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business
cost management strategic

Cost Management Strategies For Business Decisions 4th Edition Ronald Hilton, Michael Maher, Frank Selto - Solutions

Mimi’s Dance Studio estimates studio (noninstruction) costs based on student hours of instruction, where | student receiving a private lesson for 1 hour is “1 student hour.” Data were gathered for the past 24 months and entered into a regression program. The following output was
Farout Cards makes and produces greeting cards. Every month, it produces from 5 to 15 new Sram Account Analysis Method in batches. At the end of the month, the company destroys the master copy of all existing cards so that (LO 4)it produces new card products each month. The costs of designing the
Highland Music records and sells music. Every month, it produces several new products in batches. The costs of making the master CD, including hiring musicians and studio costs, are product-level costs.The costs of materials and packaging are unit-level costs. The costs of setting up the production
Your company, Local Express Services, makes special deliveries to real estate and law firms. It is estimating its costs for the coming period.The controller’s office estimated overhead costs at $9,000 per month for fixed costs and $12 per delivery for variable costs. Your nemesis on the staff,
Lerner, Inc., is accumulating data to prepare its annual profit plan for the coming year. The behavior pattern of the maintenance costs must be determined. The accounting staff has suggested using regression to derive an equation in the form of y = a + bx for maintenance costs. Monthly data
The accounting department of Insecurity Protection Services, a company that provides security services for rich, famous, and insecure people (and anyone else who can afford them) is analyzing the costs of its(LO 3) accounting services. Analysts have selected the following cost drivers: number of
Refer to Problem 11.47.Requireda. Before proceeding to requirement (b) of this problem, indicate the information required to perform account analysis for Insecurity Protection Services’ accounting department cost estimation that is not in Problem 11.47.b. Now assume that Insecurity Protection
OLA COSTOMDAVCHECKSIDIOCESSCC aera. ncuryuteusaisirskcnsecsakeonee $180,000 Total cost of maintaining CUSTOMEHACCOUNIS amonteo ae : 110,000 Total cost of performing special analySe€$ .......cccccccee creer 60,000 Total facilities-level costs (total for 16 months) ....... AA gunl 610,000 sTORENEE
Refer to Problems 11.47 and 11.48. Insecurity Protection Services hired an engineering consulting firm sie :a d to perform an engineering estimate of the accounting department’s costs. The firm identified the follow- (LO 5)ing cost estimates based on information for the current period:Facilities
University Hospital has prepared a schedule of actual overhead costs for its blood test unit for the past year.463 Problem 11.53 Methods of Cost Estimation:Account Analysis(LO 3,4)Activities Overhead Costs; Technician Total Indirect Building Equipment Equipment Data Technical Month Tests Hours
Jammin’ Corporation plans to manufacture Inexcess, a product that requires a substantial amount of direct labor on each unit. Based on the company’s experience with other products that required similar amounts of direct labor, management believes that a learning factor exists in the production
Krylon Company has purchased 800 pressure gauges annually from COn, Inc. The price of these gauges has increased each year, reaching $1,000 per unit last year. Because the purchase price has increased significantly, Krylon management has asked for a cost estimate of manufacturing gauges in its own
Obtain 11 years of data from the published financial statements of a company. Using the first 10 years of data, perform a regression analysis in which the dependent variable is cost of goods sold and the independent variable is revenue (some companies call it sales). Now use the results from the
Do you think it is reasonable to delegate the responsibility for diagnosing quality problems to individuals in the departments where quality problems occur?
Would it always be better to use a cross-functional team (e.g., across departments or functions) to diagnose quality problems?
Some accountants ask this question about COQ: Are we really making a difference, or is COQ just another Maker report? Evaluate these claims about the value of COQ.a. COQ allows the organization to focus on the reduction or elimination of non-value-added costs of quality.b. COQ is a better measure
Managing quality seems to be a general management task, so what can cost-management analysts provide to improve this important activity?
Is there a conflict between meeting quality and time goals, or do these goals reinforce each other?
How should cost-management analysts choose among all available quality and time-management tools?
Why is managing quality important?
Why is managing time important?
Why do advocates of TQM expect to earn higher profits?
What are the similarities and differences between TQM and ROQ?
What are the two dimensions of quality?
What is the major difference between tangible and intangible product features that affect management of quality?
How are process and product variations lead indicators of quality?
How do lead indicators of quality differ from diagnostic information about quality?
How does customer satisfaction differ from quality?Is cost of quality a lead indicator or diagnostic information? Explain.
How do organizations make trade-offs among the four types of quality activities?
