Harris Systems has decided to adopt ABC. To remain competitive, Harris Systems’s management believes the company must produce the type of servers produced in Job B (from Decision Case 19-1) at a target cost of $5,400. Harris Systems has just joined a B2B e-market site that management believes will enable the firm to cut direct materials costs by 10%. Harris’s management also believes that a value engineering team can reduce assembly time.
Compute the assembling cost savings required per Job B-type server to meet the $5,400 target cost. (Hint: Begin by calculating the direct materials, direct labor, and allocated
Want to see the full answer?
Check out a sample textbook solutionChapter 19 Solutions
Horngren's Financial & Managerial Accounting, The Managerial Chapters (6th Edition)
Additional Business Textbook Solutions
Financial Accounting (12th Edition) (What's New in Accounting)
Fundamentals Of Cost Accounting (6th Edition)
Horngren's Accounting (12th Edition)
Fundamentals Of Financial Accounting
Managerial Accounting
Managerial Accounting (4th Edition)
- Hudson Corporation is considering three options for managing its data warehouse: continuing with its own staff, hiring an outside vendor to do the managing, or using a combination of its own staff and an outside vendor. The cost of the operation depends on future demand. The annual cost of each option (in thousands of dollars) depends on demand as follows: If the demand probabilities are 0.2, 0.5, and 0.3, which decision alternative will minimize the expected cost of the data warehouse? What is the expected annual cost associated with that recommendation? Construct a risk profile for the optimal decision in part (a). What is the probability of the cost exceeding $700,000?arrow_forwardSterling Industries produces machine parts as a contract provider for a large manufacturing company Sterling produces two particular parts, shafts and gears. The competition is keen among contract pro- ducers, and Sterling's top management realizes how vulnerable its market is to cost-cutting competitors Hence, having a very accurate understanding of costs is important to Sterling's survival Sterling's president, Sheila Hudson, has observed that the company's current cost to produce shafts is $21.41, and the current cost to produce gears is S12.73. She indicated to the controller that she suspects some problems with the cost system because Sterling is suddenly experiencing extraordinary competition on shafts, but it seems to have a virtual corner on the gears market. She is even considering dropping the shaft line and converting the company to a one-product manufacturer of gears. She asked the controller, George Coleman, to conduct a thorough cost study and to consider whether changes…arrow_forwardBarbour Corporation, located in Buffalo, New York, is a retailer of high-tech products and is known for its excellent quality and innovation. Recently, the firm conducted a relevant cost analysis of one of its product lines that has only two products, T-1 and T-2. The sales for T-2 are decreasing and the purchase costs are increasing. The firm might drop T-2 and sell only T-1. Barbour allocates fixed costs to products on the basis of sales revenue. When the president of Barbour saw the income statements (see below), he agreed that T-2 should be dropped. If T-2 is dropped, sales of T-1 are expected to increase by 10 percent next year, but the firm's cost structure will remain the same. Sales Variable costs: Cost of goods sold Selling & administrative Contribution margin es Fixed expenses: Fixed corporate costs Fixed selling and administrative Total fixed expenses Operating income Required: T-1 $ 200,000 70,000 20,000 $ 110,000 58,700 14,300 $ 73,000 T-2 $ 260,000 130,000 50,000 $ 80,000…arrow_forward
- Barbour Corporation, located in Buffalo, New York, is a retailer of high-tech products and is known for its excellent quality and innovation. Recently, the firm conducted a relevant cost analysis of one of its product lines that has only two products, T-1 and T-2. The sales for T-2 are decreasing and the purchase costs are increasing. The firm might drop T-2 and sell only T-1. Barbour allocates fixed costs to products on the basis of sales revenue. When the president of Barbour saw the income statements (see below), he agreed that T-2 should be dropped. If T-2 is dropped, sales of T-1 are expected to increase by 10 percent next year, but the firm's cost structure will remain the same. Sales Variable costs: Cost of goods sold Selling & administrative Contribution margin Fixed expenses: Fixed corporate costs Fixed selling and administrative Total fixed expenses Operating income Required: T-1 $ 210,000 T-2 $ 268,000 72,000 22,500 $ 115,500 134,000 52,000 $ 82,000 77,000 23,000 62,000…arrow_forwardBarbour Corporation, located in Buffalo, New York, is a retailer of high-tech products and is known for its excellent quality and innovation. Recently, the firm conducted a relevant cost analysis of one of its product lines that has only two products, T-1 and T-2. The sales for T-2 are decreasing and the purchase costs are increasing. The firm might drop T-2 and sell only T-1. Barbour allocates fixed costs to products on the basis of sales revenue. When the president of Barbour saw the income statements (see below), he agreed that T-2 should be dropped. If T-2 is dropped, sales of T-1 are expected to increase by 10 percent next year, but the firm's cost structure will remain the same. Sales. Variable costs: Cost of goods sold Selling & administrative Contribution margin Fixed expenses: Fixed corporate costs Fixed selling and administrative Total fixed expenses Operating income T-1 $ 200,000 1. 