Pastel Bags (PB) is a designer of high-quality backpacks and purses. Each design is made in small batches. Each spring, PB comes out with new designs for the backpack and for the purse. The company uses these designs for a year and then moves on to the next trend. The bags are all made on the same fabrication equipment that is expected to operate at capacity. The equipment must be switched over to a new design and set up to prepare for the pro- duction of each new batch of products. When completed, each batch of products is immediately shipped to a wholesaler. Shipping costs vary with the number of shipments. Budgeted information for the year is as follows: Pastel Bags Budget for Costs and Activities For the Year Ended February 28, 2017 Direct materials-purses $ 319,155 Direct materials-backpacks Direct manufacturing labor-purses Direct manufacturing labor-backpacks Setup Shipping Design Plant utilities and administration 454,995 99,000 113,000 64,000 73,000 169,000 221,000 $1,513,150 Total Other budget information follows: Backpacks 6,175 Purses Total 3,075 Number of bags Hours of production 9,250 1,665 2,585 4,250 Number of batches 120 80 200 Number of designs 4

Pastel Bags (PB) is a designer of high-quality backpacks and purses. Each design is made in small batches. Each spring, PB comes out with new designs for the backpack and for the purse. The company uses these designs for a year and then moves on to the next trend. The bags are all made on the same fabrication equipment that is expected to operate at capacity. The equipment must be switched over to a new design and set up to prepare for the pro- duction of each new batch of products. When completed, each batch of products is immediately shipped to a wholesaler. Shipping costs vary with the number of shipments. Budgeted information for the year is as follows: Pastel Bags Budget for Costs and Activities For the Year Ended February 28, 2017 Direct materials-purses $ 319,155 Direct materials-backpacks Direct manufacturing labor-purses Direct manufacturing labor-backpacks Setup Shipping Design Plant utilities and administration 454,995 99,000 113,000 64,000 73,000 169,000 221,000 $1,513,150 Total Other budget information follows: Backpacks 6,175 Purses Total 3,075 Number of bags Hours of production 9,250 1,665 2,585 4,250 Number of batches 120 80 200 Number of designs 4

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter8: Budgeting For Planning And Control

Section: Chapter Questions

Problem 26E: Ingles Corporation is a manufacturer of tables sold to schools, restaurants, hotels, and other...

