Horngren's Accounting (12th Edition)
12th Edition
ISBN: 9780134486444
Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 23, Problem 23.1DC
Decision Case 23-1
Suppose you manage the local Scoopy’s ice cream parlor. In addition to selling ice cream cones, you make large batches of a few flavors of milk shakes to sell throughout the day. Your parlor is chosen to test the company's 'Made-for-You' system. This new system enables patrons to customize their milk shakes by choosing different flavors.
Customers like the new system and your staff appears to be adapting, but you wonder whether this new made-to-order system is as efficient as the old system in which you just made a few large batches. Efficiency is a special concern because your performance is evaluated in part on the restaurants efficient use of materials and labor. Your superiors consider efficiency variances greater than 5% to be unacceptable.
You decide to look at your sales for a typical day. You find that the parlor used 390 pounds of ice cream and 72 hours of direct labor to produce and sell 2,000 shakes. The standard quantity allowed for a shake is 0.2 pound of ice cream and 0.03 hour of direct labor. The
Requirements
1. Compute the efficiency variances for direct labor and direct materials.
2. Provide likely explanations for the variances. Do you have reason to be concerned about your performance evaluation? Explain.
3. Write a memo to Snoopy’s national office explaining your concern and suggesting a remedy.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Suppose you manage the local Scoopy’s ice cream parlor. In addition to selling ice cream cones, you make large batches of a few flavors of milkshakes to sell throughout the day. Your parlor is chosen to test the company’s “Made-for-You” system. This new system enables patrons to customize their milkshakes by choosing different flavors.
Customers like the new system and your staff appears to be adapting, but you wonder whether this new made-to-order system is as efficient as the old system in which you just made a few large batches. Efficiency is a special concern because your performance is evaluated in part on the restaurant’s efficient use of materials and labor. Your superiors consider efficiency variances greater than 5% to be unacceptable.
You decide to look at your sales for a typical day. You find that the parlor used 390 pounds of ice cream and 72 hours of direct labor to produce and sell 2,000 shakes. The standard quantity allowed for a shake is 0.2 pounds of ice cream and…
The Robert Baker Bread Company is planning to open a production plant to bake bread for sale and distribution in grocery stores. Robert's customers have already become familiar with his company's name and reputation for quality in visiting his cafés throughout the Midwest. Customers like the ability to customize the amount of seasoning and flavors that Robert puts in the various types of bread. When Robert begins mass production of the bread what should he be most concerned with regarding his customers' reaction?
Group of answer choices
a) His customers have become used to the ability to customize the bread, which they will not have in a mass-produced product sold in grocery stores
b) The cost of the bread in the grocery store will have to be higher than in his café
c) Robert's café operations will lose customers who will simply buy the bread at the grocery store instead
d) Robert will need to open more café locations to sell whatever bread the grocery stores do not sell
Number 6
Tasty Time Cafeteria operates cafeteria food services in public buildings in the Midwest. Tasty
Time is contemplating a major change in its cost structure. Currently, all of their cafeteria lines
are staffed with hourly wage employees who hand serve the food to customers. Benson Riggs,
Tasty Time's owner, is considering replacing the employees with an automated self-service
system. However, before making the change, Benson would like to know the consequences of
the change, since the volume of business varies significantly from location to location. Shown
below are the CVP income statements for each alternative.
Automated Self-Service
Personal Service
System
$2,500,000
1.125,000
$1,375,000
875,000
S 500,000
System
$2,500,000
1.875,000
625,000
125,000
S 500,000
Sales
Variable costs
Contribution margin
Fixed costs
Net Income
Instructions
Determine the degree of operating leverage for each alternative.
Which alternative would produce the higher net income if sales increased by…
Chapter 23 Solutions
Horngren's Accounting (12th Edition)
Ch. 23 - Prob. 1QCCh. 23 - MajorNet Systems is a start-up company that makes...Ch. 23 - MajorNet Systems is a start-up company that makes...Ch. 23 - MajorNet Systems is a start-up company that makes...Ch. 23 - MajorNet Systems has budgeted three hours of...Ch. 23 - MajorNet Systems has budgeted three hours of...Ch. 23 - FrontGrade Systems allocates manufacturing...Ch. 23 - FrontGrade Systems allocates manufacturing...Ch. 23 - FrontGrade Systems allocates manufacturing...Ch. 23 - The person probably most responsible for the...
