Test bank cost and management accounting 4e by barfield ch16

CHAPTER 16 INNOVATIVE INVENTORY AND PRODUCTION MANAGEMENT TECHNIQUES MULTIPLE CHOICE Which of the following is not an ordering cost? a b c d cost of receiving inventory cost of preparing the order cost of the merchandise ordered cost of storing the inventory ANSWER: an ordering cost a carrying cost a purchasing cost a cost of not carrying goods in stock ANSWER: a EASY A _ system of production control is paced by product demand a b c d EOQ ABC push pull ANSWER: EASY The cost of receiving inventory is regarded as a b c d d d EASY Which of the following statements is false concerning electronic data interchange? a b c d Electronic data interchange (EDI) is essential in a pull system One of the benefits realized by EDI organizations is a faster processing of transactions Electronic data interchange is essential in a push system Electronic data interchange refers to computer-to-computer exchange of information ANSWER: c MEDIUM 16–1 16–2 Chapter 16 _ is a “pull” system of production and inventory control a b c d EDI EOQ JIT ABC ANSWER: a EASY Reducing setup time is a major aspect of a b c d all push inventory systems the determination of safety stock quantities a JIT system an EOQ system ANSWER: c EASY Reducing inventory to the lowest possible levels is a major focus of a b c d JIT push inventory systems EOQ ABC ANSWER: EASY a company’s vendors employees inspection of finished goods inventory a good product warranty ANSWER: c In a JIT system, the quality of each product begins with a b c d Innovative Inventory and Production Management Techniques a EASY JIT is a philosophy concerned with a b c d when to something how to something where to something how much of something should be done ANSWER: a EASY Chapter 16 10 Innovative Inventory and Production Management Techniques When JIT is implemented, which of the following changes in the accounting system would not be expected? a b c d fewer cost allocations elimination of standard costs combining labor and overhead into one product cost category combing raw material and materials in work-in-process into one product cost category ANSWER: 11 MEDIUM EOQ systems push systems in general JIT pull systems in general ANSWER: c EASY Just-in-time (JIT) inventory systems a b c d result in a greater number of suppliers for each production process focus on a “push” type of production system can only be used with automated production processes result in inventories being either greatly reduced or eliminated ANSWER: 13 b Striving for flexibility in the number of products that can be produced in a short period of time is characteristic of a b c d 12 16–3 d EASY The JIT philosophy does not focus on a b c d standardizing parts used in products eliminating waste in the production process finding the absolute lowest price for purchased parts improving quality of output ANSWER: c EASY 16–4 14 Chapter 16 In a JIT manufacturing environment, product costing information is least important for use in a b c d work in process inventory valuation pricing decisions product profitability analysis make-or-buy decisions ANSWER: 15 MEDIUM cost of specific-purpose equipment cost of equipment maintenance property taxes on the plant salary of a manufacturing cell worker ANSWER: c EASY With JIT manufacturing, which of the following costs would be considered a direct product cost? a b c d insurance on the plant repair parts for machinery janitors’ salaries salary of the plant supervisor ANSWER: 17 a With JIT manufacturing, which of the following costs would be considered an indirect product cost? a b c d 16 Innovative Inventory and Production Management Techniques b MEDIUM Which of the following statements is not true? a b c d JIT manufacturing strives for zero inventories JIT manufacturing strives for zero defects JIT manufacturing uses manufacturing cells JIT manufacturing utilizes long lead time and few deliveries ANSWER: d EASY Chapter 16 18 Innovative Inventory and Production Management Techniques The JIT environment has caused a reassessment of product costing techniques Which of the following statements is true with respect to this reassessment? a b c d Traditional cost allocations based on direct labor are being questioned and criticized The federal government, through the SEC, is responsible for the reassessment The reassessment is caused by the replacement of machine hours with labor hours None of the above is true ANSWER: 19 b c d MEDIUM employees are retrained on different equipment, but the plant layout generally remains unchanged new machinery and equipment must be purchased from franchised JIT dealers machinery and equipment are moved into small autonomous production lines called islands or cells new, more efficient machinery and equipment are purchased and installed in the original plant layout ANSWER: c MEDIUM Which of the following describes the effect on direct labor when management adopts the JIT philosophy? a b c d Each direct labor person performs a single task, thereby allowing that person to reach his or her theoretical potential Because each person runs a single machine in a JIT environment, there are more employees