P2 - MBE

Kaizen costing emphasizes:

• the need to achieve a target and maintain it

• continuous improvement

• the immediate elimination of all inefficiencies

• Japanese culture

In the context of quality costs, customer compensation costs (1) and test equipment running costs (2) would be classified as:

• 1. Internal failure costs | 2. Prevention costs

• 1. Internal failure costs | 2. Appraisal costs

• 1. External failure costs | 2. Appraisal costs

• 1. External failure costs | 2. Prevention costs

Which of the following are usually elements of a JIT system?

(i) Machine cells

(ii) Inventory only held at the bottleneck resource

(iii) Close relationship with major suppliers

(iv) Multi‐skilled Labour

• (i), (ii) and (iii) only

• (i), (iii) and (iv) only

• (i) and (iii) only

• All of these

Which of the following statements about JIT is correct?

• JIT protects an organization against risks of disruption in the supply chain.

• A narrow geographical spread in a business makes JIT more difficult to apply.

• With JIT, there is a risk that inventories could become obsolete.

• JIT is more difficult to implement when it is not easy to predict patterns of demand.

The following details relate to one unit of Product Z:

Selling price $45.00

Purchased components $14.00

Labour $10.00

Variable overhead $8.50

Fixed overhead $4.50

Time on bottleneck resource 10 minutes

Product return per minute is:

• $0.80

• $1.25

• $2.10

• $3.10

Which of the following statements regarding Total Quality Management (TQM) is not true?

• Customer needs are placed above those of the organization's needs.

• TQM will often involve the use of Just In Time (JIT) inventory control.

• TQM believes that the costs of prevention are less than the costs of correction.

• TQM is a principle that should only be applied to a manufacturing organisation.

MB manufactures a product that requires 3.75 hours per unit of machining time. Machine time is a bottleneck resource, because there are a limited number of machines. There are just seven machines, and each is available for up to 15 hours each day, five days a week.

The product has a selling price of $100 per unit, a direct material cost of $40 per unit, a direct labour cost of $10 per unit and a factory overhead cost of $30 per unit. These costs are based on a weekly production and sales volume of 140 units.

What is the throughput accounting ratio? (2 d.p.)

Which of the following costs are likely to be reduced on the introduction of a JIT system in a company? Tick ALL that apply:

• Purchasing costs

• Inventory holding costs

• Ordering costs

• Information system costs

Which of the following is not suitable for a JIT production system?

• Batch production

• Jobbing production

• Process production

• Service production

Companies that embrace TQM often split their costs into four categories: prevention costs,

appraisal costs, internal failure costs and external failure costs. A company wants to

categorise the following costs:

(i) Training staff in the importance of quality.

(ii) Replacing, from inventory, a defective item returned by a customer.

(iii) Scrapping an item deliberately tested to destruction.

(iv) Losses on the sale of items identified as rejects.

Which categories best reflect the nature of the above costs?

Order of answers:

Prevention | Appraisal | Internal Failure | External Failure

• (i) (ii) (iii) (iv)

• (i) (iii) (iv) (ii)

• (ii) (iv) (iii) (i)

• (iii) (i) (iv) (ii)