Question: The procurement process for Jarom Wholesale Company
The procurement process for Jarom Wholesale Company includes a series of activities that transforms a materials requisition into a vendor payment. The process begins with a request for materials. The requesting department prepares and sends a materials request form to the Purchasing Department. The Purchasing Department then places a request for a quote to vendors. Vendors prepare bids in response to the request for a quote. A vendor is selected based on the lowest bid. A purchase order to the low-bid vendor is prepared. The vendor delivers the materials to the company, whereupon a receiving ticket is prepared. Payment to the vendor is authorized if the materials request form, receiving ticket, and vendor invoice are in agreement. These three documents fail to agree 40% of the time, initiating effort to reconcile the differences. Once the three documents agree, a payment is made. The process can be diagrammed as follows: 
An activity analysis indicated the following activity costs with this process: 
On average, the process handles 10,000 individual requests for materials that result in 10,000 individual payments to vendors. Management proposes to improve this process in two ways. First, the Purchasing Department will develop a preapproved vendor list for which orders can be placed without a request for quote. It is expected that this will reduce the cost of requesting and receiving vendor bids by 75%. Second, additional training and standardization will be provided to reduce errors introduced into the materials requisition form and receiving tickets. It is expected that this will reduce the number of reconciliation differences from 40% to 10%, over an average of 10,000 payments. a. Develop a table showing the percent of individual activity cost to the total process cost. b. Determine the average total process cost per vendor payment, assuming 10,000 payments. c. Prepare a table showing the improvements in the activity costs as a result of the changes proposed by management. Show columns of activity cost prior to improvement, after improvement, and savings. d. Estimate the average cost per vendor payment, assuming that the changes proposed by management are enacted for 10,000 total payments.
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> How does management determine the order in which support department costs are allocated under the sequential method?
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> Based on the data in Exercise 3-14, determine the following: a. Cost of beginning work in process inventory completed in November b. Cost of units transferred to the next department during November c. Cost of ending work in process inventory on November
> a. Based on the data in Exercise 3-11, determine the following: 1. Cost of beginning work in process inventory completed this period 2. Cost of units transferred to finished goods during the period 3. Cost of ending work in process inventory 4. Cost per
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> Schumacher Industries Inc. manufactures recreational vehicles. Schumacher Industries uses a job order cost system. The time tickets from June jobs are summarized as follows: Job 11-101 …………………... $ 4,640 Job 11-102 ……………….…….. 5,510 Job 11-103 ………………...…
> The weekly time tickets indicate the following distribution of labor hours for three direct labor employees: The direct labor rate earned per hour by the three employees is as follows: Tom Couro …….. $32 David Cla
> A summary of the time tickets is as follows: Journalize the entry to record the factory labor costs.
> Kingsford Furnishings Company manufactures designer furniture. Kingsford Furnishings uses a job order cost system. Balances on April 1 from the materials ledger are as follows: Fabric ………â
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> Why is the direct method of support department cost allocation less accurate than the sequential and reciprocal services methods?
> The following information is available for the first year of operations of Creston Inc., a manufacturer of fabricating equipment: Sales ……………………………………….……………… $12,375,000 Gross profit …………………………….…………………. 5,200,000 Indirect labor ………………………….………………….… 410
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> The following information is available for Fuller Manufacturing Company for the month ending October 31: Cost of direct materials used in production …………………. $1,323,600 Direct labor …………………………………….…………………………. 1,680,000 Work in process inventory, October
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> What are some drawbacks of applying support department costs using a single plant-wide rate?
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> Why does support department cost allocation matter to service businesses (such as colleges and universities)?
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> How can support department and joint cost allocation affect production employee performance evaluations?
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> Why are support department costs difficult to apply to products?
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> Data are presented in the following table of returns on investment and residual incomes: Determine the missing items, identifying each item by the appropriate letter.
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> The condensed income statement for the Consumer Products Division of Tri-State Industries Inc. is as follows (assuming no support department allocations): The manager of the Consumer Products Division is considering ways to increase the return on invest
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> How can activity-based costing be used in service companies?
> Partially completed budget performance reports for Delmar Company, a manufacturer of light duty motors, follow: a. Complete the budget performance reports by determining the correct amounts for the lettered spaces. b. Compose a memo to Randi Wilkes, vic
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