Fenzel Slide Oil produces a lubricant, SlickTone, which is used on trombone slides. Information about the budget for the year 2018 is as follows: 1. The company expects to sell 7,000 bottles of SlickTone in the first quarter, 6,000 in the second quarter, 10,000 in the third quarter, and 8,000 in the fourth quarter. 2. A bottle of SlickTone requires 6 ounces of Chemical A and 3.5 ounces of Chemical B. 3. For the first, second, and third quarters of 2018, the desired ending inventory of finished goods is equal to 8 percent of next quarter’s sales, whereas the desired ending inventory for material is 12 percent of next quarter’s production requirements. 4. There are 1,600 bottles of SlickTone, 4,800 ounces of Chemical A, and 2,400 ounces of Chemical B on hand at the beginning of the first quarter. 5. At the end of the fourth quarter, the company must have 1,000 bottles of SlickTone, 8,000 ounces of Chemical A, and 4,000 ounces of Chemical B to meet its needs in the first quarter of 2019. 6. The cost of Chemical A is $1.05 per ounce, the cost of Chemical B is $0.15 per ounce, and the selling price of SlickTone is $12.00 per bottle. 7. The cost of direct labor is $0.55 per bottle, and the cost of variable overhead is $0.75 per bottle. Fixed manufacturing overhead is $3,000 per quarter. 8. Variable selling and administrative expense is 4 percent of sales and fixed selling and administrative expense is $3,000 per quarter. Required: a. Prepare a production budget for each quarter of 2018. b. Prepare a material purchases budget for each quarter of 2018. c. Prepare a budgeted income statement for each quarter of 2018 (ignore taxes).
> Consider the supply chain involved when a customer orders a book from Amazon. Identify the push/pull boundary and two processes each in the push and pull phases.
> What types of networks are best suited to highly differentiated products?
> Consider a firm such as Ford, with more than 150 facilities worldwide. List the pros and cons of having many facilities and why it may or may not be suitable for the automobile industry.
> Consider a firm such as Dell, with very few production facilities worldwide. List the pros and cons of this approach and why it may or may not be suitable for the computer industry.
> McMaster-Carr sells maintenance, repair, and operations equipment from five warehouses in the United States. WW Grainger sells products from more than 350 retail locations, supported by several warehouses. In both cases, customers place orders using the
> Consider the supply chain involved when a customer purchases a book at a bookstore. Identify cycles in this supply chain and the location of the push/pull boundary.
> Amazon.com has built new warehouses as it has grown. How does this change affect various cost and response times in the Amazon.com supply chain?
> How is the rise in transportation costs likely to affect global supply chain networks?
> How do import duties and exchange rates affect the location decision in a supply chain?
> How do the location and size of warehouses affect the performance of a firm such as Amazon.com? What factors should Amazon.com take into account when making this decision?
> Consider the sale of home improvement products at Home Depot or a chain of hardware stores such as True Value. Who can extract the greatest benefit from going online? Why?
> Is e-business likely to be more beneficial in the early part or the mature part of a product’s life cycle? Why?
> Why has e-business been more successful in the computer hardware industry compared to the grocery industry? In the future, how valuable is e-business likely to be in the computer hardware industry?
> In the future, do you see the value added by distributors decreasing, increasing, or staying about the same?
> What types of distribution networks are typically best suited for commodity items?
> A distributor has heard that one of the major manufacturers from which it buys is considering going direct to the consumer. What can the distributor do about this? What advantages can it offer the manufacturer that the manufacturer is unlikely to be able
> What are some strategic planning and operational decisions that must be made by an apparel retailer like The Gap?
> A specialty chemical company is considering expanding its operations into Brazil, where five companies dominate the consumption of specialty chemicals. What sort of distribution network should this company use?
> Why should an e-business such as Amazon.com build more warehouses as its sales volume grows?
> Amazon.com sells books, music, electronics, software, toys, and home improvement products online. In which product category does e-business offer the greatest advantage compared with a retail store chain? In which product category does e-business offer t
> What differences in the retail environment may justify the fact that the fast-moving consumer goods supply chain in India has far more distributors than in the United States?
> On which supply chain drivers should a firm trying to shrink its cash-to-cash cycle focus?