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Ingles Corporation is a manufacturer of tables sold to schools, restaurants, hotels, and other institutions. The table tops are manufactured by Ingles, but the table legs are purchased from an outside supplier. The Assembly Department takes a manufactured table top and attaches the four purchased table legs. It takes 16 minutes of labor to assemble a table. The company follows a policy of producing enough tables to ensure that 40 percent of next months sales are in the finished goods inventory. Ingles also purchases sufficient materials to ensure that materials inventory is 60 percent of the following months scheduled production. Ingless sales budget in units for the next quarter is as follows: Ingless ending inventories in units for July 31 are as follows: Required: 1. Calculate the number of tables to be produced during August. 2. Disregarding your response to Requirement 1, assume the required production units for August and September are 2,100 and 1,900, respectively, and the July 31 materials inventory is 4,000 units. Compute the number of table legs to be purchased in August. 3. Assume that Ingles Corporation will produce 2,340 units in September. How many employees will be required for the Assembly Department in September? (Fractional employees are acceptable since employees can be hired on a part-time basis. Assume a 40-hour week and a 4-week month.) (CMA adapted)
Taylor Company produces two industrial cleansers that use the same liquid chemical input: Pocolimpio and Maslimpio. Pocolimpio uses two quarts of the chemical for every unit produced, and Maslimpio uses five quarts. Currently, Taylor has 6,000 quarts of the material in inventory. All of the material is imported. For the coming year, Taylor plans to import 6,000 quarts to produce 1,000 units of Pocolimpio and 2,000 units of Maslimpio. The detail of each products unit contribution margin is as follows: Taylor Company has received word that the source of the material has been shut down by embargo. Consequently, the company will not be able to import the 6,000 quarts it planned to use in the coming years production. There is no other source of the material. Required: 1. Compute the total contribution margin that the company would earn if it could import the 6,000 quarts of the material. 2. Determine the optimal usage of the companys inventory of 6,000 quarts of the material. Compute the total contribution margin for the product mix that you recommend. 3. Assume that Pocolimpio uses three direct labor hours for every unit produced and that Maslimpio uses two hours. A total of 6,000 direct labor hours is available for the coming year. a. Formulate the linear programming problem faced by Taylor Company. To do so, you must derive mathematical expressions for the objective function and for the materials and labor constraints. b. Solve the linear programming problem using the graphical approach. c. Compute the total contribution margin produced by the optimal mix.
Payton Bags (PB) is a designer of high-quality backpacks and purses. Each design is made in small batches. Each spring, PB comes out with new designs for the backpack and for the purse. The company uses these designs for a year and then moves on to the next trend. The bags are all made on the same fabrication equipment that is expected to operate at capacity. The equipment must be switched over to a new design and set up to prepare for the production of each new batch of products. When completed, each batch of products is immediately shipped to a wholesaler. Shipping costs vary with the number of shipments. Budgeted information for the year is as follows: 1(Click the icon to view the budgeted information.) Read the requirements2. Requirement 1. Identify the cost hierarchy level for each cost category. Cost Cost Hierarchy Level Direct materials—purses (1) Direct materials—backpacks (2) Direct labor—purses (3) Direct…
Pastel Bags (PB) is a designer of high-quality backpacks and purses. Each design is made in small batches. Each spring, PB comes out with new designs for the backpack and for the purse. The company uses these designs for a year and then moves on to the next trend. The bags are all made on the same fabrication equipment that is expected to operate at capacity. The equipment must be switched over to a new design and set-up to prepare for the production of each new batch of products. When completed, each batch of products is immediately shipped to a wholesaler. Shipping costs vary with the number of shipments. Budgeted information for the next financial year is: Pastel Bags: budgeted costs and activities Direct materials—purses $319 155 Direct materials—backpacks 454 995 Direct production labour—purses 99 000 Direct production labour—backpacks 113 000 Set-up 64 000 Shipping 73 000 Design 169 000 Plant utilities and administration 221…
Pumpkin Bags (PB) is a designer of high-quality backpacks and purses. Each design is made in small batches. Each spring, PB comes out with new designs for the backpack and for the purse. They use these designs for one year and then move on to the next trend. The bags are all made on the same fabrication equipment that is expected to operate at capacity. The equipment must be switched over to a new design and set up to prepare for the production of each new batch of products. When completed, each batch of products is immediately shipped to a wholesaler. Shipping costs vary with the number of shipments. Budgeted information for the year is as follows: Required 1. Calculate the cost per unit of cost driver for each cost category. 2. Calculate the total costs and cost per unit for each product line. 3. Explain how you could use the information in requirement 4 to reduce costs.
