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business
cost management strategic

Cost Management Strategies For Business Decisions 3rd Edition Michael W. Maher, Frank Selto Ronald W. Hilton - Solutions

17.2 Distinguish between a columnar and a formula flexible budget.
17.1 What types of organizations use flexible budgets?
16.49 Refer to the preceding case. Required Prepare journal entries to record all events listed for Clapton Guitar Company during July. Specifically, the journal entries should reflect the following events. (1) Purchase of direct material. (2) Use of direct material. (3) Incurrence of direct-labor
16.48 Clapton Guitar Company manufactures acoustic guitars. The company uses a standard, job-order cost- accounting system in two production departments. Highly skilled artisans build the wooden guitars in the construction department and coat them with several layers of lacquer. Then the units are
16.47 Manhattan Fashions, Inc., manufactures inexpensive men's dress shirts, which are produced in lots to fill each special order. Its customers are department stores in various cities. Manhattan Fashions sews the particular store's labels on the shirts. During November the company worked on three
16.46 Oakland Chemical Corporation manufactures a wide variety of chemical compounds and liquids for industrial uses. The standard mix for producing a single batch of 500 gallons of doroxaline follows: Input Chemical Kalite Salex Cralyn Total Quantity (in gallons) .................100 Cost (per
16.45 Gibraltar Insurance Company compares actual results with standard costs. The standard direct-labor rates are established each year when the annual plan is formulated and held constant for the entire year. The standard direct-labor rates in effect for the current fiscal year and the standard
16.44 Melbourne Electronics Corporation manufactures TV sets in Australia, largely for the domestic market. The company recently implemented a kaizen costing program with the goal of reducing the manufactur ing cost per television set by 10 percent during 20x1, the first year of the kaizen effort.
16.43 United Kingdom Agribusiness, Ltd. (UKA), manufactures agricultural machinery in Manchester. England. At a recent staff meeting the controller presented the following direct-labor variance report for the year just ended.UNITED KINGDOM AGRIBUSINESS, LTD. Direct-Labor Variance Report fall
16.42 Surf's Up. Inc. manufactures fiberglass boards used for riding the waves at the beach. The products are sold under the brand name Crazy Board. The standard cost for material and labor is $89.20 per board. This includes 8 kilograms of direct material at a standard cost of $5.00 per kilogram
16.41 Tastee Fruit Company is a small producer of fruit-flavored frozen desserts. For many years, its products have had strong regional sales on the basis of brand recognition. However, other companies have begun marketing similar products in the area, and price competition has become increasingly
16.40 PrimeCare, Inc., a manufacturer of custom-designed home health care equipment, has been in business for 15 years. Last year, to better control the costs of its products, the controller implemented a standard- costing system. Reports for tracking performance are issued monthly, and any
16.39 Texarkana Textiles, Inc. manufactured 500 units of a special multilayer fabric with the trade name Stylex during July. The standard prime costs for one unit of Stylex are: Direct material: 20 yards at $1.35 per yard. Direct labor 4 hours at $9.00 per hour Total standard prime cost per unit of
16.38 Analyze each of the following scenarios independently. Information about Maxey Corporation's direct-material cost follows: Standard price per direct-material ounce. Actual quantity purchased and used. Standard quantity allowed for production. Price variance $ 345 420 ounces 435 ounces $2.950
16.37 Orion Corporation has established the following standards for the prime costs of one unit of its chief product, dartboards. Standard Cost Direct material. Direct labor Standard Quantity ......8.5 pounds 25 hour Standard Price or Rate $1.80 per pound $8.00 per hour $15.30 2.00 Total... $17.30
16.36 Caltex, Inc. has set the following direct-material standards for its product, the universal gismo. Standard costs for one unit of output: Material 1, 10 units of input at $100 per unit Material II, 20 units of input at $150 per unit During August, the company had the following results:
16.35 Boca Raton Burrito has two categories of direct labor, unskilled, which costs $6.50 per hour, and skilled. which costs $10.30 per hour. Management has established standards per "equivalent meal," which has been defined as a typical meal consisting of a burrito, a drink, and a side order.
