Current Attempt in Progress Dorothy and her colleague Margaret are having a debate about the nature of their merchandising company's purchasing department costs. Dorothy believes the purchasing department costs should be considered batch-level costs and allocated to product lines based on the number of purchase orders used in each area. Margaret believes the costs should be considered unit-level costs because the volume of units needed drives the amount of purchasing. Data for both cost drivers, along with total purchasing department costs for the company, is as follows. Purchasing department costs Budgeted number of purchase orders Budgeted number of units Purchasing cost allocated e Textbook and Media The first product line requires 50 purchase orders this year in order to purchase 28,000 units. How much purchasing cost would be allocated to this line under the (a) batch-level assumption and (b) unit-level assumption? Save for Later $4,021,500 $ 38,300 26,810,000 (a) Batch-level $ (b) Unit-level Attempts: 0 of 4 used Submit Answer

Current Attempt in Progress Dorothy and her colleague Margaret are having a debate about the nature of their merchandising company's purchasing department costs. Dorothy believes the purchasing department costs should be considered batch-level costs and allocated to product lines based on the number of purchase orders used in each area. Margaret believes the costs should be considered unit-level costs because the volume of units needed drives the amount of purchasing. Data for both cost drivers, along with total purchasing department costs for the company, is as follows. Purchasing department costs Budgeted number of purchase orders Budgeted number of units Purchasing cost allocated e Textbook and Media The first product line requires 50 purchase orders this year in order to purchase 28,000 units. How much purchasing cost would be allocated to this line under the (a) batch-level assumption and (b) unit-level assumption? Save for Later $4,021,500 $ 38,300 26,810,000 (a) Batch-level $ (b) Unit-level Attempts: 0 of 4 used Submit Answer

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter15: Lean Accounting And Productivity Measurement

Section: Chapter Questions

Problem 18E: Lean manufacturing uses value streams to produce a family of products that require the same...

