One large company that has been successful in applying Total Quality Management (TQM) principles in manufacturing reports that it has had less success in applying the same techniques in improving administrative functions such as order taking, distribution, and human resources. This company (which has won several quality awards and has significantly improved its product quality) used state-of-theart TQM methods to train all of its employees in how to apply TQM. However, the company has not been able to achieve the same cost reductions and service quality enhancements in administrative areas as it has in the manufacturing area. Assuming that this phenomenon extends to other companies, why do you think that TQM works better in manufacturing than in nonmanufacturing/ service areas?
> The following data are available for the Megan Corp. finishing department for the current year. The department makes a single product that requires three hours of labor per unit of finished product. Budgeted volume for the year was 30,000 direct labor ho
> You are considering buying a $50,000 car. The dealer has offered you a 13.6 percent loan with 30 equal monthly payments. On questioning him, you find that the interest charge of $17,000 (or 0.136 x $50,000 x 2.5 years) is added to the $50,000 for a total
> Medical Instruments produces a variety of electronic medical devices. Medical Instruments uses a standard cost system and computes price variances at the time of purchase. One product, a thermometer, measures patient temperatures orally. It requires a si
> Flower City Cartridges (FCC) manufactures replacement cartridges for desktop printers. FCC uses standard costs within a job order cost system. In June, FCC purchased 18 gallons of blue ink for $385.20 and produced the following four different cartridge j
> American Cinema shows first-run movies. It pays the company distributing the movies a fixed fee of $1,000 per week plus a percentage of the gross box office receipts. In the first two weeks a movie is released, the theater pays the fixed fee of $1,000 pe
> Marti Meyers, vice president of marketing for LaserFlo, was concerned as she reviewed the costs for the AP2000 laser printer she was planning to launch next month. The AP2000 is a new commercial printer that LaserFlo designed for medium-size direct mail
> Candice Company has decided to introduce a new product that can be manufactured by either of two methods. The manufacturing method will not affect the quality of the product. The estimated manufacturing costs of the two methods are as follows: Candice&ac
> Wedig Diagnostics manufactures two laser photometers that are used in preparing DNA tests. The U.S. model is designed for use in the United States and the EU model is designed to meet the specifications in most of the European Union. Both models are manu
> Hochstedt is a German firm with a wholly owned U.S. subsidiary. The parent firm manufactures and exports products from Germany to its U.S. subsidiary for sale in the United States. Hochstedt also has wholly owned subsidiaries in 14 other countries. The f
> Dr. Na Gu plans to open a radiology office that provides CAT scans. She can lease the CAT scanner for $1,200 per month plus $45 for each imaging session. In addition to the $45 lease cost per imaging session, Dr. Gu must purchase film for each session at
> “I used to run the company that made Formula 409, the spray cleaner. From modest entrepreneurial beginnings, we’d gone national and shipped the hell out of P&G, Colgate, Drackett, and every other giant that raised its head. From the beginning, I’d employ
> Emrich Processing is a small custom stainless steel parts processor. Customers send new and used stainless steel parts to Emrich for cleaning in various acid baths to remove small imperfections or films on the surface. These parts are used in a variety o
> The Stowbridge Division is analyzing expanding its Total Quality Management program. It already has a TQM program in place. However, one of its customers, Amlan Equipment, is asking all suppliers to become ISO 9000–qualified, a process that certifies tha
> Printers, Inc., manufactures and sells a midvolume color printer (MC) and a high-volume color printer (HC). Each MC requires 100 direct labor hours to manufacture and each HC requires 150 direct labor hours. At the beginning of the year, 700 MCs are sche
> The soldering department of Xtel Circuits solders integrated circuits onto circuit boards. The department is highly automated. The existing machinery is state of the art, having been installed only 15 months ago. Overhead in the department is allocated b
> Simple Plant manufactures DNA test strips. Manufacturing overhead is applied to units produced using direct labor dollars as the allocation base. The overhead rate is calculated prior to the beginning of the fiscal year that runs January 1 to December 31
