Soft Mats produces exercise mats for use in fitness centres. Production capacity is 40 000 mats per year. Due to a chain of fitness centres closing, Soft Mats now has spare capacity of 4000 mats per year. An international hotel chain, Mini Break, has recently contacted Soft Mats to place a one-off order for 6000 mats. Mini Break has recently remodelled a number of its hotels to incorporate fitness centres for guests. Budgeted costs for 40 000 mats are: • Variable manufacturing costs $1 600 000 • Fixed manufacturing costs $1 800 000. Mats normally sell for $100 each, while Mini Break has offered to pay $90 per mat. Mini Break has also requested that each mat be embossed with its company logo. An embossing machine costing $40 000 would therefore need to be purchased by Soft Mats. The machine could not be used for other products. Required (a) From a financial perspective, should Soft Mats accept the special order? Show calculations. (b) Would you recommend accepting the order if Soft Mats was currently operating at 95 per cent capacity? Show calculations. (c) What other factors should be considered before the order is accepted?
> Should the lean thinking firm be concerned about the costs of quality activities? Describe by drawing on Deming’s 14 principles of management.
> Describe the four types of quality-related activities.
> Explain how the TOC fits within the lean thinking philosophy.
> Search online for two organisations that have used target costing. Briefly comment on what you find in relation to this practice.
> Outline the five steps in the theory of constraints? In many examples of the TOC in practice, idle capacity is generated. Why? Can this be a good thing?
> What is a just-in-time manufacturing system? Why would organisations choose to adopt it?
> Describe the behavioural and social controls in a lean manufacturing environment. How would they be different to in traditional (non-lean) organisations?
> Briefly comment on how a lean approach will impact on accounting practices?
> Based on your understanding of the TOC explain why conventional standard costed work in process inventories might hide problems, obscure interdependences and make it difficult to identify the real constraint in a system. Why might this conventional meth
> Proponents of TOC suggest that it is problematic to make decisions based entirely on resource consumption (this is, the ABC system) because there is no guarantee that the spending to supply resources will be fully aligned with the new levels of resource
> What is the lean thinking philosophy? Outline the five steps in the lean thinking model.
> In the past, drug makers have been reluctant to invest in cures for diseases in developing countries such as Africa and South America. Most people in these countries cannot afford to pay for treatments, and managers have typically invested in other long-
> Many countries provide motivation for entities to produce environmental accounting reports. For example, 17 countries - United Kingdom, Denmark, Netherlands, Belgium, France and Germany among others - participate in the European Environmental Reporting A
> While she was watching operations at a food processing plant, a consultant noticed a large amount of soup on the floor under a filling machine. An operator washed this soup away each day. When asked about the loss of soup, the production manager replied
> Cougar Toys is a toy wholesaler supplying to a range of different customers. With concerns about sources of profi tability from these different customers, Cougar has embarked on a relatively simple customer analysis exercise. In the fi rst instance, cust
> A dilemma that individuals face is whether to be truthful when it appears that a project is over budget. Being over budget typically means that actual costs exceed budgeted costs or that a planned timeline will not be met. People often delay reporting an
> The Australian government has contracted with alternative energy industry organisations to develop new energy technologies. These contracts are sometimes based on cost. Because these organisations are also developing technologies for non-government entit
> Green and Greener Co., a law firm specialising in environmental litigation, had the following costs last year: The following costs were included in overhead: The entity recently improved its ability to document and trace costs to individual cases. Re
> When activity-based costing was first developed, consultants sometimes promoted it for inappropriate uses. Many consulting services focused on using ABC information for short-term decisions such as pricing and product emphasis. Yet in the early stages of
> To reduce costs and focus on core competencies, many entities are increasingly outsourcing manufacturing activities to vendors in countries having low labour costs such as China, India, Thailand, Indonesia and Mexico. Certain activists claim that this pr
> Brewster House is a not-for-profit shelter for the homeless. Lately funding has decreased, but the demand for overnight shelter has increased. In cold weather, clients are turned away because the shelter is full. The director believes that the current ca
> Refer to comprehensive example 3 and search online for more details about these disasters. Could a performance measurement system be useful in mitigating disasters such as these? Is there any way management accounting could provide useful early warning s
> In October 2015, Statistics New Zealand published the first comprehensive and independent report on the state of the country’s environment. This provided information on five ‘domains’ — air, atmosphere and climate, fresh water, land, and marine. The repo
> Matahari Ltd manufactures and installs renewable energy systems. It has four divisions in Australia: Wind, Thermal Solar, Photo Voltaic (PV) and Installation. The company was listed on the Australian Stock Exchange in 2013. The CEO, William Smith, believ
