# Question

Refer to Problem 15.22.

After some detailed polling among the 60, four types of eaters were identified: two types of light eaters and two types of heavy eaters. The consumption patterns for each group are given (slices of pizza, glasses of root beer, and bowls of salad): Light Eaters (Group A): A1 = (2,2,1) and A2 = (3,3,1); Heavy Eaters (Group B): B1 = (6,3,1) and B2 = (7,2,1). There are an equal number of CPAs in each of the four groups.

Required:

1. Calculate the average lunch cost for each CPA in each of the two groups, A and B. Compare this to the ABC cost assignments. Discuss the merits of grouping based on similarity.

Discuss the analogy to multiple-product value streams.

2. Suppose that members of the heavy-eating group (Group B) decided that they were eating more than necessary for their health and well-being and decided to reduce their total calories. They therefore agreed to reduce consumption of pizza by one slice and consumption of root beer by one glass for each member of the group. Relative to the original order, how much extra capacity exists? If the excess capacity is eliminated by reducing the order, what is the new average cost? Suppose that the decision is to use the extra capacity to invite four guests (two of Type B1 and two of Type B2) to lunch (at the cost of the CPAs). If the original order is used as the benchmark cost, what is the extra cost of the guest program? Comment on the conceptual significance of this for manufacturing firms.

After some detailed polling among the 60, four types of eaters were identified: two types of light eaters and two types of heavy eaters. The consumption patterns for each group are given (slices of pizza, glasses of root beer, and bowls of salad): Light Eaters (Group A): A1 = (2,2,1) and A2 = (3,3,1); Heavy Eaters (Group B): B1 = (6,3,1) and B2 = (7,2,1). There are an equal number of CPAs in each of the four groups.

Required:

1. Calculate the average lunch cost for each CPA in each of the two groups, A and B. Compare this to the ABC cost assignments. Discuss the merits of grouping based on similarity.

Discuss the analogy to multiple-product value streams.

2. Suppose that members of the heavy-eating group (Group B) decided that they were eating more than necessary for their health and well-being and decided to reduce their total calories. They therefore agreed to reduce consumption of pizza by one slice and consumption of root beer by one glass for each member of the group. Relative to the original order, how much extra capacity exists? If the excess capacity is eliminated by reducing the order, what is the new average cost? Suppose that the decision is to use the extra capacity to invite four guests (two of Type B1 and two of Type B2) to lunch (at the cost of the CPAs). If the original order is used as the benchmark cost, what is the extra cost of the guest program? Comment on the conceptual significance of this for manufacturing firms.

## Answer to relevant Questions

Bradford Company, a manufacturer of small tools, implemented lean manufacturing at the end of 2012. The company’s goal for the year was to increase the ROS to 40 percent of sales. A value stream team was established and ...In 2015, Choctaw Company implements a new process affecting labor and materials. The following reported data are provided to evaluate the effect on the company’s productivity: Required: 1. Calculate the productivity ...Schylar Pharmaceuticals, Inc., plans to sell 130,000 units of antibiotic at an average price of $22 each in the coming year. Total variable costs equal $1,086,800. Total fixed costs equal $8,000,000. Required: 1. What is the ...Carmichael Corporation is in the process of preparing next year’s budget. The pro forma income statement for the current year is as follows: Required: 1. What is the break-even sales revenue (rounded to the nearest dollar) ...Black Co.’s breakeven point was $780,000. Variable expenses averaged 60% of sales, and the margin of safety was $130,000. What was Black’s contribution margin? a. $364,000 b. $546,000 c. $910,000 d. $1,300,000Post your question

0