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cost management strategic
Cost Management A Strategic Emphasis 8th Edition Edward Blocher, David F. Stout, Paul Juras, Steven Smith - Solutions
Use the data for Ashley Technology Inc. in Problem 16-41 to complete the following requirements. Also assume that fixed manufacturing costs are $50 million in both 2018 and 2019.Data from Problem 16-41Ashley Technology Inc. manufactures a scrambling device for cellular telephones. The device’s
Use the data for Ashley Technology Inc. in Problem 16-41 to complete the following requirements:Data from Problem 16-41Ashley Technology Inc. manufactures a scrambling device for cellular telephones. The device’s main component is a delicate part, CT140. CT140 is easily damaged and requires
Ashley Technology Inc. manufactures a scrambling device for cellular telephones. The device€™s main component is a delicate part, CT140. CT140 is easily damaged and requires careful handling. Once damaged, it must be discarded. The firm hires only skilled laborers to manufacture and
Our examples in the chapter have focused on manufacturing, where the output is units of product and the inputs are manufacturing activities or costs. The concept of productivity can be applied in a variety of settings, wherever there are inputs and outputs. For example, consider LandscapeCity, a
The U.S. Bureau of Labor Statistics (https://data.bls.gov/timeseries/PRS85006092) provides quarterly data for labor productivity in business, nonfarm business, and manufacturing industries. The Bureau of Labor Statistics also breaks down these data into industry segments. The data for the annual
Software Solution (SOS) helps subscribers solve software problems. All transactions are made over the telephone. For the year 2018, 10 engineers, most of whom are recent graduates, handled 100,000 calls. The average yearly salary for software engineers was $45,000. Starting in 2019, the firm
What are the types of sales variances?
ACME manufacturing is a low-cost producer of a single, commodity product: RGL-01. Standard overhead cost information for one unit of this product is presented below:Standard number of machine hours per unit produced............................0.5Standard variable overhead rate per machine
Glavine & Co. produces a single product, each unit of which requires three direct labor hours (DLHs). Practical capacity (for setting the factory overhead application rate) is 30,000 DLHs, on an annual basis. The information below pertains to the most recent year:Standard direct labor hours
New Millennium Technologies uses a standard cost system. It budgeted 50,000 machine hours to manufacture 100,000 units in 2019. The budgeted total fixed factory overhead was $9,000,000. The company manufactured and sold 80,000 units in 2019 and would report a loss of $9,600,000 after charging the
At its Sutter City plant, Yuba Machine Company manufactures nut shellers, which it sells to nut processors throughout the world. Since its inception, the family-owned business has used actual factory overhead costs in costing factory output. On December 1, 2019, Yuba began using a predetermined
As noted in the text, identifying and reporting standard cost variances (such as those covered in Chapters 14 and 15) is the first step in one strategy for controlling costs and improving short-term financial performance. Required What guidelines can you suggest for determining which cost variances
The XYZ Manufacturing Company produces two products, S-101 and C-110. You have obtained the following information regarding the annual manufacturing support (i.e., factory overhead) costs associated with the manufacturing process used to produce these two products:Required1. Prepare an Excel
Alden Company uses a three-variance analysis for factory overhead variances. Practical capacity is defined as 32 setups and 32,000 machine hours to manufacture 6,400 units for the year. Selected data for 2019 follow:Required1. Compute: (a) the total overhead spending variance, (b) the overhead
Refer to the information in Brief Exercise 15-16. Calculate and label the following factory overhead variances for the year: (a) Total overhead cost variance, (b) Total flexible-budget variance, (c) Production volume variance. Round each answer to the nearest whole dollar, and
