Ron, the director at the Annenberg Center, is planning his pricing strategy for a musical to be held in a 100-seat theater. He sets the full price at $80 and estimates demand at this price to be normally distributed with mean 40 and standard deviation 30. Ron also decides to offer student-only advance sale tickets discounted 50 percent off the full price. Demand for the discounted student-only tickets is usually abundant and occurs well before full-price ticket sales. a. Suppose Ron sets a 50-seat booking limit for the student-only tickets. What is the number of full-price tickets that Ron expects to sell? [18.2] b. Based on a review of the show in another city, Ron updates his demand forecast for full-price tickets to be normal with mean 60 and standard deviation 40, but he does not change the prices. What is the optimal protection level for full-price seats? [18.2] c. Ron realizes that having many empty seats negatively affects the attendees’ value from the show. Hence, he decides to change the discount given on student-only tickets from 50 percent off the full price to 55 percent off the full price and he continues to set his protection level optimally. (The demand forecast for full-price tickets remains as in b, normal with mean 60 and standard deviation 40.) How will this change in the student- only discount price affect the expected number of empty seats? (Will they increase, decrease, or remain the same, or is it not possible to determine what will happen?) [18.2] d. Ron knows that on average eight seats (Poisson distributed) remain empty due to no- shows. Ron also estimates that it is 10 times more costly for him to have one more attendee than seats relative to having one empty seat in the theater. What is the maxi- mum number of seats to sell in excess of capacity? [18.3]
> In the Toyota Production System, jidoka refers to [8.4] a. Level production, where different models are produced alongside each other on the assembly line. b. Continuous improvement, where workers organize meetings to discuss ways of improving the produc
> Consider the following two production processes making an electronic component for a navigation system. Both processes consist of 20 stations and operate at a cycle time of 1 minute/unit. Their most error prone operation is step 9. Process 1: Has a final
> LaVilla is a village in the Italian Alps. Given its enormous popularity among Swiss, German, Austrian, and Italian skiers, all of its beds are always booked in the winter season and there are, on average, 1,200 skiers in the village. On average, skiers s
> If you were to implement heijunka at a production facility, which of the following tasks would you prioritize? [8.4] a. Encourage feedback among workers so as to introduce kaizen teams. b. Reduce setup and changeover times at the different stations. c. R
> Consider a worker-paced line with three process steps, each of which is staffed with one worker. The sequence of the three steps does not matter for the completion of the product. Currently, the three steps are operated in the following sequence. a. What
> A production process has two machines. The first machine has a capacity of 100 units per hour and the second machine has a capacity of 60 units per hour. Demand for the process is 100 units per hour. a. In a push process, what would be the utilization of
> An employee in a restaurant spends his time on the following: waiting for a customer order, taking the order, forwarding the order to the kitchen, waiting for the kitchen to confirm the order, bringing the food to the customer, serving the customer, and
> Once the raw materials are collected, a single flow unit manufacturing process comprises three sequential steps: ∙ Step 1 consumes large amounts of an expensive paint ∙ Step 2 is the bottleneck ∙ Step 3 has a large amount of idle time There exists a 20 p
> A company making tires for bikes is concerned about the exact width of their cyclocross tires. The company has a lower specification limit of 22.8 mm and an upper specification limit of 23.2 mm. The standard deviation is 0.25 mm and the mean is 23 mm. a.
