Assume that Medco, Inc. had the following Nonvalue-Added Costs reported in Year 1: Non-Value-Added Costs Activity...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Assume that Medco, Inc. had the following Nonvalue-Added Costs reported in Year 1: Non-Value-Added Costs Activity Purchasing Molding Inspecting Grinding Total $121,000 68,000 125,000 43,000 $357,000 Assume that at the beginning of 2014, the molding process was redesigned and the employees in Molding were trained in a new work technique. By reducing the number of bad molds, the firm hoped to significantly reduce waste for all four activities. Purchasing and Inspecting resources are purchased in steps of 2,000 hours. The other two activities are acquired as used and needed. At the end of Year 2, the following results were reported for the four activities: SQ AQ SP 28,000 30,000 $20 42,000 40,000 12 0 2,000 15 0 2,500 6 Activity Activity Driver Purchasing Purchasing hours Molding Molding hours Inspecting Inspection hours Grinding Number of units Required: 1. Prepare a trend report for non-value-added costs by completing the following table: Activity Purchasing $ Molding Inspecting Grinding Total Year 1 121,000 68,000 125,000 43,000 357,000 Year 2 40,000 $ 24,000 ✓ 30,000 15,000 ✓ 109,000 ✓ Change 81,000 44,000 95,000 28,000 248,000 2. For value-added activities, the non-value-added component is from using too much of the activity, activity reduction is the result of improving activity efficiency. For non-value-added activities, is the ultimate objective. activity elimination 3. Suppose that at the end of Year 2, the selling price of a competing product is reduced by $10 per unit. Assume that the firm produces and sells 20,000 units of its product and that its product is associated only with the four activities being considered. The $ (Round your answer to two decimal places.) savings per unit of product allows ✔ Medco to match or beat the competitor s price reduction without changing the unit profit margin. By virtue of the waste-reduction savings, can the competitor s price reduction be matched without reducing the unit profit margin of the product that prevailed at the beginning of the year? Kaizen Costing Kaizen costing is concerned with reducing costs by making small continuous improvements to existing products and processes. In operational terms, this translates into reducing non-value-added costs. Controlling this cost reduction process is accomplished by repetitive use of two major subcycles: (1) the kaizen or continuous improvement subcycle, and (2) the maintenance subcycle. The kaizen subcycle is defined by a Plan-Do-Check-Act sequence. If a company is emphasizing the reduction of non-value-added costs, the amount of improvement planned for the coming period (month, quarter, etc.) is set (the Plan step). A kaizen standard reflects the planned improvement for the upcoming period. The planned improvement is assumed to be attainable, and kaizen standards are a type of currently attainable standard. Actions are taken to implement the planned improvements (the Do step). Next, actual results (e.g., costs) are compared with the kaizen standard to provide a measure of the level of improvement attained (the Check step). Setting this new level as a minimum standard for future performance locks in the realized improvements and simultaneously initiates the maintenance cycle and a search for additional improvement opportunities (the Act step). The maintenance cycle follows a traditional Establish-Do-Check-Act sequence. A standard is set based on prior improvements (locking in these improvements). Next, actions are taken (the Do step) and the results checked to ensure that performance conforms to this new level (the Check step). If not, then corrective actions are taken to restore performance (the Act step). Apply the Concepts An automotive parts division has a grinding activity for the subassemblies that it produces. Activity output is measured using grinding hours. The value-added standard (SQ) for this activity is zero grinding hours. On July 1, at the beginning of the fiscal year, sixteen grinding hours were allowed per batch (which almost always corresponded to the actual grinding hours used). The standard wage rate is $20 per grinding hour. During July, a new procedure for production of the subassemblies was developed with the expectation that the demand for grinding would be reduced by 25 percent. The new procedure was implemented in August and expectations concerning the effect on the grinding activity were met. Required: Required: 1a. The maintenance standard per batch at the beginning of August (for grinding): 1b. Expected grinding cost (per batch) on August 1: $ 1c. Kaizen standard, August 1: 1d. Expected cost (Kaizen), August 1: 2. Assume that a 20 percent reduction in time for grinding was achieved in August. After determining that this reduction is sustainable, the maintenance subcycle would be revised as follows: 2a. New maintenance standard per batch, end of August (for grinding): 2b. Expected grinding cost: (Round your answer to one decimal place.) $ hours per batch hours. hours Assume that Medco, Inc. had the following Nonvalue-Added Costs reported in Year 1: Non-Value-Added Costs Activity Purchasing