Continuous improvement is the governing principle of a lean accounting system. Following are several performance measures. Some of these measures would be associated with a traditional standard-costing accounting system, and some would be associated with a lean accounting system. a. Materials price variances b. Cycle time c. Comparison of actual product costs with target costs d. Materials quantity or efficiency variances e. Comparison of actual product costs over time (trend reports) f. Comparison of actual overhead costs, item by item, with the corresponding budgeted costs g. Comparison of product costs with competitors’ product costs h. Percentage of on-time deliveries i. First-time through j. Reports of value- and non-value-added costs k. Labor efficiency variances l. Days of inventory m. Downtime n. Manufacturing cycle efficiency (MCE) o. Unused (available) capacity variance p. Labor rate variance q. Using a sister plant’s best practices as a performance standard Required: 1. Classify each measure as lean or traditional (standard costing). If traditional, discuss the measure’s limitations for a lean environment. If it is a lean measure, describe how the measure supports the objectives of lean manufacturing. 2. Classify the measures into operational (nonfinancial) and financial categories. Explain why operational measures are better for control at the shop level (production floor) than financial measures. Should any financial measures be used at the operational level? 3. Suggest some additional measures that you would like to see added to the list that would be supportive of lean objectives.
> Heaps Company produces jewelry that requires electroplating with gold, silver, and other valuable metals. Electroplating uses large amounts of water and chemicals, producing wastewater with a number of toxic residuals. Currently, Heaps uses settlement ta
> Pittsburgh-Walsh Company (PWC) is a manufacturing company whose product line consists of lighting fixtures and electronic timing devices. The Lighting Fixtures Division assembles units for the upscale and mid-range markets. The Electronic Timing Devices
> Shannon, Inc., has two divisions. One produces and sells paper party supplies (napkins, paper plates, invitations); the other produces and sells cookware. A segmented income statement for the most recent quarter is given below: On seeing the quarterly st
> Olin Company manufactures and distributes carpentry tools. Production of the tools is in the mature portion of the product life cycle. Olin has a sales force of 20. Salespeople are paid a commission of 7 percent of sales, plus expenses of $35 per day for
> Fred Morton has just purchased a life insurance policy from Porter with premiums equal to $1,500 per year. Required: 1. Assume Fred holds the policy for one year and then drops it. What is his contribution to Porter’s operating income? 2. Assuming Fred h
> Porter Insurance Company has three lines of insurance: automobile, property, and life. The life insurance segment has been losing money for the past five quarters, and Leah Harper, Porter’s controller, has done an analysis of that segment. She has discov
> Alydar, Inc., manufactures and sells automotive tools through three divisions: Eastern, Southern, and International. Each division is evaluated as a profit center. Data for each division for last year are as follows: Alydar, Inc., had corporate administr
> Dantrell Palmer has just been appointed manager of Kirchner Glass Products Division. He has two years to make the division profitable. If the division is still showing a loss after two years, it will be eliminated, and Dantrell will be reassigned as an a
> Bill Fremont, division controller and CMA, was upset by a recent memo he received from the divisional manager, Steve Preston. Bill was scheduled to present the division’s financial performance at headquarters in one week. In the memo, Steve had given Bil
> Dana Baird was manager of a new Medical Supplies Division. She had just finished her second year and had been visiting with the company’s vice president of operations. In the first year, the operating income for the division had shown a
> Johnston Company cleans and applies powder coat paint to metal items on a job-order basis. Johnston has budgeted the following amounts for various overhead categories in the coming year. In the coming year, Johnston expects to powder coat 120,000 units.
> Gasconia Company produces three models of a product. Actual results from last year are as follows: Gasconia had budgeted the following amounts: Required: 1. Calculate the contribution margin variance. 2. Calculate the contribution margin volume variance.
