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cornerstones cost management
Cost Management Accounting And Control 3rd Edition Don R. Hansen, Maryanne M. Mowen - Solutions
Refer to 17-13. In 1999, Jack Carter, president of Kartel, requested that environmental costs be assigned to the two major products produced by the company. He felt that knowledge of the environmental product costs would help guide the design decisions that would be necessary to improve
Ann Colson, president of Deerstone, Inc., a consumer products firm, has decided to follow an environmental improvement strategy. The goal is to increase profits by increasing revenues and decreasing environmental costs. Ann is convinced that revenues could be increased if she could improve the
During the past four years, Blanding Company has made significant efforts to improve its environmental performance. Two of the strategic objectives which have received consider¬able attention are those of minimizing hazardous materials and minimizing release of liq¬uid residues. Actually, there
There are a number of firms that voluntarily disclose environmental information. Many of these firms are listed at http://www.greenbiz.com/corpweb.cfm. Among those listed are PepsiCo, McDonald's, and Baxter. PepsiCo has some interesting environmental activities reported. Access this site, select a
Use the comments from the executiv'e meeting to identify strategic objectives and pos¬sible performance measures for each of five perspectives: financial, customer, environ¬mental, process, and learning and growth. Would you recommend the Balanced Scorecard for Zando? Why?
Suppose that Doreen suggested gainsharing in response to Troy's suggestion to reward product dex'elopment employees for improving cycle time and time to market. What is gainsharing? How could it be used in the product development setting?
Determine the cost of all activities for the proposed new process. Now assign the cost of the secondary activity to the primary activities.
Classify the primary activities into three categories: environmental, quality, and other(neither quality nor environmental). Did some activities end up in more than one cat¬egory? Explain.
Calculate the cost per unit for each of the proposed products using primary activity rates. Now calculate the environmental cost per unit and the quality cost per unit. What does this tell you about the relative desirability of the two products?
Following Larry's suggestion, Luis decided to use target costing to help improve new product profitability. Based on analyses by Luis and Doreen, the target prices for XKl and XK5 are $50 per pound and $35 per pound, respectively. Luis has indicated that any new product should earn a gross profit
Determine the number of units which must be sold to break even or to earn a targeted profit.
Determine the amount of revenue required to break even or to earn a targeted profit.
Apply cost-volume-profit analysis in a multiple product setting.
Prepare a profit-volume graph and a cost-volume-profit graph, and explain the meaning of each.
Explain the impact of risk, uncertainty, and changing variables on cost-volumeprofit analysis.
Discuss the impact of activity-based costing on cost-volume-profit analysis.
If the contribution margin increases from 30% to 35%of sales, what will happen to the break-even point and why?
How does JIT affect the firm's cost equation? Affect CVP analysis?
Explain what productive efficiency means and describe the difference between technical and input trade-off efficiency.
Explain what partial productivity measurement is and describe its advantages and disadvantages.
Explain what total productivity measurement is and describe its advantages.
Describe the role of productivity measurement in assessing activity improvement.
Explain the difference between technical and input trade-off efficiency.
What is the price-recovery component?
Discuss the role accounting has in productivity mea¬surement.
What are the differences between quality and produc¬tivity? The similarities?
After determining the costs of the engineering activities. Bob was then asked to describe how these costs would be assigned to jobs produced within the factory. (The company man¬ufactures machine parts on a job-order basis.) Bob responded by indicating that creating BOMs and designing tools were
Assume that a company has two categories of overhead: machine operating costs and materials handling. The costs expected for these categories for the coming year are as follows:The plant currently applies overhead using machine hours and expected actual capacity. Ex¬pected actual capacity is
Brown Company has identified the following overhead activities, costs, and activity driv'ers for the coming year:Assume for simplicity that each activity corresponds to a process. The following two jobs were completed during the year:The company's normal activity is 4,000 direct labor
Golding Bank is in the process of implementing an activity-based costing system. A copy of an interview with the manager of Golding's Credit Card Department appears below.QUESTION 1: How many employees are in your department?RESPONSE: There are eight employees, including me.QUESTION 2: What do they
Refer to the interview in 12-4 (especially to Questions 4 and 7). The general ledger reveals the following annual costs:All nonlabor resources, other than the ATM, are spread ev'enly among the eight credit de¬ partment employees (in terms of assignment and usage). Credit department employees have
Bob Randall, cost accounting manager for Hemple Products, was given the charge to de¬termine the costs of the activities performed within the company's Manufacturing Engi¬neering Department. The department has the following activities: creating bills of materials(BOMs), studying manufacturing
Creed Jones has just finished a project where he identified and assigned costs to the ac¬tivities in the Receiving Department. The following is a list of these activities and their costs:The goods purchased are two different types of electronic components used in producing the company's two
Riobamba Manufacturing produces specially machined parts. The parts are produced in batches in one continuous manufacturing process. Each part is custom produced and re¬quires special engineering design activity (based on customer specifications). Once the de¬sign is completed, then the equipment
Refer to the data in 12-8. Build an activity relational table that can be used to calculate pool rates.
