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Important Information about Management Accounting

1) a. Identify the five steps in the lean thinking model.
b. Which of these steps do you think is the most challenging for the organization? Explain your reasoning. Give details.

2) Julie Jones was hired by a popular fast food restaurant as an order taker and cashier. Shortly after taking the job, she was shocked to overhear an employee bragging to a friend about shortchanging customers. She confronted the employee who then snapped back: 'Mind your own business. Besides, everyone does it and the customers never miss the money.' Julie didn't know how to respond to the aggressive stance.

What would be the practical consequences on the fast food industry and on consumers if cashiers generally shortchanged customers at every opportunity?

3) You have been given a summer job as an interim at Utah Aircams, a company that manufactures sophisticated spy cameras for remote-controlled military reconnaissance aircraft. The company, which is privately owned, has approached a bank for loan to help it finances its growth.

The bank requires financial statement before approving such a loan. You have been asked to help prepare classification of the following list of cost:

1. Depreciation on salespersons' cars
2. Rent on equipment used in factory
3. Lubricants used for machine maintanance
4. Salaries of personnel who work in the finished goods warehouse
5. Soap and paper towels used by factory workers at the end of a shift
6. Factory supervisors' salaries
7. Heat, water and power consumed in th factory
8. Materials used for boxing products for shipment overseas (units are not normally boxed)
9. Advertising costs
10. Workers' compensation insurance for factory employees
11. Depreciation on chairs and tables in the factory lunchroom
12. The wages of the receptionist in the administration offices
13. Cost of leasing the corporate jet used by the company's executives
14. The cost of renting rooms at a Florida resort for the annual sales conference
15. The cost of packaging the company's product

Required: Classify the above cost as either product costs or period costs.

4) Watertoys Corporation manufactured a variety of products in its factory. Data for the most recent month's operations appear below:

Beginning raw materials inventory $ 40,132
Purchases of raw materials $ 395,952
Ending raw materials inventory $ 61,322
Direct labor $ 177,450
Manufacturing overhead $ 505,325
Beginning work in process inventory $ 235,400
Ending work in process inventory $ 215,900

Prepare a schedule of cost of goods manufacturing for the company for the month. Left align all rows for formatting purposes.

Solution Preview

1) a. Identify the five steps in the lean thinking model.

The five steps are
(1) Identify value in specific products and services
(2) Identify the business process that delivers value
(3) Organize work arrangements around the flow of the business process
(4) Create a pull system that responds to customer orders
(5) Continuously pursue perfection in the business process.

Source - Managerial Accounting - Garrison, Noreen and Brewer

b. Which of these steps do you think is the most challenging for the organization? Explain your reasoning. Give details.

In my view the second step is the most challenging. We may be able to identify value by talking to customers, the difficulty would be in identifying which processes deliver value since most of the processes in an organization are interlinked and so segregating the process would not be easy. Also it is not easy to understand the inter-linkages within the processes. Even if the process is identified as non value, we may not be able to remove the process straight away. We would need to find the inter-linkages of the process and then see how to can separate the process and then remove it. Thus the identification of non value added processes would not be easy and the removal of such processes would also be challenging.

2) Julie Jones was hired by a popular fast food restaurant as an order ...

Solution Summary

The solution explains four questions relating to lean thinking model, shortchanging customers, cost classification and schedule of cost of goods manufactured. All calculations displayed.

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