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cost management strategic

Cost Management Accounting And Control 5th Edition Don R. Hansen, Maryanne M. Mowen - Solutions

The manager of Blakely Company was reviewing two competing projects for the molding department. The projects represented different methods of preparing the molds for one of the company’s more popular product lines. One project changed the way molds were poured and promised a savings in material
In an effort to become more competitive, Hardy Company has embarked on a program to reduce and eliminate its non-value-added activities and to improve the efficiency of its value-added activities. The activity of paying bills has been classified as value-added and in need of improvement. The major
In 2006, Maravilla Auto’s Motor Division hired a consulting firm to help identify and define the processes used within the division. Megan Dorr, the divisional manager, also asked the consulting firm to make recommendations concerning the reengineering of the processes to improve overall
In 2006, Fleming Chemicals used the following input combination to produce 55,000 gallons of an industrial solvent:In 2007, Fleming again planned to produce 55,000 gallons of solvent and was considering two different changes in process, both of which would be able to produce the desired output. The
Productivity concepts apply to service settings as well as manufacturing. For example, in the health care industry, increasing productivity is a possible means to control rising medical costs. It is also a means of increasing retention.Required:1. Go to http://www.findarticles.com, and search for
What are the four objectives associated with ecoefficiency?
Describe the four opportunities for improving ecoefficiency.
What is life-cycle assessment?
How can life-cycle costing improve life-cycle analysis?
What is the justification for adding an environmental perspective to the Balanced Scorecard?
What are the five core objectives of the environmental perspective?
Do you agree that all environmental failure activities are non-value-added activities?Explain.
What is the meaning of design for the environment? What is its role in activitybased management of environmental activities?
Describe the possible value of financial measures of environmental performance.Give several examples.
Consider the following ecoefficient actions:a. Improve the performance of a steam system used to generate electricity, reducing the use of energy and water.b. Install a system that converts a waste product into a salable product.c. Replaced solvent-based additives in a detergent blend with
Classify the following environmental activities as prevention costs, detection costs, internal failure costs, or external failure costs. For external failure costs, classify the costs as societal or private. Also, label those activities that are compatible with sustainable development (SD).1. A
At the end of 2007, Hender Chemicals began to implement an environmental quality management program. As a first step, it identified the following costs in its accounting records as environmentally related for the year just ended:Required:1. Prepare an environmental cost report by category. Assume
Jackman Cleanser Division produces surfactants, ingredients used in producing laundry detergents. (Surfactants are the components that help release soil from clothing.) It is possible to make different types of surfactants, depending on the nature of the material input. One possibility, for
Burnham Munchies, Inc., is an international producer of potato chips. At the end of 2006, Mandy Pohlson, president of Burnham, appointed a task force to focus on the packaging and product use segments of its product’s life cycle. Since customers consumed the contents of the package (if not
Identify the core environmental objective associated with each of the following measures:a. Tons of greenhouse gas emissionsb. Tons of hazardous waste delivered for off-site managementc. Pounds of plastic recycledd. British thermal units (BTUs)e. Cars produced/pounds of steel usedf. Percentage of
At the beginning of 2004, Limon Company, an international telecommunications company, embarked on an environmental improvement program. The company set a goal to have all its facilities ISO 14001 registered by 2007. (There are 30 facilities worldwide.)It also adopted the Balanced Scorecard with an
Refer to Problem 16-12. As part of its environmental cost reporting system, Limon tracks its total environmental costs. Consider the following cost and sales data:Required:1. Prepare a bar graph for environmental costs expressed as a percentage of sales.Assuming that environmental performance has
The following items are listed in an environmental financial statement (issued as part of an environmental progress report):Environmental benefits (savings, income, and cost avoidance):• Ozone-depleting substances cost reductions• Hazardous waste disposal cost reductions• Hazardous waste
Refer to Problem 16-14. In the environmental benefits section of the report, three types of benefits are listed: income, savings, and cost avoidance. Now, consider the following data for selected items for a 4-year period:The engineering design costs were incurred to redesign the production
The following environmental cost reports for 2005, 2006, and 2007 are for the Communications Products Division of Kartel, a telecommunications company. In 2005, Kartel committed itself to a continuous environmental improvement program, which was implemented throughout the company.At the beginning
Thomas Manufacturing produces automobile components used in automobile assembly.One of its divisions manufactures automotive front-end pieces. The division is currently considering two different designs: one using galvanized steel and the other using a polymer composite. Both products are
Carol Thayn, president of Milton, 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. Carol is convinced that revenues could be increased if she could improve the
During the past four years, Monticello Company has made significant efforts to improve its environmental performance. Two of the strategic objectives that have received considerable attention are those of minimizing hazardous materials and minimizing release of liquid residues. Actually, two
Selling and administrative expenses, all fixed, amounted to \($180,000\) last year.1- Mello-Tote Company manufactures nylon arm-band carriers for use with popular portable MP3 devices. Variable costs are \($18\) per arm-band carrier, the price is \($28\), and fixed costs are $43,000.Required:1.