Golding Company recently installed an activity-based relational database. Using the informa¬tion contained in the activity relational table, the following pool rates have been computed:Two products are produced by Golding: a deluxe disk player and a regular disk player.Each product has an area in
Christina Walters, vice president of finance for Underwood Company, attended a seminar three years ago on activity-based costing. She immediately began a project to gather data on activities for three plants that produced the same products and were similar in size and organization. After the first
Larson Company, a bike manufacturer, produces two types of bikes: mountain bikes and racing bikes. The company has two manufacturing processes: frame and bar fabrication and assembly. Once the frame and bar are produced, they are transferred to assembly, where, with other purchased parts, assembly
White Company produces exercise equipment. One of its plants produces two versions of an exercise bike: an economy model and a custom model. The custom model has a sturdier frame; a plushier seat; and a variety of electronic gadgets to help the exerciser monitor heart¬beat, calories, distance
Stillwater Medical Center operates a cardiology care unit. Currently, all patients are charged the same rate per patient day for daily care services. Daily care services are broadly defined as occupancy, feeding, and nursing care. A recent study, however, revealed several inter¬esting outcomes.
Cushing First National Bank operated for years under the assumption that profitability can be increased by increasing dollar volumes. Historically, First National's efforts were directed towards increasing total dollars of sales and total dollars of account balances. In recent years, however. First
Refer to the data given in 12-17.Required:1. Prepare activity and product relational tables.2. Comment on how the activity relational database differs from a general ledger databaase.
BKM Foundry manufactures different kinds of equipment used by the aerospace, commer¬cial aircraft, and electronic industries. Twenty different products are created using two ma¬jor manufacturing processes: molding and assembly. The procurement and sustaining processes are also used in the plant.
Springs Company produces two type of calculators: scientific and business. Both products pass through two producing departments. The business calculator is by far the most popu¬ lar. The following data have been gathered for these two products:Required:1. Compute the overhead cost per unit for
Consider the following conversation between Leonard Bryner, president and manager of a firm engaged in job manufacturing, and Chuck Davis, CMA, the firm's controller.LEONARD: Chuck, as you know, our firm has been losing market share over the past three years. We have been losing more and more bids,
Explain what strategic cost management is and how it can be used to help a firm create a competitive advantage.
Describe value-chain analysis and the strategic role of activity-based customer and supplier costing.
Explain what life cycle cost management is and how it can be used to maximize profits over a product's life cycle.
Describe the basic features of JIT purchasing and manufacturing.
Describe the effect JIT has on cost traceability and product costing.
What is customer value? Flow is customer value re¬lated to a cost leadership strategy? To a differentiation strategy? To strategic positioning?
What does it mean to exploit internal and external link¬ages?
What is the difference between a producer-oriented definition of product life cycle and a customer-oriented definition?
Explain how the life cycle viewpoints are interrelated.
Explain why price sensitivity increases as a product moves from the introduction to maturity stages.
Describe a revenue enhancement strategy during the maturity stage of a product's life cycle.
"Life cycle cost reduction is best achieved during the development stage of the production life cycle." Do you agree? Explain.
Explain why design strategies should consider pro¬duction, logistical, and postpurchase activities.
"A JIT system must exploit customer and supplier link¬ages to be successful." Explain.
Plant layout and efficiency is an important executional cost driver for JIT. Explain how this executional cost dri¬ver is chosen to increase efficiency and decrease cost.
Besides plant layout and efficiency, what other orga¬nizational cost drivers are used to advantage by JIT systems?
