Question: Lee SA manufactures various types of colour
Lee SA manufactures various types of colour laser printer in a highly automated facility with high fixed costs. The market for laser printers is competitive. The various colour laser printers on the market are comparable in terms of features and price. Lee believes that satisfying customers with products of high quality at low costs is key to achieving its target profitability. For 2019, Lee plans to achieve higher quality and lower costs by improving yields and reducing defects in its manufacturing operations. Lee will train workers and encourage and empower them to take the necessary actions. Currently, a significant amount of Lee’s capacity is used to produce products that are defective and cannot be sold. Lee expects that higher yields will reduce the capacity that Lee needs to use to manufacture products. Lee does not anticipate that improving manufacturing will automatically lead to lower costs because Lee has high fixed costs. To reduce fixed costs per unit, Lee could lay oemployees and sell equipment or use the capacity to produce and sell more of its current products or improved models of its current products. Lee’s balanced scorecard for the just-completed financial year 2018 is shown below. For brevity, the initiatives taken under each objective are omitted. 
Required 1. Was Lee successful in implementing its strategy in 2018? Explain. 2. Is Lee’s balanced scorecard useful in helping Lee understand why it did not reach its target market share in 2018? If it is, explain why. If it is not, explain what other measures you might want to add under the customer perspective and why. 3. Would you have included some measure of employee satisfaction in the learning and growth perspective and new product development in the internal business process perspective? That is, do you think employee satisfaction and development of new products are critical to Lee for implementing its strategy? Why or why not? Explain briefly. 4. What problems, if any, do you see in Lee’s improving quality and significantly downsizing to eliminate unused capacity?
> Espasso SA has just finished production of Tornado, the latest action film directed by Domingos Vieira and starring Arnaldo Moura and Victoria Rebello. The total production cost to Espasso was €5 million. All the production personnel and actors on Tornad
> Koninklijke BolsWessanen NV has fixed costs of €300 000 and a variable-cost percentage of 80%. The company earns net profit of €84 000 in 2018. The income tax rate is 40%. Required Calculate: (1) operating profit (2) contribution margin (3) total revenu
> Knitwear Ltd is considering three countries for the sole manufacturing site of its new sweater: Cyprus, Turkey and Ireland. All sweaters are to be sold to retail outlets in Ireland at €32 per unit. These retail outlets add their own mark
> Ella Ltd recently started to manufacture and sell product DG. The variable cost of product DG is £4 per unit and the total weekly fixed costs are £18 000. The company has set the initial selling price of product DG by adding a
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> Grünberg Lehrmittelverlag GmbH manufactures and sells pens. Present sales output is 5 million annually at a selling price of €0.50 per unit. Fixed costs are €900 000 per year. Variable costs are €0.30 per unit. Required (Consider each case separately.)
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> GF is a company that manufactures clothes for the fashion industry. The fashion industry is fast moving and consumer demand can change quickly due to the emergence of new trends. GF manufactures three items of clothing: the S, the T and the B using the s
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> The Ville de Genève, Switzerland, makes a SFr 400 000 lump-sum budget appropriation to an agency to conduct a counseling programmed for drug addicts for a year. All of the appropriation is to be spent. The variable costs for drug prescriptions average SF
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> The manager of a tourist attraction is considering whether to open on 1 January, a day when the attraction has, in previous years, been closed. The attraction has a daily capacity of 1000 visitors. If the attraction opens for business on that day it will
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> CombraiInformatique (CI) manufactures and sells computers and computer peripherals to several nationwide retail chains. Marcel Proust is the manager of the printer division. Its two largest selling printers are P-41 and P-63. The manufacturing cost of ea
> It is the end of 2019. Ginnungagap Oy began operations in January 2018. The company is so named because it has no variable costs. All its costs are fixed; they do not vary with output. Ginnungagap is located on the bank of a river and has its own hydroel
> In 2018, the Montpazier brewery of Bières Ronsard showed these results: The Montpazier brewery had actual costs of: The sales division of Bières Ronsard purchased 2 400 000 barrels in 2018 at the €68 per barrel ra
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> Espasso is negotiating for Tornado 2, a sequel to its mega-blockbuster Tornado. This negotiation is proving more difficult than for the original movie. The budgeted production cost (excluding payments to the director Vieira and the stars Moura and Rebell
> Svenborg AS manufactures and sells wide-screen television sets. It uses an actual-costing system, in which unit costs are calculated on a monthly basis. Data relating to January, February and March of 2018 are: The selling price per unit is DKr 2500. Re
> Starzmann GmbH assembles and sells motor vehicles. It uses an actual-costing system, in which unit costs are calculated on a monthly basis. Data relating to April and May of 2018 are: The selling price per motor vehicle is €24 000. Requ
> Overhead cost issues (From CIMA Management Accounting Pillar Managerial Level 1 Paper, November 2006) (25 minutes) X Ltd has two production departments, Assembly and Finishing, and two service departments, Stores and Maintenance. Stores provide the follo
> Absorption vs marginal costing (From ACCA Financial Information for Management, Part1, June 2004) (40 minutes) Langdale Ltd is a small company manufacturing and selling two different products – the Lang and the Dale. Each product passes
> E plc provides a computer upgrading, servicing and repair facility to a variety of business and personal computer users. The management team has managed the business to date by using a standard costing and budgetary control system. However, the team has
> Mayfair Limited currently subsidizes cafeteria services for its 200 employees. Mayfair is in the process of reviewing the cafeteria services as cost-cutting measures are needed throughout the organization to keep the prices of its products competitive.