classified as direct labor The environment becomes more labor-intensive Machine operators are expected to run several different types of machines, help set up for production runs, and identify and repair machinery needing maintenance ANSWER: 21 a When a firm adopts the just-in-time method of management, a 20 16–5 d MEDIUM JIT concepts a can be effectively implemented in organizations that are only partially automated b are only appropriate for use with CIM systems c involve shifting from a capital-intensive to a labor-intensive process d require full computerization of the JIT manufacturing process ANSWER: a EASY 16–6 22 Chapter 16 According to JIT philosophy, a b c d inventories of finished goods always should be available to meet customer demand push-through manufacturing flows are the most efficient maintaining inventories wastes resources and frequently covers up poor work or other problems long production runs and large production lot sizes take advantage of economies of scale ANSWER: 23 MEDIUM uses a job order costing system classifies processing costs as raw (or direct) material, direct labor, and overhead is more complex than in other types of manufacturing environments follows process costing procedures whereby costs are accumulated by the process (cell) and attached to units processed for the period ANSWER: d MEDIUM An implication of the demand-pull nature of the JIT production process is that a b c d finished goods inventories must be available to meet customer demand, although raw material is delivered on an as-needed basis more storage space for inventories is necessary finished products are packaged and shipped to customers immediately, thus requiring minimal finished goods inventories problem areas become less visible as inventories are reduced ANSWER: 25 c Accounting for product costs in a JIT environment a b c d 24 Innovative Inventory and Production Management Techniques c MEDIUM In accounting for JIT operations, the Raw Material Inventory account a b c d is closely monitored to ensure that materials are always on hand in time can be expected to have a larger balance than with traditional manufacturing methods is combined with the Work In Process Inventory account is combined with the Finished Goods Inventory account ANSWER: c EASY Chapter 16 26 Innovative Inventory and Production Management Techniques A kanban plays an important role in a b c d JIT EOQ ABC CPM ANSWER: 27 EASY Focused factory arrangements Economic order quantity Multiprocess handling Activity-based management ANSWER: b MEDIUM The term “cell” is used to describe a b c d a grouping of one or more automated machines within a company a storage bin for “C” type inventory in an ABC inventory system files in a CAD/CAM system a factory’s area of conversion activity ANSWER: 29 a may involve relocation or plant modernization by a vendor a b c d 28 16–7 a EASY In a production cell, a b c d an individual worker may be expected to operate several different machines, setups, and perform preventive maintenance on the equipment each worker becomes an expert in the operation of a single piece of equipment machines are arranged so that similar machines are grouped together clear separation is maintained between those workers who operate the machinery and those workers who set up and maintain the machinery ANSWER: a MEDIUM 16–8 30 Chapter 16 U-shaped groupings of workers and machines that improve materials handling and flow are known as a b c d manufacturing cells efficiency stations multi-flow modules productivity islands ANSWER: 31 EASY More flexibility no no yes yes ANSWER: d Less process involvement no yes yes no EASY The process of _ occurs when equipment is programmed to stop when a certain situation arises a b c d throughput automation backflushing information sharing ANSWER: 33 a For workers in a multiprocess handling situation, which of the following happens? a b c d 32 Innovative Inventory and Production Management Techniques b EASY The connection of two or more flexible manufacturing systems via a host computer and a networking information system is known as a b c d computer integrated manufacturing yes yes no no ANSWER: b EASY electronic data interchange yes no no yes Chapter 16 34 Innovative Inventory and Production Management Techniques A key element of Japan’s success in world markets is a b c d the elimination of waste in all operations automation of the billing function inefficient labor forces in competing countries the verification procedures incorporated into computer programs ANSWER: 35 Standard costs yes no yes no ANSWER: EASY c Minimal variances from standards no no yes yes EASY Which of the following areas offers an opportunity to eliminate waste? a b c d raw material and labor space and production time recordkeeping and working capital all of the above ANSWER: 37 a Backflush costing is concerned with which of the following? a b c d 36 16–9 d EASY Flexible manufacturing systems are a b c d designed to provide more flexibility in a firm’s manufacturing process by using computer-aided machinery the same as computer-aided design systems commonly used by firms that need to make large quantities of one product are very