> Marian Health Care is a large hospital system outside Chicago that offers both hospital (inpatient) and clinic (outpatient) services. It has a centralized admissions office that admits and registers clients, some of whom are seeking inpatient hospital se
> Houston Milling is a subcontractor to Pratt & Whitney, which makes jet engines. Houston Milling makes two different fuel pump housings for two Pratt & Whitney jet engines: the A11 housing and the D43. These pump housings are received from Pratt &
> CLIC manufactures two types of cigarette lighters: Basic and Super. A new plant began producing both lighter models this year. The following variable costing statement summarizes the first year of operations: For internal control purposes, variable costi
> Chemtrex is an agricultural chemical producer. Process costing is used in its mixing department. At the beginning of July, Chemtrex had 700,000 gallons 70 percent complete in work in process. During July, it started another 4,000,000 gallons and produced
> Beckett is a large car dealership that sells several different automobile manufacturers new cars (Toyota, Ford, Lexus, and Subaru). Beckett also consists of a Pre-owned Cars Department and a large service department. Beckett is organized into three profi
> Two genetically engineered enzymes are produced simultaneously from a series of chemical and biological processes: Q enzyme and Y enzyme. The cost per batch of Q and Y enzymes is $200,000, resulting in 300 grams of Q and 200 grams of Y. Before Q and Y ca
> Kay Enterprises is a small, family-owned and managed business. It has a patented production process for manufacturing a digital switch used in large telephone switches. It manufactures two models in its plant in Atlanta, Georgia. The U.S. model is sold t
> New York Fashions owns 87 women’s clothing stores in shopping malls. Corporate headquarters of New York Fashions uses flexible budgets to control the operations of each of the stores. The following table presents the August flexible bud
> Your boss, the vice president of corporate accounting, has just returned from a two-week seminar in Maui on activity-based cost accounting. He says he wants to completely overhaul the company’s existing absorption-based accounting system. “Activity-based
> Overland Steel operates a coal-burning steel mill in New York state. Changes in the state’s air quality control laws will result in this mill’s incurring a $1,000 per day fine (which will be paid at the end of the year) if it continues to operate. The mi
> Five departments of National Training Institute, a nonprofit organization, share a rented building. Four of the departments provide services to educational agencies and have little or no competition for their services. The fifth department, Technical Tra
> Data for the Bidwell Company are as follows: Required: a. Based on the preceding data, calculate break-even sales in units. b. If Bidwell Company is subject to an effective income tax rate of 40 percent, calculate the number of units Bidwell would have t
> Kollel is a private hospital that operates in a large metropolitan area. The hospital admits “regular” patients and “private” patients. Regular patients are admitted and treated by s
> J.P. Max is a department store carrying a large and varied stock of merchandise. Management is considering leasing part of its floor space for $72 per square foot per year to an outside jewelry company that would sell merchandise. Two areas currently in
> Potter-Bowen (PB) manufactures and sells postage meters throughout the world. Postage meters print the necessary postage on envelopes, eliminating the need to affix stamps. The meter keeps track of the postage, the user takes the meter’s counter to a pos
> Portable Phones, Inc., manufactures and sells wireless telephones for residential and commercial use. Portable Phones’ plant is organized by product line, with five phone assembly departments in total. Each of these five phone assembly departments is res
> “It was in Deyang in 1969 that I came to know how China’s peasants really lived. Each day started with the production team leader allocating jobs. All the peasants had to work, and they each earned a fixed number of ‘work points’ (gong-fen) for their day
> US Copiers manufactures a full line of copiers including desktop models. The Small Copier Division (SCD) manufactures desktop copiers and sells them in the United States. A typical model has a retail price of less than $500. An integral part in the copie
> Some economists (e.g., Hayek) argue that decentralization of economic decisions in the economy leads to efficient resource allocation. What differences exist within the firm that make the link between decentralization and efficiency less clear?