> Spring Distribution has decided to analyze the profitability of another five customers (see pages 373 of the text). It buys bottled water at €0.50 per bottle and sells to wholesale customers at a list price of €0.60 per
> Wright Air is a no-frills airline that services the Midwest. Its mission is to be the only short-haul, low-fare, high-frequency, point-to-point carrier in the Midwest. However, there are several large commercial carriers offering air transportation, and
> Comtrex Company provides cable and internet services in the Greater Boston area. There are many competitors that provide similar services. Comtrex believes that the key to financial success is to offer a quality service at the lowest cost. Comtrex curren
> Refer to the information in Exercise 21.18 in answering the following requirements; there is no connection between the situations. Required 1. An outside contractor o ffers to do the finishing operation for 12 000 units at €10 per unit, double the €5 p
> Salamanca SA manufactures filing cabinets in two operations: machining and finishing. Additional information is as follows. Each cabinet sells for €72 and has direct materials costs of €32 incurred at the start of the m
> Range-Tout SARL builds and distributes industrial storage racks using a just-in-time system and maintaining minimal stocks. Range-Tout’s earnings increased sharply in 2017 and earnings-based bonuses were paid to the management sta for the first time in
> Arjun Manraj runs a print shop. Manraj requires 100 000 boxes of printing paper each year. He wants his suppliers to deliver the boxes on a JIT basis in order quantities of 400 boxes. Papyrus Ltd currently supplies the paper to Manraj. Papyrus charges
> Keep-Kool makes air conditioners. It purchases 12 000 units of a particular type of compressor part, CU29, each year at a cost of £50 per unit. Keep-Kool requires a 12% annual return on investment. In addition, relevant carrying costs (for insurance, mat
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> Assume the same facts as in Exercise 21.11. Now assume that there is only one trigger point, the completion of good finished units of product, which are debited to Finished Goods Control at standard costs. Any under- or overallocated conversion costs are
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> Assume the same facts as in Exercise 21.11. Assume that the second trigger point for Papadopoulos is the sale – rather than the production – of finished units. Also, the Stock Control account is confined solely to direct materials, whether these material
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> Mannklein AG is a major manufacturer of metal-cutting machines. It has plants in Frankfurt and Stuttgart. The managers of these two plants have different manufacturing philosophies. LiisaKurunmäki, the recently appointed manager of the Fra
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> TurunTelelaitosOy manufactures cordless telephones. TurunTelelaitos is planning to implement a JIT production system, which requires annual tooling costs of €150 000. TurunTelelaitos estimates that the following annual benefits would arise from JIT produ
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> Krügsmann AG has a plant that manufactures transistor radios. The production time is only a few minutes per unit. The company uses a just-in-time production system and a back flush costing system with two trigger points for journal entries
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> Meredith Ltd makes a special-purpose machine D4H used in the textile industry. Meredith has designed the D4H machine for 2018 to be distinct from its competitors. It has been generally regarded as a superior machine. Meredith presents the following data
> PB is a car production company. PB uses a system of standard costing to set its budgets. Budgets are set annually by the Finance department and approved by the Board of Directors of PB. The Finance department prepares variance reports each month for revi
> AST is a grocery and general merchandise retail group. AST has supermarkets located in most towns and cities in its home country. Over the last few years, profits have fallen and AST has recognized that it has paid insufficient attention to customer car
> TSH provides courses for students who are studying for accountancy examinations. The accountancy education sector is extremely competitive; it is dominated by a small number of national organizations but there is also a large number of smaller regional t
> YY is a large banking organization. It has a branch in most of the towns in the country in which it operates. The bank’s business is mainly concerned with private individuals. It is a very ‘traditional’ bank that offers only ‘over the counter’ services d
> Jamair was founded in September 2007 and is one of a growing number of low-cost airlines in the country of Shania. Jamair’s strategy is to operate as a low-cost, high-efficiency airline, and it does this by: ● operating mostly in secondary cities to redu
> Beckley Hill (BH) is a private hospital carrying out two types of procedures on patients. Each type of procedure incurs the following direct costs: BH currently calculates the overhead cost per procedure by taking the total overhead cost and simply divi
