ause the bulk of potential cost savings related to labor costs”. Identify relevant and irrelevant costs and
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Dear you can use any kind of companies
Companies with labor incentive manufacturing processes are most likely to benefit from sending
manufacturing operations overseas because the bulk of potential cost savings related to labor costs”.
Identify relevant and irrelevant costs and benefits in a decision.
Prepare an analysis showing whether a product line or other business segment should be added
or dropped.
Determine the value of obtaining the constrained resource.
Step by step
Solved in 2 steps
- Morrisons Plastics Division, a profit center, sells its products to external customers as well as to other internal profit centers. Which one of the following circumstances would justify the Plastics Division selling a product internally to another profit center at a price that is below the market-based transfer price? a. The buying unit has excess capacity. b. The selling unit is operating at full capacity. c. Routine sales commissions and collection costs would be avoided. d. The profit centers managers are evaluated on the basis of unit operating income.Assume you are the department B manager for Marleys Manufacturing. Marleys operates under a cost-based transfer structure. Assume you receive the majority of your raw materials from department A, which sells only o department B (they have no outside sales). After calculating the operating income in dollars and operating income in percentage, analyze the following financial information to determine costs that may need further investigation. (Hint: It may be helpful to perform a vertical analysis.)In designing a bonus structure to reward your production managers, one of the options is to reward the managers based on reaching annual income targets. What are the differences between a reward system for a company that uses absorption costing and one for a company that uses variable costing?
- Many outsourced jobs have resulted in offshoring jobs, rather than using domestic outsourcing. If a U.S. company wants to offshore a service like customer service, for example, what are some of their considerations? In your answer, address offshoring disadvantages as compared with domestic outsourcing.Analyze Horsepower Hookup, Inc. Horsepower Hookup, Inc., is a large automobile company that specializes in the production of high-powered trucks. The company is determining cost allocations for purposes of performance evaluation. A portion of company bonuses depends on divisions achieving cost management goals. This necessitates highly accurate support department cost allocation. Management has also stated that it has the means to implement as complex a method as necessary. The general manager over the Mid-Size D wants to get a good idea of what factors are driving the costs of the support departments in order to make accurate cost allocations, so finding accurate support department cost drivers is important. Support department costs include Janitorial (163,100) and Security (285,400). The Janitorial costs vary depending on the number of vehicles produced, increasing with larger production volumes. Security costs are fixed based on the size of the lot, and do not change with respect to how many vehicles are in the lot or warehouse. Joint costs involved in producing the trucks before the split-off point where the various makes, models, and colors are produced are 946,000 for the period. All makes, models, and colors sell at relatively similar margins, but the sports models and metallic colors are normally more difficult to produce during the joint production process. a. Which support department cost allocation method (direct, sequential, or reciprocal services) should be used to allocate support department cost? b. What driver would be best for allocating Janitorial costs? c. What driver would be best for allocating Security costs? d. If Janitorial costs were to be allocated based on square footage, and Security costs based on asset value, what percentage of each support departments costs would be allocated to each production department using the sequential method (allocating Security costs first) given the following: e. Should Janitorial and Security costs be considered when evaluating the performance of cost management employees? f. What joint cost allocation method should be used for performance evaluation purposes?The management of Hartman Company is trying to determine the amount of each of two products to produce over the coming planning period. The following information concerns labor availability, labor utilization, and product profitability: a. Develop a linear programming model of the Hartman Company problem. Solve the model to determine the optimal production quantities of products 1 and 2. b. In computing the profit contribution per unit, management does not deduct labor costs because they are considered fixed for the upcoming planning period. However, suppose that overtime can be scheduled in some of the departments. Which departments would you recommend scheduling for overtime? How much would you be willing to pay per hour of overtime in each department? c. Suppose that 10, 6, and 8 hours of overtime may be scheduled in departments A, B, and C, respectively. The cost per hour of overtime is 18 in department A, 22.50 in department B, and 12 in department C. Formulate a linear programming model that can be used to determine the optimal production quantities if overtime is made available. What are the optimal production quantities, and what is the revised total contribution to profit? How much overtime do you recommend using in each department? What is the increase in the total contribution to profit if overtime is used?