> Sulert, Inc., produces and sells gel-filled ice packs. Sulert’s performance report for April follows: Required: 1. Calculate the contribution margin variance and the contribution margin volume variance. 2. Calculate the market share var
> Haysbert Company provides management services for apartments and rental units. In general, Haysbert packages its services into two groups: basic and complete. The basic package includes advertising vacant units, showing potential renters through them, an
> San Mateo Optics, Inc., specializes in manufacturing lenses for large telescopes and cameras used in space exploration. As the specifications for the lenses are determined by the customer and vary considerably, the company uses a job-order costing system
> Jellison Company had the following operating data for its first two years of operations: Variable costs per unit: Direct materials 4.00 Direct labor $ 2.90 Variable overhead 1.50 Fixed costs per year: Overhead 180,000 Selling and administrative 70,350 Je
> The following information pertains to Vladamir, Inc., for last year: Beginning inventory, units 1,320 Units produced 100,000 Units sold 101,000 Variable costs per unit: Direct materials $ 8.00 Direct labor $ 9.50 Variable overhead $ 1.25 Variable selling
> Snyder Company produced 90,000 units during its first year of operations and sold 87,000 at $21.80 per unit. The company chose practical activity—at 90,000 units—to compute its predetermined overhead rate. Manufacturing costs are as follows: Direct mater
> Jorell, Inc., manufactures and distributes a variety of labelers. Annual production of labelers averages 340,000 units. A large chain store purchases about 30 percent of Jorell’s production. Several thousand independent retail office supply stores purcha
> Quencher Beverage is a large regional retail establishment. Quencher recently decided to start selling one of its most popular products—Coca-Cola 10-packs—at a loss (i.e., a loss leader) in order to entice consumers to purchase other items in greater amo
> Garcia Company produces two different types of gauges: a density gauge and a thickness gauge. The segmented income statement for a typical quarter follows. The density gauge uses a subassembly that is purchased from an external supplier for $25 per unit.
> The School of Accounting (SOA) at State University is planning its annual fundraising campaign for accounting alumni. This year, the SOA is planning a call-a-thon and will ask Beta Alpha Psi members to volunteer to make phone calls to a list of 5,000 alu
> Jean and Tom Perritz own and manage Happy Home Helpers, Inc. (HHH), a house-cleaning service. Each cleaning (cleaning one house one time) takes a team of three house cleaners about 1.5 hours. On average, HHH completes about 15,000 cleanings per year. The
> KarlAuto Corporation manufactures automobiles, vans, and trucks. Among the various KarlAuto plants around the United States is the Bloomington plant, where vinyl covers and upholstery fabric are sewn. These are used to cover interior seating and other su
> Pharmaco Corporation buys three chemicals that are processed to produce two popular ingredients for liquid pain relievers. The three chemicals are in liquid form. The purchased chemicals are blended for two to three hours and then heated for 15 minutes.
> Apollonia Dental Services is part of an HMO that operates in a large metropolitan area. Currently, Apollonia has its own dental laboratory to produce two varieties of porcelain crowns— all porcelain and porcelain fused to metal. The uni
> Brandy Dees recently bought Nievo Enterprises, a company that manufactures ice skates. Brandy decided to assume management responsibilities for the company and appointed herself president shortly after the purchase was completed. When she bought the comp
> St. John’s Medical Center (SJMC) has five medical technicians who are responsible for conducting cardiac catheterization testing in SJMC’s Cath Lab. Each technician is paid a salary of $36,000 and is capable of conducting 1,000 procedures per year. The c
> Two brothers, Enzo and Pietro, opened the Italian House Restaurant several years ago. The restaurant offers a variety of culinary dishes that are divided into two main product offerings: Primi (pasta first dishes) and Secondi (nonpasta meat and vegetaria
> Fiorello Company manufactures two types of cold-pressed olive oil, Refined Oil and Top Quality Oil, out of a joint process. The joint (common) costs incurred are $92,500 for a standard production run that generates 30,000 gallons of Refined Oil and 15,00
> Devern Assurance Company provides both property and automobile insurance. The projected income statements for the two products are as follows: The president of the company is considering dropping the property insurance. However, some policyholders prefer
> Norton Products, Inc., manufactures potentiometers. (A potentiometer is a device that adjusts electrical resistance.) Currently, all parts necessary for the assembly of products are produced internally. Norton has a single plant located in Wichita, Kansa
> Good Scent, Inc., produces two colognes: Rose and Violet. Of the two, Rose is more popular. Data concerning the two products follow: The company uses a conventional costing system and assigns overhead costs to products using direct labor hours. Annual ov
> Refer to Brief Exercise 8-2 for the production budgets for practice balls and match balls. Every practice ball requires 0.7 square yard of polyvinyl chloride panels, one bladder with valve (to fill with air), and 3 ounces of glue. Smart Strikeâ