2. Required % increase in sales from T-1 3. Required % increase in sales from T-1 70,000…arrow_forwardBarbour Corporation, located in Buffalo, New York, is a retailer of high-tech products and is known for its excellent quality and innovation. Recently, the firm conducted a relevant cost analysis of one of its product lines that has only two products, T-1 and T-2. The sales for T-2 are decreasing and the purchase costs are increasing. The firm might drop T-2 and sell only T-1. Barbour allocates fixed costs to products on the basis of sales revenue. When the president of Barbour saw the income statements (see below), he agreed that T-2 should be dropped. If T-2 is dropped, sales of T-1 are expected to increase by 10 percent next year, but the firm's cost structure will remain the same. Sales Variable costs: Cost of goods sold Selling & administrative Contribution margin Fixed expenses: Fixed corporate costs. Fixed selling and administrative Total fixed expenses Operating income Required: T-1 $ 200,000 70,000 20,000 $ 110,000 58,700 14,300 $ 73,000 T-2 $ 260,000 130,000 50,000 $ 80,000…arrow_forward
- 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. Which of these are possible reasons that explain why the demand for receiving is more than the efficient level of 36,000 orders. 2. Break…arrow_forwardWaterfun 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…arrow_forwardA number of costs are listed below that may be relevant in a decision faced by the management of Bulacan Company. Bulacan normally runs at capacity and the old Model CY1000 machine is the company’s constraint. Management is considering purchasing a new machine, Model CZ4000 and the old one, CY1000 will be sold. The new machine is more efficient and can produce 20% more units than the old one. Demand for Bulacan’s product is greater than what they can supply. If the new machine is purchased, there should be a reduction in maintenance costs however the new machine is very costly and the company will need to borrow money in order to make the purchase. The increase in volume will be large enough to require increases in fixed selling expense, but general administrative expenses will remain unchanged. Required: For each cost listed determine whether the cost is relevant or irrelevant to the decision to replace the CY1000. a. Sales Revenue b. Direct materials c. Direct labor d. Variable…arrow_forward
- The Monroe Forging Company sells a corrugated steel product to the Standard Manufacturing Company and is in competition on such sales with other suppliers of the Standard Manufacturing Co. The vice president of sales of Monroe Forging Co. believes that by reducing the price of the product, a 40% increase in the volume of units sold to the Standard Manufacturing Co. could be secured. As the manager of the cost and analysis department, you have been asked to analyze the proposal of the vice president and submit your recommendations as to whether it is financially beneficial to the Monroe Forging Co. You are specifically requested to determine the following: (a) Net profit or loss based on the pricing proposal. (b) Unit sales volume under the proposed price that is required to make the same $40,000 profit that is now earned at the current price and unit sales volume. Use the following data in your analysis:arrow_forwardJay White works for Nelson Design Paperworks Limited, as a marketing manager for a division that produces a variety of paper products. He is considering the divisional manager’s request for a sales forecast for a new line of paper napkins. The divisional manager has been gathering data so that he can choose between two different production processes. The first process would have a variable cost of $10 per case produced and total fixed cost of $100,000. The second process would have a variable cost of $6 per case and total fixed cost of $200,000. The selling price would be $30 per case. Ron had just completed a marketing analysis that projects annual sales of 30,000 cases. Jay is reluctant to report the 30,000 forecasts to the divisional manager. He knows that the first process would be labor intensive, whereas the second would be largely automated with little labor and no requirement for an additional production supervisor. If the first process is chosen,…arrow_forwardThe Conti Company is decentralized, and divisions are considered investment contors. Con has one division that manufactures oak dining room chairs with upholstered seat cushions. The Chair Division cuts, assembles, and finishes the cak chairs and then purchases and attaches the seat cushions (Click the icon to view additional information) Read the requirements Requirement 3. Assume the Chair Division purchases the 900 cushions needed from the Cushion Division at its current variable cost. What is the total contribution margin for each division and the company? (Enter "0" for any zero amounts) Number of units Contribution margin per unt Total contribution margin Cushion Division Total Requirement 4. Review your answers for Requirements 1, 2, and 3. What is the best option for Con Company? The best option for Cois in total contribution margin than if the duson purchanchons inveraly By having the Chair Division purchase the cushions from a in outside vendor, the company would get…arrow_forward
- Essentials of Business Analytics (MindTap Course ...StatisticsISBN:9781305627734Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. AndersonPublisher:Cengage LearningCornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning