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o Repetition is an important component, a key Repetition is an important component, a key part of learning. In memory, the more times part of learning. In memory, the more times patterns of thought are repeated, the more patterns of thought are repeated, the more likely you will be able to recall information.likely you will be able to recall information.

o These PowerPoint slides have been modified These PowerPoint slides have been modified from the lecture decks by making them fill-in-from the lecture decks by making them fill-in-the-blank. Why? So that you get an the-blank. Why? So that you get an opportunity to repeat a visual cue (from the opportunity to repeat a visual cue (from the lecture or the book) via completing text here.lecture or the book) via completing text here.

o In addition, most text book exhibits have In addition, most text book exhibits have been removed as they are available in your been removed as they are available in your text directly.text directly.


Cost Cost

Management for

Management for

Just-in-Time

Just-in-Time

Environments

Environments

Chapter 27Chapter 27Chapter 27Chapter 27


Learning Learning Objective

ObjectiveDescribe just-in-time

Describe just-in-time

manufacturing practices.

manufacturing practices.

11


_________-__-_______ Practices_________-__-_______ Practices

o ________-__-_______(JIT), sometimes called ________-__-_______(JIT), sometimes called _______ manufacturing, is a philosophy _______ manufacturing, is a philosophy that focuses on _______ _______ and cost that focuses on _______ _______ and cost and eliminating _______ _______ .and eliminating _______ _______ .


Reducing _______ Reducing _______

o Just-in-time (JIT) manufacturing views Just-in-time (JIT) manufacturing views inventory as _______ and _______ . As a inventory as _______ and _______ . As a result, JIT emphasizes _______ or _______ result, JIT emphasizes _______ or _______ inventory.inventory.

o Under traditional manufacturing, inventory Under traditional manufacturing, inventory often _______ _______ _______ problems.often _______ _______ _______ problems.

o JIT manufacturing attempts to _______ and JIT manufacturing attempts to _______ and _______ _______ problems._______ _______ problems.

REDUCING REDUCING INVENTORYINVENTORY


Reducing Lead TimeReducing Lead Time

o _______ _______ , sometimes called _______ _______ _______ , sometimes called _______ time, is a measure of the time that elapses time, is a measure of the time that elapses between _______ a unit of product and _______ between _______ a unit of product and _______ the unit of product. The __________ time can the unit of product. The __________ time can be classified as one of the following:be classified as one of the following: ___-____ lead time, which is the time spent in ___-____ lead time, which is the time spent in

_______ _______ materials into a _______ _______ of _______ _______ materials into a _______ _______ of product.product.

___-_____-________ lead time, which is the time ___-_____-________ lead time, which is the time spent while the unit of product is _______ to enter, spent while the unit of product is _______ to enter, or _______ _______ to, the _______ production or _______ _______ to, the _______ production process.process.



o The _______-_______ ratio is computed as The _______-_______ ratio is computed as follows:follows:

Value-Added Ratio =Value-Added Ratio =


Value-Added Ratio =

Value-Added Ratio = = ______%


o The material in Exhibit 2 arrived was The material in Exhibit 2 arrived was delivered to the customer 125 minutes delivered to the customer 125 minutes later. Value was added in only 65 of these later. Value was added in only 65 of these minutes. The value-added ratio is minutes. The value-added ratio is calculated as follows:calculated as follows:

Reducing Lead Time


Reducing Setup TimeReducing Setup Time

o A _______ is the effort spent preparing an A _______ is the effort spent preparing an _______ or _______ for a production run. If _______ or _______ for a production run. If setups are _______ and _______ , the _______ setups are _______ and _______ , the _______ size (_______ of units) for the related size (_______ of units) for the related production run is _______ _______ .production run is _______ _______ .

o _______ batch sizes allow setup costs to be _______ batch sizes allow setup costs to be spread over _______ units and, thus, spread over _______ units and, thus, _______ the _______ _______ unit._______ the _______ _______ unit.

o Exhibit 3 shows the relationship between Exhibit 3 shows the relationship between _______ times and _______ time._______ times and _______ time.


