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cost management strategic
Cost Management Strategies For Business Decisions 3rd Edition Michael W. Maher, Frank Selto Ronald W. Hilton - Solutions
8.18 Explain how the concept of "normal spoilage" could impede quality improvements in processes. If you do not distinguish between normal and abnormal spoilage, how would you identify "unacceptable" spoilage?
8.17 One of your process supervisors said to you, "Well, you have to break eggs to make an omelet," as a reason for considering the period's spoilage as a normal cost of pro- duction. Is spoilage a normal cost of production? If so, why report it separately?
8.16 (Appendix A) When using the FIFO method of process costing, total equivalent units produced for a given period equal the number of unitsa. Started and completed during the period plus the num ber of units in beginning WIP plus the number of units in ending WIPb. In beginning WIP plus the
8.15 In computing the cost per equivalent unit, the weighted- average method considersa. Current costs only.b. Current costs plus costs in beginning WIP inventory.c. Current costs plus costs in ending WIP inventory.d. Current costs less costs in beginning WIP inventory. [CPA adapted]
8.14 An error was made in computing the percentage of com- pletion of the ending WIP inventory for the current year. The error resulted in assigning a lower percentage of com- pletion to each component of the inventory than actually was the case. Assume that there was no beginning inven tory. What
8.11 Management of a company that manufactures cereal is try- ing to decide whether to install a job or a process-costing system. The manufacturing vice president has stated that job costing gives the company the best control because it makes possible the assignment of costs to specific lots of
8.5 Do costs of a prior department behave similarly to costs of direct materials? Under what conditions are the costs simi- lar? Why are they accounted for separately? 8.6 Assume that the number of units transferred out of a department is unknown. What is the formula to solve for units transferred
8.4 (Appendix A) What is the distinction in equivalent units under the FIFO method and under the weighted-average method?
8.3 (Appendix A) If costs change from one period to another, why do costs that are transferred out of one department under FIFO costing include units with two different costs?
8.2 A manufacturing company has records of its current activity. in WIP inventory and its ending WIP inventory; however, the record of its beginning inventory has been lost. What data are needed to compute the beginning inventory? Express your answer in equation form.
8.1 Why are equivalent units computed for process costing?
7.77 You are an analyst employed by a manufacturer that has traditionally produced large batches of identical items based on long-range sales forecasts. The company has maintained large buffer inventories to accommodate unforeseen fluctuations in demand and seemingly inevitable quality problems in
7.76 An analysis of the process of developing a new model automobile identified six major development activities, which together define a new model's product development lead time. 1. Concept generation-conducting marketing research and combining it with technical possibilities into a product
7.75 MBNA Corporation is one of the most successful banks in the world. Like traditional banks, MBNA takes deposits and makes loans, but it has no branch banks, no commercial loans, and only a small num- ber of checking accounts. MBNA specializes in making loans to individuals through a credit
7.74 Billington Corporation makes bicycle frames in two processes, tube cutting and welding. The tube- cutting and welding processes have a practical capacity of 150,000 and 100,000 units per year. respec- tively. Committed costs of quality activities follow: Design of product and process costs
7.73 Southern Cross Electrical, located in the state of Victoria, Australia, recently implemented changes to improve its manufacturing operations. Following are average process statistics before and after changes to one of the company's processes. Item Previous Current Percentage Process Process
7.72 Rob Barkell, CFO of Monarch Electrical Corp., has asked you to estimate the benefits of changing the company's current production process to a design based on published data from a British electrical man- ufacturer. The British firm reported the following data for one of its circuit breaker
7.71 You are concemed that your company is understating its cycle time and throughput efficiency by mea suring the cycle time for only those products completed without any defects. Products that are reworked or scrapped (because they cannot be made serviceable) are accounted for separately and
7.70 Insurance companies spend considerable resources on processing claims (which results in a claim denial or payment to cover a loss). Short, accurate processing is desirable because both customers and the company benefit by resolving claims satisfactorily and by using minimum resources to do so.