Is COQ more consistent with TQM or ROQ? Explain.
How are managing quality and managing time related?
Is JIT possible without high-quality processes? Explain.
What are some useful indicators of productivity? How are they measured?
What is cycle time? How is it measured?
What is throughput efficiency? How is it measured?
Explain the concept of process capacity. Use an example from the chapter to describe the capacity of a specific process.
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?
An engineer argues, “Quality means the product will perform faultlessly.” A marketing manager retorts, “No, quality is whatever the customer says it is.” Are these views conflicting? Explain.
You are discussing the importance of quality with a colleague.She says, “High quality may have been an important part of business competition in the 1980s and 1990s when quality varied across companies. Now, increasing quality is much less important than decreasing new product development
Two years after Wallace Co. won the Malcolm Baldrige Quality Award, this small oil company filed for bankruptcy.
Explain how this could have happened.Contrast these statements. FedEx: “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.”
Consider your school’s course-registration process. Why would goals to improve cycle time require improvements in quality?
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.
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?
Why did students (in the 1960s) demand to evaluate university courses?
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 customers rated the company’s
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, or
Identify the customer(s) for your product or service and determine what they consider important.“ Identify what you need to satisfy the customer.Define the process for doing the work.Mistake-proof the process and eliminate wasted effort.
Ensure continuous improvement by measuring, analyzing, and controlling the improved process.Is Motorola’s approach to quality more closely aligned with TQM or ROQ? Explain
Consider the book in front of you. What are its tangible and intangible features? Are any more important than others?Can you rate these features according to a three-point scale? Is each feature:1 = Much better than expected?0 = About as expected?—1 = Worse than expected?Should the publisher and
What are the similarities and differences between TQM, ROQ, and COQ? Can an organization employ all three approaches to managing quality? Explain.
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.7.34 235 7.36 7.37
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?
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.
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,
Find a newspaper or magazine article about a recent transportation project (e.g., widening or adding a highway).Critically evaluate this project from a systemwide viewpoint, as discussed on pp. 270-271.
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?ZZK Industries manufactures zippers. The following table presents its financial information for one year:(LO 2) Sales $450,000
hat are the most important customer-quality attributes for each of the following products or services?a.(LO 1) b.Tuxedo for a bridegroom.Microwave oven.c. Accounting course at a university.d. Trip on acruise ship.e. Frozen dinner.f. Tax return prepared by a professional.
What is the most important cust ; li de-off f ; heuer Exercise 7.42 portant customer quality trade-off for each of the following products and services? Quality According to thea. Personal computer. Customerb. Portable MP3 player. (LO 1)c. Checking account.d. Taxi ride through New York City.e.
Owenborri i ; ve : bees ; borrogh Corporation manufactures air conditioners. The following represents financial informa Costs of Quality tion for two years:(LO 2)Year | Year 2 Sella reine eatenacnetaar e ee$ 2,450,000 $2,200,000 Costs Process inspection .............c0.0 16,500 18,800 SIOGE Olesak
Vedral Industries manufactures computer printers. The following represents its financial information for Costs of Quality two years. (LO 2)Year | Year 2 SSIES nonce tsnacooen re ta inceier para hance ten $1,960,000 $1,760,000 Costs Process inSpeCtion ..........0cee 13,200 15,000 SCRA ee ween court
N. Lions Corporation manufactures computer games. The following represents its financial information Costs of Quality(LO 2) for two years.Year | Year 2 SalOS iss Reduce: oe ae eee $3,920,000 $3,520,000 Costs PrOCESS INSDE CON: een eee 26,400 30,000 S Gia Dirastae saat coma ne eee 28,800 30,100
The following are selected operating costs for GE Products for last month.Cost of Quality(LO 2) Warranty eldinisin/tuadty aware Ra eens Digeeneee $ 476 BEN [Melis plete lalnl@ esmurgnecen ene eratredtah: eagsocesetcgopenticeckinecont 600 SUpplienevaluationSsa) £aieordess. sertenet eee 450 Lost
Prepare a quality control chart from the following sequential, monthly cycle-time data from the manu- Quality and Time Control facture of computer library devices. The desired level of performance is 140. The upper control limit is (LO 2,6)160, and the lower control limit is 120. What does this
Prepare a quality control chart from the following sequential, weekly test data from the manufacture of Cee Brirol computer tape storage devices. The desired level of performance is 1.5. The upper control limit is 2.1, (LO 2,6)and the lower control limit is 1.2. What does this chart indicate? ;Week
Prepare a quality control chart from the following sequential, weekly cycle-time data from the manu- Guat’ COntrel Appendix)facture of computer-tape storage devices. Use the historical mean cycle time and a 2 standard-deviation (LO 6)upper and lower control limit. What does this chart
Prepare a Pareto chart using the following data on causes of adjustments to domestic and foreign customers’billings during the month of January. What does this chart indicate?Causes of Defects Frequency Correction of incorrect prior adjustments............cce 10
Prepare a Pareto chart using the following data on causes of defects during a week’s manufacture of electronic circuit boards.Causes of Defects Frequency Faulty OO aNGhea so. ceeeencrenk heats, Sei eh eho Pio eis Rec 6 Improper SEQUENCE Of COMPONENTS....e.ee. .t.ee.eee.ee s 17
LeBron Waters 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 $2,000 in
Carlson 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 save
Shaq Corporation has discovered a problem involving welding its bicycle frames that costs the company$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 $1,500 in
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
Consider the following information:January February March April Units completed 100 83 24 70 Processing time 145.3 145.3 170.4 158.4 Waiting time 2,579.5 2,477.8 hsv ROS).Requireda. Compute the average cycle time per unit and the throughput efficiencies for each month.b. BUILD YOUR OWN SPREADSHEET.