San Jose Goodwill Bank has been experiencing significant competition from nonbanking financial service providers such as mutual funds. As a result, interest rates were lower and the bank found it more difficult to maintain or increase deposits. Profits had declined for the Strategic Positioning
Abrea, Inc., manufactures trenchers. Abrea uses JIT manufacturing and carries insignificant levels of inventory. Abrea manufactures everything needed for the trenchers except for the engines. The engines for the smaller trencher line are purchased from two sources: JD En¬gines and BW Engines. The
BJ Manufacturing produces several types of potentiometers. The products are produced in batches according to customer order. Although there are a variety of potentiometers, they can be grouped into three product families. The number of units sold is the same for each family. The selling prices for
Given below are a series of statements associated with product life cycle viewpoints. For each statement, identify whether it is associated with the marketirig, production, or cus¬tomer viewpoint. Where possible, identify the particular characteristic being described. If the statement fits more
Tronico Parts, Inc., produces electronic products with short life cycles (less than two years).Development has to be rapid, and the profitability of the products is tied strongly to the ability to find designs that will keep production and logistics costs low. Recently manage¬ment has also decided
Prior to installing a JIT system. Burrows Company used machine hours to assign mainte¬nance costs to its three products (socket sets, pliers, and wrenches). The maintenance costs totaled $560,000 per year. The machine hours used by each product and the quantity of each product produced are as
Homer Manufacturing produces different models of 22-calibre rifles. The manufacturing costs assigned to its economy model rifle before and after installing JIT are given in the table on the following page. Cell workers do all maintenance and are also responsible for mov¬ing materials, cell
Lochner Company has installed a JIT purchasing and manufacturing system and is using backflush accounting for its cost flows. It currently uses the completion of goods as the trig¬ger point to flush the manufacturing costs out of the system. During the month of October, Lochner had the following
Mott Company recently implemented a JIT manufacturing system. After one year of oper¬ation, Heidi Burrows, president of the company, wanted to compare product cost under the JIT system with product cost under the old system. Mott's two products are weed eaters and lawn edgers. The unit prime costs
Berry Company, a manufacturer of athletic shoes, has adopted JIT manufacturing. In im¬plementing the system, three types of manufacturing cells were created—one for each type of shoe produced. The manufacturing costs for the line of basketball shoes are given below(expected production of 25,000
Goldstein Company produces two types of vases (A and B). Both pass through two pro¬ducing departments: Molding and Painting. It also has a Maintenance Department that ser¬vices and repairs the equipment used in each producing department. Budgeted data for the three departments are given below.In
Thayn Company has implemented a JIT flexible manufacturing system. Kevin Ross, con¬troller of the company, has decided to reduce the accounting requirements given the ex¬pectation of lower inventories. For one thing, he has decided to treat direct labor cost as a part of overhead and to
Don Homer, cost accounting manager for Tibbings, Inc., was having dinner with Spencer Gee, a friend since college days. The two had attended the same university and belonged to the same fraternity. Upon graduation, they had taken positions with two competitors whose headquarters were located in the
Compare and contrast functional-based, activitybased, and strategic-based responsibility accounting systems.
Explain process value analysis.
Describe activity-based financial performance measurement.
Describe activity-based budgeting.
Explain the basic features of the Balanced Scorecard.
Describe a functional-based responsibility accounting system.
Describe an activity-based responsibility accounting system. How does it differ from functional-based re¬sponsibility accounting?
What is meant by "activity inputs"? "Activity output"?Explain what is meant by "activity output measure¬ment."
Wliat are value-added activities? Value-added costs?
Explain how value-added standards are used to iden¬tify value-added and nonvalue-added costs.
Explain how trend reports of nonvalue-added cost can be used.
Explain why activity-based budgeting is the reverse of activity-based costing.
What is the meaning of the activity volume variance?Explain how the unused capacity variance is useful to managers.
According to the Balanced Scorecard, what is a strategy?
Explain what the difference is between lag measures and lead measures.
What is meant by double feedback?
Cambry Day, president of DayTime Novelties, was considering a memo sent to her by Colby Sorensen, vice president of operations. The memo argued that DayTime needed to change its responsibility accounting system from an activity-based approach to a strategic-based ap¬proach. Colby was convinced
David Christensen, plant manager, was given the charge to produce 120,000 bolts used in the manufacture of small twin engine aircraft. Directed by his divisional manager to give the bolt production priority over other jobs, he had two weeks to produce the units. Meet¬ing the delivery date was
For each of the following situations, provide the following information:a. An estimate of the nonvalue-added cost caused by each activityb. The root causes of the activity cost (such as plant layout, process design, and product design)c. The cost reduction measure: activity elimination, activity
Parker Toys produces a variety of handheld video games. Due to competitive pressures, the company was making an effort to reduce costs. As part of this effort, management imple¬mented an activity-based management system and began focusing its attention on processes and activities. Purchasing was
Lemmons Company has developed value-added standards for four activities: purchasing parts, assembling parts, administering parts, and inspecting parts. The activities, the activ¬ity driver, the standard and actual quantities, and the price standards follow for 2000:The actual prices paid per unit
Refer to 14-6. Suppose that Lemmons Company used an activity analysis program during 2001 in an effort to reduce nonvalue-added costs. The value-added standards, actual quan¬tities, and prices for 2001 follow:Required:1. Prepare a report that compares the nonvalue-added costs for 2000 with those
Kenzie Sorensen, controller of Riqueza Company, has been helping an outside consult¬ing group install an activity-based cost management system. This new accounting sys¬tem is designed to support the company's efforts to become more competitive (by creat¬ing a competitive advantage). For the past
Nabors Motors Division was given the charge to reduce the delivery time of its tractor mo¬tors from 3 days to 1 day. To help achieve this goal, engineering and production workers had made the commitment to reduce setup times. Current setup times were 12 hours. Setup cost was $50 per setup hour.
Jamison, Inc., uses three forklifts to move materials from receiving to stores. The forklifts are also used to move materials from stores to the production area. The forklifts are obtained through an operating lease that costs $8,000 per year per forklift. Jamison employs 10 fork¬lift operators
NBH Company, a small electronics firm, buys circuit boards and manually inserts various electronic devices into the printed circuit board. NBH sells its products to original equip¬ment manufacturers. Profits for the last two years have been less than expected. Natalie Henson, owner of NBH, was
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