding 1. Days’ Payable Outstanding: Days’ Payable Outstanding=(Accounts PayableCOGS)×365 2. Effect of Accounts Payable Adjustment: Recalculate days’ payable outstanding for an 8% increase or decrease.