> How can the full set of logistical and cross-functional drivers be used to create strategic fit for a PC manufacturer targeting both time sensitive and price conscious customers?
> What are some industries in which products have proliferated and life cycles have shortened? How has the supply chains in these industries adapted?
> How can a home delivery company like Peapod use pricing of its delivery services to improve its profitability?
> Motorola has gone from manufacturing all its cell phones in-house to almost completely outsourcing the manufacturing. What are the pros and cons of the two approaches?
> How could an industrial supplies distributor use information to increase its responsiveness?
> Why should a firm like Dell take into account total supply chain profitability when making decisions?
> How could a bicycle manufacturer increase responsiveness through its facilities?
> How could an auto manufacturer use transportation to increase the efficiency of its supply chain?
> Would you expect a brick-and-mortar retailer or an online retailer to have a higher asset turnover? Which supply chain drivers impact asset turnover?
> How could a grocery store use inventory to increase the responsiveness of the company’s supply chain?
> Give arguments to support the statement that Wal-Mart has achieved very good strategic fit between its competitive and supply chain strategies.
> Reconsider the previous four questions for other companies such as Amazon.com, a supermarket chain, and auto manufacturer, and a discount retailer such as Wal-Mart.
> How can Nordstrom expand the scope of the strategic fit across the supply chain?
> What level of responsiveness would be most appropriate for Nordstrom’s supply chain? What should the supply chain be able to do particularly well?
> Where would you place the demand faced by Nordstrom on the implied demand uncertainty spectrum? Why?
> How would you characterize the competitive strategy of a high-end department store chain such as Nordstrom? What are the key customer needs that Nordstrom aims to fill?
> Consider the purchase of a can of soda at a convenience store. Describe the various stages in the supply chain and the different flows involved.
> Explain the advantages of using market price as a transfer price.
> What does responsibility accounting imply with respect to holding managers responsible for standard cost variances?
> The Xtreme Board Company manufactures skateboards. The president of the company, Greg Conklin, believes: “You get what you measure!” Accordingly, he would like to include a number of nonmonetary measures related to factors that affect the success of the
> The Champion Chemical Company has a number of divisions that produce and market paints, varnishes, and other chemical products. The company also has a small plant that manufactures metal containers for the divisions’ various products. The plant, which ha
> The variance summary for Bell Computers is as follows: Required: Prepare a journal entry to close the variance accounts at Bell Computers. Assume that the total variance is not material and is closed to cost of goods sold. Bell Computers Variance Su
> What is the problem with using only financial measures of performance?
> Distinguish among cost centers, profit centers, and investment centers.
> How could costly duplication of activities occur in a decentralized operating environment?
> The strategy for success at Sassy Jeans calls for rapid growth, a limited number of units for each design to enhance exclusivity, perfect fit, on-time delivery to customers, retaining employees who contribute to innovation, and control of inventory. Req
> In the fourth quarter of 2017, Eurofit Cycling, a bike shop, had the following net income: Sales…………………â
> Barret Hospital is interested in analyzing overhead related to laundry services. The hospital administrator estimated that monthly fixed costs would be $90,000, and variable costs would be $3.00 per patient day. During the month of September, the hospita
> What is management by exception?
> What factors should be considered when investigating variances?
> Department managers at Nadaire Department Stores are allowed considerable discretion in sourcing and pricing products based on local tastes and competition. They are also responsible for staffing their departments. Required: Suggest two financial perfor
> The Lyndstrom Glass Company is a manufacturer of automotive glass and glass products used in the home. Discuss the advantages of forming two divisions (an Automotive division and a Home Products division) and allowing the division managers substantial de
> A major software company has established customer service centers in India, Ireland, and Israel to provide support to its U.S. customers with foreign operations. The prices that the company charges for software reflect estimated costs in operating the ce
> At Frigicor, the standard quantity of labor is 22 hours per refrigeration unit. The standard wage rate is $35. In July, the company produced 75 refrigeration units and incurred 2,100 labor hours at a cost of $69,000. Required: Calculate the labor rate v
> At Frigicor, the standard price for the M640 electrical relay (a component used in the production of a commercial refrigeration unit) is $57. Standards call for 2.5 relays per unit of finished product. In July, the company purchased 150 relays for $8,900
> LEO Corporation has five divisions, each of which is managed by a divisional president who reports to the chief executive officer of LEO. LEO is decentralized, and divisional presidents are granted authority to make investments under $3,000,000 without p
> What role do standard costs play in controlling the operations of a business?