- The following series of statements or phrases are associated with product life-cycle viewpoints. Identify whether each one is associated with the marketing, production, or customer viewpoint. Where possible, identify the particular characteristic being described. If the statement or phrase fits more than one viewpoint, label it as interactive. Explain the interaction. a. Sales are increasing at an increasing rate. b. The cost of maintaining the product after it is purchased. c. The product is losing market acceptance and sales are beginning to decrease. d. A design is chosen to minimize post-purchase costs. e. Ninety percent or more of the costs are committed during the development stage. f. The length of time that the product serves the needs of a customer. g. All the costs associated with a product for its entire life cycle. h. The time in which a product generates revenue for a company. i. Profits tend to reach peak levels during this stage. j. Customers have the lowest price sensitivity during this stage. k. Describes the general sales pattern of a product as it passes through distinct life-cycle stages. l. The concern is with product performance and price. m. Actions taken so that life-cycle profits are maximized. n. Emphasizes internal activities that are needed to develop, produce, market, and service products.Jolene Askew, manager of Feagan Company, has committed her company to a strategically sound cost reduction program. Emphasizing life-cycle cost management is a major part of this effort. Jolene is convinced that production costs can be reduced by paying more attention to the relationships between design and manufacturing. Design engineers need to know what causes manufacturing costs. She instructed her controller to develop a manufacturing cost formula for a newly proposed product. Marketing had already projected sales of 25,000 units for the new product. (The life cycle was estimated to be 18 months. The company expected to have 50 percent of the market and priced its product to achieve this goal.) The projected selling price was 20 per unit. The following cost formula was developed: Y=200,000+10X1 where X1=Machinehours(Theproductisexpectedtouseonemachinehourforeveryunitproduced.) Upon seeing the cost formula, Jolene quickly calculated the projected gross profit to be 50,000. This produced a gross profit of 2 per unit, well below the targeted gross profit of 4 per unit. Jolene then sent a memo to the Engineering Department, instructing them to search for a new design that would lower the costs of production by at least 50,000 so that the target profit could be met. Within two days, the Engineering Department proposed a new design that would reduce unit-variable cost from 10 per machine hour to 8 per machine hour (Design Z). The chief engineer, upon reviewing the design, questioned the validity of the controllers cost formula. He suggested a more careful assessment of the proposed designs effect on activities other than machining. Based on this suggestion, the following revised cost formula was developed. This cost formula reflected the cost relationships of the most recent design (Design Z). Y=140,000+8X1+5,000X2+2,000X3 where X1=MachinehoursX2=NumberofbatchesX3=Numberofengineeringchangeorders Based on scheduling and inventory considerations, the product would be produced in batches of 1,000; thus, 25 batches would be needed over the products life cycle. Furthermore, based on past experience, the product would likely generate about 20 engineering change orders. This new insight into the linkage of the product with its underlying activities led to a different design (Design W). This second design also lowered the unit-level cost by 2 per unit but decreased the number of design support requirements from 20 orders to 10 orders. Attention was also given to the setup activity, and the design engineer assigned to the product created a design that reduced setup time and lowered variable setup costs from 5,000 to 3,000 per setup. Furthermore, Design W also creates excess activity capacity for the setup activity, and resource spending for setup activity capacity can be decreased by 40,000, reducing the fixed cost component in the equation by this amount. Design W was recommended and accepted. As prototypes of the design were tested, an additional benefit emerged. Based on test results, the post-purchase costs dropped from an estimated 0.70 per unit sold to 0.40 per unit sold. Using this information, the Marketing Department revised the projected market share upward from 50 percent to 60 percent (with no price decrease). Required: 1. Calculate the expected gross profit per unit for Design Z using the controllers original cost formula. According to this outcome, does Design Z reach the targeted unit profit? Repeat, using the engineers revised cost formula. Explain why Design Z failed to meet the targeted profit. What does this say about the use of unit-based costing for life-cycle cost management? 2. Calculate the expected profit per unit using Design W. Comment on the value of activity information for life-cycle cost management. 3. The benefit of the post-purchase cost reduction of Design W was discovered in testing. What direct benefit did it create for Feagan Company (in dollars)? Reducing post-purchase costs was not a specific design objective. Should it have been? Are there any other design objectives that should have been considered?When operating in a constrained environment, which products should be produced? A. products with the highest contribution margin per unit B. products with the highest contribution margin per unit of the constrained process C. products with the highest selling price D. products with the lowest allocated joint cost
- Select a manufacturing organization for justifying“Companies with labor incentive manufacturing processes are most likely to benefit from sendingmanufacturing operations overseas because the bulk of potential cost savings relate to labor costs”.Q1. Identify relevant and irrelevant costs and benefits in a decision?Q2. Prepare an analysis showing whether a product line or other business segment should be addedor dropped?Q3. Determine the value of obtaining constrained resources?Select a manufacturing organization (Toyota Motors) for justifying "Companies with labor incentive manufacturing processes are most likely to benefit from sending manufacturing operations overseas because the bulk of potential cost savings relate to labor costs". Identify relevant and irrelevant costs and benefits in a decision. Prepare an analysis showing whether a product line or other business segment should be added or dropped. Determine the value of obtaining the constrained resources. (Note-MANUFACTURING ORGANIZATION- Toyota motors)"Companies with labor incentive manufacturing processes are most likely to benefit from sending manufacturing operations overseas because the bulk of potential cost savings relate to labor costs".Question: Identify relevant and irrelevant costs and benefits in a decision. (Note: Samsung Manufacturing)