Obtain a copy of the following article: Andrew Bargerstock and Ye Shi, “Leaning Away from Standard Costing,” Strategic Finance, June 2016, pp. 39–45 (available at: http://sfmagazine.com/post-entry/june-2016-leaning-away-from-standard-costing/). This article critically evaluates the
As part of its comprehensive planning and control system, Mopar Company uses a master budget and subsequent variance analysis. You are given the following information that pertains to the company€™s only product, XL-10, for the month of December.Required1. Using text Exhibit 14.4 as a
Zodiac Sound Co. manufactures audio systems, both made-to-order and mass-produced systems, that are typically sold to large-scale manufacturers of electronics equipment. For competitive reasons, the company is trying to increase its manufacturing cycle efficiency (MCE) measure. As a strategy for
Crane Corporation€™s master (static) budget for the year is shown below:Required1. During the year, the company manufactured and sold 55,000 units of product. Prepare an Excel spreadsheet that contains a flexible budget for this level of output. Round all budget figures to nearest whole
Information regarding Maxwell’s direct labor cost for the month of January follows:Direct labor hourly rate paid................................................................................$28.50Total standard direct labor hours for units produced this period..................11,000Direct
Assume that in October 2019 the Schmidt Machinery Company (Exhibit 14.1) manufactured and sold 950 units for $835 each. During this month, the company incurred $475,000 total variable costs and $180,000 total fixed costs. The master (static) budget data for the month are as given in Exhibit
The following information is available for Brownstone Products Company for the month of July:Required1. What was the total operating income variance for July, rounded to the nearest whole dollar? Was this variance favorable (F) or unfavorable (U)?2. Set up a spreadsheet to compute the July sales
Refer to the data in Brief Exercise 14-21. (a) What was the direct labor rate variance for the month, rounded to 2 decimal places? (b) Was this variance favorable (F) or unfavorable (U)? SCHMIDT MACHINERY COMPANY Income Statement For 2019 $624,000 Sales (Exhibit 14.4), at standard selling price
Refer to Exhibit 14.8 and the accompanying discussion in the text. Demonstrate that the flexiblebudget variance for PVC during October 2019 was $1,680F. SCHMIDT MACHINERY COMPANY Income Statement For 2019 $624,000 Sales (Exhibit 14.4), at standard selling price Add: Selling price variance (Exhibit
Refer to Exhibit 14.8 and the accompanying discussion in the text. Demonstrate that the purchaseprice variance for PVC during October 2019 was $720U. SCHMIDT MACHINERY COMPANY Income Statement For 2019 $624,000 Sales (Exhibit 14.4), at standard selling price Add: Selling price variance (Exhibit
Refer to Exhibit 14.8 and the accompanying discussion in the text. Demonstrate that the materials usage variance for PVC during October 2019 was $2,400F. SCHMIDT MACHINERY COMPANY Income Statement For 2019 $624,000 Sales (Exhibit 14.4), at standard selling price Add: Selling price variance (Exhibit
Kraft Bakeries introduced in 2019 a new line of frozen apple pie. For 2019, sales by quarter were as follows: 11,000 units, 16,000 units, 15,000 units, and 20,000 units. Because of aggressive marketing and promotion, the company expects that sales for each quarter of 2020 will be 25% higher than
As part of the process of preparing the master budget for the coming year, you’ve been asked to perform What-If analyses, in the form of scenarios, on the original planning assumptions regarding product A produced by your company. The following are the baseline planning data for the coming year
OFC Company (Exercise 10-41) has decided to implement a kaizen (continuous-improvement) program to enhance operational efficiency. After a careful study, management and employees agree that the firm will be able to reduce cost rates for batch-level activities by 2% and unit-level activities (other
Triple-F Health Club (Family, Fitness, and Fun) is a not-for-profit, family-oriented health club. The club€™s board of directors is developing plans to acquire more equipment and expand club facilities. The board plans to purchase about $25,000 of new equipment each year and wants to
What is the relevant cost when determining whether to sell a product before or after additional processing?
