Managerial Accounting (5th Edition)
5th Edition
ISBN: 9780134128528
Author: Karen W. Braun, Wendy M. Tietz
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Videos
Question
Chapter 15, Problem 15.13AE
1.
To determine
To compute: The annual cost of machine drool currently.
2.
To determine
To compute: The amount that can be saved if the machine drools are sold to a recycler.
3.
To determine
To compute: The amount that can be saved if the production process is reengineered.
4.
To determine
To identify: Which option company should exercise & for what reason.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Choosing cost drivers, activity-based costing, activity-based management. Pastel Bags (PB) is a designer of high-quality backpacks and purses. Each design is made in small batches. Each spring, PB comes out with new designs for the backpack and for the purse. The company uses these designs for a year and then moves on to the next trend. The bags are all made on the same fabrication equipment that is expected to operate at capacity. The equipment must be switched over to a new design and set up to prepare for the production of each new batch of products. When completed, each batch of products is immediately shipped to a wholesaler. Shipping costs vary with the number of shipments. Budgeted information for the year is as follows:
there is some question about whether the company is actually making any money on jobs for some customers-particularly those
located on remote ranches that require considerable travel time. The owner's daughter, home for the summer from college, has
suggested investigating this question using activity-based costing. After some discussion, she designed a simple system consisting of
four activity cost pools. The activity cost pools and their activity measures appear below:
Activity Cost Pool
Cleaning carpets
Activity for the Year
13,500 hundred square feet
65,000 miles
1,900 jobs
Travel to jobs
Job support
Other (organization-sustaining costs and idle
capacity costs)
Not applicable
The total cost of operating the company for the year is $369,000 which includes the following costs:
Wages
Cleaning supplies
Cleaning equipment depreciation
Vehicle expenses
Office expenses
President's compensation
Total cost
Activity Measure
Square feet cleaned (00s)
Miles driven
Number of jobs
Wages
Cleaning…
Purchasing department cost drivers, activity-based costing, simple regression analysis. Perfect Fit operates a chain of 10 retail department stores. Each department store makes its own purchasing decisions. Carl Hart, assistant to the president of Perfect Fit, is interested in better understanding the drivers of purchasing department costs. For many years, Perfect Fit has allocated purchasing department costs to products on the basis of the dollar value of merchandise purchased. A $100 item is allocated 10 times as many overhead costs associated with the purchasing department as a $10 item.
Hart recently attended a seminar titled “Cost Drivers in the Retail Industry.” In a presentation at the seminar, Kaliko Fabrics, a leading competitor that has implemented activity-based costing, reported number of purchase orders and number of suppliers to be the two most important cost drivers of purchasing department costs. The dollar value of merchandise purchased in each purchase order was not…
Chapter 15 Solutions
Managerial Accounting (5th Edition)
Ch. 15 - (Learning Objective 1) Which of the following is...Ch. 15 - (Learning Objective 1) Which of the following...Ch. 15 - Prob. 3QCCh. 15 - Prob. 4QCCh. 15 - (Learning Objective 2) What is the current status...Ch. 15 - (Learning Objective 2) Which of the following...Ch. 15 - Prob. 7QCCh. 15 - Prob. 8QCCh. 15 - Prob. 9QCCh. 15 - Prob. 10QC
Ch. 15 - Prob. 15.1SECh. 15 - Identify aspects within each G4 category on a GRI...Ch. 15 - Identify aspects within each G4 Social subcategory...Ch. 15 - Prob. 15.4SECh. 15 - Prob. 15.5SECh. 15 - Prob. 15.6SECh. 15 - Define key sustainability terms (Learning...Ch. 15 - Prob. 15.8SECh. 15 - Prob. 15.9AECh. 15 - Prob. 15.10AECh. 15 - Prob. 15.11AECh. 15 - Prob. 15.12AECh. 15 - Prob. 15.13AECh. 15 - Sustainability and cost behavior (Learning...Ch. 15 - Prob. 15.15AECh. 15 - Prob. 15.16AECh. 15 - Sustainability and budgeting (Learning Objective...Ch. 15 - Prob. 15.18AECh. 15 - Prob. 15.19AECh. 15 - Sustainability and capital investments (Learning...Ch. 15 - Sustainability and the statement of cash flows...Ch. 15 - Prob. 15.22AECh. 15 - Prob. 15.23BECh. 15 - Prob. 15.24BECh. 15 - Prob. 15.25BECh. 15 - Prob. 15.26BECh. 15 - Sustainability and process costing (Learning...Ch. 15 - Prob. 15.28BECh. 15 - Sustainability and CVP concepts (Learning...Ch. 15 - Prob. 15.30BECh. 15 - Prob. 15.31BECh. 15 - Prob. 15.32BECh. 15 - Prob. 15.33BECh. 15 - Sustainability and capital investments (Learning...Ch. 15 - Prob. 15.35BECh. 15 - Prob. 15.36BECh. 15 - Prob. 15.37APCh. 15 - Prob. 15.38APCh. 15 - Prob. 15.39BPCh. 15 - Prob. 15.40BPCh. 15 - Each year for the past six years, Caesars...Ch. 15 - Discussion Questions 1. Pressure to become more...Ch. 15 - Corporate Sustainability Reports Note: In the...Ch. 15 - Sustainability and investment choices...Ch. 15 - Ethics of internal sustainability reporting...Ch. 15 - FirstEnergy and its sustainability report...