16.34 The controller for Tribecca Caterers', Inc., uses a statistical control chart to help management determine when to investigate variances. The critical value is 1 standard deviation. The company incurred the following direct-labor efficiency variances during the first six months of the current
16.33 Kalamazoo Chemical Company manufactures industrial chemicals. The company plans to introduce a new chemical solution and needs to develop a standard product cost. The new chemical solution is made by combining a chemical compound (lotrel) and a solution (salex), heating the mixture, adding a
16.32 Due to evaporation during production. Piscataway Plastics Company requires 8 pounds of material input for every 7 pounds of good plastic sheets manufactured. During May, the company produced 4.725 pounds of good sheets. Required Compute the total standard allowed input quantity given the good
16.31 Choose one of the following manufacturers (or any manufacturer of your choosing), and use the Internet to gather information about any new products the company has recently introduced or plans to introduce. Boeing (www.boeing.com> Caterpillar (www.caterpillar.com) Ford (www.ford.com/us)
16.30 Refer to the data in Exercise 16.28 for Columbus Container Company. Required Prepare journal entries to: (1) Record the purchase of direct material on account. (2) Add direct-material and direct-labor cost to Work-in-Process Inventory. (3) Record the direct-material and direct-labor
16.29 Refer to the data in the preceding exercise. Required Use diagrams similar to those in Exhibits 16-1 and 16-2 to determine the direct material and direct- labor variances. Indicate whether each variance is favorable or unfavorable.
16.28 Columbus Container Company manufactures recyclable soft-drink cans. A unit of production is a case of 12 dozen cans. Actual material purchases amounted to 240,000 kilograms at $.81 per kilogram. Actual costs incurred in the production of 50,000 units follow: Direct labor Direct material..
16.27 Read "When Hybrid Cars Collide." The Wall Street Journal, February 6, 2003, p. B1. by Norohiku Shirouzu. Required As a group, discuss how companies developing new high-tech products would set standard costs for them. What special challenge does the "format" issue present in standard setting
16.26 Agrico, Inc. produces items made from local farm products that it distributes to supermarkets. Because price competition has become increasingly important over the years, Abby Tyler, the company's con- troller, is planning to implement a standard-costing system. She asked her cost-management
16.25 The standard direct-labor cost per reservation for Adventure Air Charters is $.65 ($6.50 per hour divided by 10 reservations per hour). During the period. actual direct-labor costs totaled $44,500. 6,800 direct labor hours were worked, and 72,000 reservations were made. Required Compute the
16.24 The standard direct-labor cost per unit for Reimal Housewares, Inc. was $10 (55 per hour times 2 hours per unit). During the period, actual direct-labor costs amounted to $18,800, 3.900 direct-labor hours were worked, and 1.900 units were produced. Required Compute the direct-labor rate and
16.23 Hasegawa Company manufactures laboratory glassware in its plant near Kyoto, Japan. The con- troller recently reported the following information concerning direct-material requirements in department 8. Required Standard direct-material cost per unit produced Direct material purchased
16.22 Which of the following terms is most consistent with the old saying, "Slow and steady wins the race": advanced manufacturing system, product innovation, kaizen cost- ing, or investment in high technology? Explain.
16.21 Discuss several ways in which standard-costing systems should be adapted in today's advanced manufacturing environment.
16.20 Many companies set wage rates through union negotia- tions. Under these circumstances, how could a labor price variance arise that is the responsibility of a line manager?
16.19 Refer to question 16.18. Why does an analogous question not arise in the context of the direct-labor variances?
16.17 Why should management want to divide production cost variances into price and efficiency variances?
16.16 In a service environment with no inventories, is variance analysis useful? Why or why not?
16.15 Distinguish between perfection and practical standards. Which type of standard is likely to produce the best motivational effects?
16.14 (Appendix) List four companies that probably use direct- material mix and yield variances.
16.13 What is meant by the term kaizen costing?
16.12 Describe how standard costs are used for product costing.
16.11 What manager generally is in the best position to influ- ence the direct-labor efficiency variance?
16.10 What is the interpretation of the direct-labor efficiency variance?
16.9 What are some possible causes? What manager generally is in the best position to influ- ence the direct labor rate variance?
16.8 What is the interpretation of the direct-labor rate vari- ance?
16.7 Describe the factors that managers often consider when determining the significance of a variance.
16.6 What manager usually is in the best position to influence the direct-material quantity variance?
16.5 What is the interpretation of the direct-material quantity variance?
16.4 What manager usually is in the best position to influence the direct-material price variance?
16.3 What is the interpretation of the direct-material price variance?
16.2 Explain how standard material prices and quantities are set.
16.1 One of the principles espoused by management is that one should manage by exception. How can responsibility reporting systems and/or analysis of variances assist in that process?
15.55 Triple-F Health Club (Family, Fitness, and Fun) is a nonprofit health club. Its board of directors is devel- oping 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 begin a fund to purchase an
15.54 Pacifico, Inc., is a small, rapidly growing wholesaler of consumer electronic products. The firm's main product lines are smail kitchen appliances and power tools. Malinda Alexander, Pacifico's general man- ager of marketing, recently completed a sales forecast. She believes the company's
15.53 Refer to the original data given in problem 15.50 for Arrow Space, Inc. The lead time required to receive an order of XL-20 is one month. Requireda. Assuming stable usage of XL-20 each month, determine the reorder point for XL-20.b. Suppose that the monthly usage of XL-20 fluctuates between
15.52 Refer to the original data given in problem 15.50 for Arrow Space, Inc. Required Prepare a graphical analysis of the economic order quantity decision for XL-20.
approach?
