c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Student Version o Repetition is an important component, a key part of learning. In memory, the more times patterns of thought are repeated, the more likely you will be able to recall information. o These PowerPoint slides have been modified from the lecture decks by making them fill-in-the-blank. Why? So that you get an opportunity to repeat a visual cue (from the lecture or the book) via completing text here. o In addition, most text book exhibits have been removed as they are available in your text directly.

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Cost Management for Just-in-Time Environments Chapter 27

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective Describe just-in-time manufacturing practices. 1

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. _________-__-_______ Practices o ________-__-_______(JIT), sometimes called _______ manufacturing, is a philosophy that focuses on _______ _______ and cost and eliminating _______ _______.

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Reducing _______ o Just-in-time (JIT) manufacturing views inventory as _______ and _______. As a result, JIT emphasizes _______ or _______ inventory. o Under traditional manufacturing, inventory often _______ _______ _______ problems. o JIT manufacturing attempts to _______ and _______ _______ problems.

R EDUCING I NVENTORY

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Reducing Lead Time o _______ _______, sometimes called _______ time, is a measure of the time that elapses between _______ a unit of product and _______ the unit of product. The __________ time can be classified as one of the following:  ___-____ lead time, which is the time spent in _______ _______ materials into a _______ _______ of product.  ___-_____-________ lead time, which is the time spent while the unit of product is _______ to enter, or _______ _______ to, the _______ production process.

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Reducing Lead Time o The _______-_______ ratio is computed as follows: Value-Added Ratio =

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Value-Added Ratio = = ______% Reducing Lead Time o The material in Exhibit 2 arrived was delivered to the customer 125 minutes later. Value was added in only 65 of these minutes. The value- added ratio is calculated as follows: Reducing Lead Time

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Reducing Setup Time o A _______ is the effort spent preparing an _______ or _______ for a production run. If setups are _______ and _______, the _______ size (_______ of units) for the related production run is _______ _______. o _______ batch sizes allow setup costs to be spread over _______ units and, thus, _______ the _______ _______ unit. o Exhibit 3 shows the relationship between _______ times and _______ time.

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Total Within-Batch Wait Time = (_____________________) x (_____________– 1) Reducing Setup Time o The lead time for Process Y is longer because each unit has to wait its “_______” while other units in the batch are processed. It takes a unit five minutes for each operation—four minutes waiting and one minute in production. o The _______ time is called _______-_______ _______ time. The total _______-_______ _______ time is calculated as follows:

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Total Within-Batch Wait Time = (___ + ___ + ___) minutes x (___ – 1) Total Within-Batch Wait Time = ______ minutes Reducing Setup Time o The total within-batch wait time for Process Y is 12 minutes, as computed below. Total Within-Batch Wait Time = (_____________________) x (_____________– 1)

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Value-Added Ratio = ____ minutes % = ____ % Reducing Setup Time o The value-added ratio for Process Y is ____ %, as computed below.

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Reducing Setup Time o Automotive Components Inc. manufactures engine starters as follows:

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. The total lead time is 985 minutes, as computed below: Reducing Setup Time o The total within-batch wait time is 936 minutes, as computed below:

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Value-Added Ratio = (__+ __ + __) minutes ______ minutes % (rounded) = ______ % (rounded) Value-Added Ratio Reducing Setup Time o Based on the data in the preceding slides, the value-added ratio is approximately ______ %, as computed below:

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Reducing Setup Time o Automotive Components can increase its value-added ratio by:  ________________________________________________ ___________________, and  ________________________________________________ ________________________________________________ ________________________________________________

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Emphasizing ________-_______ Layout o If the manufacturing process is organized around a ________, it is called a ________- _______ layout (or ________ _______ ). o If the manufacturing process is organized around a ________, it is called a ________- _______ layout.

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Emphasizing Product-Oriented Layout o Just-in-time normally organizes manufacturing around __________ rather than _________. Organizing work around _________ reduces:  ____________________________________________

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Emphasizing _______ _______ o _______ _______ is a _______ approach that grants employees the _______ and _______ to make decisions about operations by:  ______________________________________________.  ______________________________________________ ______________________________________________.

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Emphasizing _______ Manufacturing o Producing items only as they are needed by the customer is called _______ manufacturing (or _______ __ _______). o A system that accomplishes _______ manufacturing is often called _______ (Japanese for “_______”). Electronic cards or containers signal production quantities to be filled by the preceding operation.

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Emphasizing Pull Manufacturing o In contrast, the _______ approach is to _______ _______ based on _______ customer requirements. This principle is called _______ manufacturing (or _______ __ _______).

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Emphasizing Zero Defects o Just-in-time manufacturing attempts to _______ _______ quality. _______ _______ creates:  _____________________________________________

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Emphasizing Zero Defects o Six Sigma was developed by Motorola Corporation to improve _____ and manufacturing _____ and consists of five steps:  D_______________  M _______________  A _______________  I _______________  C _______________ o These five steps form the acronym ________

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Emphasizing ________ ________ Management o ________ ________ management coordinates and controls the flow of ________, ________, ________, and ________ with suppliers, ________, and ________.

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Emphasizing Supply Chain Management o To enhance the interchange of information between suppliers and customers, supply chain management often uses:  ________ ________ ___________(EDI), which uses ________ to communicate  _______ ________ ______ ______(RFID), which are ________ ________ (________ ) placed on or ________ within products that can be read by ________ ________ that allow instant ________ of product ________.