Lance’s Diner has a hot-lunch special each weekday and Sunday afternoon. The cost of food and other variable costs for each meal served is $3.50; weekly fixed costs (e.g., building depreciation and equipment rental costs) are $6,000, regardless of how many days the diner is open per week. Lance
Vista Company manufactures electronic equipment. In 2018, it purchased from an outside supplier the special switches used in each of its products. The supplier charged Vista $2 per switch. As an alternative, Vista’s CEO considered purchasing either machine A or machine B so the company could
Barbour Corporation, located in Buffalo, New York, is a retailer of high-tech products and is known for its excellent quality and innovation. Recently, the firm conducted a relevant cost analysis of one of its product lines that has only two products, T-1 and T-2. The sales for T-2 are decreasing
Merchants’ Bank (MB) is a large regional bank operating in 634 locations in the southeastern United States. Until 2014, the bank operated a call center for customer inquiries out of a single location in Atlanta, Georgia. MB understood the importance of the call center for overall customer
What is the present value of $1,000 to be received 2 years from now, if the discount rate is (a) 10%, (b) 14%, and (c) 20%? Do the calculations first using the present value factors given in Appendix C, Table 1, then using the formula that appears at the bottom of Appendix C, Table 1 to generate
Assume that it is January 1, 2019, and that the Mendoza Company is considering the replacement of a machine that has been used for the past 3 years in a special project for the company. This project is expected to continue for an additional 5 years (i.e., until the end of 2023). Mendoza will either
VacuTech is a high-technology company that manufactures sophisticated instruments for testing microcircuits. Each instrument sells for $3,500; variable manufacturing cost per unit (all cash) equals $2,450. An essential component of the company’s manufacturing process is a sealed vacuum chamber
Use the same information for this problem as you did for Problem 12-47, except that the discount rate is 10% (not 12%), the investment is subject to taxes, and the projected pretax operating cash inflows are as follows:Jensen has been paying 25% for combined federal, state, and local income taxes,
Use the data in Problem 12-48 for Bob Jensen Inc. and MACRS. The asset qualifies as a 5-year property.RequiredCompute the following for the proposed investment:1. Its payback period (in years) under the assumption that the cash inflows occur evenly throughout the year. Round your answer to 1
A proposed investment has the following projected after-tax cash flows over its 3-year life:Initial outlay (time 0) = ($1,000)End of year 1 = $2,000End of year 2 = $2,000End of year 3 = ($3,700)Required1. In a capital budgeting context, explain the difference between a normal and a non-normal cash
Estimated cashflow data for each of two projects, A and B, and the discount rate, r, to be used for the analysis of capital investment projects are given below:Discount rate, r = 10.0%.Required1. In a capital budgeting context, explain the difference between independent and mutually exclusive
What does the term constraints mean in the theory of constraints analysis?
Using the information in Problem 9-46, complete the following:Data from Problem 9-46Computer Graphics (CG) is a small manufacturer of electronic products for computers with graphics capabilities. The company has succeeded by being very innovative in product design. As a spin-off of a large
Computer Graphics (CG) is a small manufacturer of electronic products for computers with graphics capabilities. The company has succeeded by being very innovative in product design. As a spin-off of a large electronics manufacturer (ElecTech), CG management has extensive experience in both
Garner Strategy Institute (GSI) presents executive-level training seminars nationally. Eastern University (EU) has approached GSI to present 40 one-week seminars during 2019. This activity level represents the maximum number of seminars that GSI is capable of presenting annually. GSI staff would
Lionel Corporation manufactures pharmaceutical products sold through a network of sales agents in the United States and Canada. The agents are currently paid an 18% commission on sales; that percentage was used when Lionel prepared the following budgeted income statement for the fiscal year ending
Bubba’s Western Wear is a western hat retailer in Lubbock, Texas. Although Bubba’s carries numerous styles of western hats, each hat has approximately the same price and purchase cost, as shown in the following table. Sales personnel receive a commission to encourage them to be more aggressive
Smith Company can produce two types of carpet cleaners, Brighter and Cleaner. Data on these two products are as follows:The number of machine hours to produce one unit of Brighter is 1, while the number of machine hours for each unit of Cleaner is 2. Total fixed costs for the manufacture of both
1. Using the data from 2019 in Exhibit 9.1, create an Excel spreadsheet to provide a sensitivity analysis of the effect on operating profit of potential changes in demand for HFI Inc., raging from a 20 percent decrease to 20 percent increase. Use Exhibits 9.2 and 9.6 as a guide. Assume that
Lawn Master Company, a manufacturer of riding lawn mowers, has a projected income for the coming year as follows:Required1. Determine the breakeven point in sales dollars.2. Determine the required sales in dollars to earn a before-tax profit of $8,000,000.3. What is the breakeven point in sales
TastyKreme and Krispy Kake are are both producers of baked goods, but each has followed a different production strategy. The differences in their strategies resulted in differences in their cost structure, as shown in the following table:Required1. Compute the operating income and degree of
Using the data provided, compute the margin of safety and margin of safety ratio.Units sold..............................................1,000Price.........................................................$ 10Sales..................................................$10,000Variable manufacturing
The following sales and cost data (in thousands) are for two companies in the transportation industry:Required1. Calculate the degree of operating leverage (DOL) for each company. If sales increase from the present level, which company benefits more? How do you know?2. Assume that sales rise 10% in
May Clothing is a retail men’s clothing store. May’s variable cost is $20 per shirt and the sales price is $40 per shirt. May plans to sell 400,000 shirts for the year and, at this level, would generate a beforetax profit of $2,500,000. What is the degree of operating leverage (DOL) at this
Scott Power produces batteries. The company has determined its contribution margin to be $8 per battery and its contribution margin ratio to be 0.4. What is the effect on profits of the sale of one additional battery? Of one additional dollar of sales?