complicated and cause increased defect rates in output ANSWER: a EASY 16–10 38 Chapter 16 Kaizen means a b c d doing it the Japanese way continuous improvement employee empowerment implementation of a centralized organizational structure ANSWER: 39 a EASY The peak level of unit sales will occur in which stage of the product life cycle? a b c d growth maturity decline introduction ANSWER: b EASY For product life cycle costing, R&D costs are a b c d expensed as incurred capitalized and allocated over the life cycle deducted as period costs charged to specific departments as incurred ANSWER: 42 EASY target costing product life cycle costing activity-based costing responsibility costing ANSWER: 41 b The process that determines an allowable product cost while setting market price and allowing for an acceptable profit margin is known as a b c d 40 Innovative Inventory and Production Management Techniques b EASY An important focus in product life cycle costing is a b c d the activity base the target cost the cost driver variable costs ANSWER: b EASY Chapter 16 67 Innovative Inventory and Production Management Techniques Value engineering seeks to obtain increased a b c d product life-cycle and reduced direct labor inputs planning team membership and reduced time-to-market product performance ratio and reduced substitute goods product functionality and reduced costs ANSWER: 68 DIFFICULT can be applied to services if they are sufficiently uniform can be applied to services only if they are automated can be applied to services that are performed in a manufacturing environment cannot be applied to services ANSWER: a MEDIUM Kaizen costing helps to a b c d reduce product costs of products in the design and development stage keep the target cost as the primary focus after a product enters production keep profit margin relatively stable as product price declines over the product life cycle reduce the cost of engineering change orders during each stage of the product life cycle ANSWER: 70 d Target costing a b c d 69 16–17 c DIFFICULT In which life-cycle stage are product quality improvements and stable selling prices likely to occur? a b c d introduction growth maturity decline ANSWER: b MEDIUM 16–18 71 Chapter 16 From a cost management view, research and development cost represents a b c d a life-cycle investment a period expense an unearned revenue a risk reserve ANSWER: 72 Computers yes no yes yes ANSWER: MEDIUM c Furniture yes yes no no Textbooks yes yes no yes Automobiles yes no yes yes MEDIUM Kanban is the Japanese word for a b c d production just-in-time card target costing ANSWER: 74 a Life-cycle costing is especially important in which of the following types of companies? a b c d 73 Innovative Inventory and Production Management Techniques c EASY JIT seeks to a b c d reduce production cost while increasing quality radically redesign the production process for effectiveness modify all non-value-added activities all of the above ANSWER: a DIFFICULT Chapter 16 75 Innovative Inventory and Production Management Techniques The JIT philosophy indicates that inventory, as well as which of the following, should be eliminated? a b c d Suppliers yes yes no no ANSWER: 76 Employees yes no yes no MEDIUM variable overhead allocation methodologies fixed overhead allocation methodologies variable and fixed overhead allocation methodologies the financial accounting requirement to expense research and development as incurred ANSWER: b MEDIUM Goods will flow through a production process at the rate of the a b c d slowest part of the process fastest part of the process average of all the parts of the process time standards set using externally calibrated benchmarks ANSWER: 78 d Storage yes yes no yes Business-ValueAdded Activities yes no no yes Companies have often produced significant amounts of unwanted inventory because of a b c d 77 16–19 a MEDIUM A machine constraint creates a b c d an autonomation a bottleneck a push inventory system the need for third-party logistics ANSWER: b EASY 16–20 79 Chapter 16 In a production process with a machine constraint, if a quality control point is to be established, it should be set up a b c d within the machine's processes directly after the machine has performed its functions immediately before the machine at the end of the production process ANSWER: 80 Innovative Inventory and Production Management Techniques c EASY Managing constraints is a process of a b c d backflush costing design for manufacturability just-in-time redesign continuous improvement ANSWER: d MEDIUM THE FOLLOWING MULTIPLE CHOICE RELATE TO MATERIAL COVERED IN THE APPENDIX OF THE CHAPTER 81 (Appendix) The Whitehead Co produces quality jewelry items for various retailers For the coming year, it has estimated it will consume 500 ounces of gold Its carrying costs for a year are $2 per ounce No safety stock is maintained If the EOQ is 100 ounces, what is the cost per order? a b c d $40 $20 $5 $25 ANSWER: 82 b MEDIUM (Appendix) The Whitehead Co produces quality jewelry items for various retailers For the coming year, it has estimated it will consume 500 ounces of gold Its carrying costs for a year are $2 per ounce No safety stock