Ch. 23 - HajorNet System’s static budget predicted...Ch. 23 - What is a variance?Ch. 23 - Explain the difference between a favorable and an...Ch. 23 - What is a static budget performance report?Ch. 23 - How do flexible budgets differ from static...Ch. 23 - How is a flexible budget used?Ch. 23 - What are the two components of the static budget...Ch. 23 - What is a flexible budget performance report?Ch. 23 - What is a standard cost system?Ch. 23 - Explain the difference between a cost standard and...Ch. 23 - Give the general formulas for determining cost and...Ch. 23 - How does the static budget affect cost and...Ch. 23 - List the direct materials variances, and briefly...Ch. 23 - List the direct labor variances, and briefly...Ch. 23 - List the variable overhead variances, and briefly...Ch. 23 - List the fixed overhead variances, and briefly...Ch. 23 - How is the fixed overhead volume variance...Ch. 23 - What is management by exception?Ch. 23 - List the eight product variances and the manager...Ch. 23 - Briefly describe how journal entries differ in a...Ch. 23 - What is a standard cost income statement?Ch. 23 - Matching terms Learning Objective 1 Match each...Ch. 23 - Preparing flexible budgets Learning Objective 1...Ch. 23 - Calculating flexible budget variances Learning...Ch. 23 - Matching terms Learning Objective 2 Match each...Ch. 23 - Identifying the benefits of standard costs...Ch. 23 - Calculating materials variances Learning Objective...Ch. 23 - Calculating labor variances Learning Objective 3...Ch. 23 - Interpreting material and labor variances Learning...Ch. 23 - Computing standard overhead allocation rates...Ch. 23 - Computing overhead variances Learning Objective 4...Ch. 23 - Understanding variance relationships Learning...Ch. 23 - Journalizing materials entries Learning Objectives...Ch. 23 - Journalizing labor entries Learning Objectives 6...Ch. 23 - Preparing a standard cost income statement...Ch. 23 - Preparing a flexible budget Learning Objective 1...Ch. 23 - Preparing a flexible budget performance report...Ch. 23 - Preparing a flexible budget performance report...Ch. 23 - Defining the benefits of setting cost standards...Ch. 23 - Calculating materials and labor variances Learning...Ch. 23 - Computing overhead variances Learning Objective 4...Ch. 23 - Calculating overhead variances Learning Objective...Ch. 23 - Preparing a standard cost income statement...Ch. 23 - Preparing journal entries Learning Objective 6 MOH...Ch. 23 - Preparing a standard cost income statement...Ch. 23 - Preparing a flexible budget performance report...Ch. 23 - Preparing a flexible budget computing standard...Ch. 23 - Computing standard cost variances and reporting to...Ch. 23 - Computing and journalizing standard cost variances...Ch. 23 - Prob. P23.29APGACh. 23 - Preparing a flexible budget performance report...Ch. 23 - Preparing a flexible budget and computing standard...Ch. 23 - Prob. P23.32BPGBCh. 23 - Prob. P23.33BPGBCh. 23 - Preparing a standard cost income statement...Ch. 23 - Prob. P23.35CTCh. 23 - Preparing a flexible budget and performance report...Ch. 23 - Prob. 23.1TIATCCh. 23 - Decision Case 23-1 Suppose you manage the local...Ch. 23 - Fraud Case 23-1 Drew Castello, general manager of...
