Suburban General Hospital owns and operates several community hospitals in North Carolina. One of its hospitals, Cordona Community Hospital, is a not-for-profit institution that has not met its financial targets in the past several years because of decreasing volume. It has been losing market share largely because of the entrance of a new competitor, Jefferson Memorial Hospital. Jefferson has successfully promoted itself as the premier provider of quality care; its slogan is “Patients Come First.” To compete with Jefferson, Cordona has developed a new department, guest services, to improve patient relations and overall customer service. Guest services personnel will be positioned throughout the hospital and at major entrances to help patients and their families get where they are going. Guest services will also be visible in the waiting rooms of high-volume areas such as cardiovascular services and women’s services to help guide the patients throughout their visit. Cordona’s management is wrestling with how to charge guest services to the various profit centers in the hospital. Required: What are some different ways to allocate the costs of guest services, and what would be the effect of each on the behavior of the managers of the different profit centers?
> Contrast past and present business environments with regard to the following aspects: basis of competition, manufacturing processes and manufacturing technology, required labor skills, emphasis on quality, number of products, number of markets, types of
> What are some factors in the contemporary business environment that are causing changes in business firms and other organizations? How are the changes affecting the way those firms and organizations use cost management information?
> The management accountant is a full business partner with management in which of the four stages of cost system development, and why?
> Award Plus Co. manufactures medals for winners of athletic events and other contests. Its manufacturing plant has the capacity to produce 10,000 medals each month; current monthly production is 7,500 medals. The company normally charges $225 per medal. V
> If Problem 10-58 (Budgeting and Sustainability) has not already been assigned, it can be assigned here. Note: For requirements 1 and 2, round answers to nearest whole number. For requirements 3a and 3b, round answer to 2 decimal places.
> Read the article by Joel Litman and Mark L. Frigo titled “When Strategy and Valuation Meet,” Strategic Finance, August 2004, pp. 31–39. The article provides a comprehensive discussion of how business strategy and business valuation are interrelated and p
> Refer to the information for Brooks Plumbing Products Inc. (BPP) in Problem 20-51. Required: (round all calculated answers to the nearest whole dollar) 1. What is the valuation of BPP (for 2022) using the market value method? 2. What is the valuation of
> Brooks Plumbing Products Inc. (BPP) manufactures plumbing fixtures and other home improvement products that are sold in Home Depot and Walmart as well as hardware stores. BPP has a solid reputation for providing value products, good quality, and a good p
> The George Company has a policy of maintaining an end-of-month cash balance of at least $30,000. In months where a shortfall is expected, the company can draw in $1,000 increments on a line of credit it has with a local bank, at an interest rate of 12 pe
> Refer to the information in Problem 20-49 for the Davidson Yachts Company. Required: 1. What is the valuation of Davidson Yachts Company using the book value of equity method? 2. What is the valuation of Davidson Yachts Company using the multiples-based
> Davidson Yachts is a small private company founded by two businesspeople who are friends and avid sailors. At present, they are interested in expanding the business and have asked you to review its financial statements. Davidson Yachts sells approximatel
> A study of the airline industry examined whether performance on a selected nonfinancial measure was a significant predictor of CEO compensation. A sample of 35 firms was taken, and regression was conducted to determine the potential relationship between
> Many people ask, “Are executives worth their very high pay?” As noted in the chapter, this is a difficult question to answer because the benefits an effective executive brings to the company are hard to measure. One th
> Universal Air Inc. supplies instrumentation components to airplane manufacturers. Although only a few competitors are in this market, the competition is fierce. Universal uses a traditional performance incentive plan to award middle-management bonuses o
> Digital Business Incorporated (DBI) is a worldwide manufacturing company that specializes in high technology products for the aerospace, automotive, and plastics industries. State-of-the-art technology and business innovation have been key to the firm’s
> McCoy Brands Inc. (MBI) is a retailer of consumer products. The company made two acquisitions in previous years to diversify its product lines. In 2020, MBI acquired a consumer electronics firm producing computers. MBI now (2022) has three divisions: Con
> A restaurant manager has the following goals: (1) serve 300 customers per day and (2) achieve an average price per customer of $6.88. The restaurant is open 365 days per year. The two goals are equally important. The manager’s salary is $68,000. The m