is maintained If the EOQ is 100 ounces, what would be the estimate for Whitehead’s total carrying costs for the coming year? a b c d $200 $250 $100 $1,000 ANSWER: c MEDIUM Chapter 16 83 Innovative Inventory and Production Management Techniques (Appendix) A firm estimates that its annual carrying cost for material X is $.30 per lb If the firm requires 50,000 lbs per year, and ordering costs are $100 per order, what is the EOQ (rounded to the nearest pound)? a b c d 5,774 lbs 4,082 lbs 1,732 lbs 1,225 lbs ANSWER: 84 a MEDIUM (Appendix) Z Corp.’s EOQ for Material A is 500 units This EOQ is based on: Annual demand Ordering costs 5,000 units $12.50 What is the annual carrying cost per unit for Material A? a b c d $0.50 $2.00 $2.50 $5.00 ANSWER: 85 16–21 a MEDIUM (Appendix) Z Corp.’s EOQ for Material A is 500 units This EOQ is based on: Annual demand Ordering costs 5,000 units $12.50 What are Z Corp.’s total annual ordering costs for Material A? a b c d $6,000 $600 $125 $1,000 ANSWER: c MEDIUM 16–22 86 Chapter 16 (Appendix) Clear View Co manufactures various glass products including a car window The setup cost to produce the car window is $1,200 The cost to carry a window in inventory is $3 per year Annual demand for the car window is 12,000 units What is the most economical production run (rounded to the nearest unit)? a b c d 6,000 units 3,000 units 9,295 units 3,098 units ANSWER: 87 d MEDIUM (Appendix) Clear View Co manufactures various glass products including a car window The setup cost to produce the car window is $1,200 The cost to carry a window in inventory is $3 per year Annual demand for the car window is 12,000 units If the annual demand for the car window was to increase to 15,000 units, a b c d the number of setups would decrease the total carrying costs would increase the economic order quantity would decline all of the above would occur ANSWER: 88 Innovative Inventory and Production Management Techniques b EASY (Appendix) A company has estimated its economic order quantity for Part A at 2,400 units for the coming year If ordering costs are $200 and carrying costs are $.50 per unit per year, what is the estimated total annual usage? a b c d 6,000 units 28,800 units 7,200 units 2,400 units ANSWER: c MEDIUM Chapter 16 89 Innovative Inventory and Production Management Techniques (Appendix) A company annually consumes 10,000 units of Part C The carrying cost of this part is $2 per year and the ordering costs are $100 The company uses an order quantity of 500 units By how much could the company reduce its total costs if it purchased the economic order quantity instead of 500 units? a b c d $500 $2,000 $2,500 $0 ANSWER: 90 MEDIUM 250 units 1,000 units 500 units 2,000 units ANSWER: a MEDIUM (Appendix) Which of the following tells management “when” to order? a b c d safety stock level order point the economic order quantity the Pareto inventory analysis ANSWER: 92 a (Appendix) A company annually consumes 10,000 units of Part C The carrying cost of this part is $2 per year and the ordering costs are $100 The company uses an order quantity of 500 units If the company operates 200 days per year, and the lead time for ordering Part C is days, what is the order point? a b c d 91 16–23 b EASY (Appendix) Which of the following affects the order point? a b c d daily usage lead time safety stock all of the above ANSWER: d EASY 16–24 93 Chapter 16 (Appendix) A decrease in the lead time would reduce the a b c d order point safety stock economic order quantity ordering costs ANSWER: 94 d EASY (Appendix) If no safety stock is carried, the average inventory is equal to the a b c d order point/2 order point × economic order quantity/2 economic order quantity × ANSWER: c EASY (Appendix) The role of safety stock in an organization is to a b c d reduce the lead time for an order to be received reduce the probability of a stockout reduce the order point decrease the economic order quantity ANSWER: 97 EASY cost of a stockout probability of a stockout carrying cost of stock economic order quantity ANSWER: 96 a (Appendix) The size of the safety stock is directly affected by all of the following, except the a b c d 95 Innovative Inventory and Production Management Techniques b EASY (Appendix) The optimal size of the safety stock is defined by the point where the a b c d costs of carrying the safety stock equal stockout costs setup costs equal stockout costs ordering costs equal stockout costs reorder point equals safety stock ANSWER: a MEDIUM Chapter 16 98 Innovative Inventory and Production Management Techniques (Appendix) If a company carries safety stock and its annual carrying costs per unit are $0.30, what formula yields the total annual carrying costs? a b c d $0.30 × [(EOQ/2) + Safety stock)] $0.30 × (EOQ + Safety stock) $0.30 × [(EOQ × 2) + Safety stock)] $0.30 × (EOQ – Safety stock) ANSWER: 99 EASY 10,000 gallons 38,000 gallons 48,000 gallons 58,000 gallons ANSWER: d MEDIUM (Appendix) Blanchard Corp operates its factory 300 days per year Its annual consumption of Material Y is 1,200,000 gallons It carries a 10,000 gallon safety stock of Material Y and its lead time is 12 business days If the EOQ for Material Y is 