Olmos Company manufactures room-sized air purifiers. Fixed costs amount to \($1,386,000\) per year. Variable costs per air purifier are \($98\), and the average price per air purifier is $120.Required:1. How many air purifiers must Olmos Company sell to break even?2. If Olmos Company sells 85,000
Glass-Works, Inc., makes and sells a variety of cut glass vases. Fixed costs are \($216,000\) per year. The average price for a cut glass vase is \($24\), and the average variable cost is \($16\) per item.Required:1. How many vases must be sold to break even?2. If Glass-Works wants to earn
Leota Mohrman owns and operates The Hassle-Free Hothouse (THH), which provides live plants and flower arrangements to professional offices. Leota has fixed costs of $2,380 per month for office/greenhouse rent, advertising, and a delivery van. Variable costs for the plants, fertilizer, pots, and
Green Bay Motors, Inc., employs 20 sales personnel to market its line of luxury automobiles.The average car sells for \($65,000\), and a 6 percent commission is paid to the salesperson. Green Bay Motors is considering a change to the commission arrangement where the company would pay each
Head-Gear Company produces helmets for bicycle racing. Currently, Head-Gear charges a price of \($30\) per helmet. Variable costs are \($20.40\) per helmet, and fixed costs are \($38,680\). The tax rate is 25 percent. Last year, 13,400 helmets were sold.Required:1. What is Head-Gear’s net income
Lauterbach Corporation manufactures skateboards and is in the process of preparing next year’s budget. The pro forma income statement for the current year is as follows:Required:1. What is the break-even point (rounded to the nearest dollar) for Lauterbach Corporation for the current year?2. For
Choose the best answer for each of the following multiple-choice questions.1. Cost-volume-profit analysis includes some simplifying assumptions. Which of the following is not one of these assumptions?a. Cost and revenues are predictable.b. Cost and revenues are linear over the relevant range.c.
Chromatics, Inc., produces novelty nail polishes. Each bottle sells for \($3.60\). Variable unit costs are as follows:Fixed overhead costs are \($12,000\) per year. Fixed selling and administrative costs are \($6,720\) per year. Chromatics sold 35,000 bottles last year.Required:1. What is the
Reingold Company produces wireless phones. One model is the miniphone—a basic model that is very small and slim. The miniphone fits into a shirt pocket. Another model, the netphone, has a larger display and is Internet-ready. For the coming year, Reingold expects to sell 200,000 miniphones and
Don Masters and two of his colleagues are considering opening a law office in a large metropolitan area that would make inexpensive legal services available to those who could not otherwise afford these services. The intent is to provide easy access for their clients by having the office open 360
Gossimer, Inc., is a manufacturer of exercise equipment. The budgeted income statement for the coming year is as follows.Required:1. What is Gossimer’s variable cost ratio? Its contribution margin ratio?2. Suppose Gossimer’s actual revenues are \($150,000\) greater than budgeted. By how much
Belmont produces and sells plastic storage containers. Last year, Belmont sold 125,000 units. The income statement for Belmont, Inc., for last year is as follows:Required:1. Compute the break-even point in units and in revenues. Compute the margin of safety for last year.2. Suppose that the selling
Coastal Carolina Company produces a single product. The projected income statement for the coming year, based on sales of 100,000 units, is as follows:Required:1. Compute the unit contribution margin and the units that must be sold to break even. Suppose that 30,000 units are sold above the
