Crumbly Cakes make cakes, which are sold directly to the public. The new production manager (a...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Crumbly Cakes make cakes, which are sold directly to the public. The new production manager (a celebrity chef) has argued that the business should use only organic ingredients in its cake production. Organic ingredients are more expensive but should produce a product with an improved flavour and give health benefits for the customers. It was hoped that this would stimulate demand and enable an immediate price increase for the cakes. Crumbly Cakes operates a responsibility based standard costing system which allocates variances to specific individuals. The individual managers are paid a bonus only when net favourable variances are allocated to them. The new organic cake production approach was adopted at the start of March 2009, following a decision by the new production manager. No change was made at that time to the standard costs card. The variance reports for February and March are shown below (Fav = Favourable and Adv = Adverse). Manager responsible Allocated variances Production manager Sales manager Material price (total for all ingredients) Material mix Material yield Sales price Sales contribution volume February Variance $ 25 Fav 0 20 Fav 40 Adv 35 Adv March Variance $ 2,100 Adv 600 Adv 400 Fav 7,000 Fav 3,000 Fav The production manager is upset that he seems to have lost all hope of a bonus under the new system. The sales manager thinks the new organic cakes are excellent and is very pleased with the progress made. Crumbly Cakes operate a JIT stock system and holds virtually no inventory. Required: (a) Assess the performance of the production manager and the sales manager and indicate whether the current bonus scheme is fair to those concerned. Crumbly Cakes make cakes, which are sold directly to the public. The new production manager (a celebrity chef) has argued that the business should use only organic ingredients in its cake production. Organic ingredients are more expensive but should produce a product with an improved flavour and give health benefits for the customers. It was hoped that this would stimulate demand and enable an immediate price increase for the cakes. Crumbly Cakes operates a responsibility based standard costing system which allocates variances to specific individuals. The individual managers are paid a bonus only when net favourable variances are allocated to them. The new organic cake production approach was adopted at the start of March 2009, following a decision by the new production manager. No change was made at that time to the standard costs card. The variance reports for February and March are shown below (Fav = Favourable and Adv = Adverse). Manager responsible Allocated variances Production manager Sales manager Material price (total for all ingredients) Material mix Material yield Sales price Sales contribution volume February Variance $ 25 Fav 0 20 Fav 40 Adv 35 Adv March Variance $ 2,100 Adv 600 Adv 400 Fav 7,000 Fav 3,000 Fav The production manager is upset that he seems to have lost all hope of a bonus under the new system. The sales manager thinks the new organic cakes are excellent and is very pleased with the progress made. Crumbly Cakes operate a JIT stock system and holds virtually no inventory. Required: (a) Assess the performance of the production manager and the sales manager and indicate whether the current bonus scheme is fair to those concerned.
Expert Answer:
Answer rating: 100% (QA)
a The performance of the production manager should be assessed based on the variances allocated to h... View the full answer
Related Book For
Cost Management Accounting and Control
ISBN: 978-0324559675
6th Edition
Authors: Don R. Hansen, Maryanne M. Mowen, Liming Guan
Posted Date:
Students also viewed these accounting questions
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
Planning is one of the most important management functions in any business. A front office managers first step in planning should involve determine the departments goals. Planning also includes...
-
Googles ease of use and superior search results have propelled the search engine to its num- ber one status, ousting the early dominance of competitors such as WebCrawler and Infos- eek. Even later...
-
Use the following information for this question: Taxable income Marginal tax rate 15% 25% 34% 39% 34% 35% S S 0-S 50,000 75,000 50,000-$ S 75,000 $100,000 $ 100,000-S 335,000 S 335,000-$10,000,000...
-
How might the output and income gains from immigration shown by the simple immigration model be affected by (a) Unemployment in the originating nation, (b) Remittances by immigrants to the home...
-
Pearl, Inc., has offered $357 million cash for all of the common stock in Jam Corporation. Based on recent market information, Jam is worth $319 million as an independent operation. If the merger...
-
Ashton wants to store the following data about S&Ss purchases of inventory: item number date of purchase vendor number vendor address vendor name purchase price quantity purchased employee number...
-
Lincoln Lights is considering hiring one of three soft-ware firms to implement a new IT system. Lincoln management has decided to evaluate the rms on three dimensionsreputation, skill level, and...
-
If a JPY futures contract is for 12,500,000 yen, what is your daily cash flow in USD if you go short 3 contracts at 0.009812 and the contract settles at 0.009842 later that day?
-
The file P02_18.xlsx contains daily values of the Standard & Poors 500 Index from 1970 to early 2012. It also contains percentage changes in the index from each day to the next. a. Create a histogram...
-
Determine cold work factor given the original area 100 mm and the current area 80 mm. Select one: a. 0.25 b. 100 C. 80 d. 0.2
-
The unadjusted trial balance of the Manufacturing Equitable at December 31, 2021, the end of its fiscal year, included the following account balances. Manufacturing's 2021 financial statements were...
-
Three people pull simultaneously on a stubborn donkey. Jack pulls directly ahead of the donkey with a force of 68.1 N, Jill pulls with 64.5 N in a direction 45 to the left, and Jane pulls in a...
-
Assignment: Email Your Instructor Instructions: Planning < > Read the document, Professional Email for D2L, to understand the etiquette and layout for this email. This is SharePoint file. If you...
-
During 2021, Blue Sky Airlines paid salary expense of $37.1 million. At December 31, 2021, Blue Sky accrued salary expense of $2.8 million. Blue Sky then paid $3.0 million to its employees on January...
-
Research how multinational companies like the Fortune 500 companies can use the process of Scenario Planning to determine how they have and can adapt to an uncertain world that includes COVID-19, the...
-
Suppose a university advertises that its average class size is 31 or less. A student organization is concerned that budget cuts have led to increased class sizes and would like to test this claim. A...
-
On October 1, 2021, Adoll Company acquired 2,600 shares of its $1 par value stock for $38 per share and held these shares in treasury. On March 1, 2023, Adoll resold all the treasury shares for $34...
-
Anselmos Kwik Print provides a variety of photocopying and printing services. On June 5, Anselmo invested in some computer-aided photography equipment that enables customers to reproduce a picture or...
-
Brown Company reported sales of $8,100,000 in 2010. At the end of the year, the following quality costs were reported: Design review ...... $405,000 Recalls ........ 135,000 Re inspection .........
-
Refer to Exercise 13-6. Assume that the company identifies poor plant layout as the root cause of wait time and move time. Required: 1. Express an improvement strategy as a series of if-then...
-
This problem can be solved analytically or with a spreadsheet. Two identical large glass bulbs are filled with gases and connected by a capillary tube that is \(\delta=0.0090\) \(\mathrm{m}\) long....
-
Estimate \(\mathrm{Sc}_{\mathrm{V}}\) for a saturated vapor mixture that is \(80 \mathrm{~mol} \%\) ethanol and \(20 \mathrm{~mol} \%\) water at \(1.0 \mathrm{~atm}\).
-
PhotoMax, Inc., plans to prepare a sales budget schedule and a purchases budget schedule for 20X3. Management has set a sales goal of 250,000 units. After reviewing price trends, the sales manager...
Study smarter with the SolutionInn App