Molding Inspecting Grinding Total $121,000 68,000 125,000 43,000 $357,000 Assume that at the beginning of 2014, the molding process was redesigned and the employees in Molding were trained in a new work technique. By reducing the number of bad molds, the firm hoped to significantly reduce waste for all four activities. Purchasing and Inspecting resources are purchased in steps of 2,000 hours. The other two activities are acquired as used and needed. At the end of Year 2, the following results were reported for the four activities: SQ AQ SP 28,000 30,000 $20 42,000 40,000 12 0 2,000 15 0 2,500 6 Activity Activity Driver Purchasing Purchasing hours Molding Molding hours Inspecting Inspection hours Grinding Number of units Required: 1. Prepare a trend report for non-value-added costs by completing the following table: Activity Purchasing $ Molding Inspecting Grinding Total Year 1 121,000 68,000 125,000 43,000 357,000 Year 2 40,000 $ 24,000 ✓ 30,000 15,000 ✓ 109,000 ✓ Change 81,000 44,000 95,000 28,000 248,000 2. For value-added activities, the non-value-added component is from using too much of the activity, activity reduction is the result of improving activity efficiency. For non-value-added activities, is the ultimate objective. activity elimination 3. Suppose that at the end of Year 2, the selling price of a competing product is reduced by $10 per unit. Assume that the firm produces and sells 20,000 units of its product and that its product is associated only with the four activities being considered. The $ (Round your answer to two decimal places.) savings per unit of product allows ✔ Medco to match or beat the competitor s price reduction without changing the unit profit margin. By virtue of the waste-reduction savings, can the competitor s price reduction be matched without reducing the unit profit margin of the product that prevailed at the beginning of the year? Kaizen Costing Kaizen costing is concerned with reducing costs by making small continuous improvements to existing products and processes. In operational terms, this translates into reducing non-value-added costs. Controlling this cost reduction process is accomplished by repetitive use of two major subcycles: (1) the kaizen or continuous improvement subcycle, and (2) the maintenance subcycle. The kaizen subcycle is defined by a Plan-Do-Check-Act sequence. If a company is emphasizing the reduction of non-value-added costs, the amount of improvement planned for the coming period (month, quarter, etc.) is set (the Plan step). A kaizen standard reflects the planned improvement for the upcoming period. The planned improvement is assumed to be attainable, and kaizen standards are a type of currently attainable standard. Actions are taken to implement the planned improvements (the Do step). Next, actual results (e.g., costs) are compared with the kaizen standard to provide a measure of the level of improvement attained (the Check step). Setting this new level as a minimum standard for future performance locks in the realized improvements and simultaneously initiates the maintenance cycle and a search for additional improvement opportunities (the Act step). The maintenance cycle follows a traditional Establish-Do-Check-Act sequence. A standard is set based on prior improvements (locking in these improvements). Next, actions are taken (the Do step) and the results checked to ensure that performance conforms to this new level (the Check step). If not, then corrective actions are taken to restore performance (the Act step). Apply the Concepts An automotive parts division has a grinding activity for the subassemblies that it produces. Activity output is measured using grinding hours. The value-added standard (SQ) for this activity is zero grinding hours. On July 1, at the beginning of the fiscal year, sixteen grinding hours were allowed per batch (which almost always corresponded to the actual grinding hours used). The standard wage rate is $20 per grinding hour. During July, a new procedure for production of the subassemblies was developed with the expectation that the demand for grinding would be reduced by 25 percent. The new procedure was implemented in August and expectations concerning the effect on the grinding activity were met. Required: Required: 1a. The maintenance standard per batch at the beginning of August (for grinding): 1b. Expected grinding cost (per batch) on August 1: $ 1c. Kaizen standard, August 1: 1d. Expected cost (Kaizen), August 1: 2. Assume that a 20 percent reduction in time for grinding was achieved in August. After determining that this reduction is sustainable, the maintenance subcycle would be revised as follows: 2a. New maintenance standard per batch, end of August (for grinding): 2b. Expected grinding cost: (Round your answer to one decimal place.) $ hours per batch hours. hours
Expert Answer:
Answer rating: 100% (QA)
Required Solution 1a The maintenance standard per batch at the beginning of August ... View the full answer
Related Book For
Posted Date:
Students also viewed these accounting questions
-
Yogi expects to produce 1,700 units in January and 2,160 units in February. The company budgets four pounds per unit of direct materials at a cost of $45 per pound. Indirect materials are...
