Attorney Maria Conroe uses a job order costing system to collect costs of client engagements. Conroe is currently working on a case for Stacie Olivgra. During the first three months of 2010, Conroe logged 95 hours on the Olivgra case. In addition to direct hours spent by Conroe, her office assistant has worked 35 hours typing and copying 1,450 pages of documents related to the Olivgra case. Conroe’s assistant works 160 hours per month and is paid a salary of $4,800 per month. The average cost per copy is $0.06 for paper, toner, and machine rental. Telephone and fax charges for long-distance calls on the case totaled $145. Last, Conroe has estimated that total office overhead for rent, utilities, parking, and so on amount to $9,600 per month and that, during a normal month, the office is open every hour that the assistant is at work. Overhead charges are allocated to clients based on the number of hours of assistant’s time. a. Conroe desires to set the billing rate so that she earns, at a minimum, $190 per hour, and covers all direct and allocated indirect costs related to a case. What minimum charge per hour (rounded to the nearest $10) should Conroe charge Olivgra? (Hint: Be sure to include office overhead.) What would be the total billing to Olivgra? b. All the hours that Conroe spends at the office are not necessarily billable hours. In addition Conroe did not consider certain other expenses such as license fees, country club dues, automobile costs, and other miscellaneous expenses when she determined the amount of overhead per month. Therefore, Conroe is considering billing clients for direct costs plus allocated indirect costs plus a 40 percent margin to cover nonbillable time as well as other costs. What will Conroe charge Olivgra in total for the time spent on her case? c. Which billing method is more likely to be accepted by clients and why?
> This case highlights a pioneering airline company with humble roots, an enduring culture shaped by a maverick leader, and a record of success in an industry where most companies have failed to prosper in the decades since deregulation. Southwest Airlines
> Siemens is a leading global electrical engineering and electronics firm headquartered in Munich, Germany. Profiling a highly diversified company, this case addresses the issue of optimizing the business portfolio through a coherent corporate strategy. An
> The Safaricom case provides an excellent opportunity to apply strategic management concepts to a constantly growing and extremely competitive organization. Safaricom is the largest mobile service provider in Kenya. It offers not only means of mobile comm
> What is the relationship between the core competencies a firm possesses, the core competencies the firm feels it needs, and decisions to form cooperative strategies?
> To strengthen its diversified portfolio, Polaris Industries entered the motorcycle business in the 1990s. This case encapsulates the history and development of the Polaris Victory Motorcycle Division from its conception in 1993 up until 2014. It closely
> This case is an in-depth study of the motion picture exhibition industry which exposes the tenuous and uncertain outlook for movie theater owners. Changing value chain dynamics and operating variables that affect the profitability of exhibitors are discu
> This case focuses on the corporate governance aspect of Martha Stewart Living Omnimedia (MSO), a media empire founded by Martha Stewart. Stewart is a former model and devoted her career to domestic perfection and luxury. She is the brand icon of MSO; how
> This case is about a family-owned corporation from the perspective of its latest CEO, Charles Luck, IV. It provides an overview of the strategic management processes instituted under his direction, emphasizing the formulation and implementation of value
> The Knowledge is Power Program (KIPP) Houston Public School case provides an exciting opportunity to apply strategic management principles to an innovative, non-profit educational organization. At the time of the case, new regional superintendent Sehba A
> This case describes a new product success story, set in a competitive business climate. Keurig was one of the companies to commercialize an innovative technology that allowed people to brew one cup of coffee at a time. Keurig was established in 1992. The
> This case highlights Invitrogen, one of the largest catalog life science companies in the industry. In a highly competitive industry, the company has taken some risky steps in order to continue its growth. Invitrogen built its growth from aggressive acqu
> The IKEA case provides an excellent opportunity to apply strategic management concepts to a large privately-held company that is expanding into India. IKEA is a Netherlands-based Swedish company with a presence in 44 countries around the world, including
> This case illustrates the importance of environmental awareness, the long-term prospect of product development, and the resourceful use of an acquisition strategy to achieve organizational objectives. It opens with an overview and history on the Fisk bro
> This case identifies a unique strategy for the 5th largest breweries in the world, Carlsberg A/S, whose leaders have recognized that in order to survive in the business, it has to be either the first or second leader in any market it is operating in. The
> How can the resource-based view of the firm (see Chapters 1 and 3) help us understand why firms develop and use cooperative strategies such as strategic alliances and joint ventures?
