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business
cost management strategic
Cost Management Strategies For Business Decisions 4th Edition Ronald Hilton, Michael Maher, Frank Selto - Solutions
Evaluate this comment: “Historical costs are only the starting point for predicting future costs. .. . Many types of costs, such as inventory, book value of equipment, and allocation of fixed [higher-level resource] costs are not relevant for decision making.”®
One implication of ABC systems could be that using fewer cost-driver bases reduces consumption of resources, which reduces costs. Therefore, this logic continues, managers should seek to reduce the number of cost-driver bases used. A prominent critic of ABC has stated that activitybased
Place the following activities involved in a university’s admission process in chronological order and match each to its most likely cost driver. (Cost-driver bases may be used more than once.)(LO 2)Activities ¢ Possible Cost-Driver Bases@ 1. Processing applications Ab agjes,a. Number of
Match each of the following activities to the most likely activity level for a bank. Suggest a feasible cost-driver base for each, and explain why you think that your chosen cost-driver bases are feasible.Activity Activity Level 1. Sales calls—existing commercial customersa. Unit 2. Sales
Mitsu Corporation produces two types of flat-screen televisions. The standard televisions are designed for durability. The company recently began producing the higher-quality, high-grade model to appeal to dedicated watchers. Since the introduction of the high-grade product, profits have steadily
Green Garden Care, Inc., is a lawn and garden care service. It originally specialized in serving small ina residential clients but recently started contracting for work on office building grounds. Since Glenn Service Environme Greenthumb (owner) believes that commercial lawn care is more
ecreational Products, Inc., produces headlamps for campers, hikers, and other people who want the convehi nience of a light at night without carrying a flashlight. It currently allocates overhead costs using direct-labor Exercise 4.38 Limitations of Traditional Costing Methods Pbk q jours, but the
Assume that you manage a business that provides services to both state government agencies and private organizations. Contracts for both groups are awarded on the basis of competitive bids. Your contracts with government agencies provide for reimbursement of costs plus a set percentage markup above
Prague Glass & Crystal Company manufactures three types of glassware: unleaded glass, low-lead crystal, and high-lead crystal. Glass quality increases with higher lead content, which allows for more detailed cutting and etching. Unleaded glass production is highly automated, but cutting and etching
Sparkle Company makes three types of sunglasses: Stars, Geeks, and Fashions. Sparkle presently Limitations of Traditional applies overhead using a predetermined rate based on direct-labor hours. A group of company employ-Costing Methods ees recommended that Sparkle switch to activity-based costing
Cannonball Corporation manufactures three bicycle models: racing, mountain, and children’s. The racing model, the Aerolight, is made of a titantum-aluminum alloy. The mountain bike, the Summit, is made of aluminum. The steel-framed children’s bike is the Spinner. Because of the different
Many companies recognize that their cost systems are inadequate for today’s global market. Managers in companies selling multiple products are making important product decisions based on distorted cost information because many cost systems are designed to focus on inventory valuation.Required If
Security, Inc., has just completed a major change in its method to inspect its product. Previously, 10 inspectors examined the product after each major process. The salaries of these inspectors were charged as direct labor to the operation or job. To improve efficiency, Security’s production
The ABC team at Sky Enterprises, a company that uses satellites for surveillance, has pieced together the following data for its satellite surveillance service:Unit-level actual activity (hours of surveillance) is unknown; predetermined cost-driver rate is$10,000 per unit; total unit cost assigned
Social Services has just one product, Consultation Sessions. The company’s ABC team has pieced together the following data:Unit-level activity is 10,000 hours; predetermined cost-driver rate is $60 per hour.There are no batch-level activities.Product-level activity is 1 product; predetermined
The company’s management wants you to compute the total cost and unit cost of each product for the month of July, which had the following level of activities. (Note: July is not necessarily a typical month.)Product A Product B 1.1 and 1.3 Direct material 800,000 units 900,000 units 1.2 and 1.4
Refer to Problem 4.49. You have just discovered that the product manager of product A has been less than honest in reporting the number of direct-labor hours used. In checking the payroll records, you discover that 2,000 direct-labor hours ($20,000 direct-labor costs) actually were used in July to