> Super Clean produces and sells stain remover. Information about the budget for the year 2018 is as follows: 1. The company expects to sell 57,000 bottles of stain remover in the first quarter, 65,000 in the second quarter, 105,000 in the third quarter,
> Overhead volume variances do not signal that overhead costs are in or out of control. Do you agree? Explain.
> How might a favorable material price variance or a favorable labor rate variance be related to an unfavorable material quantity variance?
> How are standard costs developed for direct materials, direct labor, and manufacturing overhead?
> List four advantages related to decentralization of a firm’s operations.
> Poseidon Electronics operates 10 stores in Washington, Oregon, and California, selling consumer electronics including stereo equipment and home theater systems. The following financial information is available for 2018 and 2017: Required: a. Although ne
> Atomic Electronics is considering instituting a plan whereby managers will be evaluated and rewarded based on a measure of economic value added (EVA). Before adopting the plan, management wants you to calculate what EVA will be in 2018, based on financia
> Consider the following information for Executive Electronics: Required: a. Evaluate the company in terms of residual income (RI), which is equivalent to EVA since there are no adjustments for accounting distortions. b. While income has increased in fis
> Consider the following information for McKinley and Son: Required: a. Evaluate the company in terms of ROI. b. While income has increased in fiscal 2018, is it clear that the company’s performance has improved? 12/31/2017 12/31/20
> Top management of the Gates Corporation is trying to construct a performance evaluation system to use to evaluate each of its three divisions. This past year’s financial data are as follows: Required: a. How would the divisions be rank
> Sarah Jones, the manager of the Teen division of the Eve Clothing Company, was evaluating the acquisition of a new embroidery machine. The budgeted operating income of the Teen division was $5,000,000 with total assets of $33,000,000 and noninterest-bea
> Pinnacle Engineering, an acclaimed chemical engineering team of engineers, chemists, and other scientists, had the following income in 2017: The following changes are expected in 2018: 1. The company is expecting a 12 percent increase in revenues becau
> Montana Woolen Products has two divisions: a Fabric division that manufactures woolen fabrics and a Clothing division that manufactures woolen dresses, coats, shirts, and accessories. All fabric used by the Clothing division is supplied by the Fabric div
> The City of Medina Park operates a plumbing and electrical maintenance department, responsible for maintaining all water and electric service functions in buildings owned by the city. The city administration is concerned about the rising costs of the mai
> The Leviathan Steel Company has a coal-mining subsidiary in West Virginia. A substantial amount of the coal produced by the subsidiary is used by Leviathan’s steel foundries located in Pennsylvania. Required: a. Recommend and defend a transfer price (m
> Kasper Industries produces custom molds that are used by producers of molded products (e.g., ski boots and snowboards). Many of its customers use just-in-time (JIT) manufacturing, and on-time delivery of the molds is critical because production is halted
> Consider the following data related to the financial performance of Royal Company: Between 2015 and 2018, income increased by 63 percent, showing a significant increase in income each year. In light of this performance, the board of directors has awarde
> The Spectrum Book Company has two divisions: The Brick and Mortar division sells books through more than 100 bookstores throughout the United States; the Internet division was formed 18 months ago and sells books via the Internet. Data for the past year
> Magellan Materials manufactures metal and plastic gutters for use in commercial and residential construction. Production occurs in two separate plants. Distribution is from a central warehouse, and there is a centrally managed sales office. Both producti
> Bechtel Technical Clothing produces parkas used by arctic explorers, mountain climbers, and people living in Minnesota. The company uses a standard costing system, and standards call for 2.5 yards of material at $55 per yard for each parka. The standard
> The National Battery Company produces a wide variety of batteries for home, automobile, and marine use. One example of its many products is the Road Guardian automobile battery. The standard cost for this battery is as follows: Standard cost, road guardi
> In her review of annual production variances, Amy Abel, CFO of Chanceworth Manufacturing, noted that there was a $80,000 favorable material price variance, a $70,000 unfavorable material quantity variance, an $90,000 favorable labor rate variance, and a
