COST ACCOUNTING W18 CUSTOM W/ACCESS
18th Edition
ISBN: 9781323831427
Author: Horngren
Publisher: PEARSON
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Chapter 1, Problem 1.20E
Key success factors. Dominion Consulting has issued a report recommending changes for its newest manufacturing client, Gibson Engine Works. Gibson currently manufactures a single product, which is sold and distributed nationally. The report contains the following suggestions for enhancing business performance:
- a. Develop a rechargeable electric engine to stay ahead of competitors.
- b. Adopt a TQM philosophy to reduce waste and defects to near zero.
- c. Reduce lead times (time from customer order of product to customer receipt of product) by 20% in order to increase customer retention.
- d. Negotiate faster response times with direct material suppliers to allow for lower material inventory levels.
- e. Benchmark the company’s gross margin percentages against its major competitors.
Link each of these changes to the key success factors that are important to managers.
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Key success factors. Dominic Consulting has issued a report recommending changes for its newest manufacturing client, Casper Engines. Casper Engines currently manufactures a single product, which is sold and distributed nationally. The report contains the following suggestions for enhancing business performance:
Develop a hybrid engine to stay ahead of competitors
Increase training hours of assembly-line personnel to decrease the currently high volumes of scrap and waste.
Reduce lead times (time from customer order of product to customer receipt of product) by 20% in order to increase customer retention.
Negotiate faster response times with direct material suppliers to allow for lower material inventory levels
Benchmark the company’s gross margin percentages against its major competitors.
Link each of these changes to the key success factors that are important to managers.
Clason, Inc. manufactures door panels. Suppose clason is considering sending the following amounts on a new total quality management (TQM) PROGRAM.
(Information)
Strength-testing one item from each batch of panels $ 68,000
Training employees in TQM 27,000
Training suppliers in TQM 39,000
Identifying suppliers who commit to on-time deliver of perfect-quality materials 58,000
Clason expects the new program would save costs through the following:
(Information)
Avoid lost profits from lost sales due to disappointed customers $86,000
Avoid rework and spoilage 63,000
Avoid inspection of raw materials 57,000
Avoid warranty costs…
Maxwell Company produces a variety of kitchen appliances, including cooking ranges and dishwashers. Over the past several years, competition has intensified. In order to maintain—and perhaps increase—its market share, Maxwell’s management decided that the overall quality of its products had to be increased. Furthermore, costs needed to be reduced so that the selling prices of its products could be reduced. After some investigation, Maxwell concluded that many of its problems could be traced to the unreliability of the parts that were purchased from outside suppliers. Many of these components failed to work as intended, causing performance problems. Over the years, the company had increased its inspection activity of the final products. If a problem could be detected internally, then it was usually possible to rework the appliance so that the desired performance was achieved. Management also had increased its warranty coverage; warranty work had been increasing over the years.
DAVID…
Chapter 1 Solutions
COST ACCOUNTING W18 CUSTOM W/ACCESS
Ch. 1 - How does management accounting differ from...Ch. 1 - Management accounting should not fit the...Ch. 1 - How can a management accountant help formulate...Ch. 1 - Describe the business functions in the value...Ch. 1 - Explain the term supply chain and its importance...Ch. 1 - Management accounting deals only with costs. Do...Ch. 1 - How can management accountants help improve...Ch. 1 - Prob. 1.8QCh. 1 - Prob. 1.9QCh. 1 - What three guidelines help management accountants...
Ch. 1 - Prob. 1.11QCh. 1 - Prob. 1.12QCh. 1 - Prob. 1.13QCh. 1 - Prob. 1.14QCh. 1 - Prob. 1.15QCh. 1 - Which of the following is not a primary function...Ch. 1 - Value chain and classification of costs, computer...Ch. 1 - Prob. 1.18ECh. 1 - Value chain and classification of costs, fast-food...Ch. 1 - Key success factors. Dominion Consulting has...Ch. 1 - Key success factors. Vargas Construction Company...Ch. 1 - Planning and control decisions. Gregor Company...Ch. 1 - Planning and control decisions. Gavin Adams is the...Ch. 1 - Prob. 1.24ECh. 1 - Five-step decision-making process, service firm....Ch. 1 - Professional ethics and reporting division...Ch. 1 - Professional ethics and reporting division...Ch. 1 - Planning and control decisions, Internet company....Ch. 1 - Prob. 1.29PCh. 1 - Prob. 1.30PCh. 1 - Management accounting guidelines. For each of the...Ch. 1 - Prob. 1.32PCh. 1 - Prob. 1.33PCh. 1 - Budgeting, ethics, pharmaceutical company. Chris...Ch. 1 - Professional ethics and end-of-year actions. Linda...Ch. 1 - Professional ethics and end-of-year actions....Ch. 1 - Ethical challenges, global company environmental...
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Repeat for 20X5.arrow_forwardJolene 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.) 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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. 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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?arrow_forward
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