Refer to Problem 4.49. The company’s management wants to compare the unit-based cost of each product to its full cost.Requireda. Compute the total costs of each product for the month of July using the unit-based cost approach described in the chapter appendix.b. Repeat requirement (a), but
Happy Surgery’s management wants you to compute the total cost and unit cost for 2 of the firm’s 25 different products, eye surgery and hip replacement, for the month of March. The activity levels for the month of March follow. (Note: March is not necessarily a typical month.)et WZ Use medical
Refer to Problem 4.52. You have just discovered an error in data reporting for eye surgeries. The number of hours of surgery during March was 60, not 80.Problem 4.53 Information Misreported:Traditional versus Activity-Based Costing Required(LO 1,2, 4,5, 6,7)a. Using this new information, recompute
Refer to Problem 4.52. Management of Happy Surgeries wants to compare the unit-based cost of eye surgery and hip surgery to its full cost.Requireda. Compute the total costs of each product for the month of March using the unit-based cost approach described in the chapter appendix.b. Repeat
Sporti Gus’ management wants you to compute the total cost and unit cost of the 20 tennis rackets and 10 fishing rods for the month of June, which had the following level of activities:Tennis Rackets$2,000 in sales 2 purchase orders 2 promotions Fishing Rods$1,000 in sales 3 purchase orders 2
Intellig provides the following data for a one-week period for the assembly of two different circuit boards A and B used by two different computer manufacturing customers.Material costs used and supplied for 3,500 units of board A produced and shipped, $40,000; 2,000 units of board B produced and
Marketing Solutions is a regional provider of telemarketing surveys and sales for nonprofit organizations.The basic unit of service is a completed telephone survey or a sales call. Assume that all telemarketing labor is paid hourly. Supervisory labor is salaried. The following are data from a
ABC in its modern form was developed largely in the United Kingdom and United States. As a result, ABC might reflect certain cultural norms about business management that are common to these countries but are not worldwide practice. At least one article has contrasted U.S. and French approaches to
Insurance companies and the federal government are restricting reimbursements to health care facilities and causing these facilities to seek cost reductions and more accurate tracing of costs without reducing the quality of care. Lisa Whelan, the administrator of Community Hospital, is exploring
Huge Company’s tooling business unit (TBU) manufactures metal and carbon-fiber parts for the company’s major products. TBU’s principal focus in recent years has been to schedule its resources properly, but its manager is concerned that the current method of costing the unit’s work is
Explain how you think Pursuit Data compared the expected costs and benefits in the analysis even though some are quantitative but others are qualitative.
Is it possible that the qualitative or nonquantified costs or benefits of this decision could be more important than those that are quantified? Explain with an example from Exhibit 1-5.
Explain the possible linkages among development time, sales, product quality, and customer satisfaction that are reflected in Exhibit 1-5.
if personnel are laid off or dismissed to realize cost savings, does Pursuit Data have any ethical obligations to those employees? Could the way that Pursuit Data treats those employees affect retained or future employees? Explain.
What should a cost-management analyst do when the demands of the job conflict with personal or professional ethical standards?
How does a cost-management analyst contribute to strategic decision making?
How should a cost-management analyst prepare information for strategic decision making
Review and define each of the chapter’s key terms.
What is the primary objective of cost management?
What is the concept of the value chain, and why is it important for cost management?
What is strategic decision making? Give examples of several strategic decisions.
What are some cost-management techniques that help make better management decisions?
What are cross-functional teams, and why are they important?
How do companies use benefit-cost analysis to make important decisions?
How does outsourcing affect an organization’s value chain?
What is the value of ethical standards to individuals? To an organization? To society?
How does a code of ethics differ from personal ethical standards?
How do the strategic missions of build, hold, harvest, and divest differ?
How do organizations create and maintain competitive advantages?
What is the difference between quantitative information and qualitative information?
What are the eight steps of leading and managing change
“Cost accounting and cost management really are the same functions and operations.” Do you agree or disagree?