> Salem Electronics currently produces two products: a programmable calculator and a tape recorder. A recent marketing study indicated that consumers would react favorably to a radio with the Salem brand name. Owner Kenneth Booth was interested in the poss
> Aubrey Company produces a single product. Last year’s income statement is as follows: Sales (12,000 units) $1,218,000 Less: Variable costs 365,400 Contribution margin $ 852,600 Less: Fixed costs 300,000 Operating income $ 552,600 Required: 1. Compute the
> Ironjay, Inc., produces two types of weight-training equipment: the Jay-f lex (a weight machine that allows the user to perform a number of different exercises) and a set of free weights. Ironjay sells the Jay-f lex to sporting goods stores for $200. The
> Mahan Consulting is a service organization that specializes in the design, installation, and servicing of mechanical, hydraulic, and pneumatic systems. For example, some manufacturing firms, with machinery that cannot be turned off for servicing, need so
> Katayama Company produces a variety of products. One division makes neoprene wetsuits. The division’s projected income statement for the coming year is as follows: Sales (65,000 units) $15,600,000 Less: Variable expenses 8,736,000 Contribution margin $ 6
> Rahm Company produces a single product. The projected income statement for the coming year, based on sales of 160,000 units, is as follows: Sales $2,000,000 Less: Variable costs 1,400,000 Contribution margin $ 600,000 Less: Fixed costs 450,000 Operating
> Cassius produces and sells novelty items for resort gift shops. Last year, Cassius sold 99,200 units. The income statement for Cassius, Inc., for last year is as follows: Sales $992,000 Less: Variable expenses 545,600 Contribution margin $446,400 Less: F
> Nealon Company runs a driving range and golf shop. The budgeted income statement for the coming year is as follows. Required: 1. What is Nealon’s variable cost ratio? Its contribution margin ratio? 2. Suppose Nealon’s
> Consider the following information on four independent companies. Required: Calculate the correct amount for each question mark. Be sure to round any fractional breakeven units up to the next whole number.
> More-Power Company has projected sales of 75,000 regular sanders and 30,000 mini-sanders for next year. The projected income statement is as follows: Required: 1. Set up the given income statement on a spreadsheet (e.g., Excel®). Then, substit
> Refer to Brief Exercise 8-1, through Requirement 1. Smart Strike requires ending inventory of product to equal 25 percent of the next month’s unit sales. Beginning inventory in January was 2,400 practice soccer balls and 400 match socce
> Aliyah Brown and two of her colleagues are considering opening a law office in a large metropolitan area that would make inexpensive legal services available to those who could not otherwise afford these services. The intent is to provide easy access for
> In 20x1, Fleming Chemicals used the following input combination to produce 55,000 gallons of an industrial solvent: Materials 33,000 lbs. Labor 66,000 hrs. In 20x2, Fleming again planned to produce 55,000 gallons of solvent and was considering two differ
> Khan Company produces handcrafted leather purses. Virtually all of the manufacturing cost consists of materials and labor. Over the past several years, profits have been declining because the cost of the two major inputs has been increasing. Lila Khan, t
> Richins Company is considering the acquisition of a computerized manufacturing system. The new system has a built-in quality function that increases the control over product specifications. An alarm sounds whenever the product falls outside the programme
> Bradford Company, a manufacturer of small tools, implemented lean manufacturing at the end of 20x1. The company’s goal for the year was to increase the ROS to 40 percent of sales. A value stream team was established and began to work on
> Renlund Company is transitioning to a lean manufacturing system and has just finalized two order fulfillment value streams. One of the value streams has two products, and the other has four products. The two-product value stream produces precision machin
> After some detailed polling among the 60, four types of eaters were identified: two types of light eaters and two types of heavy eaters. The consumption patterns for each group are given (slices of pizza, glasses of root beer, and bowls of salad): Light
> Sixty employees (all CPAs) of a local public accounting firm eat lunch at least twice weekly at a very popular pizza restaurant. The pizza restaurant recently began offering discounts for groups of 15 or more. Groups would be seated in a separate room, s
> In 20x3, Jack Carter, president of Kartel, requested that environmental costs be assigned to the two major products produced by the company. He felt that knowledge of the environmental product costs would help guide the design decisions that would be nec
> In March, Nashler Company produced 163,200 units and had the following actual costs: Direct materials $1,170,000 Direct labor 258,000 Supplies 38,100 Maintenance 30,960 Power 29,300 Supervision 99,450 Depreciation 76,000 Other overhead 244,300 Required:
> The following environmental cost reports for 20x3, 20x4, and 20x5 (year end December 31) are for the Communications Products Division of Kartel, a telecommunications company. At the end of 20x2, Kartel committed itself to a continuous environmental impro