> In the early 1980s, Bernard Hancock built a small brewery on his 150-acre property in the Macedon Ranges. The brewery, named Mountain Mist Brewery, was designed with ales in mind and Bernard introduced a number of cutting edge and innovative technologies
> Duncans sells doughnuts. Data for a recent week are as follows: The manager estimates that if she were to increase the price of cones from $1.75 to $1.93 each, weekly volume would be cut to 850 cones due to competition from other nearby ice cream shops
> Regal Foods is a multi-divisional company operating in a range of locations around the globe. Its product-based divisions are: Ice Cream and Associated Dairy Products, Confectionery, Nutrition, and Prepared Food. Regal has total sales in excess of $10 bi
> Hailey’s Hair Products has two criteria upon which its reward system is based: (1) rewarding executives for performance and (2) adding to shareholder value. At present, the remuneration package for executives consists of a base salary, annual bonus an
> Fitness Forever International sells personal exercise equipment both within Australia and internationally. One division of Fitness Forever produces a product called Absaway, which is a specialised piece of equipment that focuses on exercising the abdomin
> You are on the board of a computer software company that has three distinct divisions: home networks, small business systems and ERP systems. In a bid to encourage higher performance, it has been proposed that the company would benefit from creating a re
> Whistlestop Adventure has grown from a one-man operation into a large, soon to be listed, adventure clothing and equipment company. For much of its four-year history, Whistlestop has used one company-wide incentive plan that all employees and managers pa
> The Dancing Goat is the name Logan Jones chose for his café. The origins of the name came from a 1600s fable of a young goat herder watching his goats dance after they ate red coffee beans. Logan wanted his customers to have the same pleasant ‘dancing’ e
> Synergy Ltd’s incentive plan is based on a shared bonus pool. Return on investment (ROI) is used as the main performance metric and is calculated as: Operating profit before tax ÷ Assets at gross book value Receipt of the incentive is dependent on the a
> Brian Henshall, Foundation Emeritus Professor of Management at The University of Auckland, suggests a number of potential performance measures that could be used to monitor performance for the country of New Zealand. Henshall recommends that the measures
> Frieda’s Fizz brews specialty soft drinks, including root beer and other flavours. Its vision is 'To proudly produce and sell extraordinarily smooth, rich, and delicious soft drinks to satisfy kids of all ages.' The entity has a reputation for high quali
> A large supermarket has used a balanced scorecard for several years. The store’s vision is to provide customers with low-cost goods and a high-quality shopping experience. The entity’s strategy has been to focus on red
> Hector Gonzales runs the Floral Art Company, which supplies floral arrangements to three large supermarket chains throughout Australia. Management has become concerned about the rising costs associated with the processing and dispatch of orders. An activ
> Mark Hopper owns Dane Champions, a dog kennel that raises champion Great Danes for showing and breeding. His vision is to be the best-known breeder of Great Danes globally. His strategy is to breed and sell dogs from outstanding lineage from the standpoi
> Brewster House is a not-for-profit shelter for the homeless. Lately funding has decreased, but the demand for overnight shelter has increased. In cold weather, clients are turned away because the shelter is full. The director believes that the current ca
> Quantum Computers produces and sells laptop computers. The entity is currently deciding whether to continue concentrating on the laptop computer market or to expand by entering the highly competitive computer desktop workstation market. Most of the manag
> Squeezers Juice and Tea Company manufactures organic juices and chai teas that are sold at whole foods stores. Several of its products have been featured in movies because the company’s products are popular with celebrities. The owners and employees valu
> Refer to the information in problem 19.25. Dyggur Equipment wants to offer weekend servicing of heavy equipment. None of its competitors offer this service, and management believes this service will bring in new business and help retain current customers
> Dyggur Equipment manufactures and sells heavy equipment used in construction and mining. Customers are contractors who want reliable equipment at a low cost. The entity’s strategy is to provide reliable products at a price lower than its competitors. Man
> Curry House owns a number of stores that sell fast food. As part of its compensation packages, Curry House provides employees with bonuses based on customer satisfaction surveys. Recent analysis of the data shows a positive correlation between survey rat
> Sunshop Books is a multi-divisional book company that listed on the stock exchange about three years ago. Like many in the industry, Sunshop started out in the 1980s as a single-site suburban bookstore. Company CEO Lewis Negus has been in the role for th
> The ATCO Company purchased the Dexter Company three years ago. Prior to the acquisition, Dexter manufactured and sold plastic products to a wide variety of customers. Since becoming a division of ATCO, Dexter only manufactures plastic components for prod
> Strong Welding Equipment Company produces and sells welding equipment nationally and internationally. Following is information about two divisions in US dollars. Required (a) Calculate each division’s ROI. (b) Calculate each division
> Explain why not-for-profit entities do not always set prices so that their operating costs are recovered.