> Federal Mixing (FM) is a division of Federal Chemicals, a large diversified chemical company. FM provides mixing services for both outside customers and other Federal divisions. FM buys or receives liquid chemicals and combines and packages them accordin
> Mr. Jones intends to retire in 20 years at the age of 65. As yet he has not provided for retirement income, and he wants to set up a periodic savings plan to do this. If he makes equal annual payments into a savings account that pays 4 percent interest p
> Taylor Chemicals produces a particular chemical at a fixed cost of $1,000 per day. The following table displays how marginal cost varies with output (in cases): Required: a. Given the preceding data, construct a table that reports total cost and average
> Telephone Computer Corporation (TCC) manufactures and sells two computerized directory assistance computers to telephone companies. The firm has its own sales force that sells directly to the phone companies. TCC currently sells two computer systems: the
> You are working for an investment banking firm. One of your clients is examining the possibility of purchasing Stirling Manufacturing, a parts supplier (specifically, tail-light assemblies) to the automobile industry. Stirling has sales of $130 million a
> Kinsley & Sons is a large, successful direct-mail catalog company in the highly competitive market for upscale men’s conservative business and business-casual dress wear. On sales of $185 million they had earnings of $13 million. Most of the sales are fr
> WWWeb Marketing is a decentralized firm specializing in designing and operating Internet marketing Web sites. The firm is four years old and has been growing rapidly, but it only shows a small profit. WWWeb has three profit centers: Design Division, Serv
> Western Sugar processes sugar beets into granulated sugar that is sold to food companies. It uses a standard cost system to aid in cost control and performance evaluation. To compute the standards for next year, the actual expense incurred by expense cat
> Avant Designs designs and manufactures polished-nickel fashion bracelets. It offers two bracelets: Aztec and Mayan. The following data summarize budgeted operations for the current year: Budgeted fixed manufacturing overhead for the year was $258,000. Re
> The PQR Coal Company has several conventional and strip mining operations. Recently, new legislation has made strip mining, which produces coal of high sulfur content, unprofitable, so those operations will be discontinued. Unfortunately, PQR purchased $
> The Doe Company sells three products: sliced pineapples, crushed pineapples, and pineapple juice. The pineapple juice is a by-product of sliced pineapple, while crushed pineapples and sliced pineapples are produced simultaneously from the same pineapple.
> Neweway Plastics manufactures an acrylic compound used in automobile bumpers in a continuous flow process. Raw material is added at the beginning of the process and conversion costs are incurred uniformly over the process. The accompanying table summariz
> Healing Touch manufactures massage chairs with the following standard cost structure: During the month 500 chairs are manufactured and the following costs incurred: Required: a. Calculate all materials and labor variances (including price, quantity, wage
> Friendly Grocer has three departments in its store: beverages, dairy and meats, and canned and packaged foods. Each department is headed by a departmental manager. Operating results for the last month (in thousands) are given in the table. The direct cos
> Aspen View produces a full line of sunglasses. This year it began producing a new model of sunglasses, the Peak 32. It produced 5,300 pairs and sold 4,900 pairs. The following table summarizes the fixed and variable costs of producing Peak 32 sunglasses.
> DeJure Scents manufactures an aftershave and uses process costing. All materials are added at the beginning of the process and conversion costs are incurred uniformly over time. In May, DeJure started 15,000 gallons. There was no beginning inventory. May
> Just One, Inc., has two mutually exclusive investment projects, P and Q, shown below. Suppose the market interest rate is 10 percent. The ranking of projects differs, depending on the use of IRR or NPV measures. Which project should be selected? Why is t
> Wyatt Oil owns a major oil refinery in Channelview, Texas. The refinery processes crude oil into valuable outputs in a two-stage process. First, it distills a barrel of crude oil at a variable cost of $2 per barrel into two types of outputs: light distil
> Why are drivers for long-haul (cross-country) moving companies (e.g., Allied Van Lines) often franchised, while moving companies that move households within the same city hire drivers as employees? Franchised drivers own their own trucks. They are not pa
> Murray Hill was preparing the monthly report that allocates the three service department’s (A, B, and C) costs to the three operating divisions (D1, D2, and D3) when he choked to death on a stale double cream-filled donut. You must step
> Royal Resort and Casino (RRC), a publicly traded company, caters to affluent customers seeking plush surroundings, high-quality food and entertainment, and all the “glitz” associated with the best resorts and casinos.