Quality Clothing, Inc., produces skorts and jumper uniforms for school children. In the process of cutting out the cloth pieces for each product, a certain amount of scrap cloth is produced. Quality has been selling this cloth scrap to Jorge's Scrap Warehouse for $3.15 per pound. Last year, the company sold 39,000 lb. of scrap, which would be enough to make 9,750 teddy bears that the management of Quality is now interested in producing. Their processes would need some reprogramming, particularly in the cutting and stitching processes, but it would require no additional worker training. However, new packaging would be needed. The total variable cost to produce the teddy bears $3.80. Fixed costs would increase by $94,000 per year for the lease of the packaging equipment and Quality estimates it could produce and sell 9,750 teddy bears per year. Finished teddy bears could be sold for $18.00 each. Calculate the effect on operating income. Round your answers to the nearest dollar. Sell…
(GGI) manufactures lawn fertilizer. Because of the product’s very high quality, GGI often receives special orders from agricultural research. For each type of fertilizer sold, each bag is carefully filled to have the precise mix of components advertised for that type of fertilizer. GGI’s operating capacity is 26,000 one-hundred-pound bags per month, and it currently is selling 24,000 bags manufactured in 24 batches of 1,000 bags each. The firm just received a request for a special order of 7,000 one-hundred-pound bags of fertilizer for $150,000 from APAC, a research organization. The production costs would be the same, but there would be no variable selling costs. Delivery and other packaging and distribution services would cause a one-time $2,500 cost for GGI. The special order would be processed in two batches of 3,500 bags each. (No incremental batch-level costs are anticipated. Most of the batch-level costs in this case are short-term fixed costs, such as salaries and…
Green Grow Incorporated (GGI) manufactures lawn fertilizer. Because of the product’s very high quality, GGI often receives special orders from agricultural research groups. For each type of fertilizer sold, each bag is carefully filled to have the precise mix of components advertised for that type of fertilizer. GGI’s operating capacity is 22,000 one-hundred-pound bags per month, and it currently is selling 20,000 bags manufactured in 20 batches of 1,000 bags each. The firm just received a request for a special order of 5,000 one-hundred-pound bags of fertilizer for $130,000 from APAC, a research organization. The production costs would be the same, but there would be no variable selling costs. Delivery and other packaging and distribution services would cause a one-time $2,500 cost for GGI. The special order would be processed in two batches of 2,500 bags each. (No incremental batch-level costs are anticipated. Most of the batch-level costs in this case are short-term fixed costs,…
*Merriweather Corporation is a manufacturer of tables sold to schools, restaurants, hotels, and other institutions. The table tops are manufactured by Merriweather, but the table legs are purchased from an outside supplier. The Assembly Department takes a manufactured table top and attaches the four purchased table legs. It takes 20 minutes of labor to assemble a table. The company follows a policy of producing enough tables to ensure that 40% of next month's sales are in the finished goods inventory. Merriweather also purchases sufficient raw materials (legs) to ensure that raw materials (legs) inventory is 60% of the following month's scheduled production needs. Merriweather's sales budget in units for the next quarter is as follows: (CMA adapted) July 2,500 August 2,700 September 2,300 Merriweather's ending inventories in units for June 30 are: Finished goods 2,100 Raw materials (legs) 4,200 Assume the required production for August and…
The owner of Warwick Printing is planning direct labor needs for the upcoming year. The owner has provided you with the following information for next year's plans: Each color on the banner must be printed one at a time. Thus, for example, a four-color banner will need to be run through the printing operation four separate times. The total production volume last year was 800, as follows: The four-color banner is a new product offering for the upcoming year. The owner believes that the expected 1,000-unit increase in volume fromlast year means that direct labor expenses should increase bu 125% (1,000/800). What do you think?
Cans plc is developing a new form of 'crinkly can' for soft drinks. The crinkly can has grooves in the side which match the size of the fingers of a hand. The company's research and development department employs 50 people full-time and accounts for 2 per cent of the company's costs. The design manager thinks that it may be important in future to develop special designs for particular commercial customers, even if this involves relatively small production runs and a higher price to the customer for each can. He said 'Our profit margins are not yet satisfactory. I would like to maintain our existing level of sales of the standard can at the standard price, but also take advantage of our design skills and sell additional cans of the new style cans in smaller batches but at a higher price.' REQUIRED Explain the further information you would need in order to report on the benefits and problems for creating higher contribution margins and higher profit margins on the basis of the design…
Ingles Corporation is a manufacturer of tables sold to schools, restaurants, hotels, and other institutions. The table tops are manufactured by Ingles, but the table legs are purchased from an outside supplier. The Assembly Department takes a manufactured table top and attaches the four purchased table legs. It takes 16 minutes of labor to assemble a table. The company follows a policy of producing enough tables to ensure that 40 percent of next month’s sales are in the finished goods inventory. Ingles also purchases sufficient materials to ensure that materials inventory is 60 percent of the following month’s scheduled production. Ingles’s sales budget inunits for the next quarter is as follows: July 2,450August 2,900September 2,100Ingles’s ending inventories in units for July 31 are as follows:Finished goods 1,900Materials (legs) 4,000 Required:1. Calculate the number of tables to be produced during August. 2. Disregarding your response to Requirement 1, assume the required…