> Identify three products for which target costing and kaizen costing could be used. Identify three products for which target costing and kaizen costing would be inappropriate.
> The management of Kayla Industries have been aggressive in trying to build market share. The price was set at $5 per unit, well below the existing market price. Variable costs were $4.50 per unit and annual fixed costs in the first year were $600 000. R
> Tartan Company is a single-product entity and provides the summary data shown below relating to its product for 2020. Selling price per unit……………………………………………………………….. $ 50 Variable manufacturing costs …………………………………………………….. 24 Annual fixed manufacturing
> Magic Dusters has also identified that another ingredient, Delta D (500 litres required), will also be used in the special order for Stay Clean Ltd (see problem 10.47). Unlike Alpha A, Delta D is currently used in normal production for Magic Dusters. The
> Magic Dusters is considering a special order from Stay Clean Ltd for a special cleaning product for windows. One ingredient required for the product is Alpha A, which Magic Dusters has in its inventory. Magic Dusters’ current products do not use Alpha A;
> Lavender Plantations Pty Ltd manufactures three lavender-based products, candles, soaps and detergents. On average 75 000 candles, 50 000 soaps and 125 000 detergents are sold. Next year, the company has a restricted advertising budget of $40 000, which
> Coffee House sells specialist coffee drinks from a rented cart on the beachside on the Sunshine Coast. Provided below is a summarised version of its statement of profit or loss for July 2019. The costs of beverages and napkins are classified as variable
> Waffle House sells ice-cream cones in a variety of flavours. Financial data for a recent week are shown below. Revenue (2000 cones @ $2.00) …………………. $4 000 Cost of ingredients ………………………………………. 1 200 Rent ……………………………………………………………… 700 Store attendant ……………
> Lavender Plantations Pty Ltd manufactures and sells candles, soaps and detergents, and distributes them to stores located in Australia and New Zealand. The normal selling price per carton of candles is $25; the variable cost of a carton of candles is $15
> Briefly outline some of the key qualitative risk considerations with respect to outsourcing decisions.
> Explain the meaning of the term ‘fixed cost’ and give five examples of fixed costs.
> ‘If an entity has the objective of profit maximisation, break-even analysis is not necessary.’ Discuss this assertion.
> The following information has been extracted from the financial statements of Vivid, a social media company. Revenue is generated through advertising on the social media platform, where the number of ‘clicks’ is the dr
> Advantage Tennis Coaching (ATC) has been engaged to provide tennis coaching services to students at a local private girls’ college. ATC has put forward a proposal to the University of Queensland’s School of Human Movem
> Mansfield Ltd has recently expanded its production facility to satisfy a new customer order that will start in six months. As a consequence, it has the opportunity to make use of the spare capacity for the next six months. Financial information on the cu
> Elm Ltd has been manufacturing its own shades for its camping chairs. The company is currently operating at 100 per cent capacity. Variable manufacturing overhead is charged to production at the rate of 50 per cent of direct labour cost. The direct mater
> Flash Pty Ltd manufactures handheld egg-beaters. For the first eight months of 2020, the company reports the following operating results while operating at 80 per cent capacity. Sales (400 000 units) ………………………….. $ 2 000 000 Cost of sales ………………………………………
> Blitz Nails has provided the following financial data for the last two financial periods. The manager, Jonie Matte, is beginning her planning for next year and requires the following information. Required (a) Calculate the break-even level of sales in
> Terrace Company currently manufactures a sub-assembly for its main product. The costs per unit are as follows. Direct materials …………………………………. $ 4.00 Direct labour ………………………………………. 30.00 Variable overhead …………………………………. 15.00 Fixed overhead (allocated) …
> Lavender Plantations Pty Ltd management plan to introduce detergents to its product range in 2022. They have provided the following information relating to the planned activities. Required (a) Calculate the break-even point in total units and units per
> Mermaid Enterprises operates a single-product entity. Data relating to the product for 2019 are as follows. Annual volume ……………………………………………………………….. 64 000 units Selling price per unit …………………………………………………………………… $ 60 Variable manufacturing cost per unit
> How does the calculation of break-even differ between single product and multi-product entities?
