Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
16th Edition
ISBN: 9780134475585
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Textbook Question
Chapter 12, Problem 12.28E
Identifying and managing unused capacity (continuation of 12-25). Refer to Exercise 12-25.
- 1. Calculate the amount and cost of (a) unused manufacturing capacity and (b) unused selling and customer-service capacity at the beginning of 2017 based on actual production and actual number of customers served in 2017.
Required
- 2. Suppose Stanmore can add or reduce its manufacturing capacity in increments of 30 units. What is the maximum amount of costs that Stanmore could save in 2017 by downsizing manufacturing capacity?
- 3. Stanmore, in fact, does not eliminate any of its unused manufacturing capacity. Why might Stanmore not downsize?
12-25 Strategy, balanced scorecard. Stanmore Corporation makes a special-purpose machine, D4H, used in the textile industry. Stanmore has designed the D4H machine for 2017 to be distinct from its competitors. It has been generally regarded as a superior machine. Stanmore presents the following data for 2016 and 2017.
| 2016 | 2017 | |
| 1. Units of D4H produced and sold | 200 | 210 |
| 2. Selling price | $40,000 | $42,000 |
| 3. Direct materials (kilograms) | 300,000 | 310,000 |
| 4. Direct material cost per kilogram | $8 | $8.50 |
| 5. Manufacturing capacity in units of D4H | 250 | 250 |
| 6. Total conversion costs | $2,000,000 | $2,025,000 |
| 7. Conversion cost per unit of capacity (row 6 ÷ row 5) | $8,000 | $8,100 |
| 8. Selling and customer-service capacity | 100 customers | 95 customers |
| 9. Total selling and customer-service costs | $1,000,000 | $940,500 |
| 10. Selling and customer-service capacity cost per customer (row 9 ÷ row 8) | $10,000 | $9,900 |
Stanmore produces no defective machines, but it wants to reduce direct materials usage per D4H machine in 2017. Conversion costs in each year depend on production capacity defined in terms of D4H units that can be produced, not the actual units produced. Selling and customer-service costs depend on the number of customers that Stanmore can support, not the actual number of customers it serves. Stanmore has 75 customers in 2016 and 80 customers in 2017.
- 1. Is Stanmore’s strategy one of product differentiation or cost leadership? Explain briefly.
Required
- 2. Describe briefly key measures that you would include in Stanmore’s balanced scorecard and the reasons for doing so.
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PROBLEM: Financial Perspective
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Problem 2-29 (Algo) Changes In Cost Structure; Break-Even Analysis; Operating Leverage; Margin of
Safety [LO2-4, LO2-5, LO2-7, LO2-8]
Morton Company's contribution format income statement for last month is given below:
Sales (46,000 units x $21 per unit)
Variable expenses
Contribution margin
Fixed expenses
Net operating income
$
$
966,000
676,200
289,800
231, 840
57,960
The industry in which Morton Company operates is quite sensitive to cyclical movements in the economy. Thus, profits vary
considerably from year to year according to general economic conditions. The company has a large amount of unused capacity and is
studying ways of improving profits.
Required:
1. New
ment has come onto market that would allow Morton Company to automate a portion of its operations. Variable
expenses would be reduced by $6.30 per unit. However, fixed expenses would increase to a total of $521,640 each month. Prepare
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Chapter 12 Solutions
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
Ch. 12 - Define strategy.Ch. 12 - Describe the five key forces to consider when...Ch. 12 - Prob. 12.3QCh. 12 - What is a customer preference map, and why is it...Ch. 12 - Prob. 12.5QCh. 12 - What are four key perspectives in the balanced...Ch. 12 - What are the five types of conditions to consider...Ch. 12 - Describe three features of a good balanced...Ch. 12 - What are three important pitfalls to avoid when...Ch. 12 - Describe three key components in doing a strategic...
Ch. 12 - Why might an analyst incorporate the...Ch. 12 - How does an engineered cost differ from a...Ch. 12 - What is downsizing?Ch. 12 - What is a partial-productivity measure?Ch. 12 - Prob. 12.15QCh. 12 - Jacobs Inc. is a relatively new company that has...Ch. 12 - The balanced scorecard describes all of the...Ch. 12 - Canarsie Corporation uses a balanced scorecard to...Ch. 12 - Balanced scorecard. Pineway Electric manufactures...Ch. 12 - Analysis of growth, price-recovery, and...Ch. 12 - Strategy, balanced scorecard, merchandising...Ch. 12 - Strategic analysis of operating income...Ch. 12 - Analysis of growth, price-recovery, and...Ch. 12 - Identifying and managing unused capacity...Ch. 12 - Strategy, balanced scorecard. Stanmore Corporation...Ch. 12 - Strategic analysis of operating income...Ch. 12 - Analysis of growth, price-recovery, and...Ch. 12 - Identifying and managing unused capacity...Ch. 12 - Strategy, balanced scorecard, service company....Ch. 12 - Strategic analysis of operating income...Ch. 12 - Analysis of growth, price-recovery, and...Ch. 12 - Identifying and managing unused capacity...Ch. 12 - Balanced scorecard and strategy. Scott Company...Ch. 12 - Strategic analysis of operating income...Ch. 12 - Analysis of growth, price-recovery, and...Ch. 12 - Identifying and managing unused capacity...Ch. 12 - Balanced scorecard. Following is a random-order...Ch. 12 - Balanced scorecard. (R. Kaplan, adapted) Petrocal,...Ch. 12 - Balanced scorecard. Vic Corporation manufactures...Ch. 12 - Balanced scorecard, environmental, and social...Ch. 12 - Balanced scorecard, social performance. Comtex...Ch. 12 - Balanced scorecard, environmental, and social...Ch. 12 - Partial-productivity measurement. Gable Company...Ch. 12 - Total factor productivity (continuation of 12-43)....
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