FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Related questions
Question
Waterfun Technology produces engines for recreational boats. Because of competitive pressures, the company was making an effort to reduce costs. As part of this effort, management implemented an activity-based management system and began focusing its attention on processes and activities. Receiving was among the processes (activities) that were carefully studied. The study revealed that the number of receiving orders was a good driver for receiving costs. During the last year, the company incurred fixed receiving costs of $630,000 (salaries of 10 employees). These fixed costs provide a capacity of processing 72,000 receiving orders (7,200 per employee at practical capacity). Management decided that the efficient level for receiving should use 36,000 receiving orders.
Required:
1. Explain why receiving would be viewed as a value-added activity. List all possible reasons. Also, list some possible reasons that explain why the demand for receiving is more than the efficient level of 36,000 receiving orders.
2. Break the cost of receiving into its value-added and nonvalue-added components.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution
Trending nowThis is a popular solution!
Step by stepSolved in 6 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Grey Inc. has many divisions that are evaluated on the basis of ROI. One division, Centra, makes boxes. A second division, Mantra, makes chocolates and needs 80,000 boxes per year. Centra incurs the following costs for one box: Direct materials $0.35 Direct labor $0.60 Variable overhead $0.40 Fixed overhead $0.13 Total $1.48 Centra has capacity to make 700,000 boxes per year. Mantra currently buys its boxes from an outside supplier for $1.80 each (the same price that Centra receives). Assume that Grey Inc. allows division managers to negotiate transfer price. Centra is producing 600,000 boxes. If Centra and Mantra agree to transfer boxes, what is the ceiling of the bargaining range and which division sets it? a.$1.80; Centra b.$1.35; Centra c.$1.48; Centra d.$1.80; Mantra e.$1.35; Mantraarrow_forwardPolar Bear Computer Co. outsources the production of motherboards for its computers. It is currently deciding which of two suppliers to use: Alpha or Beta. Due to differences in the product failure rates in the two companies, 10% of motherboards purchased from Alpha will be inspected and 30% of motherboards purchased from Beta will be inspected. The following data refer to costs associated with Alpha and Beta: Number of orders per year 90. 90 Annual motherboards demanded 19,000 19,000 Price per motherboard $96 $90 Ordering cost per order $10 $11 Inspection cost per unit $5 $5 Average inventory level 200 units 200 units Expected number of stockouts 200 600 Stockout cost (cost of rush order) per stockout $3 $7 Units returned by customers for replacing motherboards 90 900 Cost of replacing each motherboard $23 $23 Required annual return on investment 10% 10% Other carrying cost per unit per year $2.30 $2.30 Requirement 1. What is the relevant cost of purchasing from…arrow_forwardNorthwood Company manufactures basketballs. The company has a ball that sells for $36. At present, the ball is manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses are high, totaling $21.60 per ball, of which 60% is direct labor cost. Last year, the company sold 59,000 of these balls, with the following results: Sales (59,000 balls) Variable expenses Contribution margin Fixed expenses Net operating income $2,124,000 1,274,400 CM Ratio Unit sales to break even 849,600 705,600 $ 144,000 Required: 1-a. Compute last year's CM ratio and the break-even point in balls. (Do not round intermediate calculations.) % balls 4 1-b. Compute the the degree of operating leverage at last year's sales level. (Round your answer to 2 decimal places.) Degree of operating leveragearrow_forward
- Felipe's Mexican Restaurant incurred salaries expense of $70,000 for 2024. The payroll expense includes employer FICA tax, in addition to state unemployment tax and federal unemployment tax. Of the total salaries, $23,000 is subject to unemployment tax. Also, the company provides the following benefits for employees: health insurance (cost to the company, $2,000), life insurance (cost to the company, $400), and retirement benefits (cost to the company, 8% of salaries expense). Requirement 1. Journalize Felipe's expenses for employee benefits and for payroll taxes. Explanations are not required. Begin with the entry to accrue Felipe's employer payroll taxes. (Round all amounts to the nearest cent. Record debits first, then credits. Exclude explanations from journal entries.) Date ages Get more help - Accounte [99+ More info Dabit Gradit For all payroll calculations, use the following tax rates and round amounts to the nearest cent: Employee: Employer: OASDI: 6.2% on first $132,900…arrow_forwardZarson’s Netballs is a manufacturer of high-quality basketballs and volleyballs. Setup costs are driven by the number of setups. Equipment and maintenance costs increase with the number of machine-hours, and lease rent is paid per square foot. Capacity of the facility is 14,000 square feet, and Zarson is using only 80% of this capacity. Zarson records the cost of unused capacity as a separate line item and not as a product cost. The following is the budgeted information for Zarson Zarson’s Netballs Budgeted Costs and Activities For the Year Ended December 31, 2017 Direct materials—basketballs $ 168,100 Direct materials—volleyballs 303,280 Direct manufacturing labor—basketballs 111,800 Direct manufacturing labor—volleyballs…arrow_forwardThornton Health Care Center Incorporated has three clinics servicing the Seattle metropolitan area. The company's legal services department supports the clinics. Moreover, its computer services department supports all of the clinics and the legal services department. The annual cost of operating the legal services department is $331,000. The annual cost of operating the computer services department is $292,600. The company uses the number of patients served as the cost driver for allocating the cost of legal services and the number of computer workstations as the cost driver for allocating the cost of computer services. Other relevant information follows. Number of Patients:Number of Workstations Sewell clinic 6, 500 : 7 Alphretta clinic 5, 600: 11 Gwinnett clinic 6,300 : 14 Legal services 6 Computer services 18 Required Allocate the cost of computer services to all of the clinics and the legal services department. After allocating the cost of computer services, allocate the cost of…arrow_forward
- Northwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the ball is manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses are high, totaling $15.00 per ball, of which 60% is direct labor cost. Last year, the company sold 54,000 of these balls, with the following results: Sales (54,000 balls) $ 1,350,000 Variable expenses 810,000 Contribution margin 540,000 Fixed expenses 372,000 Net operating income $ 168,000 Required: 1. Compute (a) last year's CM ratio and the break-even point in balls, and (b) the degree of operating leverage at last year’s sales level. 2. Due to an increase in labor rates, the company estimates that next year's variable expenses will increase by $3.00 per ball. If this change takes place and the selling price per ball remains constant at $25.00, what will be next year's CM ratio and the break-even point in balls? 3. Refer to the data in (2)…arrow_forwardMaglie Company manufactures two video game consoles: handheld and home. The handheld consoles are smaller and less expensive than the home consoles. The company only recently began producing the home model. Since the introduction of the new product, profits have been steadily declining. Management believes that the accounting system is not accurately allocating costs to products, particularly because sales of the new product have been increasing. Management has asked you to investigate the cost allocation problem. You find that manufacturing overhead is currently assigned to products based on their direct labor costs. For your investigation, you have data form last year. Manufacturing overhead was $1,432,000 based on production of 290,000 handheld consoles and 108,000 home consoles. Direct labor and direct materials costs were as follows. Handheld Home Total Direct labor…arrow_forwardMarshall Company is a large manufacturer of office furniture. The company has recently adopted lean accounting and has identified two value streams-office chairs and office tables. Total sales in the most recent period for the two streams are $245 and $310 million, respectively. In the most recent accounting period, Marshall had the following operating costs, which were traced to the two value streams as follows (in thousands): Operating costs: Materials Labor Equipment-related costs Occupancy costs Sales Operating costs: Total operating costs Value-stream profit before inventory change In addition to the traceable operating costs, the company had manufacturing costs of $116.750 million, and selling and administrative costs of $25 million that could not be traced to either value stream. Due to the implementation of lean methods, the firm has been able to reduce Inventory In both value streams significantly. Marshall has calculated the fixed cost of prior-period Inventory that is…arrow_forward
- A corporation is considering the addition of new automated manufacturing equipment in one of its production departments. Currently, the department produces 50,000 units a year with average unit costs as follows: Direct materials Direct labor (2 hours at $15 per hour) Fixed overhead Both direct materials and direct labor are variable costs. The ratio of unit fixed costs to unit variable costs (direct materials plus direct labor) in the current labor-intensive operation is 25% ($20 $80). The new machinery will increase total fixed overhead costs in the department by $500,000 per year and make production more capital-intensive. Production will double to 100,000 units a year using the same total number of direct labor hours per year as the old labor-intensive operation. Direct materials cost will be unchanged at $50 per unit. Which of the following is the predicted ratio of unit fixed costs to unit variable costs in the new capital-intensive operation (rounded to the nearest 0.00%)? O…arrow_forwardMaple Woods Inc. manufactures lounge chairs available in both a luxury and a standard model. The company has made the standard model for years; the luxury model was introduced several years ago to capture a new segment of the market. Since the introduction of the luxury model, the company's profits have steadily declined, and management has become concerned about the accuracy of its costing system. Sales of the luxury model have been increasing rapidly. Overhead is applied to products on the basis of direct labour hours. At the beginning of the current year, management estimated that $6,512,836 in overhead costs would be incurred and the company would produce and sell 6,300 units of the luxury model and 44,680 units of the standard model. The luxury model requires 3.0 hours of direct labour time per unit, and the standard model requires 2.0 hours. Materials and labour costs follow: Direct materials cost per unit. Direct labour cost per hour Predetermined overhead rate Unit product cost…arrow_forwardBoise, a division of Price Enterprises, currently performs computer services for various departments of the firm. One of the services has created a number of operating problems, and management is exploring whether to outsource the service to a consultant. Traceable variable and fixed operating costs total $103,000 and $48,000, respectively, in addition to $41,000 of corporate administrative overhead allocated from Price. If Boise were to use the outside consultant, fixed operating costs would be reduced by 70%. What are the irrelevant costs in Boise’s outsourcing decision?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education