> Vetro Inc. is a glass manufacturer that produces glasses of every shape and type. Recently it signed a contract to supply round glasses to Switch, a Swiss watch manufacturer. The specifications require the diameter to be between 4.96 cm and 5.04 cm. With
> For a key joint, a precision machining process has a lower specification limit of a width of 0.99 mm and an upper specification limit of 1.01 mm. The standard deviation is 0.005 mm and the mean is 1 mm. a. What is the process capability index for the bot
> John is a newly minted quality engineer at MakeStuff Inc. His boss, intending to promote higher quality in the company, tells him to increase the process capability index of their main product. John decides to simply increase the upper specification limi
> OPIM Bus Inc. offers low-cost bus transportation between Philadelphia and Bryn Mawr. The invested capital is $500,000, corresponding to the investment in the two vehicles it owns. Each of the two buses can carry 50 passengers. Each bus does 12 daily trip
> A large catalog retailer of fashion apparel reported $100,000,000 in revenues over the last year. On average, over the same year, the company had $5,000,000 worth of inventory in their warehouses. Assume that units in inventory are valued based on cost o
> Oscar is considering getting into the real estate business. He’s looking at buying an existing office building for $1.8 million in cash. He wants to estimate what his return on invested capital (ROIC) will be on an annual basis. The building has 14,000 s
> PhillyAir Inc. offers low cost air travel between Philadelphia and Atlantic City. Philly Air’s invested capital is $5,000,000, corresponding to the investment in the two planes the company owns. Each of the two planes can carry 50 passengers. Each plane
> Penne Pesto is a small restaurant in the financial district of San Francisco. Customers order from a variety of pasta dishes. The restaurant has 50 seats and is always full during the four hours in the evening. It is not possible to make reservations at
> A carpet manufacturer makes four kinds of carpet on a machine. For simplicity, call these four types of carpet, A, B, C, and D. It takes 3 hours to switch production from one type of carpet to another. The demand rates (yards/hr) for the four types of ca
> Bruno Fruscalzo decided to set up a small production facility in Sydney to sell to local restaurants that want to offer gelato on their dessert menu. To start simple, he would offer only three flavors of gelato: fragola (strawberry), chocolato (chocolate
> Precision Testing (PTests) does fluid testing for several local hospitals. Consider their urine testing process. Each sample requires 12 seconds to test, but after 300 samples, the equipment must be recalibrated. No samples can be tested during the recal
> Kinga Doll Company manufactures eight versions of its popular girl doll, Shari. The company operates on a 40-hour workweek. The eight versions differ in doll skin, hair, and eye color, enabling most children to have a doll with a similar appearance to th
> JCL Inc. is a major chip manufacturing firm that sells its products to computer manufacturers like Dell, HP, and others. In simplified terms, chip making at JCL Inc. involves three basic operations: depositing, patterning, and etching. ∙
> Consider the following batch-flow process consisting of three process steps performed by three machines: Work is processed in batches at each step. Before a batch is processed at a step, the machine at that step must be set up. (During a setup, the machi
> Consider the following batch flow process consisting of three process steps performed by three machines: Work is processed in batches at each step. Before a batch is processed at step 1, the machine has to be set up. During a setup, the machine is unable
> A manufacturing company producing medical devices reported $60,000,000 in sales over the last year. At the end of the same year, the company had $20,000,000 worth of inventory of ready-to-ship devices. a. Assuming that units in inventory are valued (base
> Consider the following two-step process: Step A has a processing time of 1 minute per unit, but no setup is required. Step B has a processing time of 0.1 minute per unit, but a setup time of 9 minutes is required per batch. a. Suppose units are produced
> Powered by Koffee (PBK) is a new campus coffee store. PBK uses 50 bags of whole bean coffee every month, and you may assume that demand is perfectly steady throughout the year. PBK has signed a year-long contract to purchase its coffee from a local suppl
> Millennium Liquors is a wholesaler of sparkling wines. Their most popular product is the French Bete Noire. Weekly demand is for 45 cases. Assume demand occurs over 50 weeks per year. The wine is shipped directly from France. Millennium’s annual cost of
> The accompanying diagram depicts a five-step, worker-paced headphone manufacturing plant. The headphones are meant to be used with iPods and DVD players. Step 1 involves a worker bending a metal strip into an arc shape. In step 2, the metal arc is fitted
> A manufacturer of women’s designer gloves has employed a team of students to redesign her manufacturing unit. They gathered the following information. The manufacturing process consists of four activities: (1) fabric cutting; (2) dyei
> Atlas Inc. is a toy bicycle manufacturing company producing a five-inch small version of the bike that Lance Armstrong rode to win his first Tour de France. The assembly line at Atlas Inc. consists of seven work stations, each performing a single step. S
> A small, privately owned Asian company is producing a private-label soft drink, Yoggo. A machine-paced line puts the soft drinks into plastic bottles and then packages the bottles into boxes holding 10 bottles each. The machine-paced line is comprised of
> The Geneva Watch Corporation manufactures watches on a conveyor belt with six stations. One worker stands at each station and performs the following tasks: These six workers begin their workday at 8:00 a.m. and work steadily until 4:00 p.m. At 4:00, no n
