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Study-Unit-8-Operational-Efficiency-And-Business-Process-Performance-Subunit-1-Just-In-Time-Inventory-And-Lean-Manufacturing-Lean-Resource-Managem.pdf

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Study-Unit-8-Operational-Efficiency-And-Business-Process-Performance-Subunit-1-Just-In-Time-Inventory-And-Lean-Manufacturing-Lean-Resource-M

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Study Unit 8: Operational Efficiency and Business Process
Performance
Subunit 1: Just-in-Time Inventory and Lean Manufacturing (Lean
Resource Management)
Question: 1The benefits of a just-in-time system for raw materials usually include

A. Elimination of nonvalue-adding operations.
Answer (A) is correct.
Nonvalue-adding activities are those that do not add to customer value or satisfy an organizational
need. Inventory activities are inherently nonvalue-adding. Thus, a system, such as JIT, that promotes
lean production and reduces inventory and its attendant procedures (storage, handling, etc.) also
reduces nonvalue-adding activities.

B. Increase in the number of suppliers, thereby ensuring competitive bidding.

C. Maximization of the standard delivery quantity, thereby lessening the paperwork for each delivery.

D. Decrease in the number of deliveries required to maintain production.

Question: 2A company changed from a traditional manufacturing philosophy to a just-in-time philosophy. What
are the expected effects of this change on inventory turnover and inventory as a percentage of total assets reported
on the balance sheet?
Inventory Inventory
Turnover Percentage

A. Decrease Decrease

B. Decrease Increase

C. Increase Decrease

Answer (C) is correct.
A JIT system is intended to minimize inventory. Inventory should be delivered or produced just in time
to be used. Thus, JIT increases inventory turnover (cost of sales ÷ average inventory) and decreases
inventory as a percentage of total assets.

D. Increase Increase

Question: 3Which trends in purchasing and carrying costs are most conducive to switching from a traditional
inventory ordering system to a just-in-time ordering system?
Cost per Inventory Unit
Purchase Order Carrying Costs

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬
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, A. Increasing Increasing

B. Decreasing Increasing

Answer (B) is correct.
A JIT system is intended to minimize inventory. Thus, if inventory carrying costs are increasing, a JIT
system becomes more cost effective. Moreover, purchases are more frequent in a JIT system.
Accordingly, a decreasing cost per purchase order is conducive to switching to a JIT system.

C. Decreasing Decreasing

D. Increasing Decreasing

Question: 4A manufacturing company is attempting to implement a just-in-time (JIT) purchase policy system by
negotiating with its primary suppliers to accept long-term purchase orders which result in more frequent deliveries
of smaller quantities of raw materials. If the JIT purchase policy is successful in reducing the total inventory costs of
the manufacturing company, which of the following combinations of cost changes would be most likely to occur?
Cost Category Cost Category
to Increase to Decrease

A. Purchasing costs Stockout costs

B. Purchasing costs Quality costs

C. Quality costs Ordering costs

D. Stockout costs Carrying costs

Answer (D) is correct.
The objective of a JIT system is to reduce carrying costs by eliminating inventories and increasing the
deliveries made by suppliers. Ideally, shipments are received just in time to be incorporated into the
manufacturing process. This system increases the risk of stockout costs because the inventory buffer is
reduced or eliminated.

Question: 5The effectiveness of a JIT system is often facilitated by the elimination of some common forms of
internal control. The elimination of which internal control is usually acceptable with a JIT system?

A. Preparation of hard copy receiving reports.
Answer (A) is correct.
Receiving departments are often eliminated with a JIT system so receiving reports are not needed.
Also, the quantity received should be exactly equal to immediate production needs.

B. Voucher approval prior to paying accounts payable.

C. Two signatures required on large checks.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬
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, D. Locked doors on production areas.

Question: 6Just-in-time manufacturing practices are based in part on the belief that

A. High inventory levels provide greater flexibility in production scheduling.

B. Attempting to reduce inventory to a consistently low level can lead to “panic” situations.

C. Goods should be “pulled” through the production process, not “pushed.”
Answer (C) is correct.
Just-in-time (JIT) manufacturing is a pull system; items are pulled through production by current
demand, not pushed through by anticipated demand as in traditional manufacturing setups.

D. Beefed-up internal control in the central warehouse can greatly enhance productivity in the production
areas.

Question: 7Companies that adopt just-in-time purchasing systems often experience

A. A reduction in the number of suppliers.
Answer (A) is correct.
The objective of JIT is to reduce carrying costs by eliminating inventories and increasing the deliveries
made by suppliers. Ideally, shipments of raw materials are received just in time to be incorporated into
the manufacturing process. The focus of quality control under JIT is the prevention of quality
problems. Quality control is shifted to the supplier. JIT companies typically do not inspect incoming
goods; the assumption is that receipts are of perfect quality. Suppliers are limited to those who
guarantee perfect quality and prompt delivery.

B. Fewer deliveries from suppliers.

C. A greater need for inspection of goods as the goods arrive.

D. Less need for linkage with a vendor’s computerized order entry system.

Question: 8A company changed from a traditional manufacturing operation with a job-order costing system to a
just-in-time operation with a backflush costing system. What is(are) the expected effect(s) of these changes on the
company’s inspection costs and recording detail of costs tracked to jobs in process?
Inspection Detail of Costs
Costs Tracked to Jobs

A. Decrease Decrease

Answer (A) is correct.
In a JIT system, materials go directly into production without being inspected. The assumption is that
the vendor has already performed all necessary inspections. The minimization of inventory reduces the
number of suppliers, storage costs, transaction costs, etc. Backflush costing eliminates the traditional

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬
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, sequential tracking of costs. Instead, entries to inventory may be delayed until as late as the end of the
period. For example, all product costs may be charged initially to cost of sales, and costs may be
flushed back to the inventory accounts only at the end of the period. Thus, the detail of cost accounting
is decreased.

B. Decrease Increase

C. Increase Decrease

D. Increase Increase

Question: 9Just-in-time production is also called

A. Kaizen.

B. Lean manufacturing.
Answer (B) is correct.
Lean manufacturing, or lean processes, expands the concept of just-in-time. The central focus is on
accomplishing more with less resources.

C. Activity-based management.

D. Backflush costing.

Question: 10Which of the following is not a benefit of lean production?

A. Reduced setup time.

B. Lower central support costs.

C. Lower training costs.
Answer (C) is correct.
Since every worker in a manufacturing cell must be able to operate every piece of machinery in the
cell, reduced training costs do not necessarily accompany the deployment of lean production.

D. Improved on-time delivery.

Question: 11Which of the following internal controls is not one typically eliminated when a just-in-time
inventory system is introduced?

A. Sophisticated inventory tracking system.

B. Central receiving dock.

‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬
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Judgments

Study-Unit-8-Operational-Efficiency-And-Business-Process-Performance-Subunit-1-Just-In-Time-Inventory-And-Lean-Manufacturing-Lean-Resource-Managem.pdf

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