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Emphasizing Supply Chain Management  ________ _______ ____________(ERP) systems, which are used to _______ and _______ _______ and supply chain operations.

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective Apply just-in-time practices to a non-manufacturing setting. 2

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Just-in-Time for _________ Processes o Just-in-time practices may also be applied to _______ businesses or administrative processes like:  _____________

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective Describe the implications of just-in- time manufacturing on cost accounting and performance measurement. 3

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Accounting for JIT Manufacturing o In just-in-time manufacturing, the accounting system has the following characteristics:  _____________ _____________. There are _______ transactions to record, thus _______ the accounting system.  ___________ _______________. All __-________ work is combined with _______ _______ to form a new account, _____and ___-______(RIP) _______.

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Accounting for JIT Manufacturing  _______ _______. Direct labor is combined with other costs to form a new account titled _______ _______.  _______ _______ measures. _______ _______ measures are emphasized.  Direct _______ of _______. Indirect labor is _______ assigned to _______ cells; thus, less _______ _______ is allocated to products.

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Fewer Transactions o The accounting system for just-in-time manufacturing is simplified by _______ the _______ and _______ of product costs by departments. This type of accounting is termed _______ accounting.

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Combined Accounts o Anderson Metal Fabricators, a manufacturer of metal covers for electronic test equipment, has an annual budgeted conversion cost of $2,400,000 and 1,920 planned hours of production. The cell conversion cost rate is determined as follows: Cell Conversion Cost Rate = $_____ per hr =

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Conversion Cost for Cover______________ _______ = × = _______ hours × $ _______ = $per unit $ _______ per unit Combined Accounts o Assume that Anderson Metal’s cover product cell is expected to require 0.02 hour of manufacturing time per unit. Thus, the conversion cost for the cover is $25 per unit, as shown below.

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Raw and In Process Inventory120,000 Accounts Payable120,000 To record materials purchases. A Raw Materials account is used. A _______ Raw Materials account is _______ used. Combined Accounts o Steel coil is purchased for producing 8,000 metal covers. The purchase cost was $120,000, or $15 per unit.

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Raw and In Process Inventory200,000 Conversion Costs200,000 To record applied conversion costs of the medium-cover line. The account is used to the costs. The _______ ___ _______ __ _______ account is used to _______ the _______ _______ costs. Combine Accounts o Conversion costs are applied to 8,000 covers at a rate of $25 per cover.

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Finished Goods Inventory320,000 Raw and In Process Inventory320,000 To transfer the cost of completed units to finished goods. This is a transaction because the raw and in process inventory account balance is the. This is a _______ transaction because the raw and in process inventory account balance is _______ _______ the _______. Materials ($15 x 8,000 units)$120,000 Conversion ($25 x 8,000 units) 200,000 Total$320,000 Total$320,000Materials ($15 x 8,000 units)$120,000 Conversion ($25 x 8,000 units) 200,000 Total$320,000 Total$320,000 Combined Accounts o All 8,000 covers were completed in the cell.

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. 7,800 × $___ Accounts Receivable____,000 Sales____,000 To record sales. Cost of Goods Sold____,000 Finished Goods Inventory____,000 To record cost of goods sold. 7,800 × $____ Combined Accounts o Of the 8,000 units completed, 7,800 were sold and shipped to customers at $70 per unit.

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. _______ Performance Measures o A _______ measure is operating information that has not been stated in dollar terms. Examples include:  ___________________________

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective Describe and illustrate activity analysis for improving operations. 4

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. _______ Analysis o An _______ analysis determines the cost of _______ based on an analysis of _______ _______ and other records. An _______ analysis can be used to determine the cost of:  ____________

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Costs of Quality o _______ costs are costs of _______ _______ before or _______ the manufacture of the product or _______ of services. o _______ costs are costs of _______ that _______, _______, _______, and _______ products and _______ to ensure that they _______ customer _______.

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Costs of Quality o _______ _______ costs are costs associated with _______ discovered _______ the product is _______ to the consumer. o _______ _______ costs are costs incurred _______ _______ products have been _______ to consumers.

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. _______ of _______ o Exhibit 5 shows the relationship between the _______ of _______. The _______ and _______ _______ costs decline with increases in the _______ of good units _______.

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. _______ Chart of Quality Costs o Managers want information displayed so that important problems or issues can be identified quickly. One method of reporting quality cost information is the _______ chart. o A _______ chart is a _______ chart that shows the _______ of an _______ for a number of ranked _______.

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Cost of Quality Report o A _______ of quality _______ normally reports the:  _______________________________________  _______________________________________ _______________________________________  _______________________________________

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. _______- _______ Activity Analysis o A _______-_______ activity is one that is _______ to _______ customer requirements. o A non-_______- _______ activity is _______ required by the customer but occurs because of _______, _______, _______, and _______ failures.

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Process Activity Analysis o A _______ is a series of _______ that _______ an _______ into an _______. Common business processes include:  ______________________________

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. If 10,000 sales orders are filled during the current period, the per-unit process cost is $8 per order ($80,000/10,000 orders). Process Activity Analysis o Assume that the cost of Masters Company’s four activities is as follows:

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Process Activity Analysis o Masters Company determines that only new customers need to have a credit check. If this change is made, it is estimated that only 25% of sales orders would require credit checks. In addition, by revising the warehouse product layout, it is estimated that the cost of picking orders can be reduced by 35%.

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Process Activity Analysis o If 10,000 orders will be filled, the cost savings from these two improvements are as follows:

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Cost Management for Just-in-Time Environments The End