Devonly Company produces a variety of products. One division makes gas grills for outdoor cooking. The division’s projected income statement for the coming year is as follows:Required:1. Compute the contribution margin per unit, and calculate the break-even point in units. Repeat, using the
Kline Consulting is a service organization that specializes in the design, installation, and servicing of mechanical, hydraulic, and pneumatic systems. For example, some manufacturing firms, with machinery that cannot be turned off for servicing, need some type of system to lubricate the machinery
Ironjay, Inc., produces two types of weight-training equipment: the jay-flex (a weight machine that allows the user to perform a number of different exercises) and a set of free weights. Ironjay sells the jay-flex to sporting goods stores for \($200\). The free weights sell for \($75\) per set. The
Drake Company produces a single product. Last year’s income statement is as follows:Required:1. Compute the break-even point in units and sales dollars.2. What was the margin of safety for Drake Company last year?3. Suppose that Drake Company is considering an investment in new technology that
Salem Electronics currently produces two products: a programmable calculator and a tape recorder. A recent marketing study indicated that consumers would react favorably to a radio with the Salem brand name. Owner Kenneth Booth was interested in the possibility. Before any commitment was made,
Sorrentino Company, which has been in business for one year, manufactures specialty Italian pastas. The pasta products start in the mixing department, where durum flour, eggs, and water are mixed to form dough. The dough is kneaded, rolled flat, and cut into fettucine or lasagna noodles, then dried
Consider the following quality improvement strategy as expressed by a series of if-then statements:• If design engineers receive quality training, then they can redesign products to reduce the number of defective units.• If the number of defective units is reduced, then customer satisfaction
At the end of 2005, Activo Company implemented a low-cost strategy to improve its competitive position. Its objective was to become the low-cost producer in its industry.A Balanced Scorecard was developed to guide the company toward this objective. To lower costs, Activo undertook a number of
Refer to the data in Problem 13-13.1. Express Activo’s strategy as a series of if-then statements. What does this tell you about Balanced Scorecard measures?2. Prepare a strategy map that illustrates the relationships among the likely strategic objectives.
Wilton Company has a JIT system in place. Each manufacturing cell is dedicated to the production of a single product or major subassembly. One cell, dedicated to the production of snowmobiles, has four operations: machining, finishing, assembly, and qualifying(testing). The machining process is
At the beginning of the last quarter of 2005, Youngston, Inc., a consumer products firm, hired Maria Carrillo to take over one of its divisions. The division manufactured small home appliances and was struggling to survive in a very competitive market. Maria immediately requested a projected income
Form groups of three to five. Divide the groups into four sets: A, B, C, and D.Required:Use Chapters 12 and 13 to do the following:1. Group A will compare responsibility under a traditional financial responsibility structure with responsibility under a strategic performance management system.2.
Search the Internet to find a complete description of a company that has implemented the Balanced Scorecard. Possible sources include the following: The Balanced Scorecard Collaborative (http://www.bscol.com), SAP (http://www.sap.com/sem), and http://www.bettermanagement.com. Once you have a
What is the difference between quality of design and quality of conformance?
Explain why it is important for a manager to assess the relative distribution of quality costs among the four categories.
