Question

Lean Principles

Bright Night, Inc., manufactures light bulbs. Its purchasing policy requires that the purchasing agents place each quarter’s purchasing requirements out for bid. This is because the Purchasing Department is evaluated solely by its ability to get the lowest purchase prices. The lowest bidder receives the order for the next quarter (90 working days).

To make its bulb products, Bright Night requires 52,200 pounds of glass per quarter. Bright Night received two glass bids for the third quarter, as follows:

• Central Glass Company: $23.00 per pound of glass. Delivery schedule: 52,200 (580 lbs. x 90 days) pounds at the beginning of July to last for 3 months.
• Ithaca Glass Company: $23.15 per pound of glass. Delivery schedule: 580 pounds per working day (90 days in the quarter).

Bright Night accepted Central Glass Company’s bid because it was the low-cost bid.

1. A manufacturing company gets quotes from each supplier and allocates the purchase order to the company which quotes the lowest price with the expected quality. Is this process effective in long run? Identify reason that supports the answer.

1. Yes
2. No

Reason:

1. The policy is effective as it lowers the cost of purchase.
2. The policy considers the quoted price and the quality of the product is ignored.
3. The policy of the company is not practically viable as it is not building long-term relationships with its suppliers. The reputation of the company may be affected.
4. Supplier relationships are not required as the products are purchased for the quarter alone.

2. A manufacturing company gets quotes from each supplier and allocates the purchase order to the company which quotes the lowest price with the expected quality. Are there any additional costs that are involved in bulk purchase for the quarter? Identify reason that supports the answer.

1. Yes
2. No

Reason:

1. The cost of storage, obsolescence, material management and wastages are ignored in this concept.
2. The cost of storage, obsolescence, material management and wastages are included in the purchase cost computation.
3. The cost related to quality can be compensated as the price of the material is low.
4. The responsibility of the manager is to get the lowest bid for the product and all other information is irrelevant.

3. Considering only inventory financing costs, what is the additional cost per pound of Central Glass Company’s bid if the annual cost of money is 8%? (Hint: Determine the average value of glass inventory held for the quarter and multiply by the quarterly interest charge, then divide by the number of pounds.) Round to the nearest cent.
$ per lb.

Lean Accounting

Dashboard Inc. manufactures and assembles automobile instrument panels for both eCar Motors and Greenville Motors. The process consists of a lean product cell for each customer’s instrument assembly. The data that follow concern only the eCar lean cell.

For the year, Dashboard Inc. budgeted the following costs for the eCar production cell:

Conversion Cost Categories		Budget
Labor		$800,000
Supplies		275,000
Utilities		325,000
Total		$1,400,000

Dashboard Inc. plans 2,000 hours of production for the eCar cell for the year. The materials cost is $240 per instrument assembly. Each assembly requires 24 minutes of cell assembly time. There was no April 1 inventory for either Raw and In Process Inventory or Finished Goods Inventory.

The following summary events took place in the eCar cell during April:

a. Electronic parts and wiring were purchased to produce 450 instrument assemblies in April.
b. Conversion costs were applied for the production of 400 units in April.
c. 380 units were started, completed, and transferred to finished goods in April.
d. 350 units were shipped to customers at a price of $800 per unit.

Required:

1. Determine the budgeted cell conversion cost per hour.
$ per hour

2. Determine the budgeted cell conversion cost per unit.
$ per unit

3. Journalize the summary transactions (a) through (d). If an amount box does not require an entry, leave it blank.

a.
b.
c.
d. Sale
d. Cost

4. Determine the ending balance in Raw and In Process Inventory and Finished Goods Inventory.

Raw and In Process Inventory:	$
Finished Goods Inventory:	$

5. Lean accounting is different from traditional accounting because it is more   and uses  control. As a result, the number of transactions are  . In many lean operations, purchased materials are charged to a  . Direct labor is  . Often, nonfinancial performance measures, such as  , are used to monitor performance.

please solve with best of your ability. The whole thing, I already talked to the administrative services.

Answer 1

Lean Principles

1.no,

the policy of the company is not practically viable as it is not building long term relationship with its suppliers .The reputation of the company may affected

2.yes,

the cost of storage, obsolescence, material management and wastages are ignored in this concept

3. cost per pound =$23

annual cost of money =8%

quarterly cost of money =2%

material received at begining of quarter =52200 pounds

average inventory held for quarter = average inventory * cost per pound

=26100*$23 =$600300

additional cost per pound = (average value of inventory * quarterly cost of money) / number of pounds

=($600300 *2%) / 52200

=$0.23 per pound

Lean Accounting

1.Budgeted cell conversion cost per hour =700 (1400000/2000)

2.Budgeted cell conversion cost per unit =280 (24/60*700)

3.

DATE	PARTICULARS	DEBIT	CREDIT
1	raw and in process inventory	108000
	account payable (450*240)		108000
2	raw and in process inventory	126000
	conversion cost (450*280)		126000
3	finished goods inventory	197600
	raw and in process inventory 380*(240+280)		197600
4	accounts receivable	280000
	sales (350*800)		280000
5	cost of good sold	182000
	finished goods inventory 350*(240+280)		182000

4. raw and in process inventory 36400 (108000+126000-197600)

finished goods inventory 15600 (197600-182000)