The chief executive officer (CEO) of your company recently returned from a luncheon meeting where activity-based costing was presented and discussed. Though her background is not in accounting, she has worked for the company for 15 years and is thoroughly familiar with its operations. Her impression of the presentation about ABC was that it was just another way of dividing up total overhead cost and that the total would still be the same “no matter how you sliced it.” Required Write a memorandum to the CEO, no more than one page, explaining how ABC is different from traditional volume-based costing methods. Also, identify its advantages and disadvantages vis-à-vis traditional methods. Be sure it is written to be understandable to someone who is not an accountant.
> Determine whether each of the following is best described as a fixed, variable, or mixed cost with respect to product units. 1. Rubber used to manufacture athletic shoes. 2. Maintenance of factory machinery. 3. Packaging expense. 4. Wages of an assembly-
> Listed here are four series of separate costs measured at various volume levels. Examine each series and identify whether it is best described as a fixed, variable, step-wise, or curvilinear cost. (It can help to graph the cost series.) Volume (Unit
> A high proportion of Company A’s total costs are variable with respect to units sold; a high proportion of Company B’s total costs are fixed with respect to units sold. Which company is likely to have a higher degree of operating leverage (DOL)? Explain.
> US-Mobile Company manufactures and sells two products, conventional phones and smart phones, in the ratio of 5:3. Fixed costs are $105,000, and the contribution margin per composite unit is $125. What number of both conventional and smart phones is sold
> The following costs result from the production and sale of 12,000 CD sets manufactured by Gilmore Company for the year ended December 31, 2013. The CD sets sell for $18 each. The company has a 25% income tax rate. Variable manufacturing costs Plastic fo
> Milano Co. manufactures and sells three products: product 1, product 2, and product 3. Their unit sales prices are product 1, $40; product 2, $30; and product 3, $20. The per unit variable costs to manufacture and sell these products are product 1, $30;
> You hire a new assistant production manager whose prior experience is with a company that produced goods to order. Your company engages in continuous production of homogeneous products that go through various production processes. Your new assistant e-ma
> Arctic Cat’s production requires activities. What are value-added activities?
> This year Best Company earned a disappointing 5.6% after-tax return on sales (net income/sales) from marketing 100,000 units of its only product. The company buys its product in bulk and repackages it for resale at the price of $20 per unit. Best incurre
> Mingei Co. produces and sells two products, BB and TT. It manufactures these products in separate factories and markets them through different channels. They have no shared costs. This year, the company sold 50,000 units of each product. Sales and costs
> Rivera Co. sold 20,000 units of its only product and incurred a $50,000 loss (ignoring taxes) for the current year as shown here. During a planning session for year 2014’s activities, the production manager notes that variable costs can
> Kyo Co.’s monthly sales and costs data for its operating activities of the past year follow. Management wants to use these data to predict future fixed and variable costs. (Dollar amounts are in thousands.) Required1. Prepare a scatte
> Hip-Hop Co. manufactures and markets several products. Management is considering the future of one product, electronic keyboards that has not been as profitable as planned. Since this product is manufactured and marketed independently of the other produc
> The following costs result from the production and sale of 1,000 drum sets manufactured by Tom Thompson Company for the year ended December 31, 2013. The drum sets sell for $500 each. The company has a 25% income tax rate. Variable production costs Plas
> Patriot Co. manufactures and sells three products: red, white, and blue. Their unit sales prices are red, $20; white, $35; and blue, $65. The per unit variable costs to manufacture and sell these products are red, $12; white, $22; and blue, $50. Their sa
> This year Bertrand Company sold 40,000 units of its only product for $25 per unit. Manufacturing and selling the product required $200,000 of fixed manufacturing costs and $325,000 of fixed selling and administrative costs. It’s per unit variable costs f
> Vanna Co. produces and sells two products, T and O. It manufactures these products in separate factories and markets them through different channels. They have no shared costs. This year, the company sold 50,000 units of each product. Sales and costs for
> Astro Co. sold 20,000 units of its only product and incurred a $50,000 loss (ignoring taxes) for the current year as shown here. During a planning session for year 2014’s activities, the production manager notes that variable costs can
> What is an activity cost driver?