> Consider the following tasks that must be assigned to four workers on a conveyor-paced assembly line (i.e., a machine-paced line flow). Each worker must perform at least one task. There is unlimited demand. The current conveyor-paced assembly-line config
> PowerToys Inc. produces a small remote-controlled toy truck on a conveyor belt with nine stations. Each station has, under the current process layout, one worker assigned to it. Stations and processing times are summarized in the following table: a. What
> Consider the baggage check-in of a small airline. Check-in data indicate that from 9 a.m. to 10 a.m., 255 passengers checked in. Moreover, based on counting the number of passengers waiting in line, airport management found that the average number of pas
> Consider the following six tasks that must be assigned to four workers on a conveyor-paced assembly line (i.e., a machine-paced line flow). Each worker must perform at least one task. The current conveyor-paced assembly line configuration assigns the wor
> Kim Opim, an enthusiastic student, is on her flight over from Philadelphia (PHL) to Paris. Kim reflects upon how her educational experiences from her operations courses could help explain the long wait time that she experienced before she could enter the
> After an “all night” study session the day before their last final exam, four students decide to stop for some much-needed coffee at the campus Starbucks. They arrive at 8:30 a.m. and are dismayed to find a rather long line. Fortunately for the students,
> CC Car Wash specializes in car cleaning services. The services offered by the company, the exact service time, and the resources needed for each of them are described in the following table: The company offers the following packages to their customers: &
> VF is a small accounting firm supporting wealthy individuals in their preparation of annual income tax statements. Every December, VF sends out a short survey to their customers, asking for the information required for preparing the tax statements. Based
> The Western Pennsylvania Milk Company is producing milk at a fixed rate of 5,000 gallons/hour. The company’s clients request 100,000 gallons of milk over the course of one day. This demand is spread out uniformly from 8 a.m. to 6 p.m. If there is no milk
> International Cranberry Uncooperative (ICU) is a competitor to the National Cranberry Cooperative (NCC). At ICU, barrels of cranberries arrive on trucks at a rate of 150 barrels per hour and are processed continuously at a rate of 100 barrels per hour. T
> The following provides 2012 financial information for Kroger (in million $s): a. In 2012, what were Kroger’s inventory turns? [2.4]
> BCH, a large consulting firm in the United Kingdom, has a consulting staff consisting of 400 consultants at the rank of “associate.” On average, a consultant remains at the associate level for two years. After this time, 30 percent of the consultants are
> Smith and Jackson Inc. (SJ) sells an outdoor grill to Cusano’s Hardware Store. SJ’s wholesale price for the grill is $185. (The wholesale price includes the cost of shipping the grill to Cusano). Cusano sells the grill for $250 and SJ’s variable cost per
> Handi Inc., a cell phone manufacturer, procures a standard display from LCD Inc. via an options contract. At the start of quarter 1 (Q1), Handi pays LCD $4.50 per option. At that time, Handi’s forecast of demand in Q2 is normally distributed with mean 24
> Each year the admissions committee at a top business school receives a large number of applications for admission to the MBA program and they have to decide on the number of offers to make. Since some of the admitted students may decide to pursue other o
> Consider the example of the Park Hyatt Philadelphia discussed in the text. Recall that the full fare is $225, the expected full-fare demand is Poisson with mean 27.3, the discount fare is $159, and there are 118 king/queen rooms. Now suppose the cost of
> Consider the Philadelphia–Los Angeles flight discussed in Q18.5. Assume the available capacity is 200 seats and there is no overbooking. The high fare is $675 and the low fare is $375. Demand for the low fare is abundant while demand for the high fare is
> An air cargo company must decide how to sell its capacity. It could sell a portion of its capacity with long-term contracts. A long-term contract specifies that the buyer (the air cargo company’s customer) will purchase a certain amount of cargo space at
> The following figures are taken from the 2003 financial statements of McDonald’s and Wendy’s.1 Figures are in million dollars. a. In 2003, what were McDonald’s inventory turns? What were Wendyâ&
> In the production of pizza, which of the following four variables is not an input variable? [7.1] a. The amount of dough prepared for the pizza b. The temperature of the oven c. The type of cheese on the pizza d. The time that the customer leaves the piz
> Limerick Fare is a furniture manufacturer in Dublin, Ireland. For August 2020, Limerick had the following standards for one of its products, a coffee table: The following data were compiled regarding actual performance: actual output units (tables) produ
> The Schuyler Corporation manufactures lamps. It has set up the following standards per finished unit for direct materials and direct manufacturing labor: The number of finished units budgeted for January 2020 was 10,000; 9,850 units were actually produce
> SallyMay, Inc., designs and manufactures T-shirts. It sells its T-shirts to brand-name clothes retailers in lots of one dozen. SallyMay’s May 2020 static budget and actual results for direct inputs are as follows: SallyMay has a policy
> Consider the following data collected for Theta Homes, Inc.: Required Compute the price, efficiency, and flexible-budget variances for direct materials and direct manufacturing labor.
