ACCOUNT exam
Final Assessment
Question 1
Carey Manufacturing, Inc., is considering reorganizing its plant into manufacturing cells. The following estimates have been prepared to evaluate the benefits from the reorganization:
Before the change
After the change
Total annual sales
$ 700,000
$850,000
Costs as percentage of sales:
Direct materials
10%
9%
Direct labor
6%
4%
Support costs
9%
7%
Work-in -process inventory
$200,000
$120,000
Inventory carrying costs are estimated to be 12% per year.
Required:
Why do the layout reorganization estimates include
from carrying reduced levels of work-in-process inventory?
a decrease in direct material costs as a percentage of sales?
an increase in sales?
As a result of the layout reorganization, what amount of annul change is projected
form carrying reduced levels of work-in-process inventory?
for incremental manufacturing costs?
in total benefits?
Answer:
a.
1. Layout reorganization estimates include a decrease in work-in-process inventory because cellular manufacturing streamlines production flows. When products flow immediately from one processing stage to the next, there is less build-up of work-in-process inventories.
Question 2
Identify and explain each of the three major cycles of the total-life-cycle-costing approach
How does the total-life-cycle costing approach differ from traditional product-costing? Explain.
Answer
Research, Development, and engineering cycle: target costing and value engineering Manufacturing cycle: activity-based costing, Kaizen costing post-sale service and disposal cycle
Each part of value chain is managed by different organizational function it integrates the trade-offs and performance over time and functional units
Q2a
The three major cycles of the total-life cycle costing approach are: research, development, and engineering (RD&E); manufacturing; and post-sale service and disposal.
The research, development, and engineering cycle has three
Question 1
Carey Manufacturing, Inc., is considering reorganizing its plant into manufacturing cells. The following estimates have been prepared to evaluate the benefits from the reorganization:
Before the change
After the change
Total annual sales
$ 700,000
$850,000
Costs as percentage of sales:
Direct materials
10%
9%
Direct labor
6%
4%
Support costs
9%
7%
Work-in -process inventory
$200,000
$120,000
Inventory carrying costs are estimated to be 12% per year.
Required:
Why do the layout reorganization estimates include
from carrying reduced levels of work-in-process inventory?
a decrease in direct material costs as a percentage of sales?
an increase in sales?
As a result of the layout reorganization, what amount of annul change is projected
form carrying reduced levels of work-in-process inventory?
for incremental manufacturing costs?
in total benefits?
Answer:
a.
1. Layout reorganization estimates include a decrease in work-in-process inventory because cellular manufacturing streamlines production flows. When products flow immediately from one processing stage to the next, there is less build-up of work-in-process inventories.
Question 2
Identify and explain each of the three major cycles of the total-life-cycle-costing approach
How does the total-life-cycle costing approach differ from traditional product-costing? Explain.
Answer
Research, Development, and engineering cycle: target costing and value engineering Manufacturing cycle: activity-based costing, Kaizen costing post-sale service and disposal cycle
Each part of value chain is managed by different organizational function it integrates the trade-offs and performance over time and functional units
Q2a
The three major cycles of the total-life cycle costing approach are: research, development, and engineering (RD&E); manufacturing; and post-sale service and disposal.
The research, development, and engineering cycle has three