> This case portrays the challenging events and circumstances confronting BP in Russia during 2011. It illustrates the difficulties of managing issues associated with cooperative strategies, especially complex cross-border alliances. The case opens with ba
> This case describes a unique opportunity for one of the largest financial brand names in the world, American Express, whose leaders have demonstrated a knack for identifying obscure market niches. The rapid success of Green Dot has drawn attention to Ame
> What is the restructuring strategy, and what are its common forms?
> What are the attributes associated with a successful acquisition strategy?
> What are the seven primary problems that affect a firm’s efforts to successfully use an acquisition strategy?
> What reasons account for firms’ decisions to use acquisition strategies as a means to achieving strategic competitiveness?
> Why are merger and acquisition strategies popular in many firms competing in the global economy?
> What are the short- and long-term outcomes associated with the different restructuring strategies?
> A common rationale for alliances is that firms seek out complementary resources from an alliance partner. The Mini-Case notes that a new rationale for alliances has emerged in the literature – that firms are often co-located in the same country,
> Sany Heavy Industry Company, Ltd. Is China’s largest producer of heavy equipment (and 5th largest globally). Sany’s businesses consist of cranes, road construction machinery, port machinery, and pump over machinery. Some technologies used in the producti
> Unilever is a European-based global consumer products company with a strong sustainable environment strategy. To improve efficiencies, Unilever has adopted a worldwide product structure. The company emphasizes the geographic areas using a transnational
> How does strategic entrepreneurship help firms create value?
> How does a firm acquire other companies to increase the number of innovations it produces and improve its capability to produce innovations?
> How do firms use cooperative strategies to innovate and to have access to innovative capabilities?
> How do firms develop innovations internally?
> What is international entrepreneurship? Why is it important?
> What is an entrepreneur, and what is an entrepreneurial mind-set?
> What are invention, innovation, and imitation? How are these concepts interrelated?
> Jamie Dimon, CEO of J.P. Morgan Chase survived the Great Recession quite well. However, in 2012, the company suffered losses of more than $6 billion due to excessive risk taking by traders in its London operations. Some of the loss was attributed to poo
> What is entrepreneurship, and what are entrepreneurial opportunities? Why are they important for all aspects of the strategic management process?
> What is strategic entrepreneurship? What is corporate entrepreneurship?
> As a strategic leader, what actions could you take to establish and emphasize ethical practices in your firm?
> What must strategic leaders do to develop and sustain an effective organizational culture?
> How do strategic leaders effectively manage their firm’s resource portfolio to exploit its core competencies and leverage the human capital and social capital to achieve a competitive advantage?)
> What is the effect of strategic leadership on determining the firm’s strategic direction?
> What is the managerial succession process? How important are the internal and external managerial labor markets to this process.
> What is a top management team, and how does it affect a firm’s performance and its abilities to innovate and design and implement effective strategic changes?
> What is strategic leadership? Why are top-level managers considered important resources for an organization?
> Why are strategic controls and financial controls important aspects of the strategic management process?
> Cisco has perfected the art of acquisition strategy. The technology firm seeks to provide hardware for connectivity, from the internet to mobile networks to entertainment services. The next stage of Cisco’s evolution appears to be “the Internet of everyt
> This case is about how Amazon started to compete in the tablet market from the perspective of its founder Jeff Bezos. It provides an overview of the strategic entrepreneurship process under his vision, emphasizing the entrepreneur mind-set and innovation
> San Angelo Corp. uses a job order costing system for client contracts related to custom-manufactured pulley systems. Elmore Mechanical recently ordered 20,000 pulleys, and the job was assigned #BA468. Information for Job #BA468 revealed the following: Di
> Companies use time sheets for two primary reasons: to know how many hours an employee works and, in a job order production situation, to trace work hours to products. An article (“Altering of Worker Time Cards Spurs Growing Number of Suits” by Steven Gre
> Juneau Container makes steel storage canisters for various chemical products. The company uses a job order costing system and obtains jobs based on competitive bidding. For each project, a budget is developed. One of the firm’s products
> Bonivo Inc. manufactures computers from commodity components to client specifications. The company has historically tracked only the cost of components to computers, and computer selling prices, or bids, have been based solely on the cost of components p
> Harvey Inc. uses a standard cost system for labor. Standard costs for material cannot be used because customers require unique materials and all jobs are different sizes. One of the company’s jobs experienced the following results related to direct labor