> Many accounting and accounting-related professionals are skilled in financial analysis, but most are not skilled in manufacturing. This is especially the case for process manufacturing environments (for example, a bottling plant or chemical factory). To
> Alden Co.’s monthly sales and cost data for its operating activities of the past year follow. Management wants to use these data to predict future fixed and variable costs. Required1. Prepare a scatter diagram for these data with sale
> Xcite Equipment Co. manufactures and markets a number of rope products. Management is considering the future of Product XT, a special rope for hang gliding that has not been as profitable as planned. Since Product XT is manufactured and marketed independ
> A company reports the following information about its sales and its cost of sales. Each unit of its product sells for $500. Use these data to prepare a scatter diagram. Draw an estimated line of cost behavior and determine whether the cost appears to be
> Blanchard Company’s sales manager (in Exercise 5-10) predicts that annual sales of the company’s product will soon reach 40,000 units and its price will increase to $200 per unit. According to the production manager, the variable costs are expected to in
> Refer to the information in Exercise 5-10. Prepare a CVP chart for the company. Information from 5-10: Blanchard Company manufactures a single product that sells for $180 per unit and whose total variable costs are $135 per unit. The company’s annual fi
> Refer to the information from Exercise 5-7. Use spreadsheet software to use ordinary least squares regression to estimate the cost equation, including fixed and variable cost amounts. Information from 5-7: Felix & Co. reports the following informati
> Use the following information about sales and costs to prepare a scatter diagram. Draw a cost line that reflects the behavior displayed by this cost. Determine whether the cost is variable, step-wise, fixed, mixed, or curvilinear. Period Sales Costs
> Bloom Company management predicts that it will incur fixed costs of $160,000 and earn pretax income of $164,000 in the next period. Its expected contribution margin ratio is 25%. Use this information to compute the amounts of (1) total dollar sales and (
> Following are five series of costs A through E measured at various volume levels. Examine each series and identify which is fixed, variable, mixed, step-wise, or curvilinear. Fi Edit Vaw naeri Farmat Tools Dala Window Help Volume (Units) Series A Se
> What is the first step in applying activity-based costing?
> The left column lists several cost classifications. The right column presents short definitions of those costs. In the blank space beside each of the numbers in the right column, write the letter of the cost best described by the definition. A. Total cos
> Manufacturers such as Polaris and Arctic Cat usually work to maintain a high-quality and low-cost operation. One ratio routinely computed for this assessment is the cost of goods sold divided by total expenses. A decline in this ratio can mean that the c
> Following are five graphs representing various cost behaviors. (1) Identify whether the cost behavior in each graph is mixed, step-wise, fixed, variable, or curvilinear. (2) Identify the graph (by number) that best illustrates each cost behavior: (a) Fac
> Refer to the information from Exercise 5-19. Use the information to determine the (1) weighted average contribution margin, (2) break-even point in units, and (3) number of units of each product that will be sold at the break-even point. Information fro
> R&R Tax Service offers tax and consulting services to individuals and small businesses. Data forfees and costs of three types of tax returns follow. R&R provides services in the ratio of 5:3:2(easy, moderate, business). Fixed costs total $18,000
> Refer to the information from Exercise 5-17. Use the information to determine the (1) weighted average contribution margin, (2) break-even point in units, and (3) number of units of each product that will be sold at the break-even point. Information fro
> Handy Home sells windows and doors in the ratio of 8:2 (windows: doors). The selling price of each window is $200 and of each door is $500. The variable cost of a window is $125 and of a door is $350. Fixed costs are $900,000. Use this information to det
> Cooper Company expects to sell 200,000 units of its product next year, which would generate total sales of $17 million. Management predicts that pretax net income for next year will be $1,250,000 and that the contribution margin per unit will be $25. Use
> Nombre Company management predicts $390,000 of variable costs, $430,000 of fixed costs, and a pretax income of $155,000 in the next period. Management also predicts that the contribution margin per unit will be $9. Use this information to compute the (1)
> Blanchard Company management targets an annual after-tax income of $810,000. The company is subject to a 20% income tax rate. Assume that fixed costs remain at $562,500. Compute the (1) unit sales to earn the target after-tax net income and (2) dollar sa
> KTM reports costs in financial statements. If plantwide overhead rates are allowed for reporting costs to external users, why might a company choose to use a more complicated and more expensive method for assigning overhead costs to products?
> What are the four activity levels associated with activity-based costing? Define each.
> In what way are departmental overhead rates similar to a single plantwide overhead rate? How are they different?
> Explain why a single plantwide overhead rate can distort the cost of a particular product.
> What are the advantages of using a single plantwide overhead rate?
> King Company produces variations of its product, a megatron, in response to custom orders from its customers. On June 1, the company had no inventories of goods in process or finished goods but held the following raw materials. Material M . . . . . . .
> Why are direct labor hours and machine hours commonly used as the bases for overhead allocation?
> New Belgium Brewing Company has expanded its product offerings to include many varieties of specialty and seasonal brews. Kim Jordan, CEO of New Belgium Brewing Company, realizes that financial success depends on cost control as well as revenue generatio
> Accounting professionals that work for private companies often obtain the Certified Management Accountant (CMA) designation to indicate their proficiency in several business areas in addition to managerial accounting. The CMA examination is administered
> In conducting interviews and observing factory operations to implement an activity-based costing system, you determine that several activities are unnecessary or redundant. For example, warehouse personnel were inspecting purchased components as they wer
> Polaris and Arctic Cat are competitors in the sales of recreational and off-road vehicles. Compare these companies’ income statements and answer the following. Required 1. Which company has a higher ratio of costs, defined as cost of goods sold plus tot
> Refer to financial statements of Polaris (Polaris.com) and Arctic Cat (arcticcat.com) to answer the following. Required 1. Identify at least two activities at Polaris and at Arctic Cat that cause costs to be incurred. Do you believe these companies shou
> Visit the Websites and review the financial statements for KTM (KTM.com) and Piaggio (piaggio.com). Each of these companies sells street vehicles like motorcycles or scooters in global markets. Required 1. For KTM in 2011, what are the largest three geo
> The computer workstation furniture manufacturing that Adria Lopez started is progressing well. At this point, Adria is using a job order costing system to account for the production costs of this product line. Adria has heard about process costing and is
> The following refers to units processed by an ice cream maker in July. Compute the total equivalent units of production with respect to labor for July using the weighted-average inventory method. Gallons of Percent of Product Labor Added Beginning go
> KTM and Piaggio are competitors in the global marketplace. KTM’s and Piaggio’s financial statements are in Appendix A. Required 1. Determine the change in KTM’s and Piaggio’s inventories for the most recent year reported. Then identify the impact on net
> Adria Lopez expects sales of her line of computer workstation furniture to equal 300 workstations (at a sales price of $3,000) for 2014. The workstations’ manufacturing costs include the following. Direct materials . . . . . . . . . . . $800 per unit Di
> The Soft Toys Company has collected information on fixed and variable costs for four potential plant locations. a. Plot the total cost curves for the four plant locations on a single graph. b. Compute the range of demand for which each location has a c
> Discuss the use of performance standards and performance variances. Do schools and universities use them? How can they be damaging to the organization?