> Department 100 is the first step in the firm’s manufacturing process. Data for the current quarter’s operations are as follows: Number of Units
> Dakota Mining is considering operating a strip mine, the cost of which is $4.4 million. Cash returns will be $27.7 million, all received at the end of the first year. The land must be returned to its natural state at a cost of $25 million, payable after
> The Winterton Group is an investment advisory firm specializing in high-income investors in upstate New York. Winterton has offices in Rochester, Syracuse, and Buffalo. Operating as a profit center, each office receives central services, including inform
> Robin Jensen, manager of market planning for Viral Products of the IDP Pharmaceutical Co., is responsible for advertising a class of products. She has designed a three-year marketing plan to increase the market share of her product class. Her plan involv
> Microelectronics is a large electronics firm with multiple divisions. The circuit board division manufactures circuit boards, which it sells externally and internally. The phone division assembles cellular phones and sells them to external customers. Bot
> Scanners Plus manufactures and sells two types of scanners for personal computers, the Home Scanner and the Pro Scanner. The Home model is a low resolution model for small office applications. The Pro model is a high resolution model for professional use
> Old Turkey Mash is a whiskey manufactured by distilling grains and corn and then aging the mixture for five years in 50-gallon oak barrels. Distilling requires about a week and aging takes place in carefully controlled warehouses. Before it ages, the wh
> A company recently raised the pay of employees by 20 percent. The productivity of the employees, however, remained the same. The CEO of the company was quoted as saying, “It just goes to show that money does not motivate people.” Provide a critical evalu
> Suppose the market rate of interest is 10 percent and you have just won a $1 million lottery that entitles you to $100,000 at the end of each of the next 10 years. Required: a. What is the minimum lump-sum cash payment you would be willing to take now in
> In its radio fund-raising campaign, National Public Radio (NPR) stated, “On-air radio membership campaigns are the most cost-effective means we have for raising the funds necessary to bring you the type of programming you expect.” NPR is commercial-free,
> The purchasing department of Ball Brothers purchases raw materials and supplies for the various divisions in the firm. Most of the purchasing department’s costs are labor costs. The costs of the purchasing department depend on the number of items purchas
> Carlos Sanguine, Inc., makes premium wines and table wines. Grapes are crushed and the free flowing juice and the first-processing juice are made into premium wines (bottles with corks). The second- and third-processing juices are made into table wines (
> The Medford Mug Company is an old-line maker of ceramic coffee mugs. It imprints company logos and other sayings on mugs for both commercial and wholesale markets. The firm has the capacity to produce 50 million mugs per year, but the recession has cut p
> Sunnybrook Farms is a local grocery store that is currently open only Monday through Saturday. Sunnybrook is considering opening on Sundays. The annual incremental costs of Sunday openings are estimated at $24,960. Sunnybrook Farms’ gross margin on sales
> Oneida Metal manufactures stainless steel boxes to house sophisticated communications integrated circuit boards for the defense industry. Oneida cuts the metal, bends it to form the chassis and top, punches holes, and drills and taps holes for screws. On
> Software Development Inc. (SDI) produces and markets software for personal computers, including spreadsheet, word processing, desktop publishing, and database management programs. SDI has annual sales of $800 million. Producing software is a time-consumi
> I’ve given a good deal of thought to this issue of how companies . . . go about negotiating objectives with their different business units. The typical process in such cases is that once the parent negotiates a budget with a unit, the budget then becomes
> Galt Electric Motors (GEM) produces two types of motors, small and large. Standard machine time to make one small motor is 20 minutes; standard machine time to make one large motor is 30 minutes. GEM plans to make 30,000 small motors and 20,000 large mot
> A Swiss firm, Smythe and Yves (S&Y), manufactures toiletries such as hand soaps, shampoo, conditioners, and a mouthwash that hotels purchase and place in the rooms for their guests. S&Y uses a standard cost system. One of the fragrances the compa
> Scion Corp. manufactures earth-moving equipment. Department A303 produces a number of small metal parts for the equipment, including specialized screw products, rods, frame fittings, and some engine parts. Scion uses flexible budgeting. The budget for ea
> True Cost Manufacturing, Inc., manufactures and sells large business equipment for the office and business markets. The primary function of Manufacturing is to provide components and subassemblies for the profit centers within the company. To maintain co
> Webb & Drye (WD) is a New York City law firm with over 200 attorneys. WD has a sophisticated set of information technologies—including intranets and extranets, e-mail servers, the firm’s accounting, payroll, and cl
