Page 364 - Accounting Information Systems

C H A P TER 7 The Conversion Cycle 335

Review Questions

1. Define the conversion cycle. 11. What functions should be separated to segregate
2. What activities are involved in the batch process- record keeping from asset custody?
ing system? 12. Give an example for each of the following control
3. Distinguish between continuous, batch, and made- activities in the conversion cycle: transaction au-
to-order processing. thorization, segregation of duties, and access.
4. What documents trigger and support batch proc- 13. Distinguish between computer-aided design and
essing systems? computer-aided manufacturing.
5. What are the primary determinants for both 14. What is meant by the statement, ‘‘Inventories
materials and operations requirements? camouflage production problems and can cause
overproduction’’? What is wrong with overpro-
6. What are the objectives of inventory control in
duction if you already own the raw material?
the production process?
15. What are the primary goals of lean manufacturing?
7. What document triggers the beginning of the cost
accounting process for a given production run? 16. Distinguish between activities and cost objects in
activity-based costing.
8. What documents are needed for cost accounting
clerks to update the work-in-process accounts 17. Differentiate between essential and nonessential
with standard charges? activities.
9. What types of management reports are prepared 18. What is meant by the term islands of technology?
by the cost accounting system? 19. Define computer-integrated manufacturing.
10. What document signals the completion of the pro- 20. Define the term value stream.
duction process?

Discussion Questions

1. Discuss the importance to the cost accounting 8. How does automation help achieve manufacturing
department of the move ticket. flexibility?
2. How realistic are the assumptions of the economic 9. Identify three areas where the consumer directly
order quantity model? Discuss each assumption uses computer-aided design software applications
individually. to aid in designing the product.
3. Explain why the economic order quantity is the 10. How can poor quality be expensive to the firm,
intersection of the ordering-cost curve and the especially if low-cost raw materials are used to
carrying-cost curve. reduce cost of goods sold and raise net income?
4. Supervisors in the work centers oversee the usage 11. Discuss how an emphasis on financial performance
of raw material in production; explain why the of cost centers, as measured by traditional cost
work centers do not keep the records of the accounting information, may lead to inefficient and
work-in-process. ineffective production output.
5. Explain how prenumbered documents help to 12. How can activity-based costing be used to switch
provide indirect access control over assets. the management of business activities from a cus-
6. What role does the general ledger department todial task to a continuous improvement activity?
play in the conversion cycle? 13. How are cost structures fundamentally different
7. Describe the characteristic of a world-class between the traditional and computer-integrated
company. manufacturing environments?