7.69 Your manufacturing company is considering adopting IIT production. You have gathered the following annual data, which you believe are relevant to the decision. For this analysis, ignore any initial invest- ment costs necessary to start JIT. Average inventory will decline by $1,200,000, from
7.68 Toyota is credited with refining the practice of JIT. In Japan. it benefits greatly by having most of its sup- pliers in close proximity because suppliers are able to provide parts and materials almost instanta- neously. A Fortune 500 manufacturing company in the center of the United States,
7.67 Consider the following annual information about three companies in the same manufacturing industry. Company B Production method JIT JIT Traditional Sales revenue $327.000.000 $584.000.000 $8.508.000.000 No. of employees 1.800 3,600 29,500 Cost of goods sold $245,000,000 $414,000,000
7.66 Norsk Ferries operates daily round-trip voyages between Seattle and Vancouver using a fleet of three ferries, the Sea Quill, the Neptune, and the Orcas. The budgeted amount of fuel for each round trip is the average fuel usage, which over the last 12 months has been 150 gallons. Norsk has set
7.65 Prepare a flowchart of the following medical appointment process at a Navy medical center. Prepare appointment book. Open appointment book. Is the appointment on shore or aboard ship? If aboard ship, tell patient to call xxx-xxxx by 1500 hours (3 P.M.) to make own appointment for next working
7.64 Individually or as a group with your classmates, observe an organization of your choice-wholesale, retail, or service. Prepare a short report illustrating examples of lead-indicator and diagnostic signals the organization uses or could use. How could it use quality management tools such as
7.63 Individually or as a group with your classmates, interview the manager of a fast-food restaurant. Ask the manager how quality of service is measured and used to evaluate his or her performance. Write a brief report to your instructor summarizing the results of your interview.
7.62 Individually or as a group with your classmates, interview the manager of a retail (or wholesale) store such as a music store, an automobile parts store, or the parts department of an appliance dealership. Ask the manager how items are ordered to replace those sold. For example, does he or she
7.61 Use the following data to supply information now represented by question marks. Practical capacities. are 80 percent of theoretical capacities. Number of 40-hour shifts per week Number of identical assembly lines C27?? A B D 1 2 3 4 5 Available hours per week 400 Average cycle time per unit
7.60 Use the following data to supply information now represented by question marks. Practical capacities are 80 percent of theoretical capacities. A B Number of 40-hour shifts per week 2 3 1 NO D Number of identical assembly lines 3 ? 2 5 Available hours per week ? 600 Average cycle time per unit
7.59 Consider the following information: Units completed January 100 February March April 83 24 70 Processing time Waiting time 145.3 2.5795 145.3 170.4 2.477.8 1,782.7 158.4 1.525.7 Requireda. Compute the average cycle time per unit and the throughput efficiencies for each month.b. Build your own
7.58 Consider the following information: Year 5 Year 4 Year 3 Year 2 Year 1 Number of employees 22.230 24,400 24,100 22.000 21,800 Sales revenue ($ milions) $2,843 $2.796 $2.669 $2.318 $1,993 Operating income ($ milions) $468 $475 $530 $436 $303 Sales per employee ? 7 ? Total factor productivity
7.57 Search your library or the Internet for a research study that investigates the costs and/or benefits of adopting JIT or other time-based process-management methods. Prepare a one-page summary that describes the study's objective, its source(s) of data, and its conclusion. Prepare two questions
7.56 Search the Internet for an example of a company that provides outsourced services or manufacturing activities on a just-in-time basis. As a potential client of that outsource provider, how would you evalu- ate whether to outsource your services or manufacturing activities to that company? How
7.55 Carlson Corporation has discovered a problem involving welding its bicycle frames that costs the com- pany $3,000 in waste and $1,500 in lost business per period. There are two alternative solutions. The first is to lease a new automated welder at a cost of $3,500 per period, which would save
