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Consider the following characteristics of either a JIT production system or a traditional production system. Indicate whether each is characteristic of a JIT production system or a traditional production system.

a. Products are produced in large batches.

b. Large stocks of finished goods protect against lost sales if customer demand ishigher than expected.

c. Suppliers make frequent deliveries of small quantities of raw materials.

d. Employees do a variety of jobs, including maintenance and setups as well as operating machines.

e. Machines are grouped into self-contained production cells or production lines.

f. Machines are grouped according to function. For example, all cutting machines are located in one area.

g. The final operation in the production sequence 鈥減ulls鈥 parts from the preceding operation.

h. Each employee is responsible for inspecting his or her own work.

i. Management works with suppliers to ensure defect-free raw materials.

Short Answer

Expert verified

Activity (a), (b), (f), (g) are part of the traditional production system and all other activities are part of the JIT production system.

Step by step solution

01

JIT Production system

Just-in-time production system is a type of management system that minimizes the material, labor, and time in the production process. In comparison to the traditional production system, the JIT system does not work in different departments. In the JIT system, a work cell is created that provides all needed facilities to produce goods.

The production is done in small batches in the PJIT system and the inventories instead of storing them are procured as and when required.

02

Classifying activity into JIT or traditional system

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Most popular questions from this chapter

12. Identify the following costs as prevention, appraisal, internal failure, or external failure:

a. Inspection of final products

b. Sales returns of defective products

c. Employee training

d. Reworking defective products

e. Working with suppliers to ensure delivery of high-quality raw materials

f. Costs of warranty repairs

g. Product testing

Question:The Watkins Company is decentralized, and divisions are considered investment centers. Watkins specializes in sports equipment, and one division manufactures netting that is used for basketball hoops, soccer goals, and other sports equipment. The Netting Division reports the following information for a heavy-duty basketball hoop net:

Sales Price per Unit \( 18

Variable Cost per Unit 6

Contribution Margin per Unit \) 12

The Basketball Equipment Division can purchase a similar heavy-duty net from an outside vendor for $15.

Requirements

1. Determine the negotiable range for the transfer price.

2. What is the minimum transfer price the Netting Division should consider if operating at capacity? Below capacity?

3. What is the maximum transfer price the Basketball Equipment Division should consider?

Eason Company manufactures wheel rims. The controller expects the following ABC allocation rates for 2018:

Activity Allocation Base Predetermined Overhead

Allocation Rate

Materials handling Number of parts $ 4.00 per part

Machine setup Number of setups 400.00 per setup

Insertion of parts Number of parts 26.00 per part

Finishing Number of finishing hours 90.00 per hour

Eason produces two wheel rim models: standard and deluxe. Expected data for 2018 are as follows:

Standard Deluxe

Parts per rim 4.0 7.0

Setups per 500 rims 18.0 18.0

Finishing hours per rim 1.0 5.5

Total direct hours per rim 5.0 6.0

The company expects to produce 500 units of each model during the year.

Requirements

2. Prior to 2018, Eason used a single plantwide overhead allocation rate system with direct labor hours as the allocation base. Compute the predetermined overhead allocation rate based on direct labor hours for 2018. Use this rate to determine the estimated indirect manufacturing cost per wheel rim for each model, to the nearest cent.

List and define the four types of quality costs.

Anu Ghai was a new production analyst at RHI, Inc., a large furniture factory in North Carolina. One of her first jobs was to update the predetermined overhead allocation rates for factory production costs. This was normally done once a year, by analysing the previous year鈥檚 actual data, factoring in projected changes, and calculating a new rate for the coming year. What Anu found was strange. The activity rate for 鈥渕aintenance鈥 had more than doubled in one year, and she was puzzled how that could have happened. When she spoke with Larry McAfee, the factory manager, she was told to spread the increases out over the other activity costs to 鈥渟mooth out鈥 the trends. She was a bit intimidated by Larry, an imposing and aggressive man, but she knew something wasn鈥檛 quite right. Then one night she was at a restaurant and overheard a few employees who worked at RHI talking. They were joking about the work they had done fixing up Larry鈥檚 home at the lake last year. Suddenly everything made sense. Larry had been using factory labor, tools, and supplies to have his lake house renovated on the weekends. Anu had a distinct feeling that if she went up against Larry on this issue, she would come out the loser. She decided to look for work elsewhere.

Requirements

1. Besides spotting irregularities, like the case above, what are some other ways that ABC cost data are useful for manufacturing companies?

2. What are some of the other options that Anu might have considered?

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