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Question 1
International Beans, Inc. (IBI) is a processor and distributor of a variety of blends of coffee. The company buys green (unprocessed) coffee beans from around the world and roasts, blends, and packages them for resale. IBI offers a large variety of different coffees that it sells to gourmet shops in one-kilogram bags. The major cost of the coffee is raw materials in the form of unprocessed coffee beans. However, the company’s predominately automated roasting, blending, and packing processes require a substantial amount of manufacturing overhead.
Some of IBI’s coffees are very popular and sell in large volumes, while a few of the newer blends sell in very low volumes. IBI prices its coffees at
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f. According to the CICA Handbook, Section 3031, if a company’s over applied overhead is a result of abnormally high production, how should it be handled? g. As the new assistant controller, you will be responsible for preparing the annual management reports. The company is approaching the end of its fiscal year, and the president has called a meeting with the marketing manager, the production manager, and you. During the meeting the president informs the team that sales are down and profits look like they are going to be lower than planned. The executive team is considering expanding the company’s product lines; however, this action will require a substantial loan from the bank for capital investments. Thus, the president, who is the head of the executive team, wants to ensure that profits are at least equal to or greater than last year’s. One of the executive team members has listed the following actions that could be taken to increase profits for the current year:
1. Reduce the sales price of their high-volume IBI coffee in order to increase sales.
2. Extend the current year’s cut-off date for sales to January 15 in order to include next year’s sales with the current sales.
3. Change the method of determining depreciation on all capital assets that are less than two years old from double declining balance to straight-line. Currently the declining balance rate is 40%. i. Based on the information in the question, explain why
Costa Rica now provided raw material for Starbucks which accounted for about 15 percent of the total coffee beans Starbucks needed every year. Costa Rica as one of the raw material suppliers plays an important role in global value chain. Coffee has played a pivotal role in the development of Costa Rica. It has shaped social, cultural and political institutions and is still one of country’s major agricultural exports. (Anywhere, 2016) The global value chain in this coffee industry can be described that Starbucks, the centre in this coffee global value chain, purchasing raw materials (coffee beans) from coffee farms in Costa Rica, reprocessing and reproducing in retail shops, selling the finished products (various kinds of coffee) to customers in the world.
c. Depreciation is computed using the straight-line method over the asset’s estimated useful life, which is determined by asset category as follows: Buildings and improvements (5 – 40 years); Store fixtures and equipment (3 – 15years), Leasehold improvements (Shorter of initial lease term or asset life); Capitalized software (3 – 7 years).
| In Year 1, depreciation is $5,000 plus 15% of the asset’s outlayFrom Year 2, depreciation is either * 30% of the asset’s book value; or * if the asset’s book value is less than $6,500, depreciation is the asset’s book value (i.e. asset is depreciated to zero once book value < $6,500)
when overhead is underapplied a must be made to the manufacturing overhead account to close it out
|Price of Belgium cocoa beans|Quantity of Belgium cocoa beans |Quantity of Belgium cocoa beans |Total Demanded |
Kerrie Peterson works for a Fortune 500 company named Access. She is currently a General Manager (GM), over the corporate leading business unit. Each GM was asked to cut back their operating cost and Kerrie agreed to set her goal to 15 percent, during a quarterly financial review planning session. She was confident about meeting the 15 percent goal, but the challenge was getting her senior manager on board with the ideal. Kerrie called a meeting for her senior management team, to inform them of the changes. Kerrie stressed the fact that by their department being the largest department they must join this effort, in order to meet the goal for the greater good of the company, (Lester & Parnell, 2007, Case E). As general manager, Kerrie
One of the largest challenges of his position as a top manager in the organization is making things happen. He achieves this by increasing profitability through leadership (interpersonal role, leading function) and delegation (decisional resource allocator role, organizing function) to control and utilize the strengths of his entire financial
Suggest key actions that management should take in order to confront these circumstances. Provide a rationale for your response. (Hint: Your firm’s price must cover average variable costs in the short run and average total costs in the long run to continue operations.)
Once green coffee beans arrive at facilities, they are roasted and grinded for packaging. There is an established infrastructure to track the energy use of the roasting operations in a new way, providing data that is more useful for managing energy efficiency.
give them some control over soft drink profitability. Furthermore, consumers expected to pay less through this
Peak Garage Door Inc. has set a goal to increase their sales for 2004. Garage door industry is expecting a growth of 2.4% while the management of Peak is looking to increase company’s sales 26.4%. The company currently has 50 exclusive dealers and 300 non-exclusive dealers. Management has three proposals in front of them. The first suggestion is to increase the number dealers in their existing markets. The second recommendation is to develop an exclusive franchise agreement with existing non-exclusive dealers. The third recommendation is to decrease the number of dealers and focus company’s resources on increasing support for the existing dealers. Of course there is an option for them to leave everything as it is. My
The overhead spending is greater than the direct labour costs or the direct material costs for all three product lines- Valves, Pumps and Flow Controllers (Exhibit 2). Overheads are simply charged at 185% constant for three diverse products. The fact that there is huge variance in the number of units produced per production run- it is 375 for valves and 18 for flow controllers per production run. This shows the reason for high overheads cost too. Hence it calls for checking the cost allocation system of the company.
Having worked in independent coffee establishments I recognised how the coffee culture is becoming increasingly popular and trendy, coffee has become a worldwide commodity and the demand for good artisan coffee is increasing year on year.
Starbucks inbound logistics comprises of the firm’s quality control specialist in selecting top-quality Arabia coffee beans from suppliers that maintain a sustainable approach. Starbucks supports ethical sourcing by operating “responsible purchasing practices, farmer support…” (Starbucks, 2016) also corporate social responsibility (CSR). Additionally, their tactic is utilizing the “Coffee and Farmer Equity (C.A.F.E.) Practices” (Starbucks, 2016), wherein this approach is the first set of sustainability benchmarks in the coffee industry and is certified by third-party logistics professionals. The C.A.F.E. Practices has assisted Starbucks in relation to generating a “long-term supply of high-quality coffee” (Starbucks, 2016) and influencing the lives of the farmers and their communities. Furthermore, Starbucks utilizes economies of scales in their inbound logistics activities by developing outstanding supply chain procedures by using C.A.F.E. and also includes collaborating internationally with managers discussing strategic alliances through suppliers for their products. Starbucks have recently