-
The manufacturing operations of R Eason, Inc had the following balances for the month of January: Reason transferred $ 220000 of completed goods out of work in process during January. Instructions:...
-
The balance sheet of Castle Inc had the following balances at December 31 2016 Cash 15800 Accounts Receivable 22500 Accounts Payable 11500 Less Allowance for Doubtful Accounts 800 Owners Capital...
-
Simplify each expression. Assume that all variables represent nonzero real numbers. 52
-
Suppose that the random variable X has the following p.d.f.: Construct a random variable Y = r(X) that has the uniform distribution on the interval [0, 5]. 2e-2 for> o, f(x)-| 2e- for x > 0. 0...
-
Current assets and current liabilities for Brimstone Company follow: a. Determine the working capital and current ratio for 2019 and 2018. b. Does the change in the current ratio from 2018 to 2019...
-
Using the Newmark method with \(\alpha=\frac{1}{6}\) and \(\beta=\frac{1}{2}\), solve Problem 11.19. Data From Problem 11.19:- Using the central difference method, find the response of the system...
-
The following information pertains to the Davenport plant for the month of May (all materials are added at the beginning of the process): Required Compute the cost per equivalent unit for materials...
-
Tuesday January 20, 2020. Plaintiff: Peter Grobe Defendant: High Point Insurance Company The plaintiff Peter Grobe (36), a resident of St Catherine's Ontario and a previous client of the defendant...
-
Kleen Corp., a privately owned and operated single-stream recycling facility, has annual contracts with several cities in the Tri-County Metropolitan Area. Kleen Corp. wants to add a new set of...
-
What protection is given to the owner of a patent?
-
A company produces shirts and sells them on average for $40 with a unit contribution margin of 32%. If the total fixed costs are $300,000: What is the breakeven point? How many units must be sold to...
-
Calculate the price an American call option on a non dividend paying stock with the information below. Stock price is $40 Exercise price is $38 Risk free rate is 5% Volatility is 20% Six months to...
-
Weghorst Co. is considering a three-year project that will require an initial investment of $55,000. It has estimated that the annual cash flows for the project under good conditions will be $80,000...
-
Stay Swift Corp. is looking at investing in a production facility that will require an initial investment of $500,000. The facility will have a three-year useful life, and it will not have any...
-
Magnetis Inc. has annual sales of $12 million, its cost of goods sold is 75% of annual sales, it carries an average inventory of $800,000 and its average collection period is as long as its inventory...
-
On January 0 1 , 2 0 2 4 , ABC Corp. purchased XYZ Company bonds when the market interest rate was 6 % . The XYZ bonds had a $ 6 0 0 , 0 0 0 maturity value, paid 4 % interest semi - annually on June...
-
Q1) What is the a3 Value Q2) What is the a7 Value Q3) What is the a4 Value Q4) What is the b3 Value Q5) What is the b2 Value Q6) What is the sign of 2nd constraint? A pastry chef at a bakery wants to...
-
Calculate all of the ratios discussed in the chapter for the Axtel Company of problem 5. Assume Axtel had leasing costs of $7,267,000 and amortization of $1,416,000 in 20X1, and had 1,268,000 shares...
-
A project has the following cash flows a. What is the project's payback period? b. Calculate the projects NPV at 12%. c. Calculate the project's PI at 12%. ) (S700) $200 $500 $244
-
Declan Ross wants to sell his business. The firm has no debt and earns an 8% return (ROE) on equity of $150,000. The business can borrow at an after tax rate of 5%. A consultant has advised that the...
-
The equation of motion of a simple pendulum subject to viscous damping can be expressed as \[\ddot{\theta}+c \dot{\theta}+\sin \theta=0\] If the initial conditions are \(\theta(0)=\theta_{0}\) and...
-
The phase-plane equation of a single-degree-of-freedom system is given by \[\frac{d y}{d x}=\frac{-c y-\left(x-0.1 x^{3} ight)}{y}\] Investigate the nature of singularity at \((x, y)=(0,0)\) for...
-
Identify the singularity and find the nature of solution near the singularity for van der Pol's equation: \[\ddot{x}-\alpha\left(1-x^{2} ight) \dot{x}+x=0\]
Study smarter with the SolutionInn App