> Alexon SL is an electronics business with eight product lines. Profit data for one of the products (XT-107) for the month just ended (June 2018) are as follows: Xuclà Mecà niquesFluvià SA, an instruments company, h
> Let y be any response variable and x a binary explanatory variable. Let {(xi, yi): i = 1, . . . , n} be a sample of size n. Let n0 be the number of observations with xi = 0 and n1 the number of observations with xi = 1. Let y0 be the average of the yi wi
> Suppose that the linear model, written in matrix notation, y = X + u satisfies Assumptions E.1, E.2, and E.3. Partition the model as y = X1b1 + X2ï€ ï¢2 + u, where X1 is n * (k1 + 1) and X2 is n * k2. (i)
> Assume that the model y = X + u satisfies the Gauss-Markov assumptions and let ^ be the OLS estimator of . Let Z = G(X) be an n * (k + 1) matrix function of X and assume that Z’X[a (k + 1) * (k + 1) matrix] is nonsingular. Define a new estimator of
> Let ^ be the OLS estimate from the regression of y on X. Let A be a (k + 1) * (k + 1) nonsingular matrix and define zt ; xtA, t = 1, . . . , n. Therefore, zt is 1 * (k + 1) and is a nonsingular linear combination of xt. Let Z be the n * (k + 1) matrix w
> Let xt be the 1 * (k + 1) vector of explanatory variables for observation t. Show that the OLS estimator ^ can be written as Dividing each summation by n shows that ^ is a function of sample averages.
> Let a be an n * 1 nonrandom vector and let u be an n * 1 random vector with E(uu’) = In. Show that E[tr(auu’a’)] = Σni=1a2i .
> Let A be an n * n symmetric, positive definite matrix. Show that if P is any n * n nonsingular matrix, then P’AP is positive definite.
> (i) Use the definition of inverse to prove the following: if A and B are n * n nonsingular matrices, then (AB)-1 = B-1A-1. (ii) If A, B, and C are all n * n nonsingular matrices, find (ABC)-1 in terms of A-1, B-1, and C-1.
> Let X be any n * k matrix. Show that X’X is a symmetric matrix.
> Let X be an n * k matrix partitioned as X = (X1 X2), where X1 is n * k1 and X2 is n * k2. (i) Show that What are the dimensions of each of the matrices? (ii) Let b be a k * 1 vector, partitioned as where b1 is k1 * 1 and b2 is k2 * 1. Show that
> Use the data in DISCRIM to answer this question. (See also Computer Exercise C8 in Chapter 3.) (i) Use OLS to estimate the model Log(psoda) = 0 + 1prpblck + 2log(income) + 3prppov + u, and report the results in the usual form. Is ^1 statistically di
> (i) Find the product AB using (ii) Does BA exist?
> Suppose that a military dictator in an unnamed country holds a plebiscite (a yes/no vote of confidence) and claims that he was supported by 65% of the voters. A human rights group suspects foul play and hires you to test the validity of the dictator’s cl
> The new management at a bakery claims that workers are now more productive than they were under old management, which is why wages have “generally increased.” Let Wbi be Worker i’s wage under the old
> Let Y denote a Bernoulli(() random variable with 0 < ( < 1. Suppose we are interested in estimating the odds ratio, = (/(1 - (), which is the probability of success over the probability of failure. Given a random sample {Y1, . . . , Yn}, we know that a
> Let Y denote the sample average from a random sample with mean m and variance 2. Consider two alternative estimators of m: W1 = [(n – 1)/n]Y and W2 = Y/2. (i) Show that W1 and W2 are both biased estimators of m and find the biases. What happens to the b
> Suppose that between their first and second years in college, 400 students are randomly selected and given a university grant to purchase a new computer. For student i, yi denotes the change in GPA from the first year to the second year. If the average c
> Let Y1, Y2, Y3, and Y4 be independent, identically distributed random variables from a population with mean m and variance 2. Let Y = ¼(Y1 + Y2 + Y3 + Y4) denote the average of these four random variables. (i) What are the expected value and variance of
> (i) Let X be a random variable taking on the values -1 and 1, each with probability 1/2. Find E(X) and E(X2). (ii) Now let X be a random variable taking on the values 1 and 2, each with probability 1/2. Find E(X) and E(1/X). (iii) Conclude from parts (i
> Consider the line y = 0 + 1x. (i) Let (x1, y1) and (x2, y2) be two points on the line. Show that (x, y) is also on the line, where x = (x1 + x2)/2 is the average of the two values and y = (y1 + y2)/2. (ii) Extend the result of part (i) to n points on t
> Let X denote the annual salary of university professors in the United States, measured in thousands of dollars. Suppose that the average salary is 52.3, with a standard deviation of 14.6. Find the mean and standard deviation when salary is measured in do
> In Problem 2 in Chapter 4, we added the return on the firm’s stock, ros, to a model explaining CEO salary; ros turned out to be insignificant. Now, define a dummy variable, rosneg, which is equal to one if ros Log(salary) = ï
> Suppose the yield of a certain crop (in bushels per acre) is related to fertilizer amount (in pounds per acre) as (i) Graph this relationship by plugging in several values for fertilizer. (ii) Describe how the shape of this relationship compares with a l
> If a basketball player is a 74% free throw shooter, then, on average, how many free throws will he or she make in a game with eight free throw attempts?