15.51 Refer to the original data given in the preceding problem for Arrow Space, Inc. Requireda. Prepare a table showing the total annual cost of ordering and storing XL-20 for each of the follow- ing order quantities: 400, 600, and 800 canisters.b. What are the weaknesses in the tabular
15.50 Arrow Space, Inc., manufactures specialized ceramic components used in the aerospace industry. The company's materials and parts manager is currently revising the inventory policy for XL-20, one of the chemicals used in the production process. The chemical is purchased in 10-pound canisters
15.49 Nassau Company manufactures stereo headphones in Princeton, New Jersey, Brent Dean, director of cost management, is responsible for preparing the company's master budget. In compiling the budget data for 20x1, Dean has learned that new automated production equipment will be installed on March
15.48 The San Angelo Division of Lone Star Corporation produces an intricate component used in the com- pany's product line. The division manager has been concerned recently by a lack of coordination between purchasing and production personnel and believes that a monthly budgeting system would be
15.47 Meridian, Inc., has the following data from 20x5 operations, which are to be used for developing 20x6 budget estimates: Revenue (100.000). Manufacturing costs: $790,000 Material (unit level) ....133,000 Unit-level (variable) overhead cash costs 180.900 Facility-level (fixed) overhead cash
15.46 CoffeeBreak. Inc., a manufacturer of coffee mugs, decided in October 20x0 that it needed cash to continue operations. It began negotiating for a one-month bank loan of $100,000 starting November 1, 20x0. The bank would charge interest at the rate of 1 percent per month and require the company
15.45 Atlantico produces and distributes industrial chemicals in its Delmarva Division, which is located in Wilmington, Delaware. Delmarva's earnings increased sharply in 20x0, and bonuses were paid to the management staff for the first time in several years. Bonuses are based in part on the amount
15.44 Venus Software Company has just received its sales expense report for January, which follows:Item Sales commissions Amount $139.000 Sales staff salaries... Telephone and mailing. Building lease payment 31,000 16.200 20,000 Heat, light, and water. 4.100 Packaging and delivery 27,400
15.43 Technomatics, Inc., based in Singapore, manufactures two different types of housings used for electric motors. In the fall of the current year, James Li, the controller, compiled the following data. (All mone- tary amounts are given in terms of the national currency of Singapore, the
15.42 The following information is available for 20x5 for Panhandle Products: Revenue (100,000 units) Manufacturing costs: $725.000 Materials (unit level) 42,000 Unit-level (variable) overhead cash costs 35,600 Facility-level (fixed) overhead cash costs. 81,900 Depreciation (facility level)..
15.41 Earth Ware. Inc.. manufactures floral containers. The controller is preparing a budget for the coming year and asks for your assistance. The following costs and other data apply to container production: Direct material per container: 1 pound Z-A styrene at $.40 per pound 2 pounds Vasa finish
15.40 Kaleidoscope Cutlery seeks your assistance in developing cash and other budget information for September, October, and November. On August 30, the company had cash of $5,500, accounts receiv- able of $437,000, inventories of $309,400, and accounts payable of $133.055. The budget is to be
15.39 Considering the situation in the preceding exercise, suppose that the maximum storage capacity for the company is 50 tankloads. Required What is the optimal order? Demonstrate why.
15.38 Zodiac Company uses 810 tankloads a year of a specific input material. The tankloads are delivered by rail to a siding on the company property. The supplier is offering a special discount for buyers of large quantities. The schedule is as follows: Quantity Ordered (tankloads) 1-19 20-79.