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
- Heavenly Chocolates manufactures and sells quality chocolate products at its plant and retail store located in Saratoga Springs, New York. Two years ago, the company developed a web site and began selling its products over the Internet. Web-site sales have exceeded the company’s expectations, and management is now considering strategies to increase sales even further. To learn more about the web-site customers, a sample of 50 Heavenly Chocolate transactions was selected from the previous month’s sales. Data showing the day of the week each transaction was made, the type of browser the customer used, the time spent on the web site, the number of web pages viewed, and the amount spent by each of the 50 customers are contained in the file named Heavenly Chocolates. A portion of the data is shown in the table that follows: Heavenly Chocolates would like to use the sample data to determine whether online shoppers who spend more time and view more pages also spend more money during their visit to the web site. The company would also like to investigate the effect that the day of the week and the type of browser have on sales. Managerial Report Use the methods of descriptive statistics to learn about the customers who visit the Heavenly Chocolates web site. Include the following in your report. Graphical and numerical summaries for the length of time the shopper spends on the web site, the number of pages viewed, and the mean amount spent per transaction. Discuss what you learn about Heavenly Chocolates’ online shoppers from these numerical summaries. Summarize the frequency, the total dollars spent, and the mean amount spent per transaction for each day of week. Discuss the observations you can make about Heavenly Chocolates’ business based on the day of the week? Summarize the frequency, the total dollars spent, and the mean amount spent per transaction for each type of browser. Discuss the observations you can make about Heavenly Chocolates’ business based on the type of browser? Develop a scatter diagram, and compute the sample correlation coefficient to explore the relationship between the time spent on the web site and the dollar amount spent. Use the horizontal axis for the time spent on the web site. Discuss your findings. Develop a scatter diagram, and compute the sample correlation coefficient to explore the relationship between the number of web pages viewed and the amount spent. Use the horizontal axis for the number of web pages viewed. Discuss your findings. Develop a scatter diagram, and compute the sample correlation coefficient to explore the relationship between the time spent on the web site and the number of pages viewed. Use the horizontal axis to represent the number of pages viewed. Discuss your findings.arrow_forwardDiscussion Prompt Steve and Linda Hom live in Bartlesville, Oklahoma. Two years ago, they visited Thailand. Linda, a professional chef, was impressed with the cooking methods and the spices used in Thai food. Bartlesville does not have a Thai restaurant, and the Homs are contemplating opening one. Linda would supervise the cooking, and Steve would leave his current job to be the maître d'. The restaurant would serve dinner Tuesday through Saturday. Steve has noticed a restaurant for lease. The restaurant has seven tables, each of which can seat four. Tables can be moved together for a large party. Linda is planning on using each table twice each evening, and the restaurant will be open 50 weeks per year. The Homs have drawn up the following estimates: Average revenue, including beverages and $45 per meal desserts Average cost of food 15 per meal Chef's and dishwasker's salaries 5,100 per month Rent (premises, equipment) 4,000 per month Cleaning (linen, premises) Replacement of dishes,…arrow_forwardCustomer Latitude and Pricing Maria Lorenzi owns an ice cream stand that she operates during the summer months in West Yellowstone, Montana. She is unsure how to price her ice cream cones and has experimented with two prices in successive weeks during the busy August season. The number of people who entered the store was roughly the same each week. During the first week, she priced the cones at $3.50 and 1,800 cones were sold. During the second week, she priced the cones at $4.00 and 1,400 cones were sold. The variable cost of a cone is $0.80 and consists solely of the costs of the ice cream and the cone itself. The fixed expenses of the ice cream stand are $2,675 per week. Required: 1. What profit did Maria earn during the first week when her price was $3.50? 2. At the start of the second week, Maria increased her selling price by what percentage? What percentage did unit sales decrease? (Round your answers to one-tenth of a percent.) 3. What profit did Maria earn during the second…arrow_forward