> Silky Smooth lotions come in three sizes: 4, 8, and 12 ounces. The following table summarizes the selling prices and variable costs per case of each lotion size Fixed costs are $771,000. Current production and sales are 2,000 cases of 4-ounce bottles; 4,
> Alliance Tooling produces a single product in its plant. At the beginning of the year, there were no units in inventory. During the year, Alliance produced 120,000 units and sold 100,000 units at $26.75 per unit. Variable manufacturing costs are $13.50 p
> In the 1800s Australia was a colony of England and most of its trade was with England. Australia primarily exported agricultural products such as wheat and imported manufactured goods such as steel, machinery, and textiles. The volume of trade measured i
> Spa Ariana promotes itself as an upscale spa offering a variety of treatments, including massages, facials, and manicures, performed in a luxurious setting by qualified therapists. The owners of Spa Ariana invested close to $450,000 of their own money th
> Access.Com produces and sells software to libraries and schools to block access to Web sites deemed inappropriate by the customer. In addition, the software also tracks and reports on Web sites visited and advises the customer of other Web sites the cust
> Declining Market, Inc., is considering the problem of when to stop production of a particular product in its product line. Sales of the product in question have been declining and all estimates are that they will continue to decline. Capital equipment us
> You work on a team that reports to the chief financial officer of Fiedler International, a consumer products company that manages a variety of consumer beauty brands (shampoos, facial soaps, deodorants). Your team evaluates possible acquisitions. You are
> Compute the unknowns: There is no opening or closing finished goods or work-in-process inventory. Sales S100,000 29,000 Direct materials used Direct labor 10,000 Variable selling and administration expenses Fixed manufacturing overhead Fixed selling
> Ware Paper Box manufactures corrugated paper boxes. It uses a job order costing system. Operating data for February and March are as follows: The factory was closed due to a labor strike prior to January 28, when job #613 was started. There were no other
> Donovan Steel has two profit centers: Ingots and Stainless Steel. These profit centers rely on services supplied by two service departments: electricity and water. The profit centers’ consumption of the service departmentsâ€&
> Jim Shoe, chief executive officer of Jolsen International, a multinational textile conglomerate, has recently been evaluating the profitability of one of the company’s subsidiaries, Pride Fashions, Inc., located in Rochester, New York. The Rochester faci
> The Flower City Grocery is faced with the following capital budgeting decision. Its display freezer system must be repaired. The cost of this repair will be $1,000 and the system will be usable for another five years. Alternatively, the firm could purcha
> APC is a contract manufacturer of printed circuit board assemblies that specializes in manufacturing and test engineering support of complex printed circuit boards for companies in the defense and medical instruments industries. The assembly process begi
> At the Hilton Applefest and Trade Expo, James Jones, owner of Jones Orchard, saw a sign displayed in front of a vendor’s booth: I CAN GET YOU PESTICIDES AT $10.00 A GALLON—GUARANTEED IN WRITING! Over a one-year period,
> Consider the following two separate firms. One firm manufactures flexible packaging films for the snack, bakery, confectionery, and tobacco industries. Its manufacturing process has been quite stable for many years, with few technological innovations. Mo
> Wasley has three operating divisions. Each manager of a division is evaluated on that division’s total operating income. Managers are paid 10 percent of operating income as a bonus. The AB division makes products A and B. The C division
> At its Lyle Avenue plant, Milan Pasta produces two types of pasta: spaghetti and fettuccine. The two pastas are produced on the same machines, with different settings and slightly different raw materials. The fettuccine, being a wider noodle and more sus
> Familia Insurance Company (FMC) specializes in offering insurance products to the Hispanic community. It has its own direct sales organization of agents that sells three lines of insurance: life insurance, auto insurance, and home insurance. FMC is organ
> The Easton plant produces sheet metal chassis for television sets. Its customer is General Electric Appliances. The chassis are manufactured on a computerized, numerically controlled (NC) machine that cuts, drills, and bends the metal to form the chassis
> DigiEar has invented and patented a new digital behind-the-ear hearing aid with adaptive noise reduction and automatic feedback cancellation. DigiEar produces four different models of its DigiEar device. The following table summarizes the planned product
> A bank has three service centers: EDP (electronic data processing), copying, and accounting. These service centers provide services to one another as well as to three operating divisions: A, B, and C. The distribution of each service centerâ€&
> World Imports buys products from around the world for import into the United States. The firm is organized into a number of separate regional sales districts that sell the imported goods to retail stores. The eastern sales district is responsible for sel
