AIS Answer.docx

CHAPTER 14 THE PRODUCTION CYCLE SUGGESTED ANSWERS TO DISCUSSION QUESTIONS 14.1.

When activity!a"e# activity!a"e# c$"t %e&$%t" %e&$%t" in#icate that e'ce"" ca&acity ca&acity e'i"t"( e'i"t"( )ana*e)ent )ana*e)ent "h$+,# eithe% -in# a,te%native %even+eenhancin* +"e" -$% that ca&acity $% e,i)inate it th%$+*h th%$+*h #$n"i/in*. #$n"i/in*. What -act$%" in-,+ence )ana*e)ent0" #eci"i$n What a%e the ,i2e,y !ehavi$%a, "i#e e--ect" $- each ch$ice What i)&,icati$n" #$ th$"e "i#e e--ect" have -$% the ,$n*%+n +"e-+,ne"" $- activity!a"e# c$"t "y"te)"

It will often be easier to identify opportunities to downsize and eliminate jobs than to find creative value-adding activities for excess capacity. Thus, management may be more likely to eliminate excess capacity than to redirect it to new tasks. This can have serious negative effects on both employee employee morale and the long-run survival of the firm. hen employees are let go, their knowledge and customer relationships go with them. !ome consultants argue that such soft knowledge is a company"s co mpany"s most most valuable asset and, therefore, that downsizing downsizing is likely to have negative long-run conse#uences. If management uses $%& systems to justify downsizing, there is likely to be a backlash against and distrust of such systems by many managers. Instead, managers should seek to find new opportunities to productively make use of excess capacity. This can involve creating teams to look for ways to improve processes and cut costs. It is also useful useful to build-in resources for ongoing maintenance. 'inally, it is critical to focus on (practical) capacity rather than (theoretical) capacity, recognizing that neither humans nor machines can function productively *++ of the time  there needs to be (slack) built in to accommodate breaks, maintenance, and unexpected interruptions.

P%$#+cti$n Cyc,e

14.3.

Why "h$+,# acc$+ntant" acc$+ntant" &a%tici&ate &a%tici&ate in &%$#+ct &%$#+ct #e"i*n What in"i*ht" a!$+t c$"t" can acc$+ntant" c$nt%i!+te that #i--e% -%$) the &e%"&ective" $- &+%cha"in* )ana*e%" an# en*inee%"

roduct design is concerned with designing a product that meets customer re#uirements in terms of #uality, durability, and functionality while also minimizing costs. $ccountants can add value to the production team by using their expertise to help  properly track and minimize costs. $ccountants can collect past data and use it to project  potential warranty and repair costs. They can also help analyze components used to identify those used in multiple multiple products and those that are uni#ue. They can then provide cost data about the uni#ue products and ask engineering whether those parts can be replaced with components used on other products. /oing so will reduce reduce a number of indirect product costs, especially those related to purchasing and carrying inventory. 0ost important, accountants provide a different perspective and may notice things or #uestion assumptions that engineers and product designers take for granted. 14..

S$)e c$)&anie" have e,i)inate# the c$,,ecti$n c$,,ecti$n an# %e&$%tin* %e&$%tin* $- #etai,e# #etai,e# ana,y"e" $n #i%ect ,a!$% c$"t" !%$2en #$n !y va%i$+" activitie". In"tea#( -i%"t,ine "+&e%vi"$%" a%e %e"&$n"i!,e -$% c$nt%$,,in* the t$ta, c$"t" $- #i%ect ,a!$%. ,a!$%. The 5+"ti-icati$n -$% thi" a%*+)ent i" that ,a!$% c$"t" %e&%e"ent $n,y a ")a,, -%acti$n $- the t$ta, c$"t" $&%$#+cin* a &%$#+ct an# a%e n$t $%th the ti)e an# e--$%t t$ t%ace t$ in#ivi#+a, activitie". D$ y$+ a*%ee $% #i"a*%ee ith thi" a%*+)ent Why

This #uestion should create some some debate. The important issues issues to keep in mind are1 • • •

2ow will management use detailed labor data3 hat actions can be taken based on such data3 2ow do the potential benefits of collecting and reporting detailed labor costs compare to the costs of processing that data3

The answers to these #uestions will determine whether the cost o f collecting the data is less than its value.

