Managerial Accounting
15th Edition
ISBN: 9781337912020
Author: Carl Warren, Ph.d. Cma William B. Tayler
Publisher: South-Western College Pub
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Textbook Question
Chapter 13, Problem 1PA
Lean principles
Bright Night, Inc., manufactures light bulbs. Its purchasing policy requires that the purchasing agents place each quarter’s purchasing requirements out for bid. This is because the Purchasing Department is evaluated solely by its ability to get the lowest purchase prices. The lowest bidder receives the order for the next quarter (90 working days).
To make its bulb products, Bright Night requires 36,000 pounds of glass per quarter. Bright Night received two glass bids for the third quarter, as follows:
- Central Glass Company: $30.00 per pound of glass. Delivery schedule: 36,000 (400 lbs. x 90 days) pounds at the beginning of July to last for 3 months.
- Ithaca Glass Company: $30.20 per pound of glass. Delivery schedule: 400 pounds per working day (90 days in the quarter).
Bright Night accepted Central Glass Company’s bid because it was the low-cost bid.
Instructions
- 1. Comment on Bright Night’s purchasing policy.
- 2. What are the additional (hidden) costs, beyond price, of Central Glass Company’s bid? Why weren’t these costs considered?
- 3. Considering only inventory financing costs, what is the additional cost per pound of Central Glass Company’s bid if the annual cost of money is 8%? (Hint: Determine the average value of glass inventory held for the quarter and multiply by the quarterly interest charge, then divide by the number of pounds.)
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Bright Night, Inc., manufactures light bulbs. Its purchasing policy requires that the purchasing agents place each quarter’s purchasing requirements out for bid. This is because the Purchasing Department is evaluated solely by its ability to get the lowest purchase prices. The lowest bidder receives the order for the next quarter (90 working days).To make its bulb products, Bright Night requires 36,000 pounds of glass per quarter. Bright Night received two glass bids for the third quarter, as follows:• Central Glass Company: $30.00 per pound of glass. Delivery schedule: 36,000 (400 lbs. × 90 days) pounds at the beginning of July to last for 3 months.• Ithaca Glass Company: $30.20 per pound of glass. Delivery schedule: 400 pounds per working day (90 days in the quarter).Bright Night accepted Central Glass Company’s bid because it was the low-cost bid.Instructions1. Comment on Bright Night’s purchasing policy.2. What are the additional (hidden) costs, beyond price, of Central Glass…
Identifying relevant information and making pricing decisions
Sea Blue manufactures flotation vests in Charleston, South Carolina. Sea Blue’s contribution margin income statement for the month ended December 31, 2018, contains the following data:
Suppose Overboard wishes to buy 4,600 vests from Sea Blue. Sea Blue will not incur any variable Selling and administrative expenses on the special order. The Sea Blue plant has enough unused capacity to manufacture the additional vests. Overboard has offered $15 per vest, which is below the normal sales price of $19.
Requirements
Identify each cost in the income statement as either relevant or irrelevant to Sea Blue’s decision.
Prepare a differential analysis to determine whether Sea Blue should accept this special sales order.
Identify long-term factors Sea Blue should consider in deciding whether to accept the special sales order.
Chapter 13 Solutions
Managerial Accounting
Ch. 13 - What is the benefit of the lean philosophy?Ch. 13 - Prob. 2DQCh. 13 - Prob. 3DQCh. 13 - Prob. 4DQCh. 13 - Prob. 5DQCh. 13 - Why would a lean manufacturer strive to produce...Ch. 13 - Prob. 7DQCh. 13 - Prob. 8DQCh. 13 - Prob. 9DQCh. 13 - Prob. 10DQ
Ch. 13 - Prob. 11DQCh. 13 - Prob. 12DQCh. 13 - Prob. 13DQCh. 13 - Prob. 1BECh. 13 - Prob. 2BECh. 13 - Prob. 3BECh. 13 - Prob. 4BECh. 13 - Prob. 5BECh. 13 - Prob. 1ECh. 13 - Prob. 2ECh. 13 - Lean principles Rag Swag Inc. manufactures various...Ch. 13 - Prob. 4ECh. 13 - Reduce setup time Vernon Inc. has analyzed the...Ch. 13 - Compute lead time Jackson Fabricators Inc....Ch. 13 - Calculate lead time Williams Optical Inc. is...Ch. 13 - Prob. 8ECh. 13 - Prob. 9ECh. 13 - Prob. 10ECh. 13 - Prob. 11ECh. 13 - Prob. 12ECh. 13 - Lean accounting Modern Lighting Inc. manufactures...Ch. 13 - Prob. 14ECh. 13 - Prob. 15ECh. 13 - Prob. 16ECh. 13 - Prob. 17ECh. 13 - Prob. 18ECh. 13 - Process activity analysis The Brite Beverage...Ch. 13 - Prob. 20ECh. 13 - Prob. 21ECh. 13 - Lean principles Bright Night, Inc., manufactures...Ch. 13 - Prob. 2PACh. 13 - Lean accounting Dashboard Inc. manufactures and...Ch. 13 - Pareto chart and cost of quality report for a...Ch. 13 - Prob. 1PBCh. 13 - Lead time Master Chef Appliance Company...Ch. 13 - Lean accounting Com-Tel Inc. manufactures and...Ch. 13 - Pareto chart and cost of quality report for a...Ch. 13 - Prob. 1MADCh. 13 - Prob. 2MADCh. 13 - Prob. 3MADCh. 13 - Prob. 4MADCh. 13 - Ethics in Action In August, Lannister Company...Ch. 13 - Prob. 3TIFCh. 13 - Prob. 1CMACh. 13 - Prob. 2CMACh. 13 - In measuring the cost of quality, which one of the...Ch. 13 - Prob. 4CMA
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