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
- Harriman Industries manufactures engines for the aerospace industry. It has completed manufacturing the first unit of the new ZX-9 engine design. Management believes that the 1,000 labor hours required to complete this unit are reasonable and is prepared to go forward with the manufacture of additional units. An 80 percent cumulative average-time learning curve model for direct labor hours is assumed to be valid. Data on costs are as follows: Required: 1. Set up a table with columns for cumulative number of units, cumulative average time per unit in hours, and the cumulative total time in hours. Complete the table for 1, 2, 4, 8, 16, and 32 units. (Round hours to one significant digit.) 2. What are the total variable costs of producing 1, 2, 4, 8, 16, and 32 units? What is the variable cost per unit for 1, 2, 4, 8, 16, and 32 units?arrow_forwardBenchmarking, ethics. Amanda McNall is the corporate controller of Scott Quarry. Scott Quarry operates 12 rock-crushing plants in Scott County, Kentucky, that process huge chunks of limestone rock extracted from underground mines. Given the competitive landscape for pricing, Scott’s managers pay close attention to costs. Each plant uses a process-costing system, and at the end of every quarter, each plant manager submits a production report and a production-cost report. The production report includes the plant manager’s estimate of the percentage of completion of the ending work in process as to direct materials and conversion costs, as well as the level of processed limestone inventory. McNall uses these estimates to compute the cost per equivalent unit of work done for each input for the quarter. Plants are ranked from 1 to 12, and the three plants with the lowest cost per equivalent unit for direct materials and conversion costs are each given a bonus and recognized in the company…arrow_forwardBenchmarking, ethics. Amanda McNall is the corporate controller of Scott Quarry. Scott Quarry operates 12 rock-crushing plants in Scott County, Kentucky, that process huge chunks of limestone rock extracted from underground mines. Given the competitive landscape for pricing, Scott’s managers pay close attention to costs. Each plant uses a process-costing system, and at the end of every quarter, each plant manager submits a production report and a production-cost report. The production report includes the plant manager’s estimate of the percentage of completion of the ending work in process as to direct materials and conversion costs, as well as the level of processed limestone inventory. McNall uses these estimates to compute the cost per equivalent unit of work done for each input for the quarter. Plants are ranked from 1 to 12, and the three plants with the lowest cost per equivalent unit for direct materials and conversion costs are each given a bonus and recognized in the company…arrow_forward
- Benchmarking, ethics. Amanda McNall is the corporate controller of Scott Quarry. Scott Quarry operates 12 rock-crushing plants in Scott County, Kentucky, that process huge chunks of limestone rock extracted from underground mines. Given the competitive landscape for pricing, Scott’s managers pay close attention to costs. Each plant uses a process-costing system, and at the end of every quarter, each plant manager submits a production report and a production-cost report. The production report includes the plant manager’s estimate of the percentage of completion of the ending work in process as to direct materials and conversion costs, as well as the level of processed limestone inventory. McNall uses these estimates to compute the cost per equivalent unit of work done for each input for the quarter. Plants are ranked from 1 to 12, and the three plants with the lowest cost per equivalent unit for direct materials and conversion costs are each given a bonus and recognized in the company…arrow_forwardBordner Company manufactures HVAC (heating, ventilation, and air conditioning) systems for commercial buildings. For each new design, Bordner faces a 90 percent learning rate. On average, the first unit of a new design takes 600 hours. Direct labor is paid 25 per hour. Required: 1. Set up a table with columns showing: the cumulative number of units, cumulative average time per unit in hours, and cumulative total time in hours. Show results by row for total production of one unit, two units, four units, eight units, and sixteen units. (Round hour answers to two significant digits.) 