> Modern Healthcare, a group practice clinic with 10 physicians, had the following income in 2017: The following changes are expected in 2018: 1. The clinic is expecting a 2 percent decline in revenues because of increasing pressure from insurance compan
> Xcom Software operates a 24-hour help line to answer customer questions. To control the cost of operations, the company compares the actual time required to answer customer questions with a standard time of 6 minutes per customer call. Monthly bonuses ar
> The Dudley Travel Agency has found that, on average, its travel agents take 2 hours to serve each client and that those travel agents are paid a standard rate of $30 per hour. The following table contains the labor data for the Dudley Travel Agency for 2
> Will Norton, the general manager of Cummings Manufactured Siding, is reviewing a monthly variance summary. The summary reveals a large favorable material price variance and large unfavorable material quantity and labor efficiency variances. All other var
> Recycled Plastics manufactures a plastic dimensional lumber product from recycled plastic milk jugs. The company purchases consumer-recycled milk jugs in 700-pound bales and then shreds them into small pieces in its grinding department. Once ground, the
> Northwest Medical Testing draws blood samples from approximately 1,500 clients each month. The standard time for a technician to draw and prepare a blood sample for testing is 20 minutes. The standard wage rate for technicians is $40 per hour. During Aug
> The Antikron Company produces rubber seals used in the aerospace industry. Standards call for 3 pounds of material at $2.50 per pound for each seal. The standard cost for labor is 1.5 hours at $15 per hour. Standard overhead is $10 per unit. For the year
> Bowser Products operates a small plant in New Mexico that produces dog food in batches of 1,500 pounds. The product sells for $6 per pound. Standard costs for 2018 are: Standard direct labor cost = $15 per hour Standard direct labor hours per batch = 1
> Selzer & Hollinger, a low-cost legal firm, has set time standards for each of the two basic legal services it offers, which include the following: Required: a. Calculate the labor rate and labor efficiency variances for attorneys doing business inco
> Dante’s Protein Powder produces a dietary supplement. The standard cost of producing one unit is: Material (1.25 pounds × $2.50…………………. $ 3.13 Labor (1.2 hours × $10)…………………………….12.00 Overhead………………………………………………..11.60 Total………………………………………………………$26.73 Sta
> XO-20 is an oil-based product used to remove rust on bolts and nuts that are stuck. Its accounting system uses standard costs. The standards per .5-liter can of solution call for 0.75 liters of material and 4 hours of labor. (0.75 liters of material are
> The World Restaurant is situated in a local shopping center and serves food of many different cultures. It also caters private functions for companies. The results of operations for the fourth quarter of 2017 are as follows: Sales……………………………………………………………
> The chief operating officer of the Wisconsin Corporation is considering the effect of depreciation on the company’s ROI. In the most recent year, net operating profit after taxes was $35,000,000 and investment (total assets of $460,000,000 less nonintere
> K&J Web Designs creates websites for businesses. K&J has a basic website creation package that it offers for a flat fee of $750. This package includes everything that a business would need to have a simple but functional website built. K&J estimates that
> Sarah Aiken is the owner of Pretty Paws, a dog-grooming service. At standard, it takes 1 hour to groom each dog. During the month of October, it took Pretty Paws employees 350 hours to groom 300 dogs, at a total labor cost of $4,890. In November, employe
> T&C Tees is a manufacturer of T-shirts. The standard amount of 100% cotton jersey fabric used to make each T-shirt is 2.3 yards. The standard price per yard of the fabric is $2.75. During last month, T&C purchased 6,200 yards of the jersey fabric for $13
> Hank’s is a chain of 55 coffee shops. The standard amount of ground coffee per cup is .75 ounces. During the month of September, the company sold 325,000 cups of coffee (reported via electronic cash registers), and the 55 shops reported using 16,800 poun
> The following income statements and other information are available for the Schneider Company: Required: Calculate EVA for 2017. Assume that for purposes of calculating EVA, the company capitalizes research and development expenditures and amortizes the
> Consider two companies: Quantum Products and Aquafin Products. Senior managers at Quantum Products are evaluated in terms of increases in profit. In fiscal 2017, Quantum Products had a net operating profit after taxes of $4,600,000 and invested capital o