> Weingold Inc. engages in routine and customer print jobs for customers. In November 2010, a client specified the use of one of the company’s standard papers for a large job, but asked for a high level of customization relative to the print design. Thus,
> Routine maintenance services are provided by Latamore Industries to oil and gas firms in their production facilities. Although many of the client services are relatively unique, some services are repetitive. The firm individually negotiates prices with e
> Country Products manufactures quilt racks. Pine is introduced in Department 1, where the raw material is cut and assembled. In Department 2, completed racks are stained and packaged for shipment. Department 1 applies overhead on the basis of machine hour
> Rio Valde Co. uses a normal cost, job order costing system. In the Mixing Department, overhead is applied using machine hours; in Paving, overhead is applied using direct labor hours. In December 2009, the company estimated the following data for its two
> Tennessee Tack manufactures horse blankets. In 2010, fixed overhead was applied to products at the rate of $8 per unit. Variable cost per unit remained constant throughout the year. In July 2010, income under variable costing was $188,000. July’s beginni
> Mystic Inc. uses a job order costing system and applies overhead to jobs at a predetermined rate of $4.25 per direct labor dollar. During April 2010, the company spent $29,600 on direct material and $3,900 on direct labor for Job #344. Budgeted factory o
> The law firm of Taub & Lawson, LLP, currently has four cases in process. Following is information related to those cases as of the end of March 2010: Taub & Lawson allocates overhead to cases based on a predetermined rate of $150 per estimated co
> For each of the following firms, determine whether it is more likely to use job order or process costing. This firm a. provides legal services. b. is a health-care clinic. c. manufactures shampoo. d. makes custom jewelry. e. is an automobile repair shop.
> Following are specific types of information that can be located in a particular account (such as WIP Inventory) or on a particular document (such as an employee time card). For each item listed, identify the account or document that would provide the rel
> In a televised football game, what activities are value-added? What activities are nonvalue-added? Would everyone agree with your choices? Why or why not?
> Why are value-added activities defined from a customer viewpoint?
> What is activity analysis, and how is it used with cost driver analysis to manage costs?
> What is activity-based management (ABM), and what specific management tools are used in ABM?
> Significant hurdles, including a large time commitment, are often encountered in adopting ABC. What specific activities associated with ABC adoption require large investments of time?
> Are all companies likely to benefit to an equal extent from adopting ABC? Discuss.
> Ollie’s Olive Oil began business in 2010, during which it produced 104,000 quarts of olive oil. In 2010, the company sold 100,000 quarts of olive oil. Costs incurred during the year were as follows: Ingredients used …………………………………….$228,800 Direct labor …
> Once an activity-based costing system has been developed and implemented in a company, will that system be appropriate for the long term? Why or why not?
> Why do more traditional methods of overhead assignment “overload” standard high volume products with overhead costs. How does ABC improve overhead assignments?
> Do cost drivers exist in a traditional accounting system? Are they designated as such? How, if at all, does the use of cost drivers in a traditional accounting system differ from those in an activity-based costing system?
> If five people from the same organization calculated manufacturing cycle efficiency for one specific process, would each compute the same MCE? Why or why not?
> Moriarity Manufacturing produces two product models: Regular and Special. The following information was taken from the accounting records for the first quarter of 2010: Moriarity currently uses a traditional cost accounting system where total overhead co
> Bernie Lipscomb owns and manages a commercial cold-storage warehouse that has 100,000 cubic feet of storage capacity. Historically, he has charged customers a flat rate of $0.16 per pound per month for goods stored. In the past two years, Lipscomb has be
> West Virginia Concepts provides a wide range of engineering and architectural consulting services through its three offices in Charleston, Morgantown, and Martinsburg. The company allocates resources and bonuses to the three offices based on the net inco
> Casito Corp. manufactures multiple types of products; however, most of the company’s sales are from Product #347 and Product #658. Product #347 has been a standard in the industry for several years; the market for this product is compet
> Louisiana Leisure makes umbrellas, gazebos, and chaise lounges. The company uses a traditional overhead allocation scheme and assigns overhead to products at the rate of $30 per direct labor hour. The costs per unit for each product group in 2010 were as
> Illiad Inc. has a total of $2,362,500 in production overhead costs. The company’s products and related statistics follow. Additional data: The 330,000 pounds of material were purchased for $544,500. One direct labor hour costs $12. a. A