Lepidoptera Equipment Company (LEC) manufactures and distributes heavy construction equipment worldwide. LEC’s assistant controller, Bryana Wong, is aware that one of its primary competitors, Caterpillar, has implemented a remanufacturing process, which refinishes recycled engine parts to new
Use the following data to supply information now represented by question marks. Practical capacities are 80 percent of theoretical capacities.A B Cc D Number of 40-hour shifts per week 2 3 1 2-Number of identical assembly lines S ? 4 5 Available hours per week ? 600 7 Re Average cycle time per unit
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 order
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
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 day.If on
Norsk Ferries operates daily round-trip voyages between Seattle and Vancouver using a fleet of three Quality Control ferries, the Sea Quill, the Neptune, and the Orcas. The budgeted amount of fuel for each round trip is the (LO 2,6)average fuel usage, which over the last 12 months has been 150
Consider the following annual information about three companies in the same manufacturing industry. Inventory Management Company A B Cc (LO 5)Production method JIT JIT Traditional 4 Sales revenue $327 ,000,000 $584,000,000 $8,508,000,000 No. of employees . 1,600 3,600 29,500 Cost of goods sold
Toyota is credited with refining the practice of JIT. In Japan, it benefits greatly by having most of its Qualitative Evaliaton onilk suppliers in close proximity because suppliers are able to provide parts and materials almost instantaneously.A Fortune 500 manufacturing company in the center of
Your manufacturing company is considering adopting JIT production. You have gathered the following annual data, which you believe are relevant to the decision. For this analysis, ignore any initial investment costs necessary to start JIT.~ Average inventory will decline by $1,200,000, from
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. To
You are concerned that your company is understating its cycle time and throughput efficiency by measuring 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 removed
Michael Miille, CFO of Miille Electrical Corp., has asked you to estimate the benefits of changing the Medics eee company’s current production process to a design based on published data from a British electrical man- (LO 4)ufacturer. The British firm reported the following data for one of its
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.Previous Current Percentage Item Process Process Change
Whelan 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, respectively.Committed costs of quality activities follow:Design ofiproduet anc! prOCeSS'ICOSIS Eee canna rte:
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 number of checking accounts. MBNA specializes in making loans to individuals through a credit card.Credit
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 concept
The facts for the second scenario are the same as for the first one except that at the end of October, only 6,000 of the 8,000 units started had been completed and transferred out of production. These 6,000 units were either sold or are in the finished goods warehouse at the end of October. All
Why-does Spirit Beverages use process costing rather than job costing?
Why does the production cost report have separate columns for direct materials and conversion costs?Why not combine the data into one column to simplify the report?
Spoilage represents goods that are damaged, do not meet specifications, or are othérwise not suitable for further processing or sale as good output. By measuring ineS pafeiokspillage-and heS OWS%o reducei t( euch ast he ovis employees, to use higher-quality materials, and to repair faulty
Which parts of the production cost report do you think hold the most information about what the company needs to do to improve efficiency (and therefore, profitability)?
As amanager, what would you focus on to improve the profitability of Spirit Beverages?
How should Spirit Beverages measure the costs of products, services, and operations?
How should organizations recognize and measure the costs of spoilage and waste?
(Appendix A) What is the advantage of first-in, first-out (FIFO) process costing over weightedaverage process costing?
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.
(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?(Appendix A) What is the distinction in equivalent units under the FIFO method and under the weighted-average method?

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