Case 7: Armstrong Helmet Company

The equipment is expected to cost $240,000 with a 12-year life and no salvage value. It will be depreciated on a straight-line basis. The company expects to sell 96,000 units of the equipment’s product each year. The expected annual income related to this equipment follows.

Hobby Lobby Stores is a chain arts and crafts store around the nation. The owners, which is the Green Family, based a lot the their business and primary rules of their Christian faith. They have filed a court case to not provide birth contraception for their employee’s benefits for health. They feel birth contraception is unmoral and goes against their religion, which is what bases their crafts store. The Greens sued Kathleen Sebelius, who is the Secretary of the Department of Health and Human Services, on September 12, 2012 for the requirements of providing birth contraception. The court allowed their request of not providing this benefit to Hobby Lobby’s employees.

d. use a host of different cost drivers (e.g., number of production setups, inspection hours,

12. If 12,500 units are produced, what is the total amount of manufacturing overhead cost incurred to support this level of production? What is the total amount expressed on a per unit basis?

Wilkerson employs a Normal Cost System, which means that they use predetermined overhead rates along with actual costs for direct material and direct labor. Normal costing systems are appropriate when overhead costs are a relatively small percentage of total manufacturing costs and product diversity is limited. For Wilkerson, normal costing does not make sense. Overhead costs make up over 50 percent of total manufacturing costs and their product offering is relatively more diverse. This indicates that the current accounting system in place may be distorting costs significantly. Supporting data:

Gabe's Auto produces and sells an auto part for $30.00 per unit. In 2010, 100,000 parts were

Columbia High School was using the Humanities to 1500 textbook for humanities course in 1975. In 1985, school designed the course textbook as Volume 1 of the Humanities for eleventh and twelfth grade students for optional and required readings. A portion of Lysistrata was read aloud in the class during the fall semester year. After that one of the parents objected to an English translation of the Greek dramatist Aristophanes Lysistrata and to English poet Geoffrey Miller’s. The Miller’s Tale from this textbook and the parent believed that the two works of art were too vulgar. After the parent complaint, the school board review the book and they decided to retain

Going into 2004, Bob Moyer planned to produce 10,000 bicycles at Mile High Cycles. Construction of his bicycles includes the utilization of three departments, frames, wheel assembly, and final assembly. During this year, Mile High Cycles ended up actually producing 10,800 bicycles to meet higher than expected demand. Bob is curious as to whether or not he was successful in maintaining costs to meet these higher levels of demand.

| | | | | | | | | | | | | |75000 | |100000 | |125000 | |150000 | |175000 | |200000 | | |  | |  | |  | |  | |  | |  | |Direct Labor |4.00 |  |3.90 |  |3.80 |  |3.70 |  |3.80 |  |4.00 | |Material |2.00

The true variable costs to Beauregard Textiles include the Direct Labor, Material, Material Spoilage, and Direct Department Expense. By excluding those expenses not related to the production of T-30, we can calculate the contribution margin for Beauregard using unit sales price and unit variable cost. Contribution margin is a measurement of the profitability of a product and is an excellent management tool to help determine whether to keep or drop certain aspects of the business. A positive contribution margin means that the company should produce the product, a negative contribution margin means the company is likely to suffer from every unit it produces.

$200,000 - $500,000 Daily Operations Equipment (beds, towels, washer dryer, etc.) $1,000,000 – 5,000,000 Supplies $20,000 - $50,000 Operating Expense $779,000 - $832,000 Employees, 200-300 part time, @$7.25/hr.

2. What is the total cost? How much of the total cost are labor costs? Capital costs?

The materials used per unit of production, the Run labor hours and machine hours are provided in exhibit 2. The overhead expenses per unit of the product have been apportioned according to their percentage production and usage. (Drucker, 1999)

Manufacturing companies almost always incur variable expenses. A big reason why is because to make products, you need raw materials. In this case we have Fly Ash (250,000), Gypsum (250,000), Lime (300,000) and Sand (40,000). Another variable expense will be Workers Labor (100,000) and Drivers (25,000). The workers will be working varying hours depending upon the production need. During busy times they might be working overtime, while in down times they could very well be asked to not come in for a day. This is all under the assumption that they are paid hourly and not on salary. If they were salaried it would be considered a fixed cost. The same goes with the drivers. They will be delivering the products on a demand basis. More trips when the company is busy and less when production is slow.

Two locations were found to be appropriate for the plant, first is on Kimberly Street just a few blocks away from the main plant. Second being located in Hampton, which is small town around 180miles from the main plant. The Executives of the company decided that they will eventually require minimum of 75000 Square feet of floor space and 600 labors (300 Skilled, 150 Semi-Skilled, 150 Unskilled) so as to operate efficiently. The estimated cost of the machinery and equipment needed to manufacture the parts is around $2 Million and this requirement was met by the government by equipping them with government owned equipment under a contract.