14-  © 2009 Pearson Education, Education, Inc. Publishing as Prentice Prentice Hall

P%$#+cti$n Cyc,e

14.3.

Why "h$+,# acc$+ntant" acc$+ntant" &a%tici&ate &a%tici&ate in &%$#+ct &%$#+ct #e"i*n What in"i*ht" a!$+t c$"t" can acc$+ntant" c$nt%i!+te that #i--e% -%$) the &e%"&ective" $- &+%cha"in* )ana*e%" an# en*inee%"

roduct design is concerned with designing a product that meets customer re#uirements in terms of #uality, durability, and functionality while also minimizing costs. $ccountants can add value to the production team by using their expertise to help  properly track and minimize costs. $ccountants can collect past data and use it to project  potential warranty and repair costs. They can also help analyze components used to identify those used in multiple multiple products and those that are uni#ue. They can then provide cost data about the uni#ue products and ask engineering whether those parts can be replaced with components used on other products. /oing so will reduce reduce a number of indirect product costs, especially those related to purchasing and carrying inventory. 0ost important, accountants provide a different perspective and may notice things or #uestion assumptions that engineers and product designers take for granted. 14..

S$)e c$)&anie" have e,i)inate# the c$,,ecti$n c$,,ecti$n an# %e&$%tin* %e&$%tin* $- #etai,e# #etai,e# ana,y"e" $n #i%ect ,a!$% c$"t" !%$2en #$n !y va%i$+" activitie". In"tea#( -i%"t,ine "+&e%vi"$%" a%e %e"&$n"i!,e -$% c$nt%$,,in* the t$ta, c$"t" $- #i%ect ,a!$%. ,a!$%. The 5+"ti-icati$n -$% thi" a%*+)ent i" that ,a!$% c$"t" %e&%e"ent $n,y a ")a,, -%acti$n $- the t$ta, c$"t" $&%$#+cin* a &%$#+ct an# a%e n$t $%th the ti)e an# e--$%t t$ t%ace t$ in#ivi#+a, activitie". D$ y$+ a*%ee $% #i"a*%ee ith thi" a%*+)ent Why

This #uestion should create some some debate. The important issues issues to keep in mind are1 • • •

2ow will management use detailed labor data3 hat actions can be taken based on such data3 2ow do the potential benefits of collecting and reporting detailed labor costs compare to the costs of processing that data3

The answers to these #uestions will determine whether the cost o f collecting the data is less than its value.

14-  © 2009 Pearson Education, Education, Inc. Publishing as Prentice Prentice Hall

P%$#+cti$n Cyc,e

14.4.

Ty&ica,,y Ty&ica,,y(( 6cD$na,#0" 6cD$na,#0" &%$#+ce" &%$#+ce" )en+ ite)" in a#vance $- c+"t$)e% c+"t$)e% $%#e%" $%#e%" !a"e# !a"e# $n antici&ate# #e)an#. In c$nt%a"t( 7+%*e% 8in* &%$#+ce" )en+ ite)" $n,y in %e"&$n"e t$ c+"t$)e% $%#e%". Which "y"te) 96RPII $% ,ean )an+-act+%in*: #$e" each c$)&any +"e What a%e the %e,ative a#vanta*e" an# #i"a#vanta*e" $- each "y"te)