> Reese’s Tot Toy Boxes uses variable costing to manage its internal operations. The following data relate to the company’s first year of operation, when 25,000 units were produced and 21,000 units were sold. Variable costs per unit Direct material …………………
> Balfore Office makes metal five-drawer desks and, occasionally, takes custom orders. The company’s overhead costs for a month in which no custom desks are produced are as follows: Purchasing Department for raw material and supplies
> Shirtz Community Hospital has been under increasing pressure to be accountable for its patient charges. The hospital’s current pricing system is ad hoc, based on pricing norms for the geographical area; only direct costs for surgery, me
> As the chief executive officer of a large corporation, you have decided after discussion with production and accounting personnel to implement activity-based management concepts. Your goal is to reduce cycle time and, in turn, costs. A primary way to acc
> Companies that want to be more globally competitive can consider the implementation of activity-based management (ABM). Such companies often have used other initiatives that involve higher efficiency, effectiveness, or output quality. These same initiati
> Strategic Supply is a world leader in the production of electronic test and measurement instruments. The company experienced almost uninterrupted growth through the 1990s, but in the 2000s, the low-priced end of its Portables Division’s product line was
> Treffle Molding Company manufactures two products: large jar covers and small bottle caps. Large jar covers require special handling. Each cover must be individually sanded on a special machine to remove excess material (referred to as “
> Clare’s Super Cake Company makes very elaborate wedding cakes to order. The company’s owner, Clare Cole, has provided the following data concerning the activity rates in its activity-based costing system: Activity Cost
> Believing that its traditional cost system may be providing misleading information, Dover Corporation is considering an activity-based costing (ABC) approach. Dover Corporation employs a full-cost system and has been applying its manufacturing overhead o
> Hurley Corporation has identified the following overhead costs and cost drivers for the coming year: The following information was collected on three jobs that were completed during the year: Budgeted direct labor cost was $100,000, and budgeted direct m
> Elaydo Inc. makes flavored water and performs the following tasks in the beverage manufacturing process: Hours Receiving and transferring ingredients to storage …………………………….9.0 Storing ingredients ………………………………………………………………………270.0 Transferring the ingredi
> Pete’s Plant Stands manufactures wooden stands used by plant nurseries. In May 2010, the company manufactured 18,000 and sold 16,560 stands. The cost per unit for the 18,000 stands produced was as follows: Direct material ………………………………….$ 9.00 Direct labo
> Carpenter Inc. designs industrial tooling parts and makes the molds for those parts. The following activities take place when the company creates a new mold. Classify each cost as unit level (U), batch level (B), product/process level (P), or organizatio
> The following costs are incurred in a fast-food restaurant that relies on computer-controlled equipment to prepare customers’ food. Classify each cost as unit level (U), batch level (B), product/process level (P), or organizational level (O): a. Maintena
> Spice-a-licious produces creole seasoning using the following process for each batch: Function Time (Minutes) Receiving ingredients ………………………………………………....60 Moving ingredients to stockroom …………………………………80
> Log Cabins Unlimited constructs vacation houses in the North Carolina mountains. The company has developed the following value chart: Operations Average Number of Days Receiving materials ……………………………………………….2 Storing materials ………………………………………
> Farrah Westin plans to build a concrete walkway for her home during her vacation. The following schedule shows how project time will be allocated: Hours Purchase materials …………………………………………………....5 Obtain rental equipment …………………………………………….2 Remove sod an
> The Raleigh plant manager of Allentown Corp. has noticed the plant frequently changes the schedule on its production line. He has gathered the following information on the activities, estimated times, and average costs required for a single schedule chan
> The following activities take place in Usher’s Department Store. Upon receipt, Usher’s discounts all products 25 percent from the manufacturer’s suggested retail price. Only after the goods have been in stock for 90 days will additional discounts be give
> Many manufacturers are deciding to service only customers that buy $10,000 or more of products from the manufacturers annually. Manufacturers defend such policies by stating that they can provide better service to customers that handle more volume and mo
> The cost systems at many companies selling multiple products have become less than adequate in today’s global competition. Managers often make important product decisions based on distorted cost information because the cost systems have been primarily de
> Starshine Company is in the process of analyzing and updating its cost information and pricing practices. Since the company’s product line changed from general paints to specialized marine coatings, there has been tremendous overhead growth, including co
> Tom’s Shoe Repair provides a variety of shoe and repair services. Analysis of monthly costs revealed the following cost formulas when direct labor hours are used as the basis of cost determination: Supplies: y = $0 + $4.00X Production supervision and dir