> List some of the traditional performance measures and describe their value in today’s competitive climate.
> What risk do managers take when they view their firm’s performance solely in financial terms?
> In building supply chain competencies, what are the tradeoffs that must be considered?
> How should performance measures be viewed from a supply chain perspective?
> What do customers have to do with good performance measures?
> Define quality of life. Why is quality of life an important factor in facility location? Is the set of quality of life factors used by the Chamber of Commerce in Jacksonville, Florida a good one? Please explain.
> What is the difference between a total productivity measure and a single factor productivity measure? Provide an example.
> When customers purchase a service, they are actually getting a bundle of service attributes. List and describe these attributes using a car rental agency, a convenience store and a radio station.
> Using the formulas provided for utilization, calculate the utilization of your classroom.
> What are the advantages and disadvantages of using labor utilization as a performance measure? Do these same arguments apply to machine utilization?
> Cindy Jo’s Hair Salon is concerned about their rising costs of supplies, energy, and labor, so they are considering investing in better equipment, which hopefully will reduce the time required to perform most hair styles as well as resu
> What is the WTO and what is its role in world trade?
> What are the latest extensions of the SCOR model, and why are they used?
> Describe what happens as a firm progresses through the standardized levels of process detail in the SCOR model.
> How is a scorecard different from a dashboard?
> What are the steps in developing a balanced scorecard?
> Why should supply chains begin using green performance measures? Provide some examples of green supply chain performance measures. How would these differ from green performance measures for one firm?
> Why should supply chains begin using green performance measures? Provide some examples of green supply chain performance measures.
> How should a firm extend their performance measures to include other supply chain members?
> What does process integration mean, and why is it difficult to achieve?
> List some steps firms can take to reduce supply chain risk and increase security.
> What is the difference between supply chain risk management and supply chain security management? Which do you think is most important?
> Discuss the major regional trade agreements in Asia, Africa, Europe, Latin America, and North America.
> What is everyday low pricing, and how does it impact the bullwhip effect?
> What is the difference between supply chain management and supply chain process integration?
> What is cloud-based supply chain management and how might it impact process integration?
> Define the bullwhip effect and describe how it impacts supply chain integration, or how integration impacts the bullwhip effect.
> Why is visibility so important when integrating processes?
> Why is lack of trust an obstacle to supply chain management? How can we overcome this obstacle?
> What are knowledge management solutions, and how can they support a firm’s supply chain integration efforts? Give some examples.
> Why is an ERP system important for both internal and external process integration? What other IT considerations are there?
> What makes a supplier or customer a key or primary supply chain partner? Describe why it is important to begin supply chain management efforts with only these companies.
> For the office layout shown below and the accompanying trip and distance matrices, determine the total distance traveled per day. Find another layout that results in a lower total distance traveled per day. Interdepartmental Trips per Day Manage
> The Bruhaha Brewery is planning to expand internationally. The company has identified six critical location factors and their relative weights. The relative performance scores for each of the three potential sites are shown in the following table. Which
> For the previous month, the Ellram Lounge served 1,500 customers with very few complaints. Their labor cost was $3,000; material cost was $800; energy cost was $200; and building lease cost was $1,500. They were open 26 days during the month, and the lou
> How would Stella’s queuing system operating characteristics change for the problem below, if she added another cashier and increased her service rate to twenty customers per hour? Stella can handle about 10 customers per hour at her one-person comic book
> Given an average service rate of twelve customers per hour, what is the probability the business can handle all the customers when the average arrival rate is ten customers per hour? Use the Poisson distribution to calculate the probabilities for various
> Can recovery from a poor service quality incident be a good thing? Explain.
> Describe the five dimensions of service quality for a dentist’s office, how performance in these dimensions might be measured, and how recoveries might be handled for failures in each of the service quality dimensions.
> How is service quality related to customer service and satisfaction?
> Describe and give examples of a pure Internet distribution strategy and a mixed Internet distribution strategy. Find your examples on the Internet.