Williams & Williams Co. produces plastic spray bottles and wants to earn a before-tax profit of $200,000 next quarter. Variable cost is $0.50 per bottle, fixed costs are $400,000, and the selling price is $1 per bottle. How many bottles must the company sell to meet its profit goal?
Ford Tops manufactures hats for baseball teams. Ford has fixed costs of $175,000 per quarter and sells each hat for $20. If the variable cost per hat is $10, how many hats must Ford sell each quarter to break even?
Define degree of operating leverage (DOL). How is DOL measured?
What is the margin of safety (MOS), and for what is it used?
Regression analysis is commonly used to estimate costs. However, the usefulness of the results depends upon the quality of the data.Fletcher Inc. is a local delivery company. The employees handle deliveries for a variety of companies that have developed apps that allow customers to place orders for
WasteTec is a large construction company that specializes in the construction of large wastewater treatment plants and recycling plants. A major cost driver in either type of facility is the capacity of the plant. For example, the capacity of a recycling plant is measured by the number of tons of
Business schools have commonly observed that when job opportunities are down, those interested in business seek to enter MBA programs. To test this hypothesis, we decided to look at the number of applicants for MBA programs and to compare that to the unemployment rate. The applications data are
Lexon Inc. is a large manufacturer of affordable DVD players. Management recently became aware of rising expenses resulting from returns of malfunctioning products. As a starting point for further analysis, Paige Jennings, the controller, wants to test different forecasting methods and then use the
Albedo Inc. manufactures high-end replacement telescope lenses for amateur and professional astronomers who are seeking to upgrade the performance of their telescopes. You have just become employed as a staff accountant at Albedo, and Jordan Coleman, the controller, has asked you to help with
Recent research into the cost of various medical procedures has shown the impact of certain complications encountered in surgery on the total cost of a patient€™s stay in the hospital. The researchers used regression analysis and found the following results:Total cost for patient =
For several years, many utilities have employed regression analysis to forecast monthly utility usage by residential customers using weather forecasts, the number of holidays, the number of days in the month, and other factors. For example, the Connecticut Department of Public Utility Control
Ethan Manufacturing Inc. produces floor mats for automobiles. The owner, Joseph Ethan, has asked you to assist in estimating maintenance costs. Together, you and Joseph determine that the single best cost driver for maintenance costs is machine hours. These data are from the previous fiscal year
Horton Manufacturing Inc. produces blinds and other window treatments for residential homes and offices. The owner is concerned about the maintenance costs for the production machinery because maintenance costs for the previous fiscal year were higher than he expected. The owner has asked you to
Lawson Advertising Agency is trying to persuade Kansas City Sailboards Company to spend more on advertising. The agency’s argument is that a constant and strong positive relationship exists between advertising and sales in the sailboard industry. Sue Lawson presents these data taken from industry
The following costs are for Optical View Inc., a contact lens manufacturer:Required1. Calculate and graph total costs, total variable cost, and total fixed cost.2. For each level of output calculate the per-unit total cost, per-unit variable cost, and per-unit fixed cost.3. Using the results from
Recently, Walmart offered a wireless data contract based on bandwidth used, with a minimum monthly charge of $45 for up to 5 gigabytes (GB) of use. Additional GB can be purchased at the following rates: $12 for an additional 1 GB, $30 for an additional 3 GB, and $40 for a capacity of 10 GB. What is
Sanders Bears produces stuffed animals. Sanders is in the process of implementing a cost forecasting system using the high-low method. The variable cost per animal is $2 and the high and low costs used are $80,000 for 30,000 animals and $40,000 for 10,000 animals. What is the value of the fixed
Jamison Construction has implemented a cost estimation system using regression analysis. The variable cost per hour of labor is $35 and the fixed cost was determined to be $125,000. If Jamison projects it will be working 200,000 hours in 2019, what is the projected total cost?
Power Drink Inc. produces sports drinks. The accounting manager has decided to implement a high-low costing system to predict future materials handling costs. She has provided you with the following table of costs for the last five years. Looking solely at the data in the table, which two years
Peppers Lockdown produces keys for homes and cars. As Peppers planned for next year’s production, the company decided to implement a high-low system to forecast future costs. With total production of 2,500,000 keys at a total cost of $10,000 in 2018, and total production of 3,000,000 keys at a
Smith Glass Co. produces industrial glass. Smith forecasts inspection costs using the high-low method and has compiled the following data from prior results:Looking solely at the data in the table, which two years should Smith select for the high-low method of analysis? Would you consider using
How can cost estimation be used in activity-based costing?
Yonica Petroleum is a global manufacturer of specialty chemicals that are made from the waste products of the petroleum industry. Yonica in effect recycles a good portion of the waste from the refineries used by large oil companies. The specialty chemicals are used as cleaning solvents and
Cost allocation is often the centerpiece of conflict that is resolved in court cases. The litigation usually involves the dispute over how costs are allocated to a product or product line that is of interest to the plaintiff. This is particularly an issue when a company produces some products or
Great Ape Glassworks manufactures glass used for the screens on smartphones. It has two producing departments, P1 and P2, and only one service department, S1. The company is able to track overhead to the various departments but wants to allocate the service department costs to the producing
How does your answer to 7-11 change if the cost in P1 is changed from $100,000 to $120,000?Involve departmental cost allocation with two service departments and two production departments. Percentage Service Provided to Department Cost S1 s2 P1 P2 Service 1 (S1) Service 2 (S2) Production 1 (P1)
What are the limitations of joint product and departmental cost allocation?
Beaumont Specialty Chemicals (BSC) is a manufacturer of specialty chemicals sold to manufacturers, hospitals, and other users. BSC produces about 1 million gallons of its main product, BSC-22, each month. The data for BSC-22 for July follow. The chemical direct materials are added at the beginning
Carson Paint Company, which manufactures quality paint to sell at premium prices, uses a single production department. Production begins by blending the various chemicals that are added at the beginning of the process and ends by filling the paint cans. The gallon cans are then transferred to the
Refer to the information in Problem 6-43.RequiredRepeat Problem 6-43 using the FIFO method.In ProblemAlvis Construction Supply Company has a department that manufactures wood trusses (wood frames used in the construction industry). The following information is for the production of these trusses
Alvis Construction Supply Company has a department that manufactures wood trusses (wood frames used in the construction industry). The following information is for the production of these trusses for the month of February:Work-in-Process Inventory, February
Refer to the information in Problem 6-37.RequiredComplete Problem 6-37 using the FIFO method.In ProblemWeatherly Lumber Company processes wood pulp for manufacturing various paper products. The company employs a process costing system for its manufacturing operations. All direct materials are added
Pablo Company calculates the cost for an equivalent unit of production using process costing.Work-in-Process Inventory, June 1: 30,000 unitsDirect materials: 100% complete..........................................$ 60,000Conversion: 40%
Holly Company has the following information for December 1 to December 31. All direct materials are 100% complete.Required1. Calculate equivalent units using the weighted-average and FIFO methods.2. Use the given information to determine whether Holly Company is using the FIFO or weighted-average
Explain activity-based process costing.
How do the cost flows in backflush costing systems differ from those in traditional costing systems?
Suppose that manufacturing is performed in sequential production departments. Prepare a journal entry to show a transfer of partially completed units from the first department to the second department. Assume the amount of costs transferred is $50,000.
What are transferred-in costs?
Environmental sustainability is not only a potential competitive advantage to an organization, but might also be a regulatory requirement. The creation of business processes to support environmental sustainability requires the expenditure of resources, and management is faced with evaluating the
Ellie Mosk, CEO of X-Space Industries, decided to expand the company€™s product offering beyond the core model rocket business. After investigation, she decided to set up a separate division to design and manufacture products for the drone market. Several companies were interested in
Supermart Food Stores (SFS) has experienced net operating losses in its frozen food products line in the last few periods. Management believes that the store can improve its profitability if SFS discontinues frozen foods. The operating results from the most recent period are:SFS estimates that
North Company designs and manufactures machines that facilitate DNA sequencing. Depending on the intended purpose of each machine and its functions, each machine is likely to be unique. The job costing system in its Norfolk plant has five activity cost pools, in addition to direct materials and
What is activity-based management?
What type of company can benefit from an activity-based costing system?
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