7.54 Shaq, Inc. has discovered a problem involving the mix of limestone in its dry concrete mix that costs the company $5,000 in waste and $3,500 in lost business per period. There are two alternative solutions. The first is to lease a new mix regulator at a cost of $3,500 per period, which would
7.53 Canadian Seltzers has discovered a problem involving its mix of flavor to seltzer water that costs the company $3,000 in waste and $2.500 in lost business per period. There are two alternative solutions. The first is to lease a new mix regulator at a cost of $4,000 per period, which would save
7.52 Canadian Seltzers has discovered a problem involving its mix of flavor to seltzer water that costs the company $3,000 in waste and $2.500 in lost business per period. There are two alternative solutions. The first is to lease a new mix regulator at a cost of $4,000 per period, which would save
7.51 Prepare a Pareto chart using the following data on causes of adjustments to domestic and foreign cus- tomers billings during the month of January. What does this chart indicate? Causes of Defects Correction of incorrect prior adjustments Miscellaneous....... Frequency -10 30 Causes of Defects
7.50 Prepare a quality control chart from the following sequential, weekly cycle-time data from the manufac ture of computer-tape storage devices. Use the historical mean cycle time and a 2 standard-deviation upper and lower control limit. What does this chart indicate? Week Average Cycle Time in
7.49 Prepare a quality control chart from the following sequential, weekly test data from the manufacture of computer tape storage devices. The desired level of performance is 1.5. The upper control limit is 2.1. and the lower control limit is 1.2. What does this chart indicate? Week Average Test
7.48 Prepare a quality control chart from the following sequential, monthly cycle-time data from the manu- facture of computer library devices. The desired level of performance is 140. The upper control limit is 160, and the lower control limit is 120. What does this chart indicate?Month January
7.47 Prepare a run chart from the following, sequential weekly cycle-time data from the manufacture of com- puter tape storage devices. Use the historical mean of cycle time and a 2 standard-deviation upper and lower control limit. What does this chart indicate? Week 1 Average Cycle Time in Hours
7.46 The following are selected operating costs for Watson Products for last month. Warranty claims $ 476 Design engineering 600 Supplier evaluations 450 Lost contribution margins due to poor quality.... 300 Quality training.. 500 Rework................. 725 Equipment maintenance. 1,154 Product
Year | Quality training 305,000 Year 2 220.000 Warranty repairs 70,000 75,000 Testing equipment. 115.000 115.000 Customer complaints 44.500 54.200 Rework 272.000 195.000 Preventive maintenance 220.000 152.000 Materials inspection 105,000 75.000 Field testing 150,000 200,000 Required Classify these
7.45 Ramirez Corporation manufactures refrigerators. The following represents its financial information for two years. Sales.. Costs Year 1 $3.920,000 Year 2 $3,520.000 Process inspection 26,400 30,000 Scrap............ 28,800 30.100
7.44 Owenborrogh Corporation manufactures air conditioners. The following represents its financial infor- mation for two years. Year I Sales $1.960,000 Year 2 $1,760.000 Costs: Process inspection 13,200 15.000 Scrap...... 14.800 15.500 Quality training 158,000 105.000 Warranty repairs. 34,000
7.43 Vedral Industries manufactures computer printers. The following represents financial information for Iwo years: Year I Sales Costs: $2.450.000 Year 2 $2,200.000 Process inspection 16.500 18,800 Scrap......... 18,500 19.300 Quality training 198.000 130,000 Warranty repairs.mscassiefer 43.000
7.42 What is the most important customer quality trade-off for each of the following products and services?a. Personal computer.b. Portable MP3 player.c. Checking account.d. Taxi ride through New York City.e. Personal clothing.
7.41 What are the most important attributes of each of the following products or services?a. Personal computer.b. Television programming.c. Meals in a fine restaurantd. Student study guides for an accounting text.e. Running shoes. Legal representation in traffic court.
