5

Question 1

What is another name for mass production?

Answer 1

‘Flow’ or ‘continuous’ production

Question 2

What is the main philosophy behind mass production?

Answer 2

‘Push’ not ‘pull’ and driven by operational efficiency rather than customer demand.

Question 3

What type of production does mass production emphasize?

Answer 3

Make to stock, not make to order

Question 4

What are the characteristics of mass production?

Answer 4

• Large batches / long production runs
• Fixed costs spread across large number of units
• Organised by operation
• Standardised tasks
• Few product variants

Question 5

What are the two main types of costs?

Answer 5

• Direct costs
• Indirect costs

Question 6

What distinguishes direct costs from indirect costs?

Answer 6

Direct costs can be linked to specific activities; indirect costs relate to resources used by multiple activities and cannot be directly linked to a specific cost subject

Question 7

Define fixed costs.

Answer 7

Costs that have the same value regardless of the level of activity

Question 8

Define variable costs.

Answer 8

Costs that change with the level of activity

Question 9

What are semi-variable costs?

Answer 9

Costs that have both fixed and variable elements

Question 10

What traditional costing methods are typically used in mass production?

Answer 10

• Absorption costing
• Standard costing

Focus on major variable cost elements such as labour and materials
Allocates indirect costs proportionately to direct labour

Question 11

What do variances from standard costs help evaluate?

Answer 11

Functional and departmental performance

Question 12

Name three market changes affecting production and what they lead to.

Answer 12

• Globalisation
• Increasing competition
• Changes in customer demand and preferences

Which lead to:

• More customisation
• Reduced product life cycle
• Increased Overheads

Question 13

What does lean manufacturing focus on?

Answer 13

Processes and activities rather than products

Question 14

What are the three types of activities in lean manufacturing?

Answer 14

• Value added
• Non value-added (customer wouldnt be prepared to pay extra for) but currently unavoidable
• Completely non-value-added

Question 15

List the five main principles of Lean and what they are.

Answer 15

• Value: to identify what customers value and run the business accordingly
• Value stream: to identify all activities required to produce a product or service whether value added or non-value added
• Flow: to ensure that value-added activities (necessary to produce and deliver a product or service) flow without interruptions
• Pull: to produce according to customers’ demand
• Perfection: to continuously seek improvements to the process

Question 16

What is the aim of Total Quality Management (TQM)?

Answer 16

Zero defects

Question 17

What are MUDA’s 7 wastes?

Answer 17

• Transport (goods)
• Excess inventory
• Motion (people/equipment)
• Waiting
• Over-production
• Over-processing
• Defects

Question 18

What is the definition of quality?

Answer 18

Conformance to specification

Question 19

What components are included in the cost of quality?

Answer 19

• Prevention (design)
• Appraisal (quality control etc)
• Failure (returns from customers, losses on handling)

Question 20

What is value chain analysis?

Answer 20

A description of the activities that take place in a business, relating them to an analysis of the competitive strength of the business

Question 21

What are primary activities in the value chain?

Answer 21

• Inbound
• Operations
• Outbound
• Sales and marketing
• After-sales

Question 22

What are secondary activities in the value chain?

Answer 22

• Procurement
• Human resources
• Information systems
• Infrastructure

Question 23

What is absorption costing?

Answer 23

Direct labour and materials attached directly to cost objects with indirect costs allocated to those objects

Question 24

What is standard costing?

Answer 24

Materials are given a fixed value for a period, and costs are recovered against actual consumption at standard cost

Question 25

What are the limitations of standard costing?

Answer 25

* Future costs based on past experience * Risk of variable seasonal quality * Exposure to variable seasonal demand

Question 26

What is a value stream?

Answer 26

The sequence of processes needed to produce and deliver a product to the customer

Question 27

What is the 5 S approach in lean practices?

Answer 27

* Sort * Set (in order) * Shine * Standardise * Sustain

Question 28

What is the impact of the Lean approach?

Answer 28

* 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

Question 29

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 _______.

Answer 29

quality objective

Question 30

True or False: The Lean system targets waste at all levels.

Answer 30

True

Question 31

Fill in the blank: The more the output, the less fixed cost needs to be allocated to each _______.

Answer 31

sales unit

Question 32

What is the cost per unit when 1,000 units are produced?

Answer 32

70

Question 33

What is the profit per unit when 2,000 units are produced?

Answer 33

40

Question 34

True or False: Standard costing hides waste in overhead absorption rates.

Answer 34

True

Question 35

What does ABC stand for in costing?

Answer 35

Activity-Based Costing

Question 36

What is one limitation of standard costing?

Answer 36

Ignores customer-value measures

Question 37

What does ABC focus on in terms of cost structures?

Answer 37

Major cost groups and changes which are quick to enact

Question 38

What are two advantages of ABC for Lean?

Answer 38

* Breaks down processes into activities then can therefire diffrentiate between value and non-value added activities * Generates more realistic cost information by using volume and non-volume based drivers in allocationg overheads

Question 39

What is a key question raised if ABC is not the answer?

Answer 39

Which costing system should be used with Lean and why?

Question 40

Who defined ABC as an approach to costing and monitoring activitieswhich involves tracing resource consumption and costing final outputs?

Answer 40

CIMA

Question 41

What does ABC assign costs based on?

Answer 41

Actual resource consumption

Question 42

What is one weakness of ABC for Lean?

Answer 42

* Expensive to implement and maintain * Accuracy depends largely on accuracy of employees * ABC may classify some critical activities as non-value added

Question 43

What is the unit sales price in the example provided?

Answer 43

100

Question 44

What type of data does standard costing produce?

Answer 44

Late, aggregate data

Question 45

Why are absorption and standard costing no longer fit for purpose?

Answer 45

* Production is less predictable; firms must forecast variable demand. * Non-financial and customer-centric data become critical. * Traditional absorption and standard costing are inadequate—new, flexible costing approaches are needed to reflect customer value and dynamic operations.

Question 46

How does Activity-Based Costing (ABC) help control costs across service and manufacturing contexts?

Answer 46

* Map the process & identify cost drivers → cut the drivers to cut costs. ****Accept that cost structures are complex—zero-in on the few, high-impact cost groups and quick wins. ****In service industries, costs behave like large fixed blocks; in manufacturing, they trace to discrete activities—ABC reveals both patterns so managers can target savings effectively.