30,000 gallons, and the carrying cost per gallon per year is $.25, what is the total annual carrying cost for Material Y? a b c d $3,750 $7,500 $6,250 $10,000 ANSWER: 101 a (Appendix) Blanchard Corp operates its factory 300 days per year Its annual consumption of Material Y is 1,200,000 gallons It carries a 10,000 gallon safety stock of Material Y and its lead time is 12 business days What is the order point for Material Y? a b c d 100 16–25 c MEDIUM (Appendix) Blanchard Corp consumes 1,200,000 gallons of Material Y per year Its order quantity is 30,000 gallons It maintains a safety stock of 10,000 gallons and its annual carrying costs are $0.25 per gallon per year If the ordering cost is $20 per order, what are the total annual ordering costs? a b c d $600 $800 $8,300 $1,200 ANSWER: b MEDIUM 16–26 102 Chapter 16 (Appendix) R Corp.’s order quantity for Material T is 5,000 lbs If the company maintains a safety stock of T at 500 lbs., and its order point is 1,500 lbs., what is the lead time assuming daily usage is 50 lbs.? a b c d 30 days 100 days 10 days 20 days ANSWER: 103 MEDIUM $1,000 $600 $100 $1,100 ANSWER: b MEDIUM (Appendix) For Raw Material B, a company maintains a safety stock of 5,000 pounds Its average inventory (taking into account the safety stock) is 8,000 pounds What is the apparent order quantity? a b c d 16,000 lbs 6,000 lbs 10,000 lbs 21,000 lbs ANSWER: 105 d (Appendix) R Corp.’s order quantity for Material T is 5,000 lbs If the company maintains a safety stock of T at 500 lbs., and its order point is 1,500 lbs., what would be the total annual carrying costs assuming the carrying cost per unit is $0.20? a b c d 104 Innovative Inventory and Production Management Techniques b MEDIUM (Appendix) In an ABC inventory analysis, the items that are most likely to be controlled with a red-line system are the a b c d A items B items C items items on a perpetual inventory ANSWER: c EASY Chapter 16 106 Innovative Inventory and Production Management Techniques (Appendix) Which of the following might be appropriate for items in the “C” category of an ABC inventory analysis? a b c d a red-line system a two-bin system a periodic inventory system all of the above ANSWER: 107 d MEDIUM (Appendix) All other factors equal, a decrease in the order quantity will a b c d decrease the annual carrying costs decrease the annual ordering costs increase the lead time reduce the safety stock ANSWER: a EASY (Appendix) The economic order quantity is not affected by the a b c d estimate of the annual material consumption cost of insuring a unit of inventory for a year cost of purchase-order forms safety stock level ANSWER: 110 MEDIUM company’s weighted average cost of capital cost of purchase requisition forms cost of insuring inventory cost of a stockout ANSWER: 109 d (Appendix) The would not affect the economic order quantity a b c d 108 16–27 d EASY (Appendix) A decrease in the price of a raw material could result in a(n) a b c d increase in the lead time increase in the EOQ decrease in the order point increase in the setup costs ANSWER: b MEDIUM 16–28 111 Chapter 16 (Appendix) The number of orders that will be submitted each year for raw material is given by which formula? a b c d Economic order quantity × order point Total annual material needs/economic order quantity Order point/economic order quantity Total annual material needs/safety stock ANSWER: 112 Innovative Inventory and Production Management Techniques b EASY (Appendix) The economic production run quantity directly affects the a b c d order point for raw material inventories safety stock for finished goods inventory level of finished goods inventory lead time for producing finished goods inventory ANSWER: c MEDIUM SHORT ANSWER/PROBLEMS Why may a JIT control system be useful in disclosing a firm’s inefficiencies and problems? ANSWER: The JIT control system is based on a philosophy that inventory is undesirable Subscribers to the JIT philosophy believe inventory reductions expose organizational problems and inefficiencies These problems and inefficiencies may not be brought to management’s attention if inventories are not pushed to lower and lower levels They would remain hidden and undetectable at higher levels of inventory MEDIUM (Appendix) What is the purpose of the EOQ model? ANSWER: The purpose of the EOQ model is to identify the least cost quantity of a material to be purchased at each order point The model explicitly considers the carrying and ordering costs and identifies the purchase quantity that minimizes the total of these costs MEDIUM Chapter 16 Innovative Inventory and Production Management Techniques 16–29 Why does a “push” based inventory control system generate larger inventory levels than a “pull” system? ANSWER: Larger levels of inventory exist by design in push production control systems The inventory buffers permit lower levels of communication between business segments, permit longer production runs, and protect the firm from environmental uncertainties and unforeseen interruptions in production or supplies MEDIUM What does the term “pull” mean in the context of production control? ANSWER: Pull simply refers to the fact that the pace and