Explain.Peter Drucker, the famous management consultant, has said, “Every three years, an organization should challenge every product, every service, every policy, every distribution channel with the question: If we were not in it already, would we be going into it now?” Why is this question
Assume that you are a vice president of the largest department store in the region. The store president has called you in to give you a challenging assignment: “Though we are the largest store, only 10 percent of the region’s residents are Our customers. Find out why the other 90 percent are
Refer to Exhibit 1-4. How could Pursuit Data determin!whether it has a competitive advantage in new product development? What would it mean to employees of Pursuit Data if it does or does not have an advantage?
A recent survey by KPMG, one of the world’s largest busihess services firms, determined that 88 percent of other large U.S. companies have outsourced at least some parts of their value chains or support services. One of the most commonly outsourced services is income tax reporting. Assume that
“If every manager minimizes the cost of the process he or she supervises, overall costs of the company will decrease.” Do you think this would be a wise strategy?Why or why not?
Some years ago, General Motors installed industrial robots worth billions of dollars in its automobile assembly lines believing that the robots would increase the efficiency of its manufacturing processes and improve profitability. In fact, General Motors lost many billions of dollars more despite
For many years, department stores prospered because they enhanced the process of shopping, which for many people was a break from the routine of housework and child care and was an opportunity to obtain information about available products and services. What changes have occurred in recent years
“T understand the possible value of strategic planning, but I really consider it to be a luxury. I am doing all that I can just to keep the doors open and meet the next payroll.”What advice would you offer this harried CEO of a small
One of your fellow classmates remarks, “I thought this was an accounting class. If I wanted to study strategic decision making, I would take a management class. When do we get to crunch numbers?” How would you explain the importance to accounting students
Review the elements of strategic missions in Exhibit 1-1. Assume that you are managing a small business that sells coffee, espresso, and possibly various other drinks in a university’s engineering center.Consider the possibility that the business mission could be any of the four basic types.
One of the authors of this book has a favorite sandwich shop. After observing the sandwich shop’s operations, this author observed that two employees were involved in every sandwich production and sale.The person who made the sandwich did not ring up the sale or take the money from the
Two of the world’s largest soft drink companies are PepsiCo and Coca-Cola. Find their most recent annual reports in either your library or on the Internet (look, for example, at the companies’ Web sites or the Securities and Exchange Commission’s EDGAR site, www.sec.gov). From the
Quantorus Corporation manufactures disk drives for computers by assembling parts and components from hundreds of suppliers. Cost-management analysts have been analyzing costs to produce disk drives and have determined that a large proportion of the cost is caused by detecting and replacing faulty
Find a recent article in a professional magazine, such as Strategic Finance, Management Accounting Cost-Management Support(UK), Journal of Cost Management, or Harvard Business Review, that describes accounting and finance (LO 1)support of strategic decision making at a specific
Lillis, Ltd., is considering AS oats Necrss Toca able tancinena support service in the finance department. Lillis’ cost-management analyst expects annual benefits that include personnel cost sav- Ia | /bo ings of $121,000, facilities savings of $90,000, other support service cost savings of
Dinosaur Oil Company, Inc., is a large oil and gas producer headquartered in Utah. Historically, most of its operations have been in the continental United States. However, in the past decade, Dinosaur expanded its operations to 14 foreign locations where it operates alone or in conjunction with
Paul Martinez recently joined Toxic, Inc., as assistant controller. Toxic processes chemicals to use in fertilizers. During his first month on the job, Martinez spent most of his time getting better acquainted with those responsible for plant operations. In response to his questions as to the
Aroma Coffee, Inc., operates a small coffee shop in the downtown area. Its profits have been declining, and Problem 1.39 management is planning to expand and add ice cream to the menu. The annual ice cream sales are expected _ Benefit-Cost Analysis:to increase revenue by $30,000. The cost to
Change Management Corp. is a consulting firm that helps companies adapt organizational structures to current industry trends. Recently, one of its officers was approached by a representative of a high-tech research firm that offered a six-month contract to Change Management for some help in
You have recently been hired as a new cost-management analyst by Corporate Express, the world’s largest supplier of office supplies to large corporations. Corporate Express takes orders from its customers via the Internet, processes those orders with office supply manufacturers, and delivers the
Many companies use the services of internal auditors, who perform various investigative and consulting tasks within organizations, such as reviewing divisional financial statements and making recommendations to improve operating performance (e.g., improving quality and customer service). In the
Boeing Company is the world’s largest manufacturer of commercial jet airplanes. To meet growing demand, Boeing in 1997 decided to more than double its rate of production from approximately 17 to more than 40 planes per month. In March 1999, Boeing reported that this increase in production, which
Is cost of goods sold an expense? Explain
Is acommitted cost the same as a fixed cost? Explain.