Total Within-Batch Wait Time =Total Within-Batch Wait Time = (_____________________) x (_____________________) x (_____________(_____________– 1)– 1)


o The lead time for Process Y is longer The lead time for Process Y is longer because each unit has to wait its “_______” because each unit has to wait its “_______” while other units in the batch are processed. while other units in the batch are processed. It takes a unit five minutes for each It takes a unit five minutes for each operation—four minutes waiting and one operation—four minutes waiting and one minute in production.minute in production.

o The _______ time is called _______-_______ The _______ time is called _______-_______ _______ time. The total _______-_______ _______ time. The total _______-_______ _______ time is calculated as follows:_______ time is calculated as follows:


Total Within-Batch Wait Time = (___ + ___ + ___) minutes x (___ – 1)

Total Within-Batch Wait Time = ______ ______ minutesminutes


o The total within-batch wait time for Process Y is The total within-batch wait time for Process Y is 12 minutes, as computed below.12 minutes, as computed below.

Total Within-Batch Wait Time =Total Within-Batch Wait Time = (_____________________) x (_____________________) x (_____________(_____________– 1)– 1)


Value-Added Ratio =

Value-Added Ratio =____ minutes

____ minutes= ____ %%


o The value-added ratio for Process Y is The value-added ratio for Process Y is ________ %, as computed below.%, as computed below.



o Automotive Components Inc. Automotive Components Inc. manufactures engine starters as follows:manufactures engine starters as follows:


The total lead time is 985 minutes, as The total lead time is 985 minutes, as computed below:computed below:


o The total within-batch wait time is 936 The total within-batch wait time is 936 minutes, as computed below:minutes, as computed below:


Value-Added Ratio =

Value-Added Ratio =(__+ __ + __) minutes

______ minutes

= ______ %% (rounded) (rounded)Value-Added Ratio


o Based on the data in the preceding slides, Based on the data in the preceding slides, the value-added ratio is approximately the value-added ratio is approximately ____________ %, as computed below:%, as computed below:



o Automotive Components can increase its Automotive Components can increase its value-added ratio by:value-added ratio by: ________________________________________________________________________________________________

___________________, and___________________, and

________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________


Emphasizing ________-_______ LayoutEmphasizing ________-_______ Layout

o If the manufacturing process is organized If the manufacturing process is organized around a ________ , it is called a ________-around a ________ , it is called a ________-_______ layout (or ________ _______ ). _______ layout (or ________ _______ ).

o If the manufacturing process is organized If the manufacturing process is organized around a ________, it is called a ________-around a ________, it is called a ________-_______ layout. _______ layout.


Emphasizing Product-Oriented LayoutEmphasizing Product-Oriented Layout

o Just-in-time normally organizes Just-in-time normally organizes manufacturing around __________ rather manufacturing around __________ rather than _________. Organizing work around than _________. Organizing work around _________ reduces:_________ reduces: ____________________________________________ ____________________________________________

________________________________________________________________________________________

________________________________________________________________________________________

________________________________________________________________________________________


Emphasizing _______ _______ Emphasizing _______ _______

o _______ _______ is a _______ approach that _______ _______ is a _______ approach that grants employees the _______ and _______ grants employees the _______ and _______ to make decisions about operations by: to make decisions about operations by: ______________________________________________.______________________________________________.

__________________________________________________________________________________________________________________________________________.______________________________________________.


Emphasizing _______ ManufacturingEmphasizing _______ Manufacturing

o Producing items only as they are needed Producing items only as they are needed by the customer is called _______ by the customer is called _______ manufacturing (or _______ manufacturing (or _______ __ __ _______)_______)..

o A system that accomplishes _______ A system that accomplishes _______ manufacturing is often called _______ manufacturing is often called _______ (Japanese for “_______”). Electronic cards (Japanese for “_______”). Electronic cards or containers signal production quantities or containers signal production quantities to be filled by the preceding operation.to be filled by the preceding operation.