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As a start-up / ‘new’ manufacturer, one of your tasks as the Operations Manager is to identify the behaviour of manufacturing costs to develop a production cost budget. You know three methods can be used to identify cost behaviour from past data, but past data are not available because this is a start-up. Identify and compare the three known methods of measuring cost behaviour.
a difference in cost-plus pricing and target costing is that target costing starts with the price customers are willing to pay whereas cost-plus pricing starts with the cost. computes the desired markup while cost-plus pricing computes the maximum cost the company is willing to incur. is generally determined after introducing a product and cost-plus pricing is determined before introducing a product. is a simple approach while cost-plus pricing is relatively complex.
Purposes of cost allocation. Mary Martin recently started a job as an administrative assistant in the cost accounting department of Needham Manufacturing. New to the area of cost accounting, Mary is puzzled by the fact that one of Needham’s manufactured products, SR670, has a different cost depending on who asks for it. When the marketing department requested the cost of SR670 in order to determine pricing for the new catalog, Mary was told to report one amount, but when a request came in the very next day from the nancialreporting department for the cost of SR670, she was told to report a very different cost. Mary runs a report using Needham’s cost accounting system, which produces the following cost elements for one unit of SR670:
Purposes of cost allocation. Mary Martin recently started a job as an administrative assistant in the cost accounting department of Needham Manufacturing. New to the area of cost accounting, Mary is puzzled by the fact that one of Needham’s manufactured products, SR670, has a different cost depending on who asks for it. When the marketing department requested the cost of SR670 in order to determine pricing for the new catalog, Mary was told to report one amount, but when a request came in the very next day from the financialreporting department for the cost of SR670, she was told to report a very different cost. Mary runs a report using Needham’s cost accounting system, which produces the following cost elements for one unit of SR670:
Aaron McKinney is a cost accountant for Majik Systems Inc. Martin Dodd, Vice President of Marketing, has asked Aaron to meet with representatives of Majik Systems major competitor to discuss product cost data. Martin indicates that the sharing of these data will enable Majik Systems to determine a fair and equitable price for its products. Would it be ethical for Aaron to attend the meeting and share the relevant cost data? Explain your answer.
Discuss how, as warehouse manager for Vinnies Vinyls, you view the different rate of allocated costs the warehouse is being charged compared to the West store. Describe the implications of this. What steps could you take to solve this discrepancy? What alternatives would you consider, assuming management is willing to consider making changes in the rate?
The following series of statements or phrases are associated with product life-cycle viewpoints. Identify whether each one is associated with the marketing, production, or customer viewpoint. Where possible, identify the particular characteristic being described. If the statement or phrase fits more than one viewpoint, label it as interactive. Explain the interaction. a. Sales are increasing at an increasing rate. b. The cost of maintaining the product after it is purchased. c. The product is losing market acceptance and sales are beginning to decrease. d. A design is chosen to minimize post-purchase costs. e. Ninety percent or more of the costs are committed during the development stage. f. The length of time that the product serves the needs of a customer. g. All the costs associated with a product for its entire life cycle. h. The time in which a product generates revenue for a company. i. Profits tend to reach peak levels during this stage. j. Customers have the lowest price sensitivity during this stage. k. Describes the general sales pattern of a product as it passes through distinct life-cycle stages. l. The concern is with product performance and price. m. Actions taken so that life-cycle profits are maximized. n. Emphasizes internal activities that are needed to develop, produce, market, and service products.
Evaluating selling and administrative cost allocations Gordon Gecco Furniture Company has two major product lines with the following characteristics: Commercial office furniture: Few large orders, little advertising support, shipments in full truckloads, and low handling complexity Home office furniture: Many small orders, large advertising support, shipments in partial truckloads, and high handling complexity The company produced the following profitability report for management: The selling and administrative expenses are allocated to the products on the basis of relative sales dollars. Evaluate the accuracy of this report and recommend an alternative approach.
The Chocolate Baker specializes in chocolate baked goods. The firm has long assessed the profitability of a product line by comparing revenues to the cost of goods sold. However, Barry White, the firms new accountant, wants to use an activity-based costing system that takes into consideration the cost of the delivery person. Following are activity and cost information relating to two of Chocolate Bakers major products: Using activity-based costing, which of the following statements is correct? a. The muffins are 2,000 more profitable. b. The cheesecakes are 75 more profitable. c. The muffins are 1,925 more profitable. d. The muffins have a higher profitability as a percentage of sales and, therefore, are more advantageous.
Lean manufacturing uses value streams to produce a family of products that require the same manufacturing sequence. Value-stream costing is an approach often used to determine the unit product costs in a lean manufacturing environment. Which of the following best describes how unit costs are calculated using value-stream costing? a. Value stream costs divided by units shipped b. Value stream costs divided by units produced c. (Total prime costs + overhead costs assigned to the value stream using a plantwide rate) divided by units produced d. Activity-based costing assignments within the value stream
Assign the customer-related activity costs to each customer type using activity rates. Now calculate the profitability of each customer category. As a manager, how would you use this information? Emery Company sells small machine parts to heavy equipment manufacturers for an average price of 1.05 per part. There are two types of customers: those who place small, frequent orders and those who place larger, less frequent orders. Each time an order is placed and processed, a setup is required. Scheduling is also needed to coordinate the many different orders that come in and place demands on the plants manufacturing resources. Emery also inspects a sample of the products each time a batch is produced to ensure that the customers specifications have been met Inspection takes essentially the same time regardless of the type of part being produced. Emerys Cost Accounting Department has provided the following budgeted data for customer-related activities and costs (the amounts expected for the coming year): Required: 1. Assign the customer-related activity costs to each category of customers in proportion to the sales revenue earned by each customer type. Calculate the profitability of each customer type. Discuss the problems with this measure of customer profitability.
Which of the following statements is not a characteristic of a target costing system? It is a good system to compare the cost of your products with that of your competitors Assists with ensuring that a business can achieve its desired profit levels Focuses on cost reductions after the product has been designed Focuses on the manufacturing processes to see if improvements can be made from a cost perspective.