Levine Company is a manufacturer of very inexpensive cell phones and television sets. The company uses...
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Levine Company is a manufacturer of very inexpensive cell phones and television sets. The company uses recycled parts and a highly structured manufacturing process to keep costs low so that it can sell at very low prices. The company uses lean accounting procedures to help keep costs low and to examine financial performance. Levine uses value streams to study the profitability of its two main product groups, cell phones and TVs. Information about finished goods Inventory, sales, production, and average sales price follows: Units Beginning inventory Price Sold Cell Phone Group TV Group 2,400 7,400 $110 $ 160 14,300 14,800 Budgeted and actual production 16,000 15,400 Levine's costs for the current quarter are as follows. Note that some of the company's manufacturing and selling costs are traceable directly to the two value streams, while other costs are not traceable. Levine considers all traceable fixed costs to be controllable by the manager of each group. Also, Levine's value stream shows operating Income determined by the full costing method; the difference from the traditional full costing income statement is that the effect on Income from a change in inventory is shown as a separate Item on the value-stream Income statement: Unit variable costs Manufacturing Selling and administrative Traceable fixed costs Manufacturing Selling and administrative Nontraceable fixed costs Manufacturing Selling and administrative: Cell Phone Group TV Group Total $ 62 5 $97 5 266,400 108,000 277,200 108,000 $ 543,600 216,000 122,000 85,880 Required: Consider Levine's two value streams as profit centers, and use the contribution Income statement as a guide to develop a value- stream Income statement for the company. (See Exhibit 18.9 for an example of a contribution Income statement.) In your solution, replace the term controllable margin (in Exhibit 18.9) with value-stream profit Be sure to include the inventory effect on profit as a separate line item in your value-stream income statement. 1. What is the effect of the Inventory change (and in what direction) on the value stream profit of cell phones? Effect of the inventory change 2. What is the value stream profit of TVs? The value stream profit of TVs Levine Company is a manufacturer of very inexpensive cell phones and television sets. The company uses recycled parts and a highly structured manufacturing process to keep costs low so that it can sell at very low prices. The company uses lean accounting procedures to help keep costs low and to examine financial performance. Levine uses value streams to study the profitability of its two main product groups, cell phones and TVs. Information about finished goods Inventory, sales, production, and average sales price follows: Units Beginning inventory Price Sold Cell Phone Group TV Group 2,400 7,400 $110 $ 160 14,300 14,800 Budgeted and actual production 16,000 15,400 Levine's costs for the current quarter are as follows. Note that some of the company's manufacturing and selling costs are traceable directly to the two value streams, while other costs are not traceable. Levine considers all traceable fixed costs to be controllable by the manager of each group. Also, Levine's value stream shows operating Income determined by the full costing method; the difference from the traditional full costing income statement is that the effect on Income from a change in inventory is shown as a separate Item on the value-stream Income statement: Unit variable costs Manufacturing Selling and administrative Traceable fixed costs Manufacturing Selling and administrative Nontraceable fixed costs Manufacturing Selling and administrative: Cell Phone Group TV Group Total $ 62 5 $97 5 266,400 108,000 277,200 108,000 $ 543,600 216,000 122,000 85,880 Required: Consider Levine's two value streams as profit centers, and use the contribution Income statement as a guide to develop a value- stream Income statement for the company. (See Exhibit 18.9 for an example of a contribution Income statement.) In your solution, replace the term controllable margin (in Exhibit 18.9) with value-stream profit Be sure to include the inventory effect on profit as a separate line item in your value-stream income statement. 1. What is the effect of the Inventory change (and in what direction) on the value stream profit of cell phones? Effect of the inventory change 2. What is the value stream profit of TVs? The value stream profit of TVs
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Cost Management A Strategic Emphasis
ISBN: 978-0078025532
6th edition
Authors: Edward Blocher, David Stout, Paul Juras, Gary Cokins
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