2. What is the total labor cost if Bordner makes the following number of units: one, four, sixteen? What is the average cost per system for the following number of systems: one, four, or sixteen? (Round your answers to the nearest dollar.) 3. Using the logarithmic function, set up a table with columns showing: the cumulative number of units, cumulative average time per unit in hours, cumulative total time in hours, and the time for the last unit. Show results by row for each of units one through eight. (Round answers to two significant digits.)arrow_forwardQuality Clothing, Inc., produces skorts and jumper uniforms for schoolchildren. In the process of cutting out the cloth pieces for each product, a certain amount of scrap cloth is produced. Quality has been selling this cloth scrap to Jorges Scrap Warehouse for $3.25 per pound. Last year, the company sold 40,000 lb. of scrap, which would be enough to make 10,000 teddy bears that the management of Quality is now interested in producing. Their processes would need some reprogramming, particularly in the cutting and stitching processes, but it would require no additional worker training. However, new packaging would be needed. The total variable cost to produce the teddy bears $3.85. Fixed costs would increase by $95,000 per year for the lease of the packaging equipment and Quality estimates it could produce and sell 10,000 teddy bears per year. Finished teddy bears could be sold for $18.00 each. Should Quality continue to sell the scrap cloth or should Quality process the scrap into teddy bears to sell?arrow_forward
- Shorts Manufacturing, Inc., has implemented lean manufacturing in its Kansas City plant as a pilot program. One of its value streams produces a family of small electric tools. The value-stream team managers were quite excited about the results, as some of their efforts to eliminate waste were proving to be effective. During the most recent three weeks, the following data pertaining to the electric tool value stream were collected: Week 1: Demand = 90 units @ 40 Beginning inventory = 10 units @ 20 (5 materials and 15 conversion) Production = 90 units using 450 of material and 1,350 of conversion cost Week 2: Demand = 100 units @ 40 Beginning inventory = 10 units @ 20 (5 materials and 15 conversion) Production = 90 units using 450 of material and 1,350 of conversion cost Week 3: Demand = 90 units @ 40 Beginning inventory = 0 Production = 100 units using 500 of material and 1,500 of conversion cost Required: 1. Prepare a traditional income statement for each week. 2. Calculate the average value-stream product cost for each week. What does this cost signal, if anything? 3. Prepare a value-stream income statement for each week. Assume that any increase in inventory is valued at average cost. Comment on the financial performance of the value stream and its relationship to traditional income measurement.arrow_forwardKagle design engineers are in the process of developing a new green product, one that will significantly reduce impact on the environment and yet still provide the desired customer functionality. Currently, two designs are being considered. The manager of Kagle has told the engineers that the cost for the new product cannot exceed 550 per unit (target cost). In the past, the Cost Accounting Department has given estimated costs using a unit-based system. At the request of the Engineering Department, Cost Accounting is providing both unit-and activity-based accounting information (made possible by a recent pilot study producing the activity-based data). Unit-based system: Variable conversion activity rate: 100 per direct labor hour Material usage rate: 20 per part ABC system: Labor usage: 15 per direct labor hour Material usage (direct materials): 20 per part Machining: 75 per machine hour Purchasing activity: 150 per purchase order Setup activity: 3,000 per setup hour Warranty activity: 500 per returned unit (usually requires extensive rework) Customer repair cost: 25 per repair hour (average) Required: 1. Select the lower-cost design using unit-based costing. Are logistical and post-purchase activities considered in this analysis? 