7.40 What are the most important customer-quality attributes for each of the following products or services? Tuxedo for a bridegroom.b. Microwave oven.c. Accounting course at a university.d. Cruise on a Princess ship.e. Frozen dinner.f. Tax return prepared by a professional.
7.39 ZZK Industries manufactures zippers. The following table presents its financial information for one year. Sales Material inspection $450,000 ..$13.000 8.000 Required Scrap Employee training. Returned goods Finished goods inspection. Processing customer complaints. 13,000 3,000 15,000 6,000a.
7.38 How do the Baldrige National Quality Award (www.quality.nist.gov), the Deming Prize (www.deming.org/ demingprize/index.html), and ISO 9000 (www.iso.org) differ?
7.37 Find a newspaper or magazine article about a recent trans- portation project (e.g.. widening or adding a highway). Critically evaluate this project from a systemwide view- paint, as discussed on p. 265.
7.36 Respond to this comment: "I think the way you have measured practical capacity is just an excuse to keep from trying to use our processes more efficiently. We should be trying to get as close to theoretical capacity as possible. Isn't that what is meant by 'continuous improvement"? Otherwise,
7.35 Is it possible for a company to increase the throughput efficiency of one process to the point where an additional increase could reduce the company's overall profitability? If so, give an example.
7.34 Assume that a competitor of TCSI measures cycle time for only the products that pass through its processes without defects. Do you think this is necessarily a bad practice? What incentives might motivate such a practice?
7.33 Allegheny Industries' top executives are evaluated on the basis of annual profits and earnings per share. Middle managers are evaluated on the basis of cycle time and product quality. Are these evaluations consistent? Does it matter? Explain.
7.32 What are the similarities and differences between TQM. ROQ, and COQ? Can an organization employ all three approaches to managing quality? Explain.
7.31 Consider the book in front of you. What are its tangible and intangible features? Are any more important than oth- ers? Can you rate these features according to a three-point scale? Is each feature: I Much better than expected? 0 About as expected? -1-Worse than expected? Should the publisher
7.30 Motorola (www.motorola.com) has employed its Six Sigma approach to managing quality for many years. ("Six Sigma" refers to the probability of a defect occurring based on the area under a normal probability curve that is 6 standard deviations from the mean. This probability is 0000002 percent,
7.29 United Parcel Service (UPS) (www.ups.com) assumed that on-time delivery was the most important feature of its service and stressed (literally) its importance to UPS employees. UPS managers were confused as to why the company was not gaining market share even though cus- tomers rated the
7.28 Why did students (in the 1960s) demand to evaluate uni- versity courses?
7.27 Horace Mann Insurance Company sends a questionnaire to policyholders that have filed a claim. The questionnaire asks them whether they are satisfied with the way the claim has been handled. What useful information does Horace Mann Insurance obtain?
7.26 In its marketing activities. United Airlines stresses the importance of on-time flight departures and dealing with customer complaints. Qantas Airlines stresses its safety record and in-flight service. Are both airlines concerned with quality? Explain.
7.25 Consider your school's course-registration process. Why would goals to improve cycle time require improvements in quality"
7.24 Contrast these statements. Felix: "We're trying to isolate quality improvements that just don't add any value... to the customer." Hewlett-Packard: "Asking what quality is worth is like asking what my left lung is worth."
7.23 Two years after Wallace Co, won the Malcolm Baldrige Quality Award, this small oil company filed for bank- ruptcy. Explain how this could have happened.
7.22 You are discussing the importance of quality with a col- league. She says. "High quality may have been an impor- tant part of business competition in the 1980s and 1990s when quality varied across companies. Now, increasing quality is much less important than decreasing new prod- uct
7.21 An engineer argues, "Quality means the product will per- form faultlessly." A marketing manager retorts, "No. qual- ity is whatever the customer says it is." Are these views conflicting? Explain.
