Question

In: Accounting

Carts Corporation is trying to determine how long it takes for one product to pass through...

Carts Corporation is trying to determine how long it takes for one product to pass through the production process. The following information was gathered regarding how many days the product spent in various production activities.

Activity Number of Days

Inspection 4

Storage 3

Assembly 5

Handling 2

Painting 3

Packaging 1

a. Which of the above activities are value-added? b. What is Carts’ total cycle time? c. Determine Carts’ manufacturing efficiency ratio. d. If Carts implements a total quality management program and a just-in-time inventory system, what would be the change in Carts’ manufacturing efficiency ratio?

Solutions

Expert Solution

Answer:

Carts Corporation:

A) Which of the above activities are value-added?

Meaning: Value added activities are those activities which increase the value of a a product on any particular stage of production or any other department.

For Example: For automobile industries , the value added activities shall be designing, assembling, painting etc.,

Now, as per the question the value added activities which can be identified as above shall be only assembly and painting , as without which the product cannot be completed.

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B) What is Carts’ total cycle time?

Cycle time can be calculated as the total time required for a product to be completed:

Calculation:

Activity	Period (In days)
Inspection	4
Storage	3
Assembly	5
Handling	2
Painting	3
Packaging	1
Total Cycle time	18 days

Therefore, Carts’ total cycle time = 18 days

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C) Determine Carts’ manufacturing efficiency ratio:

Formula for manufacturing efficiency ratio = Value added time / Total Cycle Time

= ({Assembly days + Painting days} / Total cycle time

= { 5 + 3} days / 18 days

= 44.44% (or) 44%

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D) If Carts implements a total quality management program (TQM) and a just-in-time inventory system (JIT), what would be the change in Carts’ manufacturing efficiency ratio?

Now, TQM (Total quality management) aims at continuous reduction of errors in various stages of production, thereby reducing the need to implement quality checks and inspections,

Just in time (JIT) system follows the principle of production when required or demanded , and it is used by the companies to minimize the inventory holding costs, thereby also reducing the price of the product ultimately.

Now, JIT eliminates the storage activities required.

Total time will be reduced from = { 18 days - Inspection days (4) - Storage days (3) } = 11 days

Therefore: Carts’ manufacturing efficiency ratio can be changed as

Manufacturing efficiency ratio = Value added time / Total Cycle Time

= ({Assembly days + Painting days} / Total cycle time

= = { 5 + 3} days / (18 - 4 - 3) days

= 8 days / 11 days

= 72.73% or 73%

Upon implementation of JIT and TQM , the manufacturing efficiency ratio shall be increased from 44% to 73%.

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ekkarill92 answered 1 year ago

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