Emphasizing Pull ManufacturingEmphasizing Pull Manufacturing

o In contrast, the _______ approach is to In contrast, the _______ approach is to _______ _______ based on _______ customer _______ _______ based on _______ customer requirements. This principle is called requirements. This principle is called _______ manufacturing (or _______ _______ manufacturing (or _______ __ __ _______)._______).


Emphasizing Zero DefectsEmphasizing Zero Defects

o Just-in-time manufacturing attempts to Just-in-time manufacturing attempts to _______ _______ quality. _______ _______ _______ _______ quality. _______ _______ creates:creates: __________________________________________________________________________________________

__________________________________________________________________________________________

__________________________________________________________________________________________

__________________________________________________________________________________________

__________________________________________________________________________________________


Emphasizing Zero DefectsEmphasizing Zero Defects

o Six Sigma was developed by Motorola Six Sigma was developed by Motorola Corporation to improve _____ and Corporation to improve _____ and manufacturing _____ and consists of five manufacturing _____ and consists of five steps:steps: DD______________________________

MM _______________ _______________

AA _______________ _______________

II _______________ _______________

CC _______________ _______________

o These five steps form the acronym ________These five steps form the acronym ________


Emphasizing ________ ________ Emphasizing ________ ________ ManagementManagement

o ________ ________ management coordinates ________ ________ management coordinates and controls the flow of ________, ________, and controls the flow of ________, ________, ________, and ________ with suppliers, ________, and ________ with suppliers, ________, and ________.________, and ________.


Emphasizing Supply Chain Emphasizing Supply Chain ManagementManagement


Emphasizing Supply Chain Emphasizing Supply Chain ManagementManagement

________ _______ ____________(ERP) systems, ________ _______ ____________(ERP) systems, which are used to _______ and _______ _______ which are used to _______ and _______ _______ and supply chain operations.and supply chain operations.



ObjectiveApply just-in-time practices to a

Apply just-in-time practices to a

non-manufacturing setting.

non-manufacturing setting.

22


Just-in-Time for _________ ProcessesJust-in-Time for _________ Processes



ObjectiveDescribe the implications of just-

Describe the implications of just-

in-time manufacturing on cost

in-time manufacturing on cost

accounting and performance

accounting and performance measurement.

measurement.

33


Accounting for JIT ManufacturingAccounting for JIT Manufacturing

o In just-in-time manufacturing, the In just-in-time manufacturing, the accounting system has the following accounting system has the following characteristics:characteristics: _____________ _____________. _____________ _____________. There are There are

_______ _______ transactions to record, thus transactions to record, thus _______ _______ the accounting system.the accounting system.

___________ _______________. ___________ _______________. All All __-________ __-________ work is combined with work is combined with _______ _______ _______ _______ to to form a new account, form a new account, _____and ___-_____and ___-______(RIP) _______ ______(RIP) _______ ..


Accounting for JIT ManufacturingAccounting for JIT Manufacturing

_______ _______. Direct labor is combined with _______ _______. Direct labor is combined with other costs to form a new account titled _______ other costs to form a new account titled _______ _______._______.

_______ _______ measures. _______ _______ _______ _______ measures. _______ _______ measures are emphasized.measures are emphasized.

Direct _______ of _______ . Indirect labor is Direct _______ of _______ . Indirect labor is _______ assigned to _______ cells; thus, less _______ assigned to _______ cells; thus, less _______ _______ is allocated to products._______ _______ is allocated to products.


Fewer TransactionsFewer Transactions

o The accounting system for just-in-time The accounting system for just-in-time manufacturing is simplified by _______ the manufacturing is simplified by _______ the _______ and _______ of product costs by _______ and _______ of product costs by departments. This type of accounting is departments. This type of accounting is termed _______ accounting.termed _______ accounting.