> Modern Tiles Ltd. manufactures ceramic tiles. For January 2020, it budgeted to purchase and use 10,000 pounds of clay at $0.70 a pound. Actual purchases and usage for January 2020 were 11,000 pounds at $0.65 a pound. Modern Tiles Ltd. budgeted for 40,000
> McKenzie Ltd produces chairs and employs three workers. The staff normally work 40 hours per week for €12 per hour (including social security). It takes four hours for a worker to produce a cabinet: it sells for €80 and contains two square meters of timb
> The Alpha Company manufactures designer jewelry for jewelry stores. A new accountant intern at Alpha Company has accidentally deleted the calculations on the company’s variance analysis calculations for the year ended December 31, 2020.
> Dartford Enterprises Ltd manufactures just one product line of scientific calculators for engineers. The current standard cost of one unit of the product is as follows: During last month, due to an unexpected fall in demand for the product, only 15,000 u
> L’Accessorio, an Italian manufacturer of leather belts, budgeted prices for direct materials, direct manufacturing labor, and direct marketing (distribution) labor per luxury belt—€41, â‚&no
> Daytona Wheels is a Japanese tire manufacturer. For August 2021, it budgeted to manufacture and sell 3,000 tires at a variable cost of $74 per tire and total fixed costs of $54,000. The budgeted selling price was $110 per tire. Actual results in August 2
> Abeka Bakery Company had opening inventory of 14,800 units and closing inventory of 17,500 units. Profits based on marginal costing were £315,250 while overhead absorption rate was £5.20 unit. What is the profit using absorption costing? a. £224,250 b
> Amira Ltd is a trading company that sells mobile phones. The opening cash balance on January 1 was expected to be £30,000. The sales budgeted were as follows: Analysis of records shows that trade debtors settle their accounts as follow: &aci
> Jiffy Mart has a Kaizen (continuous improvement) approach to budgeting monthly activity costs for each month of 2021. Each successive month, the budgeted cost-driver rate decreases by 0.4% relative to the preceding month. So, for example, February’s budg
> The Jerico store of Jiffy Mart, a chain of small neighborhood convenience stores, is preparing its activity-based budget for January 2021. Jiffy Mart has three product categories: soft drinks (35% of cost of goods sold [COGS]), fresh produce (25% of COGS
> Roletter Company makes and sells artistic frames for pictures of weddings, graduations, and other special events. Bob Anderson, the controller, is responsible for preparing Roletter’s master budget and has accumulated the following info
> Xander Manufacturing Company manufactures blue rugs using wool and dye as direct materials. One rug is budgeted to use 36 skeins of wool at a cost of $2 per skein and 0.8 gallons of dye at a cost of $6 per gallon. All other materials are indirect. At the
> Price, Inc., bottles and distributes mineral water from the company’s natural springs in northern Oregon. Price markets two products: 12-ounce disposable plastic bottles and 1-gallon reusable plastic containers. Required 1. For 2020, Price marketing man
> The Deluxe Motorcar in northern California manufactures motor cars of all categories. Its budgeted sales volume for the most popular sedan model XE8 in 2020 is 4,000 units. Deluxe Motorcar has a beginning finished inventory of 600 units. Its ending inven
> Augustine Company sells a product for £50. Budgeted sales for the first quarter of 2020 are as follows: The company collects 60% in the month of sale, 20% in the following month, and 10% two months after the sale. Ten percentage of all sales
> Nova Plastics produces 10-liter plastic buckets. The company expects to produce 825,000 buckets in 2020. Nova Plastics purchases high-density polyethylene (HDPE) to produce the buckets. Each pound of HDPE produces two 10-liter buckets. Nova’s target endi
> Sandra Martins, a confectionery based in Austria, decides to produce peanut packs for supermarkets in Salzburg. The projected sales units and selling price per pack for 2021 for its three brands of peanut packs are: Required Compute the budgeted sales.