> Kristin Helmud is the general manager of Highland Inn, a local mid-priced hotel with 100 rooms. Her job objectives include providing resourceful and friendly service to the hotel’s guests, maintaining an 80% occupancy rate, improving th
> DuMelon Publishing Inc. is a nationwide company headquartered in Boston, Massachusetts. The firm’s benefits are a significant element of employee compensation. All professional employees at DuMelon receive company-paid benefits, including medical insuran
> Royal Cigar Company is preparing a budget for cash collections. Its sales for November and December are estimated as $90,000 and $100,000, respectively. Past practice indicates that sales in any given month are collected as follows: month of sale, 75 per
> Brief Exercises 7-11 through 7-14 involve departmental cost allocation with two service departments and two production departments. Use the following information for these four exercises: What is the total cost in P1 and P2 after allocation using the d
> Kate’s Candy Co. makes chewy chocolate candies at a plant in Winston-Salem, North Carolina. Steve Bishop, the production manager at this facility, installed a packaging machine last year at a cost of $500,000. This machine is expected to last for 10 more
> As indicated in the chapter, determining the appropriate transfer price in a multinational setting is a very complex problem, with multiple strategic considerations. Consider as an example a U.S. company with a subsidiary in Italy and a subsidiary in Ire
> A subsidiary company located in country A purchases $100 worth of goods. It then repackages, exports, and sells those goods to the parent company, located in country B, for $200. The parent company sells the goods (to an external entity) for $300. Theref
> Zen Manufacturing, Inc., is a multinational firm with sales and manufacturing centers in 15 countries. One of its manufacturing divisions, in country X, sells a product to a retail division in country Y for $300,000 per unit. The division in country X ha
> Ajax Consolidated has several divisions; however, only two of its divisions transfer products to other divisions. The mining division refines toldine, which it transfers to the metals division, where toldine is processed into an alloy and is sold to cust
> Federated Manufacturing Inc. (FMI) produces electronic components in three divisions: industrial, commercial, and consumer products. The commercial products division annually purchases 10,000 units of part 23–6711, which the industrial
> Phoenix Inc., a cellular communication company, has multiple business units, organized as divisions. Each division’s management is compensated based on the division’s operating income. Division A currently purchases ce
> Mylar Corporation started as a single plant to produce its major components and then assembled its main product into electric motors. Mylar later expanded by developing outside markets for some components used in its motors. Eventually, the company reorg
> American Motors Inc. is divided, for performance evaluation purposes, into several divisions. The Automobile Division of American Motors purchases most of its transmission systems from another unit of the company. The Transmission Division’s incremental
> Increasing shareholder value is a key objective for many profit-seeking organizations. As indicated in the chapter, EVA® is meant to approximate economic income and, in this sense, can be viewed as a measure of shareholder value added by the firm during
> Campbell’s Wholesale Company is preparing monthly cash budgets for the fourth quarter of the year. Monthly sales revenue in this quarter is estimated as follows: October, $30,000; November, $24,000; and December, $20,000. All sales are made on open credi
> Refer to Problem 19-44 for reported financial statement data for Nimrod Inc. Required: 1. Using the financing approach, prepare an estimate of EVA® NOPAT (to the nearest whole dollar). In addition to the preceding data, you discovered the fol
> You are provided with the following financial statement information from Nimrod Inc. for its most recent fiscal year: The statement of income for the company for the year just ended is as follows: Assume a weighted-average cost of capital (WACC) of 1
> As referenced in the five-step process presented at the beginning of this chapter, one issue that confronts top management is selection of an appropriate time period for evaluating the financial performance of the company’s investment centers. This probl
> Blackwood Industries manufactures die machinery. To meet its expansion needs, it recently (2020) acquired one of its suppliers, Delta Steel. To maintain Delta’s separate identity, Blackwood reports Delta’s operations a
> Consolidated Industries is a diversified manufacturer with business units organized as divisions, including the Reigis Steel Division. Consolidated monitors its divisions on the basis of both unit contribution and return on investment (ROI), with investm
> One of the three underlying precepts of sustainability is economic performance (balanced with social and environmental performance). This question pertains to the application of ROI as part of a performance-management system related to corporate sustaina
> What is the return on investment (ROI) of corporate wellness programs? What are the nonfinancial returns on such investments? The following article addresses the concept of return on investment for the wellness of the organization’s workforce: Leonard L.