> In the environmental benefits section of the report, three types of benefits are listed: income, savings, and cost avoidance. Now, consider the following data for selected items for a four-year period: The engineering design costs were incurred to redesi
> The following items are listed in an environmental financial statement (issued as part of an environmental progress report): Environmental benefits (savings, income, and cost avoidance): • Ozone-depleting substances cost reductions • Hazardous waste disp
> At the beginning of 20x2, Heber Company, an international telecommunications company, embarked on an environmental improvement program. The company set a goal to have all its facilities ISO 14001 registered by 20x5. (There are 60 facilities worldwide.) T
> Iona Company, a large printing company, is in its fourth year of a five-year, quality improvement program. The program began in 20x0 with an internal study that revealed the quality costs being incurred. In that year, a five-year plan was developed to lo
> In 20x1, Antonio Flores, president of Carbondale Electronics, received a report indicating that quality costs were 31 percent of sales. Faced with increasing pressures from imported goods, Antonio resolved to take measures to improve the overall quality
> Paper Products Division produces paper diapers, napkins, and paper towels. The divisional manager has decided that quality costs can be minimized by distributing quality costs evenly among the four quality categories and reducing them to no more than 5 p
> In 20x5, Major Company initiated a full-scale, quality improvement program. At the end of the year, Amelia Hoxha, the president, noted with some satisfaction that the defects per unit of product had dropped significantly compared to the prior year. She w
> Recently, Ulrich Company received a report from an external consulting group on its quality costs. The consultants reported that the company’s quality costs total about 21 percent of its sales revenues. Somewhat shocked by the magnitude
> Wayne Johnson, president of Banshee Company, recently returned from a conference on quality and productivity. At the conference, he was told that many American firms have quality costs totaling 20 to 30 percent of sales. He, however, was skeptical about
> Nashler Company has the following budgeted variable costs per unit produced: Direct materials $7.20 Direct labor 1.54 Variable overhead: Supplies 0.23 Maintenance 0.19 Power 0.18 Budgeted fixed overhead costs per month include supervision of $98,000, dep
> Classify the following quality costs as prevention, appraisal, internal failure, or external failure. Also, label each cost as variable or fixed with respect to sales volume. 1. Quality engineering 2. Scrap 3. Product recalls 4. Returns and allowances be
> Gaston Company manufactures furniture. One of its product lines is an economy-line kitchen table. During the last year, Gaston produced and sold 100,000 units for $100 per unit. Sales of the table are on a bid basis, but Gaston has always been able to wi
> Panguitch Company manufactures a component for tablet computers. Weight and durability of the component are the two most important quality characteristics for the tablet manufacturers. With respect to the weight dimension, the component has a target valu
> Gabrielle Alvarez, president of Oliver Company, was concerned with the trend in sales and profitability. The company had been losing customers at an alarming rate. Furthermore, the company was barely breaking even. Investigation revealed that poor qualit
> At the beginning of the last quarter of 20x1, Youngston, Inc., a consumer products firm, hired Maria Carrillo to take over one of its divisions. The division manufactured small home appliances and was struggling to survive in a very competitive market. M
> Mulhall, Inc., has a JIT system in place. Each manufacturing cell is dedicated to the production of a single product or major subassembly. One cell, dedicated to the production of mopeds, has four operations: machining, finishing, assembly, and qualifyin
> Auf legger, Inc., manufactures a product that experiences the following activities (and times): Required: 1. Compute the MCE for this product. 2. A study lists the following root causes of the inefficiencies: poor quality components from suppliers, lack
> Lander Parts, Inc., produces various automobile parts. In one plant, Lander has a manufacturing cell with the theoretical capability to produce 450,000 fuel pumps per quarter. The conversion cost per quarter is $9,000,000. There are 150,000 production ho
> The following strategic objectives have been derived from a strategy that seeks to improve asset utilization by more careful development and use of its human assets and internal processes: a. Increase revenue from new products. b. Increase implementation
> Refer to the data in Problem 13-16. 1. Express Mejorar’s strategy as a series of if-then statements. What does this tell you about Balanced Scorecard measures? 2. Prepare a strategy map that illustrates the relationships among the likel
> Khloe Company imports gift items from overseas and sells them to gift shops and department stores throughout the United States. Khloe Company provided the following information: a. The October 31 balance in the cash account is $53,817. b. All sales are o
> Douglas Davis, controller for Marston, Inc., prepared the following budget for manufacturing costs at two different levels of activity for 20X1: During 20X1, Marston worked a total of 80,000 direct labor hours, used 250,000 machine hours, made 32,000 mov
> Kelly Gray, production manager, was upset with the latest performance report, which indicated that she was $100,000 over budget. Given the efforts that she and her workers had made, she was confident that they had met or beat the budget. Now, she was not
> Tidwell, Inc., has two plants that manufacture a line of wheelchairs. One is located in Dallas, and the other in Oklahoma City. Each plant is set up as a profit center. During the past year, both plants sold their tilt wheelchair model for $1,782. Sales
> Angie Ramirez, vice president of Dunn Company (a producer of plastic products), has been supervising the implementation of an activity-based cost management system. One of Angie’s objectives is to improve process efficiency by improving the activities th
> Joseph Hansen, president of Electronica, Inc., was concerned about the end-of-the-year marketing report that he had just received. According to Asha Kumar, marketing manager, a price decrease for the coming year was again needed to maintain the company&a
> Novo, Inc., wants to develop an activity f lexible budget for the activity of moving materials. Novo uses eight forklifts to move materials from receiving to stores. The forklifts are also used to move materials from stores to the production area. The fo
> Volante, Inc., supplies wheels for a large bicycle manufacturing company. The bicycle company has recently requested that Volante decrease its delivery time. Volante made a commitment to reduce the lead time for delivery from seven days to one day. To he
> Joseph Fox, controller of Thorpe Company, has been in charge of a project to install an activity based cost management system. This new system is designed to support the company’s efforts to become more competitive. For the past six wee
> Reddy Heaters, Inc., produces insert heaters that can be used for various applications, ranging from coffeepots to submarines. Because of the wide variety of insert heaters produced, Reddy uses a job-order costing system. Product lines are differentiated
> Southward Company has implemented a JIT flexible manufacturing system. Nia Johnson, controller of the company, has decided to reduce the accounting requirements given the expectation of lower inventories. For one thing, she has decided to treat direct la
> Shalimar Company manufactures and sells industrial products. For next year, Shalimar has budgeted the follow sales: Quarter 1 $4,600,000 Quarter 2 5,100,000 Quarter 3 5,000,000 Quarter 4 7,600,000 In Shalimar’s experience, 10 percent of sales are paid in
> Mott Company recently implemented a JIT manufacturing system. After one year of operation, Heidi Burrows, president of the company, wanted to compare product cost under the JIT system with product cost under the old system. Mott’s two p
> Homer Manufacturing produces different models of 22-calibre rifles. The manufacturing costs assigned to its economy model rifle before and after installing JIT are given in the following table. Cell workers do all maintenance and are also responsible for
> Jolene Askew, manager of Feagan Company, has committed her company to a strategically sound cost reduction program. Emphasizing life-cycle cost management is a major part of this effort. Jolene is convinced that production costs can be reduced by paying
> Nico Parts, Inc., produces electronic products with short life cycles (of less than two years). Development has to be rapid, and the profitability of the products is tied strongly to the ability to find designs that will keep production and logistics cos
> Pawnee Works makes machine parts for manufacturers of industrial equipment. Over the years, Pawnee has been a steady and reliable supplier of quality parts to medium- and small-machine manufacturers. Michael Murray, owner of Pawnee Works, once again was
> Maxwell Company produces a variety of kitchen appliances, including cooking ranges and dishwashers. Over the past several years, competition has intensified. In order to maintain—and perhaps increase—its market share,
> Moss Manufacturing produces several types of bolts. The products are produced in batches according to customer order. Although there are a variety of bolts, they can be grouped into three product families. The number of units sold is the same for each fa
> Cortalo, Inc., manufactures riding lawn mowers. Cortalo uses JIT manufacturing and carries insignificant levels of inventory. Cortalo manufactures everything needed for the riding lawn mowers except for the engines. Several sizes of mowers are produced.
> Evans, Inc., has a unit-based costing system. Evans’s Miami plant produces 10 different electronic products. The demand for each product is about the same. Although they differ in complexity, each product uses about the same labor time and materials. The
> Phil DaStands is the athletic director at Rarelly Wynn University. The university experienced a decline in athletic event attendance over the past several years, resulting in decreasing Athletic Department revenues from ticket, concession, and merchandis
> Coral Seas Jewelry Company makes and sells costume jewelry. For the coming year, Coral Seas expects sales of $15.9 million and cost of goods sold of $8.75 million. Advertising is a key part of Coral Seas’ business strategy, and total marketing expense fo
> Grate Care Company specializes in producing products for personal grooming. The company operates six divisions, including the Hair Products Division. Each division is treated as an investment center. Managers are evaluated and rewarded on the basis of RO
