Match the descriptions that follow with the corresponding terms.
Descriptions:
_ Inventory system in which goods are manufactured or purchased just as they are needed for sale. A method of allocating overhead based on each product’s use of activities in making the product.
Systems that are especially important to firms adopting just-in-time inventory methods. One part of the value chain for a manufacturing company.
The U.S. economy is trending toward this. _ A performance-measurement approach that uses both financial and nonfinancial measures, tied to company objectives, to evaluate a company’s operations in an integrated fashion.
Terms:
(a) Activity-based costing
(b) Balanced scorecard
(c) Total quality management (TQM)
(d) Research and development, and product design
(e) Service industries
(f) Just-in-time (JIT) inventory
The correct answer and explanation is :
Here are the correct matches based on the descriptions provided:
- Inventory system in which goods are manufactured or purchased just as they are needed for sale.
- (f) Just-in-time (JIT) inventory Explanation:
The Just-in-time (JIT) inventory system is a strategy that companies use to increase efficiency and decrease waste by receiving goods only as they are needed in the production process. This minimizes inventory costs and ensures that goods are available for immediate use, thus reducing the need for storage. JIT systems are typically used in manufacturing environments where companies aim to align raw materials and production processes directly with demand. It requires accurate forecasting and close relationships with suppliers to avoid delays.
- A method of allocating overhead based on each product’s use of activities in making the product.
- (a) Activity-based costing Explanation:
Activity-based costing (ABC) is a method used to allocate overhead and indirect costs more precisely. Unlike traditional costing methods, ABC assigns overhead costs based on activities that drive costs in the production process. This approach allows businesses to understand the true cost of producing each product, taking into account various factors such as machinery setup, labor, and maintenance, providing more accurate cost information for pricing and decision-making.
- Systems that are especially important to firms adopting just-in-time inventory methods.
- (c) Total quality management (TQM) Explanation:
Total quality management (TQM) refers to a comprehensive management approach that focuses on improving the quality of products and services through continuous improvement across all departments and processes. For companies implementing Just-in-time (JIT) inventory systems, TQM is especially crucial because it ensures that the products and materials delivered to production are of high quality and meet the required specifications without defects. This helps avoid delays or disruptions in the JIT system.
- One part of the value chain for a manufacturing company.
- (d) Research and development, and product design Explanation:
In the value chain of a manufacturing company, research and development (R&D) and product design play a critical role in creating new products, improving existing ones, and ensuring that manufacturing processes are efficient. These activities are vital in the early stages of product development and influence production costs, quality, and marketability. Innovation in R&D and design drives a company’s competitive advantage in the market.
- The U.S. economy is trending toward this.
- (e) Service industries Explanation:
Over recent decades, the U.S. economy has seen a significant shift from a manufacturing-based economy to a service-oriented economy. The service industry, which includes sectors such as healthcare, education, finance, and technology, now represents a major part of the country’s GDP and employment. This trend reflects changes in consumer preferences, technological advancements, and global economic shifts.
- A performance-measurement approach that uses both financial and nonfinancial measures, tied to company objectives, to evaluate a company’s operations in an integrated fashion.
- (b) Balanced scorecard Explanation:
The balanced scorecard is a strategic performance management tool that helps organizations track and measure performance using both financial and non-financial metrics. These include customer satisfaction, internal processes, learning and growth, and financial outcomes. The balanced scorecard enables companies to align day-to-day operations with long-term strategic goals, fostering a holistic view of performance and guiding decision-making for sustainable growth.