> Suppose the following model describes the relationship between annual salary (salary) and the number of previous years of labor market experience (exper): Log(salary) = 10.6 + .027 exper. (i) What is salary when exper = 0? When exper = 5? (ii) Use equati
> Just prior to jury selection for O. J. Simpson’s murder trial in 1995, a poll found that about 20% of the adult population believed Simpson was innocent (after much of the physical evidence in the case had been revealed to the public). Ignore the fact th
> In a random effects model, define the composite error vit = i + uit, where i is uncorrelated with uit and the uit have constant variance 2u and are serially uncorrelated. Define eit = vit - (vi, where ( is given. (i) Show that E(eit) = 0. (ii) Show th
> Suppose that the idiosyncratic errors in (14.4), {uit: t = 1, 2, . . . , T}, are serially uncorrelated with constant variance, 2u. Show that the correlation between adjacent differences, (uit and (ui,t+1, is 2.5. Therefore, under the ideal FE assumption
> The following is a simple model to measure the effect of a school choice program on standardized test performance: score = 0 + 1choice + 2faminc + u1, where score is the score on a statewide test, choice is a binary variable indicating whether a stude
> Assume that u = x, so that the population variation in the error term is the same as it is in x. Suppose that the instrumental variable, z, is slightly correlated with u: Corr(z, u) = .1. Suppose also that z and x have a somewhat stronger correlation:
> Consider the simple regression model y = 0 + 1x + u and let z be a binary instrumental variable for x. Use (15.10) to show that the IV estimator ^1 can be written as ^1 = (y1 - y0)/(x1 - x0), where y0 and x0 are the sample averages of yi and xi over
> Consider a simple time series model where the explanatory variable has classical measurement error: yt = 0 + 1x*t + ut xt = x*t + et, where ut has zero mean and is uncorrelated with x*t and et. We observe yt and xt only. Assume that et has zero mean an
> (i) The variable phsrank is the person’s high school percentile. (A higher number is better. For example, 90 means you are ranked better than 90 percent of your graduating class.) Find the smallest, largest, and average phsrank in the s
> For a large university, you are asked to estimate the demand for tickets to women’s basketball games. You can collect time series data over 10 seasons, for a total of about 150 observations. One possible model is lATTENDt = 0 + 1lPRICEt + 2WINPERCt +
> A simple model to determine the effectiveness of condom usage on reducing sexually transmitted diseases among sexually active high school students is infrate = 0 + 1conuse + 2percmale + 3avginc + 4city + u1, where; infrate = the percentage of sexual
> Use the state-level data on murder rates and executions in MURDER for the following exercise. (i) Consider the unobserved effects model mrdrteit = t + 1execit + 2unemit + i + uit, where t simply denotes different year intercepts and i is the unobs
> Use the data in SCHOOL93_98 to answer the following questions. Use the command xtset schid year to set the cross section and time dimensions. (i) How many schools are there. Does each school have a record for each of the six years? Verify that lavgrexpp
> Use the data in COUNTYMURDERS to answer this question. The data set covers murders and executions (capital punishment) for 2,197 counties in the United States. (i) Consider the model murdrateit = (t + 0execsit + 1execsi,t-1 + 2execsi,t-2 + 3execsi,t
> This question assumes that you have access to a statistical package that computes standard errors robust to arbitrary serial correlation and heteroskedasticity for panel data methods. (i) For the pooled OLS estimates, obtain the standard errors that allo
> Use the data in RENTAL for this exercise. The data on rental prices and other variables for college towns are for the years 1980 and 1990. The idea is to see whether a stronger presence of students affects rental rates. The unobserved effects model is wh
> The purpose of this exercise is to compare the estimates and standard errors obtained by correctly using 2SLS with those obtained using inappropriate procedures. Use the data file WAGE2. (i) Use a 2SLS routine to estimate the equation Log(wage) = 0 + 1
