Homework

11617 Words47 Pages
Chapter 13

Cost Planning for The Product Life Cycle: Target Costing, Theory of Constraints, And Strategic Pricing

Cases

|13-1 |California-Illini Manufacturing (The Theory of Constraints) |
|13-2 |Blue Ridge Manufacturing (B) |
|13-3 |Nebraska Toaster Company (Target Costing) |
|13-4 |Mercedes-Benz All Activity Vehicle (Target Costing) |

Readings

13-1: “Target Costing at a Consumer Products Company” by Mohan Gopalakrishnan; Janet Samuels, CPA; and
…show more content…
We just do it better than anyone else." The production process is like a flow following a routing from one cost center to another in a sequence of move, wait, setup, and runtime for each process. Work-in-process inventories in the move and wait stage litter the plant. Economic lot size rules determine the size of each batch while production schedules push jobs onto the floor.

The Cost System: Measuring Performance

CI uses standard unit costs to measure performance and profit potential. In this cost system, each materials and labor input is given a standard usage, and production managers are evaluated on their ability to meet or improve upon these standards. Differences from the standard were called “variances.” For example, if a certain manufacturing operation required at standard 5 minutes, the operator would be expected to complete a lot of 100 parts in 500 minutes. If actually 550 minutes were required, there would be a 50 minute unfavorable variance. Also, using the operator’s wage rate, the cost of the variance could be calculated.

CI’s Improvement Strategy

The depressed market in the mid-1980s caused a 1986 net loss of close to $1.8 million. Inventory turns were down to one and a half, and cash flow was poor. Facing these conditions, management adopted a new strategy stressing improvements in accounting performance and reduction of inventories. Their strategies for improvement included: increasing productivity, cost cutting

More about Homework

Open Document