> Which of the following is indicated by an unfavorable fixed overhead spending variance? a. There was more excess capacity than planned b. The price of fixed overhead items cost more than budgeted c. The fixed overhead cost-allocation base was not used ef
> Coronavirus disease 2019 (COVID-19) was first identified in December 2019 and resulted in an ongoing pandemic. There are currently few effective treatments for coronavirus with doctors relying on patients’ immune systems. In 2020, a UK-based bio-tech com
> Legion Bank (LB) is examining the profitability of its Star Account, a combined savings and checking account. Depositors receive a 6% annual interest rate on their average deposit. LB earns an interest rate spread of 3% (the difference between the rate a
> The job-costing system at Sheri’s Custom Framing has five indirect-cost pools (purchasing, material handling, machine maintenance, product inspection, and packaging). The company is in the process of bidding on two jobs: Job 215, an ord
> Ramirez Wholesalers operates at capacity and sells furniture items to four department-store chains (customers). Mr. Ramirez commented, “We apply ABC to deter- mine product-line profitability. The same ideas apply to customer profitabili
> Caleb Enterprises Ltd. manufactures electrical cables for households and industries. The company has identified the following overheads activities, costs, and activity drivers for the coming year. The company’s normal activity requires
> Aniline Corporation owns a small printing press that prints leaflets, brochures, and advertising materials. Aniline classifies its various printing jobs as standard jobs or special jobs. Aniline’s simple job-costing system has two direc
> CKM is an architectural firm that designs and builds build- ings. It prices each job on a cost plus 20% basis. Overhead costs in 2020 are $4,011,780. CKM’s simple cost- ing system allocates overhead costs to its jobs based on number of
> John Bradshaw & Bros Ltd. manufactures different plastic toys for kindergartens in Lagos, Nigeria. Details of the toy production budget for the next accounting year are as follows. Note all costs are presented using the currency of Nigeria i.e., Nige
> Triumph Trophies makes trophies and plaques and operates at capacity. Triumph does large custom orders, such as the participant trophies for the Minnetonka Little League. The controller has asked you to compare plant-wide, department, and activity- based
> Automotive Products (AP) designs and pro- duces automotive parts. In 2020, actual variable manufacturing overhead is $308,600. AP’s simple costing system allocates variable manufacturing overhead to its three customers based on machine-
> The following data relate to the budget and actual results of Oscar Enterprises, which produces and sells net balls in France. Use the information above to answer questions 7-16–7-20 The standard cost of €15.00 per a n
> The Walliston Group (WG) provides tax advice to multinational firms. WG charges clients for (a) direct professional time (at an hourly rate) and (b) support services (at 30% of the direct professional costs billed). The three professionals in WG and thei
> CoreTech Laboratories does heat testing (HT) and stress testing (ST) on materials and operates at capacity. Under its current simple costing system, CoreTech aggregates all operating costs of $1,800,000 into a single overhead cost pool. CoreTech calculat
> SharpPitch, Inc., manufactures karaoke machines for several well-known companies. The machines differ significantly in their complexity and their manufacturing batch sizes. The following costs were incurred in 2019: a. Indirect manufacturing labor costs
> The Row-On-Watershed Company (ROW) produces a line of non-motorized boats. ROW uses a normal-costing system and allocates manufacturing overhead using direct manufacturing labor cost. The following data are for 2020: Inventory balances on December 31, 20
> Clayton Solutions de- signs Web pages for clients in the education sector. The company’s job-costing system has a single direct cost category (Web-designing labor) and a single indirect cost pool composed of all overhead costs. Overhead
> Discuss the role of management accounting in decision-making activities in an organization.
> Differentiate between variable costs and fixed costs. Give some examples.
> How does cost accounting help organizations assess their competitive advantage in value chain analysis?
> Why might an advertising agency use job costing for an advertising campaign by PepsiCo, whereas a bank might use process costing to determine the cost of checking account deposits?
> What are the strategic consequences of product undercosting and overcosting?
> Explain the concept of cost–volume–profit (CVP) analysis.
> Chico & Partners, a Quebec-based public accounting partnership, specializes in audit services. Its job-costing system has a single direct-cost category (professional labor) and a single indirect-cost pool (audit support, which contains all costs of t
> What is conceptually the most defensible method for allocating multiple support-department costs? Why?
> Distinguish between revenue allocation and bundled product or service.