Gray Company estimates its hidden external failure costs using the Taguchi loss function.Gray produces plastic sheets that vary in thickness and grade. For one of its largevolume products, it was determined that k = $20,000 and T = 0.20 inches in diameter.A sample of four units produced the
Maxwell Company produces two different carburetors and is concerned about their quality. The company has identified the following quality activities and costs associated with the two products:Required:1. Calculate the quality cost per unit for each product, and break this unit cost into quality
Benton Company reported sales of $8,100,000 in 2007. At the end of the year, the following quality costs were reported:Required:1. Prepare a quality cost report.2. Prepare a graph (pie chart or bar graph) that shows the relative distribution of quality costs, and comment on the distribution. Design
Reading Company reported the following sales and quality costs for the past four years.Assume that all quality costs are variable and that all changes in the quality cost ratios are due to a quality improvement program.Required:1. Compute the quality costs for all four years. By how much did net
Pawnee Company had sales of \($30,000,000\) in 2003. In 2007, sales had increased to\($37,500,000\). A quality improvement program was implemented at the beginning of 2003. Overall conformance quality was targeted for improvement. The quality costs for 2003 and 2007 follow. Assume any changes in
In 2006, Tru-Delite Frozen Desserts, Inc., instituted a quality improvement program.At the end of 2007, the management of the corporation requested a report to show the amount saved by the measures taken during the year. The actual sales and quality costs for 2006 and 2007 are as
Marlene Briggs, president of Shorts Company, was concerned with the trend in sales and profitability. The company had been losing customers at an alarming rate. Furthermore, the company was barely breaking even. Investigation revealed that poor quality was at the root of the problem. At the end of
Timpanogas Company manufactures a component for small portable DVD players (designed for use on automobile trips). Weight and durability of the component are the two most important quality characteristics for the DVD manufacturers. With respect to the weight dimension, the component has a target
Gaston Company manufactures furniture. One of its product lines is an economy-line kitchen table. During the last year, Gaston produced and sold 100,000 units for \($100\) per unit. Sales of the table are on a bid basis, but Gaston has always been able to win sufficient bids using the \($100\)
Recently, Ulrich Company received a report from an external consulting group on its quality costs. The consultants reported that the company’s quality costs total about 21percent of its sales revenues. Somewhat shocked by the magnitude of the costs, Rob Rustin, president of Ulrich Company,
In 2007, Major Company initiated a full-scale, quality improvement program. At the end of the year, Jack Aldredge, the president, noted with some satisfaction that the defects per unit of product had dropped significantly compared to the prior year. He was also pleased that relationships with
Iona Company, a large printing company, is in its fourth year of a 5-year, quality improvement program. The program began in 2003 with an internal study that revealed the quality costs being incurred. In that year, a 5-year plan was developed to lower quality costs to 10 percent of sales by the end
The ISO 9000 series and QS 9000 have had a significant impact in industrial practice.Web sites that provide a good starting point for information about these quality standards include http://www.isoeasy.org, http://www.aiag.org, and http://www.findarticles.com. The last address allows you to search
What is the price-recovery component?
Can productivity improvements be achieved without improving quality? Explain.
Why is it important for managers to be concerned with both productivity and quality?
Jason Iba has decided to purchase a personal computer. He has narrowed his choices to two: Brand A and Brand B. Both brands have the same processing speed, the same hard disk capacity, 3.5-inch disk and CD-ROM drives, and the same basic software support package. Both come from companies with good
McConkie Company has decided to pursue a cost leadership strategy. This decision is prompted, in part, by increased competition from foreign firms. McConkie’s management is confident that costs can be reduced by more efficient management of the firm’s operational activities. Improving
Aldredge Company manufactures dental equipment. Aldredge produces all the components necessary for the production of its product except for one. This component is purchased from two local suppliers: Grayson Machining and Lambert, Inc.Grayson sells the component for \($144\) per unit, while Lambert
Dino Company sells machine parts to industrial equipment manufacturers for an average price of \($0.75\) per part. There are two types of customers: those who place small, frequent orders and those who place larger, less frequent orders. Each time an order is placed and processed, a setup is
Prior to installing a JIT system, Pohlson Company, a producer of bicycle parts, used maintenance hours to assign maintenance costs to its three products (wheels, seats, and handle bars). The maintenance costs totaled \($1,960,000\) per year. The maintenance hours used by each product and the
Kaylin Company has installed a JIT purchasing and manufacturing system and is using backflush accounting for its cost flows. It currently uses the purchase of materials as the first trigger point and the completion of goods as the second trigger point. During the month of May, Kaylin had the
Refer to Exercise 11-10.Required:Prepare the journal entries for the month of May using backflush costing, assuming that Kaylin uses the sale of goods as the second trigger point instead of the completion of goods.