> The authors of an article published in Harvard Business Review (Laurie Bassei and Daniel McMurrer, “Maximizing Your Return on People,” Harvard Business Review (March 2007), p. 115-123) discuss how the concept of return on investment can be applied to the
> As indicated in the chapter, there are goal congruence problems associated with the use of return on investment (ROI) as an indicator of business unit financial performance. One such problem relates to the bias against accepting new investments because o
> Assume the purchase of new delivery trucks used in a product-delivery service. This equipment is needed to improve delivery service and respond to recent environmental goals embraced by the company. The cost of the new equipment is $1,200,000; the expect
> Easy Clean operates a chain of dry cleaners. It is experimenting with the use of a continuous improvement (i.e., kaizen) budget for operating expenses. Currently, a typical location has operating expenses of $10,000 per month. Plans are in place to achie
> Ready Products Inc. operates two divisions, each with its own manufacturing facility. The accounting system reports the following data for 2022: Ready estimates the useful life of each manufacturing facility to be 15 years. As of the end of 2022, the p
> Read the following article by Marc J. Epstein, Adriana Rejc Buhovac, and Kristi Yuthas: “Implementing Sustainability: The Role of Leadership and Organizational Culture,” Strategic Finance, April 2010, pp. 41–47. The article explains the use of management
> For each of the following cases, determine whether the business unit should be evaluated as a cost center or a profit center and explain why. If you choose cost center, then explain which type of cost center—the discretionary-cost center or the engineere
> Cardio World Inc. (CWI) is a sporting goods retailer that specializes in bicycles, running shoes, and related clothing. The firm has become successful by careful attention to trends in cycling, running, and changes in the technology and fashion of sport
> Levine Company is a manufacturer of very inexpensive cell phones and television sets. The company uses recycled parts and a highly structured manufacturing process to keep costs low so that it can sell at very low prices. The company uses lean accounting
> Braxton Hospital and Health Care Services (BHHS) in Braxton, Mississippi, is a part of the Pillford University Health System. BHHS is a 450-bed community teaching hospital with the following mission: “In six years, Braxton Hospital and Health Care Servic
> MetroBank is a fast-growing bank that serves the region around Jacksonville, Florida. The bank provides commercial and individual banking services, including investment and mortgage banking services. The firm’s strategy is to continue to grow by acquirin
> Hamilton-Jones, a large consulting firm in Los Angeles, has experienced rapid growth over the last 5 years. To better serve its clients and to better manage its practice, the firm decided 2 years ago to organize into five strategic business units, each o
> Pittsburgh-Walsh Company Inc. (PWC) manufactures lighting fixtures and electronic timing devices. The lighting fixtures division assembles units for the upscale and mid-range markets. The trend in recent years as the economy has been expanding is for sal
> Grey Manufacturing Company expects sales to total 13,000 units in the first quarter, 12,000 units in the second quarter, and 15,000 units in the third quarter of the current fiscal year. Company policy is to have on hand at the end of each quarter an amo
> RNB is a bank holding company for a statewide group of retail consumer-oriented banks. RNB was formed in the early 1960s by investors who believed in a high level of consumer services. The number of banks owned by the holding company expanded rapidly. Th
> Stratford Corporation is a diversified company whose products are marketed both domestically and internationally. Its major product lines are pharmaceutical products, sports equipment, and household appliances. At a recent meeting, Stratfordâ€
> Whitehouse Gardens Inc. is a chain of home supply and gardening product stores. Last year, Whitehouse adopted the balanced scorecard (BSC) for evaluation of store and store manager performance. The BSC has helped Whitehouse to identify the critical succe
> Fashionisto Inc. is an upscale clothing store in New York City and London. Each store has two main departments, Men’s Apparel and Women’s Apparel. Marie Phelps, Fashionisto’s CFO, wants to use strateg
> Kenneth Merchant and Tatiana Sandino summarize clearly some of the potential limitations of profit center evaluation in the article “Four Options for Measuring Value Creation,” Journal of Accountancy, August 2009, pp. 34–37 (available here: www.journalof
> This problem is an extension to the Bally Company COQ reporting example, reflected in Exhibit 17.10. At year 0, the management team for the company was presented with its first COQ report for the company. Top management was justifiably concerned both abo