0c/onald"s uses 04-II5 %urger 6ing uses 7IT. $n advantage of 04-II is that customer orders can be filled with less delay. $ disadvantage is the potential for over-producing items that are not in high demand 8in the case of 0c/onald"s, this could be either cold or stale food9. $n advantage of 7IT is that it facilitates customization. $ disadvantage is delay in filling customer orders 8i.e., longer wait times9 if there is an unanticipated large increase in demand. The two systems also differ in terms of implications for the supply chain1 because 04II systems rely on maintaining a larger supply of raw materials than 7IT systems, they are less vulnerable to short-term interruptions in the supply chain due to strikes or natural disasters that may disrupt deliveries. 14.;

S$)e c$)&anie c$)&anie"" have have "itche "itche# # -%$) -%$) a +e"ti$n "+ch that a +e"ti$n( %ite a !%ie- e'&,anati$n $- hy a +i%e# t$ )ea"+%e th%$+*h&+t an# the )$"t e--icient an# acc+%ate )eth$# $- c$,,ectin* that #ata.

Throughput L $ x % x & where $ L total production 8units9 G processing time % L processing time G total elapsed real time & L good units G total production 8units9 $ x % x & reduces down to good unitsGtotal elapsed real time The key data needed are1 total production in units good units produced 8i.e., those without defects9 time spent performing production tasks total time • • • •

The $I! can calculate total time by recording *9 the time when the production order was released and ;9 the time when it was completed and the products were placed into finished goods inventory. Total time spent in operations 8processing time9 can be collected by measuring the time spent on each operation. This can be most accurately done with badge or card readers at each station. Total production can be recorded by counting 8with bar-code scanners or using 4'I/ tags , if possible9 all units produced at each step of the manufacturing process. !ubtracting defective units from total production yields good production. roduction in multi-stage processes is probably the most difficult to measure accurately, especially if defects are identified continuously because then it is necessary to track all such partially completed work to obtain a more accurate measure of throughput.

P%$#+cti$n Cyc,e

14.;

The $"e&h 7%ant 6an+-act+%in* C$)&any )a2e" ath,etic -$$tea%. P%$ce""in* $&%$#+cti$n $%#e%" i" a" -$,,$"? At the en# $- each ee2( the &%$#+cti$n &,annin* #e&a%t)ent &%e&a%e" a )a"te% &%$#+cti$n "che#+,e 96PS: that ,i"t" hich "h$e "ty,e" an# >+antitie" a%e t$ !e &%$#+ce# #+%in* the ne't ee2. A &%$#+cti$n $%#e% &%e&a%ati$n &%$*%a) acce""e" the 6PS an# the $&e%ati$n" ,i"t 9"t$%e# $n a &e%)anent #i"2 -i,e: t$ &%e&a%e a &%$#+cti$n $%#e% -$% each "h$e "ty,e that i" t$ !e )an+-act+%e#. Each ne &%$#+cti$n $%#e% i" a##e# t$ the $&en &%$#+cti$n $%#e% )a"te% -i,e "t$%e# $n #i"2. Each #ay( &a%t" #e&a%t)ent c,e%2" %evie the $&en &%$#+cti$n $%#e%" an# the 6PS t$ #ete%)ine hich )ate%ia," nee# t$ !e %e,ea"e# t$ &%$#+cti$n. A,, )ate%ia," a%e !a%c$#e#. Fact$%y $%2e%" $%2 in#ivi#+a,,y at "&ecia,,y #e"i*ne# U"ha&e# $%2 a%ea" e>+i&&e# ith "eve%a, )achine" t$ a""i"t the) in c$)&,ete,y )a2in* a &ai% $"h$e". Fact$%y $%2e%" "can the !a%c$#e" a" they +"e )ate%ia,". T$ $&e%ate a )achine( the -act$%y $%2e%" "i&e thei% ID !a#*e th%$+*h a %ea#e%. Thi" %e"+,t" in the "y"te) a+t$)atica,,y c$,,ectin* #ata i#enti-yin* h$ &%$#+ce# each &ai% $- "h$e" an# h$ )+ch ti)e it t$$2 t$ )a2e the). Once a &ai% $- "h$e" i" -ini"he#( it i" &,ace# in a !$'. The ,a"t )achine in each $%2 ce,, &%int" a !a%c$#e ,a!e, that the $%2e% a--i'e" t$ the !$'. The c$)&,ete# "h$e" a%e then "ent t$ the a%eh$+"e.