> Information for Harbour Industries is provided below. Average selling price per unit ……………………………. $ 10.00 Average variable costs per unit: Cost per unit ………………………………………………………… 5.00 Selling costs ………………………………………………………….. 1.40 Annual fixed costs: Selling …
> IT Equip sells IT equipment, specialising in printers and projectors. The following statement reflects the contribution margin of each activity and overall profit levels. Required (a) Calculate the contribution margin ratios for each of the two areas of
> Nicholas Cash of Advantage Tennis Coaching (ATC) has received an offer from a top-ranked Australian player, Serena Novac, who wishes to spend two months in the beautiful Queensland weather and have 50 private coaching sessions with Nicholas. If the offer
> Gotrack Company produces compasses for cross-country skiing. The production capacity is 45 000 compasses and the company is currently operating at 85 per cent capacity. Variable manufacturing costs are $10 per unit. Fixed manufacturing costs are $425 000
> Lavender Plantations Pty Ltd advertises weekly specials and makes sure that the shelf space (9 metres) at the entrance to the store showcases these specials. For the current week, its three products are being advertised at special prices. Each product mu
> In the Whine Company, it costs $30 per unit ($20 variable and $10 fixed) to make a product that normally sells for $55. A foreign wholesaler offers to buy 3000 units at $35 each. The Whine Company will incur special shipping costs of $2 per unit. Requir
> Emy Fong has been operating a single-product firm for three years. As this product is now well established in the market, Fong is thinking about adding two new products to her range. Outline the impact of her decision on the calculation of her new break-
> Discuss some possible options when the break-even unit target appears too difficult to achieve.
> Yen Rippon is about to commence operations as a beauty technician. She believes her costs can be classified as fixed or variable. (a) Distinguish between fixed and variable costs. (b) Outline how Yen could make use of CVP analysis to help guide her busin
> For each of the following independent situations, calculate the break-even point in units. (a) Variable cost per unit of $3, annual fixed costs of $42 750 and selling price per unit of $9. (b) Variable costs per unit of $10, annual fixed costs of $63 200
> Discuss the concept of operating leverage.
> Find the missing figure for each of the following independent cases. (Reconstruct the statement of profit or loss for each scenario.)
> Find the missing figures for each of the independent cases shown below. (Reconstruct the statement of profit or loss for each scenario.)
> Explain the importance of the relevant range in relation to cost behaviour when considering the costs of expanding business activities.
> Discuss how knowledge of the break-even point and the margin of safety will assist management in its risk assessment of business operations.
> CVP analysis and break-even analysis are underpinned by a range of important assumptions. Briefly discuss four such assumptions.
> If an entity has a mixed cost function, a 10 per cent increase in sales volume should increase income by more than 10 per cent. Explain why.
> A university student, Barry Ward, plans to sell atomic alarm clocks with a music function over the internet and in person during the semester to help pay his study expenses. He buys the clocks for $35 and sells them for $55. If payment by cash accompanie
> Swinton Industries operates in the IT industry, producing and selling computer and IT equipment. It is structured along functional lines (research and design, production, marketing and so on) and, for most of its history, has operated with a fairly autho
> According to Telstra’s 2018 Remuneration report, 40 per cent of the executive variable remuneration plan (EVP) was based on customer performance measures. Discuss the reasons why the board has linked executive remuneration to customer satisfaction rating
> Best Beef Burgers operates a store in Melbourne and the following is its average monthly statement of profit or loss. The owner is currently preparing the budget for next year and is considering the following alternatives. 1. Reducing the cost of sales
> How can the margin of safety be used to assess risk associated with sales?
> Go to the website for JB Hi-Fi Ltd and examine its latest annual report. Write a report to the finance manager explaining how you would prepare the sales budget.
> John Wilson is the owner/manager of Overnight Courier Solutions, a small transport and courier company that provides logistic services to business. John is about to start the budget process for 2021. His marketing manager has contacted customers and anal
> Quality Goods Company operates antique and second-hand goods stores throughout Victoria. Such stores are currently very popular and sales are increasing each month. It has budgeted the following sales for the indicated months. Quality Goods Company&acir
> Bullen & Company makes and sells upmarket carrybags for laptop computers. John Crane is responsible for preparing Bullen & Company’s master budget and has assembled the data below for 2021. The direct labour rate includes wages,
> Willow Health provides a range of healthcare services to the local community, including home visits by nurses to elderly patients. An allied health worker, who performs a range of tasks such as housework and showering for patients, accompanies the nursin
> Glenn Stone, manager of Jarrett Car Repairers, has requested that you prepare a cash budget for the months of December and January. He has provided the following information to assist in this task. • Projected cash balance at the end of
> At a recent finance committee meeting, the Chief Operating Officer advised the marketing department that a 10 per cent increase in sales is expected for the coming year. The increase is to apply to all product lines. Required (a) How will this directive
> Realty Company prepares monthly cash budgets. Provided next is a set of relevant data extracted from existing reports and the sub-budgets for the two months of September and October 2021. All sales are on credit. Collections from accounts receivable nor
