Fundamental Accounting Principles
Fundamental Accounting Principles
24th Edition
ISBN: 9781260158595
Author: Wild
Publisher: MCG
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Chapter D, Problem 1E
To determine

Traditional Production Process:

In this production process the company first estimates the sales forecast for a period based on which it estimates the raw material inventory required , then raw material goes to different process before becoming the final product . The inspection of product takes place at the end of last process. The finished products are sent to finished goods warehouse and on customer requirement are delivered to customer. This is also called push production and characteristics are standard products of large batch sizes

Lean Production Process:

In this production process first the customer gives the requirement and basis on which raw material is ordered just in time and all production process are at one location resulting in faster output. The inspection is done by each employee for his process and the goods are sent to next process with zero defect. This is also called pull production and the characteristics are customized products with zero defects with small batch sizes and delivered directly from factory to customer

whether the each of the production process is related to lean or traditional

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Greenway Inc. is considering investing in a new automated packaging system. If the project is accepted, labor costs will decrease by $120,000 per year. However, other operating expenses will increase by $60,000 per year. The equipment will cost $180,000 and will be depreciated over 8 years using straight-line depreciation. The initial working capital required for the project is $6,000, and the company's marginal tax rate is 30%. What is Greenway Inc.'s annual cash flow associated with the new project?
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