15.37a. The following information relates to Madison Industries: Units required per year Cost of placing an order Unit carrying cost per year 240,000 $300 $400 Assuming that the units will be required evenly throughout the year, what is the EOQ?b. Ewing Company requires 160,000 units of product Q
15.36 Refer to the original data in the preceding exercise. Oceanside Pools estimates that the number of sub- scribers in September should fall 10 percent below August levels, and the number of service calls should decrease by an estimated 20 percent. The following information is available for
15.35 Oceanside Pools, Inc., manages neighborhood pools in Oceanside, Florida. The company attempts to make service calls at least once a month to all homes that subscribe to its service. More frequent calls are made during the summer. The number of subscribers also varies with the season. The
15.34 The Wedding Place specializes in custom wedding attire. The average price of each of bride's wedding ensembles is $3,200. For each wedding. The Wedding Place receives a 20 percent deposit two months before the wedding. 50 percent the month before, and the remainder on the day the goods are
15.33 Sounds Fine, Inc., is a large retailer of stereo equipment. The controller is about to prepare the budget for the first quarter of 20x1. Past experience has indicated that 75 percent of the store's sales are cash sales. The collection experience for the sales on account is as follows: 80
15.32 San Joaquin Produce Company is preparing its cash budget for July. The following information is avail- able concerning its accounts receivable: Estimated credit sales for July. Actual credit sales for June Estimated collections in July for credit sales in July... Estimated collections in July
15.31 Good Times, Inc., buys plain mylar balloons and prints different designs on them for various occasions. It imports the balloons from Taiwan, so at all times it keeps on hand a stock equal to the balloons needed for two months' sales. The balloons cost $ .70 each and must be paid for in cash.
15.30 Read "At Disney, String of Weak Cartoons Leads to Cost Cuts: Disney Puts Lilo and Stitch on a Tight Budget," The Wall Street Journal, June 18, 2002. A1, A6, by Bruce Orwall. Required How did Disney change its approach with the production of Lilo and Stitch? Good Times, Inc., buys plain mylar
15.29 Lehighton Products' management wishes to purchase goods in one month for sale in the next. On January 31. the company has 8,000 digital music players in stock, although sales for the next month (February) are estimated to total 8,600 players. Sales for March are expected to cqual 7,000
15.28 PlasTech Company makes a line of specialized plastic tubing items. During each of the next two years, it expects to sell 320,000 units. The beginning finished-goods inventory is 80,000 units. However, the tar- get ending finished-goods inventory for each year is 40.000 units. Each unit
15.27 Choose a city or state in the United States (or a Canadian city or province), and use the Internet to explore the annual budget of the governmental unit you selected. For example, you could check out the budget for Los Angeles at www.losangeles.com. Alternatively, take a look at the US
15.26 Zimmermann and Company. Ltd. is a large securities dealer in Frankfurt, Germany. Last year, the com- pany made 45,000 trades with an average commission of 220 euros. Small investors are abandoning the market, whose volume is expected to decline by 15 percent for the coming year. The firm's
15.25 Pawtucket Pillow Corporation has just made its sales forecasts for the coming period. Its marketing department estimates that the company will sell 630,000 units during the coming year. In the past, man- agement maintained inventories of finished goods at approximately two months' sales. The
15.24 Marlin County Bank (MCB) has $30 million in commercial loans with an average interest rate of 6 per- cent. The bank also has $24 million in consumer loans with an average interest rate of 8 percent. Finally, the bank owns $4.5 million in government securities with an average rate of 7
15.23 How would the use of a just-in-time inventory system. affect a company's budget plans?
15.22 Borealis Corporation has established a bonus plan for its employees. An employee receives a bonus if his or her subunit meets the cost levels specified in the annual budget plan. If the subunit's costs exceed the budget, its employees earn no bonus. What problems might arise with this bonus
15.21 Briefly describe three issues that create special chal- lenges for multinational firms in preparing their budgets.
15.20 Surveying the accounts payable records, a clerk in the con- troller's office noted that expenses appeared to rise signifi cantly within a month of the close of the budget period. The organization did not have a seasonal product or service to explain this behavior. Can you suggest an
15.19 List the steps you would go through in developing a budget to meet your college expenses.
15.18 If a company prepares budgeted income statements and balance sheets, why is a cash budget necessary?
15.17 A budget is also a legal limitation on expenditures of governmental agencies. If governmental employees are asked about their agencies' needs for the coming fiscal period, what types of biases are they likely to incorporate in their estimates? Why?
15.16 Give three examples of how the City of San Diego could use a budget for planning purposes.
15.15 The chief executive officer of Home Workout Equipment Corporation remarked to a colleague. "I don't understand why other companies waste so much time in the budgeting process. I set our company goals, and everyone strives to meet them. What's wrong with that approach?" Comment on the
15.14 Draw a flowchart similar to the one in Exhibit 15-1 for a service station. The service station provides automotive maintenance services in addition to selling gasoline and related products.
15.13 (Appendix) Explain the differences in the basic philoso- phies underlying the JIT and EOQ approaches to inven- tory management.
15.12 Explain the concept of zero-base budgeting.
15.11 How can an organization help to reduce the problems caused by budgetary slack?
15.10 Define the term budgetary slack and briefly describe a problem it can cause.
15.9 What is the purpose of a financial planning model? Briefly describe how such a model is constructed.
15.8 Discuss the importance of predictions and assumptions in the budgeting process.
15.7 Describe the role of a budget director.

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