Combined AccountsCombined Accounts

o Anderson Metal Fabricators, a Anderson Metal Fabricators, a manufacturer of metal covers for manufacturer of metal covers for electronic test equipment, has an annual electronic test equipment, has an annual budgeted conversion cost of $2,400,000 budgeted conversion cost of $2,400,000 and 1,920 planned hours of production. and 1,920 planned hours of production. The cell conversion cost rate is The cell conversion cost rate is determined as follows:determined as follows:

Cell Conversion Cost Rate =

Cell Conversion Cost Rate = $_____ per hr$_____ per hr=


Conversion Cost for Cover

_______ _______

_______ _______ _______ _______

= ×

= _______ hours × $ _______

= $$ _______ per unitper unit


o Assume that Anderson Metal’s cover Assume that Anderson Metal’s cover product cell is expected to require 0.02 product cell is expected to require 0.02 hour of manufacturing time per unit. Thus, hour of manufacturing time per unit. Thus, the conversion cost for the cover is $25 the conversion cost for the cover is $25 per unit, as shown below.per unit, as shown below.


Raw and In Process Inventory 120,000Accounts Payable 120,000

To record materials purchases.

A A _______ Raw Materials Raw Materials

account is account is _______ used.used.

A A _______ Raw Materials Raw Materials

account is account is _______ used.used.


o Steel coil is purchased for producing 8,000 Steel coil is purchased for producing 8,000 metal covers. The purchase cost was metal covers. The purchase cost was $120,000, or $15 per unit.$120,000, or $15 per unit.


Raw and In Process Inventory 200,000Conversion Costs 200,000

To record applied conversioncosts of the medium-cover line.

The The _______ ___ _______ __ _______ account is used account is used

to to _______ the the _______ _______ costscosts..

The The _______ ___ _______ __ _______ account is used account is used

to to _______ the the _______ _______ costscosts..

Combine AccountsCombine Accounts

o Conversion costs are applied to 8,000 Conversion costs are applied to 8,000 covers at a rate of $25 per cover.covers at a rate of $25 per cover.


Finished Goods Inventory 320,000Raw and In Process Inventory 320,000

To transfer the cost of completed units to finishedgoods.

This is a This is a _______ transaction transaction because the raw and in process because the raw and in process

inventory account balance is inventory account balance is _______ _______ the the _______..

This is a This is a _______ transaction transaction because the raw and in process because the raw and in process

inventory account balance is inventory account balance is _______ _______ the the _______..

Materials Materials ($15 x 8,000 units)($15 x 8,000 units) $120,000$120,000ConversionConversion($25 x 8,000 units)($25 x 8,000 units) 200,000 200,000 TotalTotal $320,000$320,000

Materials Materials ($15 x 8,000 units)($15 x 8,000 units) $120,000$120,000ConversionConversion($25 x 8,000 units)($25 x 8,000 units) 200,000 200,000 TotalTotal $320,000$320,000


o All 8,000 covers were completed in the cell.All 8,000 covers were completed in the cell.


7,800 7,800 ×× $___ $___7,800 7,800 ×× $___ $___

Accounts Receivable ____,000Sales ____,000

To record sales.

Cost of Goods Sold ____,000Finished Goods Inventory ____,000

To record cost of goods sold.

7,800 × $____7,800 × $____7,800 × $____7,800 × $____


o Of the 8,000 units completed, 7,800 were sold Of the 8,000 units completed, 7,800 were sold and shipped to customers at $70 per unit.and shipped to customers at $70 per unit.


_______ Performance Measures_______ Performance Measures

o A _______ measure is operating information A _______ measure is operating information that has not been stated in dollar terms. that has not been stated in dollar terms. Examples include:Examples include: ___________________________ ___________________________ ___________________________ ___________________________ ___________________________ ___________________________ ___________________________ ___________________________ ___________________________ ___________________________ ___________________________ ___________________________ ___________________________ ___________________________



ObjectiveDescribe and illustrate activity

Describe and illustrate activity

analysis for improving

analysis for improving operations.operations.