> Assume that Allied Manufacturing Co. produces sheet metal, with a target thickness of 0.750 inch. Below are the observed thicknesses of output each day over the past 30 working days. Because the company has only recently begun operations and is eager to
> Drago Company produces a line of brass-based products, one of which is a flow control valve (for regulating the flow of water). The production of this valve requires the use of specialized equipment by highly trained employees. Recently, the company has
> Can lean principles be applied to so-called knowledge work? This issue is addressed in the following article: D. R. Staats and D. M. Upton, “Lean Knowledge Work,” Harvard Business Review, October 2011, pp. 101–110 (available at https://hbr.org/2011/10/le
> As indicated in the text, various tools from operations management and statistics are used to help support Six Sigma goals and process improvements in a lean environment. One such tool is a control chart—a key element used to assess statistical process c
> Ajax Manufacturing produces a single product, which takes 8.0 pounds of direct material per unit produced. The company’s policy is to maintain an end-of-quarter inventory of materials equal to 25 percent of the following quarter’s material requirements f
> Carrie Lee, the president of Lee Enterprises, was concerned about the results of her company’s new quality control efforts. “Maybe the emphasis we’ve placed on upgrading our quality control system wil
> Upon graduation, you and a friend established a computer-consultancy business. Your business has generally been successful, but you and your colleague wish to expand the business significantly over the next 3 years. You have always assumed that the servi
> Use the data in Problem 17-70 to respond to the requirements that follow. Required: 1. If you haven’t done so already (in conjunction with Problem 17-70), prepare in Excel a COQ report for 2022 and 2023. Show subtotals each year for ea
> Acme Materials Company manufactures and sells synthetic coatings that can withstand high temperatures. Its primary customers are aviation manufacturers and maintenance companies. The following table contains financial information pertaining to COQ in 202
> Each year, Worrix Corporation manufactures and sells 3,000 premium-quality multimedia projectors at $12,000 per unit. At the current production level, the firm’s manufacturing costs include variable costs of $2,500 per unit and annual fixed costs of $6,0
> Lightening Bulk Company is a moving company specializing in transporting large items worldwide. The firm has an 85% on-time delivery rate. Thirteen percent of the items are misplaced and the remaining 2% are lost in shipping. On average, the firm incurs
> This question pertains to the use of nonfinancial performance indicators as part of a comprehensive management accounting and control system. You are asked to think critically about the value and challenges of using such data for performance evaluation p
> You have recently been hired as the management accountant for Delta Technologies Inc. The company produces a broad line of subassemblies that are used in the production of flat-screen TVs and other electronic equipment. Competitive pressures, principally
> Obtain a copy of the following article: John H. Fleming, Curt Coffman, and James K. Harter, “Manage Your Human Sigma,” Harvard Business Review, July–August 2005, pp. 107–114 (available at https://hbr.org/2005/07/manage-your-human-sigma). The authors of t
> Enterprises is a manufacturer of consumer electronics products. The industry is very competitive, and RJM has seen its profits fall in recent years, including an operating loss of $18,585 last year. RJM was able to turn that around this year by aggressiv
> Resco, a local retail establishment, expects to make inventory purchases as follows for the first quarter of the year: January, $5,500; February, $6,500; and March, $8,000. Prior experience shows that 25 percent of a given month’s purchases are paid in t
> Green Grow Inc. manufactures riding lawn mowers that it sells to the large discount stores such as Walmart, Lowe’s, and Home Depot. The mowers are marketed as a “value” product, with good quality at a very good price. The company’s two products are the Q
> Clippers Inc. (CI) manufactures two types of garden clippers. A light-duty model, called the “half-inch,” is intended for clipping branches and stems up to one-half-inch thick. The “one-inchâ
> Tall Pines Brewery (TPB) makes two specialty beers in its microbrewery: Golden Ale and Dark Ale. Both beers sell for the same price per case in the U.S. market and in the export market. The latter market is primarily European countries. Both beers also h
> Diane’s Designs is a small business run out of its owner’s house. For the past 6 months, the company has been selling two products, a welcome sign and a birdhouse. The owner has been concerned about the companyâ&
> TransPacific Airlines (TPA) budgeted 80 million passenger miles, or 5 percent of the total market for the year just completed, at a contribution margin of 40 cents per mile. The budgeted average price was 52 cents per passenger mile. The operating data f