What are the three categories of product cost in a manu
How does throughput costing differ from variable or facturing operation? Describe each element briefly. absorption costing?
What does the term “variable cost” mean?
What are the differences among throughput, contribution
What does the term “fixed cost” mean? margin, and gross margin on an income statement?
Distinguish among material resources, conversion
Explain how absorption costing can create an incentive to resources, and operating resources. make more products than can be sold.
Explain how absorption costing can create an incentive to resources, and operating resources. make more products than can be sold.
Distinguish between production and nonproduction
Timing is the key in distinguishing between absorption, resources. Give examples of each. variable, and throughput costing. Explain this statement.
Explain the concept of traceability and the way it is used
When inventory increases, is absorption-costing or to classify resources as direct or indirect. variable-costing income higher? Why?
Is aresource always either direct or indirect? Explain.
Do throughput, variable, and absorption costing result
What is a unit-level cost? How does it differ from an aver- in significantly different income measures in a JIT age cost? How does it differ from a variable cost? setting? Why?
The following items appeared in the records of Zodiac Corporation for the last year:Supervisory and indirect labor Supplies and indirect materials Work-in-process inventory, January 1 Work-in-process inventory, December 31 Administrative costs Depreciation, manufacturing Dire Finished-goods
Recent articles in the business press have reported that many employers are treating direct labor as a true variable cost. Employees are hired and laid off regularly as the employer’s needs dictate. One article referred to this practice as “tapping and zapping employees.” Another article
DigiTech sells computers. On January | of this year, it had a beginning merchandise inventory
The following balances appeared in the accounts of Osaka Machine Tool Company during the current year. (y denotes yen, the Japanese national currency.)January | December 31 Raw Matera iVenitOt Veen tele ine a ara ieee see 328,000y 366,000y WOlK-In-DlOCESSiINVClILOl y anata tienteenns n an 362,000y
The following information appears in Columbus Cable Company’s records for last year:SAlESMEVEMUC Meer erent Revere rnr ete EMI Mit ie eM Do, ckf ctsb anshee meokonaes $418,000 Manufacturing Company XO HRYT SMCN EMC SS Ses ei Sa AAR ake SP yt a 87,500 fer (LO I, 2)Mantiactaring building
The following information appears in Toledo Toy Company’s records for last year: Exercise 2.41 Statements for a S AISSIRCVIC U CM MIME fy Houhe sehen) Sr Ree RParh yaky 's ack eR Roe $ 99,300 Menuiac Gnpeicomeeny PNGIMIGIStIFE TIVCRCOSTS han yay fesaege beers aera ile clita fyS ic) ce Pare RR Ge
Herget Company manufactured 1,000 units of product last year and identified the following costs associated with the manufacturing activity (variable costs are indicated with V, fixed costs with F):WATT TEUIUISEC OW), a eo Wao Sead So 9 Nee WH MES AWS Chobe cm olee $ 69,000 BiteGHIA DOR (Wy) Sac
Maryland Mustard Company produces a specialty mustard product, which it sells over the Internet
Carolina Catsup Company produces catsup, which it sells exclusively to fast-food restaurants in 5S-gallon containers, whichell
The following questions are based on Poughkeepsie Pickle Corporation. The company’s gourmet pickles are sold to restaurants
Huron Lawn Equipment Company manufactures lawn mowers with a unit variable cost of 350.Themowerssellfor350.????ℎ????????????????????????????????????????????????????????630 each. Budgeted fixed manufacturing overhead for the most recent year was $2,200,000. Planned production and actual
The following data pertain to Xavier Tile Company. Compute throughput product cost of goods sold, throughput, and operating income from the following data for each month.Month | Month 2 Month 3 Beginning inventory, inunits................. 0 0) 100 UTS (OHRECNNGEIOL Ae GIR es te cen serene rene
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