2. Select the lower-cost design using ABC analysis. Explain why the analysis differs from the unit-based analysis. 3. What if the post-purchase cost was an environmental contaminant and amounted to 10 per unit for Design A and 40 per unit for Design B? Assume that the environmental cost is borne by society. Now which is the better design?arrow_forwardUse ABC to allocate manufacturing overhead (Learning Objective 2)Several years after reengineering its production process, King Corporation hired a new controller, Christine Erickson . She developed an ABC system very similar to the one used by King's chief rival. Part of the reason Erickson developed the ABC system was because King's profits had been declining, even though the company had shifted its product mix toward the product that had appeared most profitable under the old system . Before adopting the new ABC system, the company had used a plantwide overhead rate, based on direct labor hours developed years ago .For the upcoming year, King's budgeted ABC manufacturing overhead allocation rates are as follows :ActivityMaterials handling .......................... Machine setup ................................ Insertion of parts ............................ Finishing .........................................Allocation BaseNumber of partsNumber of setupsNumber of partsFinishing…arrow_forward
- After reviewing the new activity-based costing system that Nancy Chen has implemented at IVC's CenterPoint manufacturing facility, Tom Spencer, the production supervisor, believes that he can reduce production costs by reducing the time spent on machine setups. He has spent the last month working with employees in the plant to change over the machines more quickly with the same reliability. He plans to produce 100,000 units of the Sport model and 40,000 units of the Pro model in the first quarter. He believes that with his more efficient setup routine, he can reduce the number of setup hours for both the Sport and the Pro products by one-third. Cost Drivers and Cost Driver Volumes-CenterPoint Manufacturing Facility Activity Assembly building Assembling Setting up machines Handling material Direct material Direct labor Assembly Packaging Total direct labor Cost Driver Machine-hours Setup hours Production runs Packaging building Inspecting and packing Shipping Third Quarter Unit Cost…arrow_forwardAfter reviewing the new activity-based costing system that Nancy Chen has implemented at IVC's CenterPoint manufacturing facility, Tom Spencer, the production supervisor, believes that he can reduce production costs by reducing the time spent on machine setups He has spent the last month working with employees in the plant to change over the machines more quickly with the same reliability. He plans to produce 114,000 units of the Sport model and 47,000 units of the Pro model in the first quarter. He believes that with his more efficient setup routine, he can reduce the number of setup hours for both the Sport and the Pro products by one-third. Cost Drivers and Cost Driver Volumes-CenterPoint Manufacturing Facility Activity Assembly building Assembling Setting up machines Handling material Direct material Direct labor Assembly Packaging Total direct labor Cost Driver Machine-hours Setup hours Production runs Packaging building Direct labor-hours Inspecting and packing Shipping Number of…arrow_forwardMonty Company manufactures automobile components for the worldwide market. The company has three large production facilities in Virginia, New Jersey, and California, which have been operating for many years. Brett Harker, vice president of production, believes it is time to upgrade operations by implementing computer-integrated manufacturing (CIM) at one of the plants. Brett has asked corporate controller Connie Carson to gather information about the costs and benefits of implementing CIM. Carson has gathered the following data: Initial equipment cost $ 7,400,000 Working capital required at start-up $ 600,000 Salvage value of existing equipment $ 107,400 Annual operating cost savings $ 1,202,880 Salvage value of new equipment at end of its useful life $ 286,400 Working capital released at end of its useful life 2$ 600,000 Useful life of equipment 10 years Monty Company uses a 12% discount rate.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Inspection and Quality control in Manufacturing. What is quality inspection?; Author: Educationleaves;https://www.youtube.com/watch?v=Ey4MqC7Kp7g;License: Standard youtube license