level of production are geared to product demand Each work center sets the pace for the next upstream work center Customer demand paces the final downstream work center MEDIUM Why might it be necessary to make adjustments to the accounting system in a firm that adopts JIT? ANSWER: JIT production control systems foster automation and reduced levels of inventory Consequently, raw material inventories and direct labor costs may be too small to warrant separate cost pools—they can be combined with other cost pools Additional adjustments may be necessary to accommodate standard costs, which are constantly adjusted to reflect the latest technological changes in production methods Also, more costs could be traced to specific products and fewer costs would have to be allocated MEDIUM What is the relationship between warehouse space and the length of production runs? ANSWER: Longer production runs increase the levels of specific inventories To accommodate long production runs, significant warehouse space needs to be available for storing intermediate and final products MEDIUM 16–30 Chapter 16 Innovative Inventory and Production Management Techniques Why is it important for a company to be (geographically) close to its suppliers to implement a JIT inventory control system? ANSWER: The geographical proximity is important to minimize shipping and handling costs of supplies and materials Geographical proximity also facilitates frequent communication and joint planning between a supplier and customer MEDIUM Bell Company estimates that it will consume 400,000 units of Part A in the coming year The ordering cost for this unit is $3.20 What would be the carrying costs per unit if the EOQ model indicates that it is optimal to place exactly 50 orders for the upcoming year? ANSWER: If projected usage for the year is 400,000 units, the EOQ would be 8,000 units (400,000/50) To determine the carrying costs per unit, the following equation is solved: 8,000 = [( 400,000 $3.20 / CC] , where CC is the carrying cost per unit Solving the equation, CC = $0.04 per unit MEDIUM Bell Company estimates that it will consume 400,000 units of Part A in the coming year The ordering cost for this unit is $3.20 Bell Company wants to maintain a safety stock of 1,000 units, and its factory operates 200 days per year What is the order point if the lead time is days? ANSWER: The order point = (daily usage × lead time) + safety stock daily usage = 400,000/200 = 2,000; lead time = days, safety stock = 1,000 Order point = (2,000 × 2) + 1,000 = 5,000 units MEDIUM 10 How does adopting a JIT system affect the firm’s relationship with suppliers and how must suppliers change their way of doing business? Chapter 16 Innovative Inventory and Production Management Techniques 16–31 ANSWER: The JIT manufacturer will limit the number of suppliers to a few Longterm contracts are entered into with suppliers Suppliers’ raw material must be top quality with no defects Small quantities of raw material are delivered frequently and little or no raw material is maintained by the buyer Suppliers must be located close enough to the JIT buyer to deliver small quantities very quickly The supplier must agree to providing a top-quality product to its JIT customer MEDIUM 11 Identify and discuss how sales and costs are affected during the five stages of the product life cycle ANSWER: The five stages of the product life cycle are (1) development, (2) introduction, (3) growth, (4) maturity, and (5) decline In the development stage, no production costs or sales exist, but R & D costs are extremely high During the introduction stage low unit sales exist while high advertising costs are evident The growth stage sees increasing unit sales and decreasing production costs per unit The maturity stage witnesses peak unit sales and a stabilization of production costs per unit During the decline stage unit sales decrease while production costs per unit increase MEDIUM 12 Discuss differences in approach and potential usage between target and kaizen costing ANSWER: Target costing is considered a procedural approach that is used to determine a maximum allowable cost for a product, while kaizen costing is a mandate to reduce costs, increase product quality, and/or improve production process through continuous improvement Target costing has a large potential for cost reduction in lifelong product cost because these costs are embedded in the product during design and development Kaizen costing has limited potential in cost reduction of existing products, but may be useful in target costing in the future MEDIUM ... d cost management kaizen costing target costing life-cycle costing ANSWER: 50 c Cost tables are databases that provide information on which of the following? a b c d 49 Innovative Inventory and. .. of target costing? a b c d target cost + profit margin = selling price selling price – target cost = profit margin selling price – profit margin = target cost target cost – standard cost = profit... Innovative Inventory and Production Management Techniques b EASY An important focus in product life cycle costing is a b c d the activity base the target cost the cost driver variable costs ANSWER: