5 Flashcards
What is another name for mass production?
‘Flow’ or ‘continuous’ production
What is the main philosophy behind mass production?
‘Push’ not ‘pull’
What type of production does mass production emphasize?
Make to stock, not make to order
What are the characteristics of mass production?
- Large batches / long production runs
- Fixed costs spread across large number of units
- Organised by operation
- Standardised tasks
- Few product variants
What are the two main types of costs?
- Direct costs
- Indirect costs
What distinguishes direct costs from indirect costs?
Direct costs can be linked to specific activities; indirect costs relate to resources used by multiple activities
Define fixed costs.
Costs that have the same value regardless of the level of activity
Define variable costs.
Costs that change with the level of activity
What are semi-variable costs?
Costs that have both fixed and variable elements
What costing methods are typically used in mass production?
- Absorption costing
- Standard costing
What do variances from standard costs help evaluate?
Functional and departmental performance
Name three market changes affecting production.
- Globalisation
- Increasing competition
- Changes in customer demand and preferences
What does lean manufacturing focus on?
Processes and activities rather than products
What are the three types of activities in lean manufacturing?
- Value added
- Non value-added but currently unavoidable
- Completely non-value-added
List the five main principles of Lean.
- Value
- Value stream
- Flow
- Pull
- Perfection
What is the aim of Total Quality Management (TQM)?
Zero defects
What are MUDA’s 7 wastes?
- Transport (goods)
- Excess inventory
- Motion (people/equipment)
- Waiting
- Over-production
- Over-processing
- Defects
What is the definition of quality?
Conformance to specification
What components are included in the cost of quality?
- Prevention
- Appraisal
- Failure
What is value chain analysis?
A description of the activities that take place in a business, relating them to an analysis of the competitive strength of the business
What are primary activities in the value chain?
- Inbound
- Operations
- Outbound
- Sales and marketing
- After-sales
What are secondary activities in the value chain?
- Procurement
- Human resources
- Information systems
- Infrastructure
What is absorption costing?
Direct labour and materials attached directly to cost objects with indirect costs allocated to those objects
What is standard costing?
Materials are given a fixed value for a period, and costs are recovered against actual consumption at standard cost
What are the limitations of standard costing?
- Future costs based on past experience
- Risk of variable seasonal quality
- Exposure to variable seasonal demand
What is a value stream?
The sequence of processes needed to produce and deliver a product to the customer
What is the 5 S approach in lean practices?
- Sort
- Set (in order)
- Shine
- Standardise
- Sustain
What is the impact of the Lean approach?
- Frees up staff time
- Reduces inventory levels
- Shortens lead and cycle times
- Reduces costs and leads to more efficient processes
- Improves customer value and company performance
Fill in the blank: Quality is defined by what the customer is prepared to pay for, and every part of the business must act in support of the _______.
quality objective
True or False: The Lean system targets waste at all levels.
True
What is the price of an Americano 16oz?
2.89
What is the VAT number provided in the document?
884 2579 78
What is the total payment amount for the second transaction?
3.39
What is the subtotal for the fake Away Americano transaction?
3.09
What is the variance for Decaf shots?
-2
What is the standard number of disposable cups?
2
What is the actual number of disposable lids used?
4
Fill in the blank: The more the output, the less fixed cost needs to be allocated to each _______.
sales unit
What is the cost per unit when 1,000 units are produced?
70
What is the profit per unit when 2,000 units are produced?
40
True or False: Standard costing hides waste in overhead absorption rates.
True
What does ABC stand for in costing?
Activity-Based Costing
What is one limitation of standard costing?
Ignores customer-value measures
List three sample activities in a coffee shop.
- Stocking food counters
- Making drinks
- Serving food
What does ABC focus on in terms of cost structures?
Major cost groups and changes which are quick to enact
What are two advantages of ABC for Lean?
- Breaks down processes into activities
- Generates more realistic cost information
Fill in the blank: ABC may classify some critical activities as _______.
non-value added
What is a key question raised if ABC is not the answer?
Which costing system should be used with Lean and why?
Who defined ABC as an approach to costing and monitoring activities?
CIMA
What does ABC assign costs based on?
Actual resource consumption
What is one weakness of ABC for Lean?
Expensive to implement and maintain
What is the standard fixed cost amount mentioned in the example?
20,000
What is the total costs when 1,000 units are produced?
70,000
What is the unit sales price in the example provided?
100
What type of data does standard costing produce?
Late, aggregate data