44


_______ Analysis_______ Analysis

o An _______ analysis determines the cost of An _______ analysis determines the cost of _______ based on an analysis of _______ _______ based on an analysis of _______ _______ and other records. An _______ _______ and other records. An _______ analysis can be used to determine the cost analysis can be used to determine the cost of:of:

________________________

____________ ____________

________________________


Costs of QualityCosts of Quality

o _______ costs are costs of _______ _______ _______ costs are costs of _______ _______ before or _______ the manufacture of the before or _______ the manufacture of the product or _______ of services.product or _______ of services.

o _______ costs are costs of _______ that _______ costs are costs of _______ that _______ , _______ , _______ , and _______ _______ , _______ , _______ , and _______ products and _______ to ensure that they products and _______ to ensure that they _______ customer _______ ._______ customer _______ .


Costs of QualityCosts of Quality

o _______ _______ costs are costs associated _______ _______ costs are costs associated with _______ discovered _______ the with _______ discovered _______ the product is _______ to the consumer.product is _______ to the consumer.

o _______ _______ costs are costs incurred _______ _______ costs are costs incurred _______ _______ products have been _______ _______ _______ products have been _______ to consumers.to consumers.


_______ of _______ _______ of _______

o Exhibit 5Exhibit 5 shows the relationship between shows the relationship between the _______ of _______ . The _______ and the _______ of _______ . The _______ and _______ _______ costs decline with _______ _______ costs decline with increases in the _______ of good units increases in the _______ of good units _______ ._______ .


_______ Chart of Quality Costs_______ Chart of Quality Costs

o Managers want information displayed so Managers want information displayed so that important problems or issues can be that important problems or issues can be identified quickly. One method of reporting identified quickly. One method of reporting quality cost information is the _______ quality cost information is the _______ chart. chart.

o A _______ chart is a _______ chart that A _______ chart is a _______ chart that shows the _______ of an _______ for a shows the _______ of an _______ for a number of ranked _______ .number of ranked _______ .


Cost of Quality ReportCost of Quality Report

o A _______ of quality _______ normally A _______ of quality _______ normally reports the:reports the: ______________________________________________________________________________

____________________________________________________________________________________________________________________________________________________________

______________________________________________________________________________


_______- _______ Activity Analysis_______- _______ Activity Analysis

o A _______-_______ activity is one that is A _______-_______ activity is one that is _______ to _______ customer requirements. _______ to _______ customer requirements.

o A non-_______- _______ activity is _______ A non-_______- _______ activity is _______ required by the customer but occurs required by the customer but occurs because of _______, _______, _______, and because of _______, _______, _______, and _______ failures._______ failures.


Process Activity AnalysisProcess Activity Analysis

o A _______ is a series of _______ that _______ A _______ is a series of _______ that _______ an _______ into an _______ . Common an _______ into an _______ . Common business processes include:business processes include: ____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________


If 10,000 sales orders are filled during the If 10,000 sales orders are filled during the current period, the per-unit process cost is current period, the per-unit process cost is $8 per order ($80,000/10,000 orders).$8 per order ($80,000/10,000 orders).


o Assume that the cost of Masters Assume that the cost of Masters Company’s four activities is as follows:Company’s four activities is as follows:



o Masters Company determines that only Masters Company determines that only new customers need to have a credit new customers need to have a credit check. If this change is made, it is check. If this change is made, it is estimated that only 25% of sales orders estimated that only 25% of sales orders would require credit checks. In addition, by would require credit checks. In addition, by revising the warehouse product layout, it revising the warehouse product layout, it is estimated that the cost of picking orders is estimated that the cost of picking orders can be reduced by 35%.can be reduced by 35%.



o If 10,000 orders will be filled, the cost If 10,000 orders will be filled, the cost savings from these two improvements are savings from these two improvements are as follows:as follows:


Cost Cost

Management for

Management for

Just-in-Time

Just-in-Time

Environments

Environments

The EndThe EndThe EndThe End

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