> Margot’s Ice Cream operates several stores in a major metropolitan city and its suburbs. Its budget and operating data for the current year follow: Required: 1. Compute these variances for the individual flavors and total quantity sol
> Jay Banning, CEO and a major stockholder of Banning Inc., was unhappy with its operating results for the past year. The company manufactures two environmentally friendly, industrial-caliber cleaning machines used primarily in automobile repair shops, gas
> Robinson Company has two products, A and B. Robinson’s budget for August follows: On September l, these operating results for August were reported: Required: 1. For each product, determine the following variances measured in dollars
> Family Medical Care (FMC) is a family medical practice with 6 physicians, a nursing staff of 8 to 10 nurses, and an administrative staff that varies from 4 to 7 personnel. Rajat Patel, the chief physician at FMC, is interested in studying the efficiency
> Janice Interiors installs custom interiors for luxury mobile homes. In its most recent negotiation with the union, the firm proposed to share productivity gains in direct labor equally with the union. In return, the union agreed not to demand wage increa
> Kraft Bakeries introduced in 2022 a new line of frozen apple pie. For 2022, sales by quarter were as follows: 11,000 units, 16,000 units, 15,000 units, and 20,000 units. Because of aggressive marketing and promotion, the company expects that sales for ea
> The following data were obtained from the 2016 financial statements for two U.S. automakers (in millions of dollars): Required: 1. Calculate and interpret total productivity in dollars for the two automakers. 2. Go to the internet for these companies a
> Textron Manufacturing Inc. assembles industrial testing instruments in two departments, assembly and testing. Operating data for the current and prior years follow: The firm assembled and tested 20,000 instruments in both years. Required: 1. Calculate
> Katrina Design has decided to experiment with two alternative manufacturing approaches, identified as MF and LI, for producing men’s fashions. The firm expects the total demand to be 20,000 suits. Management estimates the required input
> In the fourth quarter of last year, Colditz Company embarked on a major effort to improve productivity. It redesigned products, reengineered manufacturing processes, and offered productivity improvement courses. The effort was completed in the last quart
> Use the data for Ashley Technology Inc. in Problem 16-41 to complete the following requirements. Also assume that fixed manufacturing costs are $50 million in both 2021 and 2022. Required: 1. Compute the total productivity ratios for 2021 and 2022. 2. O
> Use the data for Ashley Technology Inc. in Problem 16-41 to complete the following requirements: Required: 1. Compute the partial financial productivity ratios for direct materials and direct labor for each of the 2 years. 2. On the basis of the partial
> Ashley Technology Inc. manufactures a scrambling device for cellular telephones. The device’s main component is a delicate part, CT140. CT140 is easily damaged and requires careful handling. Once damaged, it must be discarded. The firm
> ACME manufacturing is a low-cost producer of a single, commodity product: RGL-01. Standard overhead cost information for one unit of this product is presented below: Required: 1. Calculate the fixed overhead application rate per machine hour (rounded t
> Glavine & Co. produces a single product, each unit of which requires three direct labor hours (DLHs). Practical capacity (for setting the factory overhead application rate) is 30,000 DLHs, on an annual basis. The information below pertains to the mos
> The Bangor Manufacturing Company produces mechanical toy robots that are typically produced in batches of 250 units. Prior to the current year, the company’s accountants used a standard cost system with a simplified method of assigning manufacturing supp
> May Clothing is a retail men’s clothing store. May's cost is $20 per shirt. The sales price is $40 per shirt. They plan to sell 400,000 shirts each year, which at this level would result in a before tax profit of $2,500,000. What is their degree of opera
> Acme Financial issues letters of credit to importers for overseas purchases. The company charges a nonrefundable application fee of $4,000 and, on approval, an additional service fee of 2.0% of the amount of credit requested. The company’s budget for the
> This assignment involves the use of a traditional (i.e., non-time-driven) ABC system to address the problem of measuring and managing the cost of capacity. As controller for Zen Company, you’ve been asked to provide input regarding the appropriate level
> Zenon Computer competes at the retail level on the basis of customer service. It has invested significant resources in its customer service department. Recently, the company has installed a traditional activity-based costing (ABC) system to provide bette