14-  © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Ch. 14? The P%$#+cti$n Cyc,e

a. repare a data flow diagram of all operations described.

inventory

E+ x *@ x N*; x *,+++,+++ units L NB;+,+++ 4educed warrantyGrepair costs L >+ x = x NA+ x *,+++,+++ units L NB;+,+++ O&ti$n 7?

Investment L N@+,+++ O N=.; x *,+++,+++ units L N=,;@+,+++ !avings L N=,;>+,+++1 4educed scrap costs L D+ x *@ x N*; x *,+++,+++ units L N*,A;+,+++ 4educed warrantyGrepair costs L D+ x = x NA+ x *,+++,+++ units L N*,A;+,+++ O&ti$n C?

Investment L N;,+++,+++ !avings L N*,C++,+++1 4educed scrap costs L @+ x *@ x N*; x *,+++,+++ units L ND++,+++ 4educed warrantyGrepair costs L @+ x = x NA+ x *,+++,+++ units L ND++,+++

P%$#+cti$n Cyc,e

!. A""+)e that !eca+"e a,, $- the &%$&$"e# chan*e" i,, inc%ea"e &%$#+ct >+a,ity( that &%$#+cti$n i,, 5+)& t$ 1(;( +nit". Which $&ti$n #$ y$+ %ec$))en# Why

$t production levels of *,@++,+++ units, options % and & both reduce total costs. ++,+++ O N*.@ x *,@++,+++ units L N;,A@+,+++. !avings L N;,*A+,+++1 4educed scrap costs L >+ x *@ x N*; x *,@++,+++ units L N*,+C+,+++ 4educed warrantyGrepair costs L >+ x = x NA+ x *,@++,+++ units L N*,+C++,+++ O&ti$n 7?

Investment L N@+,+++ O N=.; x *,@++,+++ units L N>,C@+,+++ !avings L N>,CA+,+++1 4educed scrap costs L D+ x *@ x N*; x *,@++,+++ units L N;,>=+,+++ 4educed warrantyGrepair costs L D+ x = x NA+ x *,@++,+++ units L N;,>=+,+++ O&ti$n C?

Investment L N;,+++,+++ !avings L N;,B++,+++1 4educed scrap costs L @+ x *@ x N*; x *,@++,+++ units L N*,=@+,+++ 4educed warrantyGrepair costs L @+ x = x NA+ x *,@++,+++ units L N*,=@+,+++

14.

ECEL PRO7LE6 a. C%eate the -$,,$in* "&%ea#"heet

14-  © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Ch. 14? The P%$#+cti$n Cyc,e

!. C%eate -$%)+,a" t$ ca,c+,ate Acc+)+,ate# #e&%eciati$n 9a,, a""et" +"e the "t%ai*ht ,ine )eth$#K a,, a""et" • ac>+i%e# any ti)e #+%in* the yea% *et a -+,, yea%0" initia, #e&%eciati$n: C+%%ent yea%0" #e&%eciati$n 9"t%ai*ht,ine )eth$#( -+,, a)$+nt -$% initia, • yea% in hich a""et ac>+i%e#: En#in* acc+)+,ate# #e&%eciati$n • Net !$$2 va,+e at en# $- &e%i$# • C+%%ent yea% in the ce,, t$ the %i*ht $- the &h%a"e +i"iti$n c$"t( !e*innin* #e&%eciati$n( c+%%ent • #e&%eciati$n( en#in* acc+)+,ate# #e&%eciati$n( net !$$2 va,+e In the ce,, t$ the %i*ht $- the a%%$ -$,,$in* the te't