7.20 What is the difference between theoretical and practical capacity? Why might an organization choose to operate processes at practical capacity rather than at theoretical capacity?
7.19 Explain the concept of process capacity. Use an example from the chapter to describe the capacity of a specific process.
7.18 What is throughput efficiency? How is it measured?
7.17 What is cycle time? How is it measured?
7.16 What are some useful indicators of productivity? How are they measured?
7.15 Is JIT possible without high-quality processes? Explain.
7.14 How are managing quality and managing time related?
7.13 Is COQ more consistent with TQM or ROQ? Explain.
7.12 How do organizations make trade-offs among the four types of quality activities?
7.11 Is cost of quality a lead indicator or diagnostic informa-1 tion? Explain.
7.10 How does customer satisfaction differ from quality!
7.9 How do lead indicators of quality differ from diagnostic information about quality?
7.8 How are process and product variations lead indicators of quality?
7.7 What is the major difference between tangible and intangi- ble product features that affects management of quality?
7.6 What are the two dimensions of quality?
7.5 What are the similarities and differences between TQM and ROQ
7.4 Why do advocates of TQM expect to earn higher profits?
7.3 Why is managing time important?
7.2 Why is managing quality important?
7.1 Review and define each of the chapter's key terms.
2.43 Componite Express, the world's largest supplier of office supplies to major corporations, recently hired you as a new financial analyst. The company takes orders from its customers' employees via the Internet, processes them with office supply manufacturers, and delivers the supplies to the
2.42 FirstBank of Rock Creek recently spent $400,000 to develop and implement a customer profitability analysis system that calculates the monthly profitability of each of its 40,000 customers. This system also maintains extensive customer-level information about hanking and demographic history.
2.41 Refer to Problems 6.38-6.40. FSB has identified two alternatives to improve its overall profitability; 1. Drop unprofitable customers; although this will lose those customers' margins, it will save 15 per- cent of overall committed management costs. 2. Change fees to induce unprofitable
2.40 Refer to the data and results of Problemts 6.38 and 6.39. In small groups, complete the following. Requireda. Use this additional information to estimate FSB's uses of resources to manage each customer serv- ice. Intensity of service means that FSB uses three times as many service resources to
2.39 Refer to the data and results of Problem 6.38. In small groups, complete the following. Requireda. For each customer type (A, B. and C), estimate for the entire customer population the percentage- of each type, average account balance, average number of trades, and average number of other
2.38 Frederick Squab Brokerage (FSB) offers online securities trading and other services, such as financial planning and portfolio management. It is considering following the lead of competitors that segment their customers and focus marketing efforts. FSB believes that its customers can be
2.37 Concrete Constructors Corp. (CCC) is a subcontractor that specializes in installing concrete curs, gul- ters, and driveways for commercial and residential development projects. It serves two types of cus tomers, custom home builders and large general contractors. CCC obtains work from the
2.36 Bow House Architectural, Ltd. (BHA), produces commercial and residential architectural designs for national and regional construction firms. It submits designs in competitive bidding and considers the costs of unsuccessful designs as a cost of sales. Marketing efforts have focused on
2.35 Lightwave Manufacturing Assembly, Inc., provides outsourced manufacturing assembly for electronic products companies. It currently has two major customers, MBI and TS, for which Lightwave assembles and delivers products on a just-in-time basis. Lightwave incurs annual warehousing and delivery
2.34 Beaujolais Financial Group (BFG) segments its customers into premium members, who purchase exten- sive services, and standard members, who purchase minimal services. It offers premium members a 10 per- cent discount on the total package of services purchased but requires standard members to
2.33 FirstCredit, Inc. (FCI) wishes to trace its service costs to each customer type, rated A. B. or C. A cus tomers are believed to be the most profitable, Bs might become profitable, and Cs are unprofitable. FCI offers commercial loans, consumer loans, and credit cards. Its customer
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