Refer to Exercise 11-10.Required:1. Prepare the journal entries for the month of May using backflush costing, assuming that Kaylin uses the completion of goods as the only trigger point.2. Prepare the journal entries for the month of May using backflush costing, assuming that Kaylin uses the sale
Caltor Company produces two types of space heaters (regular and super). Both pass through two producing departments: fabrication and assembly. It also has a materials handling department that is responsible for moving materials and goods to and between departments. Budgeted data for the three
Evans, Inc., has a functional-based costing system. Evans’s Miami plant produces 10 different electronic products. The demand for each product is about the same. Although they differ in complexity, each product uses about the same labor time and materials.The plant has used direct labor hours for
Amado, Inc., manfactures riding lawn mowers. Amado uses JIT manufacturing and carries insignificant levels of inventory. Amado manufactures everything needed for the riding lawn mowers except for the engines. Several sizes of mowers are produced. The most popular line is the small mower line. The
Pawnee Works makes machine parts for manufacturers of industrial equipment. Over the years, Pawnee has been a steady and reliable supplier of quality parts to medium and small machine manufacturers. Michael Murray, owner of Pawnee Works, once again was disappointed in the year-end income statement.
Jolene Askew, manager of Feagan Company, has committed her company to a strategically sound cost reduction program. Emphasizing life-cycle cost management is a major part of this effort. Jolene is convinced that production costs can be reduced by paying more attention to the relationships between
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 following table. Cell workers do all maintenance and are also responsible for moving materials, cell janitorial work, and
Mott Company recently implemented a JIT manufacturing system. After one year of operation, 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
Morgan Company has implemented a JIT flexible manufacturing system. Michael Anderson, controller of the company, has decided to reduce the accounting requirements given the expectation of lower inventories. For one thing, he has decided to treat direct labor cost as a part of overhead and to
Reddy Heaters, Inc., produces insert heaters that can be used for various applications, ranging from coffeepots to submarines. Because of the wide variety of insert heaters produced, Reddy uses a job-order costing system. Product lines are differentiated by the size of the heater. In the early
Supply chain management can be a major source of cost savings for manufacturing and service firms. A firm can reduce its costs by understanding the linkages it has with its suppliers and customers. A major factor in assessing and understanding these linkages is the measurement of costs across the
What are value-added activities? Value-added costs?
Explain why a detailed task description is needed for ABM and not for ABC.
Timesaver, Inc., produces deluxe and regular microwaves. Recently, Timesaver has been losing market share with its regular microwaves because of competitors offering a product with the same quality and features but at a lower price. A careful market study revealed that if Timesaver could reduce its
Honley Company has 20 clerks that work in its accounts payable department. A study revealed the following activities and the relative time demanded by each activity:The average salary of a clerk is $30,000.Required:Classify the four activities as value-added or non-value-added, and calculate the
Refer to Exercise 12-3.Required:Suppose that clerical error—either Honley’s or the supplier’s—is the common root cause of the non-value-added activities. For each non-value-added activity, ask a series of“why” questions that identify clerical error as the activity’s root cause.
Refer to Exercise 12-5. Suppose that Honley attacks the root cause of the non-valueadded activities by establishing a totally different approach to procurement called electronic data interchange (EDI). EDI gives suppliers access to Honley’s online database that reveals Honley’s production
Zurcher Company has developed value-added standards for four activities: purchasing parts, receiving parts, moving parts, and setting up equipment. The activities, the activity drivers, the standard and actual quantities, and the price standards for 2006 are as follows:The actual prices paid per
Refer to Exercise 12-9. Suppose that for 2007, Zurcher Company has chosen suppliers that provide higher-quality parts and redesigned its plant layout to reduce material movement. Additionally, Zurcher implemented a new setup procedure and provided training for its purchasing agents. As a
For each of the following situations, two scenarios are described, labeled A and B.Choose which scenario is descriptive of a setting corresponding to activity-based responsibility accounting and which is descriptive of financial-based responsibility accounting.Provide a brief commentary on the

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