- Q: If you were at Alice's place, what would you opt and why? Alicia WongAlicia Wong, Corporate Supply Manager, Thain Foods Limited, wanted to prepare a proposal to manufacture mustardin-house. Mustard, an important ingredient in many of thecompany’s products, was currently purchased from an outside supplier. She hoped a comprehensive proposal could beprepared in one-month’s time for the CEO’s approval. GENERAL COMPANY BACKGROUNDThain Foods Limited (TFL) had been in business for morethan 30 years. Its products included a wide range of syrups,fudges, cone dips, sauces, mayonnaise, and salad dressings. Its customers were major food chains, hotels, andrestaurants in North America and Europe.TFL believed in continuous improvement to itsoperations. Over the last two years, it invested more than$2 million in plant facilities, the bulk of it new, state-ofthe-art process equipment and process control. All production and process control functions were computerized formaximum efficiency.TFL…arrow_forwardProblem 4. Deloras Dunnville Delights (DDD) is a pastry and candy firm. Three of its most popular items all contain a secret ingredient that makes those who consume them very happy with their purchase. Due to production issues of the supplier, it has become difficult to get the secret ingredient in the required quantities. The situation is expected to be resolved as of the first of January, but for the month of December only 200,000 teaspoons of the special ingredient will be available to the firm. Information for the three products follows: Blue Brownies Lavender Fudge Red Velvet Cupcakes Normal monthly capacity23,000 Normal monthly demand19,000 45,000 32,000 30,000 42,000 Selling price $4.75 $25.00 $15.00 DM $.40 $3.50 $1.20 DL .45 1.30 .85 VOH .12 1.05 .36 12.95 $18.80 FOH 1.48 $2.45 4.44 Total Cost 6.85 DLH .25 .95 .35 MH .55 .85 .20 TSP of secret ingredient 1.45 5.45 2.60 1. In order to maximize net income for the month of December, how many units of each product should the firm…arrow_forwardScenario Two: "What if" Analysis Your client would like to consider adding ice cream cakes to the list of items available for sale. She is wanting to offer cakes with customized cake, ice cream decorations. She thinks she can sell 20 small cakes a week and 25 large cakes a week. It seems to be lucrative because the small cake is $18.95 and the large cake is $28.95. Costs are $6.45 per small cake and $9.40 per large cake. It will cost her $3,500 to purchase the equipment and insurance costs would rise by another $375 per month due to the hot equipment needed to make the cakes. What is your recommendation? Would it be profitable to sell the cakes?arrow_forward
- i-Case One Running and Growing a Business Sherri has always loved to fix healthy snacks for family and friends and about a year ago she started to sell boxes of them at the local farmer’s market. Last week she heard from a local grocery chain that also wants to stock them. When Sherri was treating her snacks as a hobby, she never paid attention to the costs. Now, she needs to get a better understanding of the costs and cost behavior patterns. At this point she plans to rent a small space for the snack operation and to store inventory. She also has arranged for some part time help to support the snack making operation. These part-time workers will be paid a flat amount per box of snacks and will only be called into work if the volume of business makes it necessary. She also plans to hire someone to help stimulate additional sales. This salesperson’s compensation will include a small salary and a commission of a $1.00 for each box of snacks sold. For question 1-3 determine the most…arrow_forwardDecision Case 20-1 Steve and Linda Hom live in Bartlesville, Oklahoma. Two years ago, they visited Thailand. Linda, a professional chef, was impressed with the cooking methods and the spices used in Thai food. Bartlesville does not have a Thai restaurant, and the Homs are contemplating opening one. Linda would supervise the cooking, and Steve would leave his current job to be the maître d'. The restaurant would serve dinner Tuesday through Saturday. Steve has noticed a restaurant for lease. The restaurant has seven tables, each of Linda is planning which can seat four. Tables can be moved together for a large party. open 50 weeks two seatings per evening, and the restaurant will be The Homs have drawn up the following estimates: per year. Average revenue, including beverages and desserts Average cost of food Chef's and dishwasher's salaries Rent (premises, equipment) Cleaning (linen, premises) Replacement of dishes, cutlery, glasses Utilities, advertising, telephone Seora $ 45 per meal…arrow_forwardThe A-to-Z Office Supply Company Christine Yamaguchi is the manager of the A-to-Z Office Supply Company in Charlotte. The company attempts to gain an advantage over its competitors by providing quality customer service, which includes prompt delivery of orders by truck or van and always being able to meet customer demand from its stock. To achieve this degree of customer service, A-to-Z must stock a large volume of items on a daily basis at a central warehouse and at three retail stores in the city and suburbs. Christine maintains these inventory levels by borrowing cash on a daily basis from the First Piedmont Bank. She estimates that for the coming fiscal year, the company’s demand for cash to pay for inventory will be $17,000 per day for 305 working days. Any money she borrows during the year must be repaid with interest by the end of the year. The annual interest rate currently charged by the bank is 9%. Any time Christine takes out a loan to purchase inventory, the bank charges…arrow_forward
- Identifying responsibility centers after decentralization Grandpa Jim’s Cookie Company sells homemade cookies made with organic ingredients. His sales are strictly Web based. The business is taking off more than Grandpa Jim ever expected, with orders coming from across the country from both consumers and corporate event planners. Grandpa decides to decentralize and hires a full-time baker who will manage production and product costs and a Web site designer/sales manager who will focus on increasing sales through the Web site. Grandpa Jim can no longer handle the business on his own, so he hires a business manager to work with the other employees to ensure the company is best utilizing its assets to produce profit. Grandpa will then have time to focus on new product development. Now that Grandpa Jim’s Cookie Company has decentralized, identify the type of responsibility center that each manager is managing.arrow_forwardCase 1: You're working the breakfast shift at a fast-food restaurant when a delivery of milk, eggs, and other dairy products arrives. There's a story in the local newspaper about contaminated milk distributed by the dairy that delivers to your restaurant. Upon reading the article more closely, you discover that only a small portion of the dairy's milk is contaminated, and the newspaper lists the senal numbers of the affected containers. When you point out the article to your manager, he tells you to forget it. "If you think we've got time to go through every carton of milk to check serial numbers, you're crazy," he says. The article says nght here that the chances are very less that anyone has a contaminated carton." He also explains that he doesn't have the workers to check the milk, and what's more, destroying the milk would require him to buy emergency milk supplies at the retail price. So he tells you to get back to work and forget about the milk. He says, "I don't have the time or…arrow_forwardRefer to Exercise 8.29. Suppose Gene determines that next years Sales Division activities include the following: Researchresearching current and future conditions in the industry Shippingarranging for shipping of mattresses and handling calls from purchasing agents at retail stores to trace shipments and correct errors Jobberscoordinating the efforts of the independent jobbers who sell the mattresses Basic adsplacing print and television ads for the Sleepeze and Plushette lines Ultima adschoosing and working with the advertising agency on the Ultima account Office managementoperating the Sales Division office The percentage of time spent by each employee of the Sales Division on each of the above activities is given in the following table: Additional information is as follows: a. Depreciation on the office equipment belongs to the office management activity. b. Of the 21,000 for office supplies and other expenses, 5,000 can be assigned to telephone costs which can be split evenly between the shipping and jobbers activities. An additional 2,400 per year is attributable to Internet connections and fees, and the bulk of these costs (80 percent) are assignable to research. The remainder is a cost of office management. All other office supplies and costs are assigned to the office management activity. Required: 1. Prepare an activity-based budget for next year by activity. Use the expected level of sales activity. 2. On the basis of the budget prepared in Requirement 1, advise Gene regarding actions that might be taken to reduce expenses. Olympus, Inc., manufactures three models of mattresses: the Sleepeze, the Plushette, and the Ultima. Forecast sales for next year are 15,000 for the Sleepeze, 12,000 for the Plushette, and 5,000 for the Ultima. Gene Dixon, vice president of sales, has provided the following information: a. Salaries for his office (including himself at 65,000, a marketing research assistant at 40,000, and an administrative assistant at 25,000) are budgeted for 130,000 next year. b. Depreciation on the offices and equipment is 20,000 per year. c. Office supplies and other expenses total 21,000 per year. d. Advertising has been steady at 20,000 per year. However, the Ultima is a new product and will require extensive advertising to educate consumers on the unique features of this high-end mattress. Gene believes the company should spend 15 percent of first-year Ultima sales for a print and television campaign. e. Commissions on the Sleepeze and Plushette lines are 5 percent of sales. These commissions are paid to independent jobbers who sell the mattresses to retail stores. f. Last year, shipping for the Sleepeze and Plushette lines averaged 50 per unit sold. Gene expects the Ultima line to ship for 75 per unit sold since this model features a larger mattress. Required: 1. Suppose that Gene is considering three sales scenarios as follows: Prepare a revenue budget for the Sales Division for the coming year for each scenario. 2. Prepare a flexible expense budget for the Sales Division for the three scenarios above.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
Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
Essentials of Business Analytics (MindTap Course ...StatisticsISBN:9781305627734Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. AndersonPublisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Essentials of Business Analytics (MindTap Course ...
Statistics
ISBN:9781305627734
Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:Cengage Learning
Elements of cost | Direct and Indirect: Material, Labor, & Expenses; Author: Educationleaves;https://www.youtube.com/watch?v=UFBaj6AHjHQ;License: Standard youtube license