Decision Analysis Task 1

1) Prepare common-sized balance sheets and income statements for Just for Feet for the period 1996-1998. Also, compute key liquidity, solvency, activity, and profitability ratios for 1997-1998. Given these data, comment on what you believe were the high-risk financial statement items for the 1998 Just for Feet audit.

Shaving 5% off the estimated direct labor-hours in the predetermined overhead rate will result in an artificially high overhead rate. The artificially high predetermined overhead rate is likely to result in overapplied overhead for the year. The cumulative effect of overapplying the overhead throughout the year is all recognized in December when the balance in the Manufacturing Overhead account is closed out to Cost of Goods Sold. If the balance were closed out every month or every quarter, this effect would be

Assignment using normal activity produces less fluctuation in period-to-period overhead assignments. It also avoids assigning the costs to idle capacity to products when production is down.

The wages of general production employees who are idled due to machine breakdown are classified as indirect costs. Direct costs are usually variable and change as production volumes change. Thus, direct materials and direct labor are typically variable costs. For special orders, some direct costs can be fixed, however. The costs (depreciation, electricity, and routine maintenance) associated with a machine dedicated to one product are direct costs of that product. Indirect costs cannot be easily and conveniently assigned to a special order. Rather, these costs are common costs, in that they are incurred to produce a variety of special orders. Maintenance costs of general purpose equipment, the supervisor’s salary, and utilities are direct costs needed to produce special orders in general, but are indirect costs for a particular special order. Moreover, general production costs, including property taxes, insurance, lawn care, cafeteria costs, and miscellaneous supplies consumed in production are indirect costs properly allocated to special orders manufactured.

According to the text, Dr. Alex Mahdi was committed to the idea of collaborative decision making. However, Dr. Mahdi utilized an individual and authoritative decision leadership style when he set up committees and appointed teachers to serve on his newly established committees in addition to their department level committees. I believe Dr. Mahdi has the resources necessary for success. He has the opportunity to boost morale, change the culture and climate of the school, and build trust worthy relationships through collaborative interaction.

The Theory of Constraints indicates that excess capacity from ‘subordinate’ departments should be utilized to lessen the strain on the bottlenecked department. Until the constraint on production has been removed management should subordinate everything else to the constraint. The proposed action of outsourcing inspection from the coating and sharpening department will free-up more valuable direct labor hours in the area of constraint. A separate inspection station before the final stage of production should be added to the production process. An employee from the chemical bathing stage will be cross-trained to inspect products as needed for the brief periods of inspection required. Because the second process has been deemed subordinate to the area experiencing constraint its excess capacity can be utilized in a more valuable capacity. Each additional hour in the coating and sharpening process will result in a firm benefit of $1250, or the contribution margin per unit of constraint for the Model C210. The addition of an inspection

(a)  Calculate the Cost and Schedule Variances and Indexes (CV, SV, CPI, SPI) for tasks A, B, C, D, and E.

The Cost Analysis for Decision Making project is intended to be a comprehensive evaluation of the key objectives covered throughout this course. It will challenge you to apply your knowledge of cost information when evaluating the decision to make or buy a product. Please use this outline and grading rubric as a guide to completing your course project. It provides specific details of the required elements of the project, and it will be used by your instructor as a grading guide.

Normally people do not break down how they make decisions, they just decide. But, for people who are making decisions for a larger group, knowing the process could be helpful. The first step in the process is to identify the problem by fully understanding and gathering all the information of the problem. Secondly, you want to think of alternatives or other options for handling the issue. Thirdly, you want to access or evaluate all the alternatives and consider the possible outcome. Finally, you go forward with the decision and evaluate the outcome (Kinicki and Williams, 2016). These steps are helpful and critical when making decisions for large groups or an organization.

Use video to highlight a selection of products you offer, and be sure to add new videos of new products or lesser-known products. You could even shoot extreme close ups and engage your customers by asking them to guess the product. Great contest idea!

The above cost system was efficient during the 1980s because it split up overhead over three cost pools, adding an additional pool, which has machine hours as its cost driver. This proved efficient because “[w]ith increased usage of automated machines, direct labor run time no longer reflected the amount of processing being performed on parts, particularly when one operator was responsible for several machines.” Packet, pg. 7.

1. Define and explain the meaning of a predetermined manufacturing overhead rate that is applied in a job-order costing system.

The current method of apportioning production overheads based on direct labour hours can be described as a traditional approach to product costing. In a manufacturing company’s financial statements, each item produced must be allocated some of the production overheads to make the statements compliant. Sometimes the individual costs of these items can be calculated incorrectly based on overall production overhead and the system of allocating in place, however the overall financial statement can still be accurate. This traditional method of allocating the production

Assume you have been hired as a managing consultant by a company to offer some advice that will help it make a decision as to whether it should shut down completely or continue its operations. It currently uses 100 workers to produce 6,000 units of output per month (working 20 days / month). The daily wage (per worker) is $70, and the price of the firm's output is $32. The cost of other variable inputs is $2,000 per day. It also tells us that the firm's fixed cost is “high enough” so that the firm's total costs exceed its total revenue. The marginal cost of the last unit is $30.

Furthermore, the ACC strategy of offering increased variety requires shorter production runs which inherently increases the cost associated with each product and packaging, as idle time due to process changeover would increase between each product production (4.8% of time com-pared with 2% for DJC). The strategy of increased variety and production runs by the ACC would also affect labor in a number of ways. Direct labor costs would go up due to a larger amount of idle time associated with process changeover and the chance of increased problems associated with the