HORNGRENS COST ACCOUNTING W/ACCESS
16th Edition
ISBN: 9781323687604
Author: Datar
Publisher: PEARSON
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Textbook Question
Chapter 12, Problem 12.28E
Identifying and managing unused capacity (continuation of 12-25). Refer to Exercise 12-25.
- 1. Calculate the amount and cost of (a) unused manufacturing capacity and (b) unused selling and customer-service capacity at the beginning of 2017 based on actual production and actual number of customers served in 2017.
Required
- 2. Suppose Stanmore can add or reduce its manufacturing capacity in increments of 30 units. What is the maximum amount of costs that Stanmore could save in 2017 by downsizing manufacturing capacity?
- 3. Stanmore, in fact, does not eliminate any of its unused manufacturing capacity. Why might Stanmore not downsize?
12-25 Strategy, balanced scorecard. Stanmore Corporation makes a special-purpose machine, D4H, used in the textile industry. Stanmore has designed the D4H machine for 2017 to be distinct from its competitors. It has been generally regarded as a superior machine. Stanmore presents the following data for 2016 and 2017.
| 2016 | 2017 | |
| 1. Units of D4H produced and sold | 200 | 210 |
| 2. Selling price | $40,000 | $42,000 |
| 3. Direct materials (kilograms) | 300,000 | 310,000 |
| 4. Direct material cost per kilogram | $8 | $8.50 |
| 5. Manufacturing capacity in units of D4H | 250 | 250 |
| 6. Total conversion costs | $2,000,000 | $2,025,000 |
| 7. Conversion cost per unit of capacity (row 6 ÷ row 5) | $8,000 | $8,100 |
| 8. Selling and customer-service capacity | 100 customers | 95 customers |
| 9. Total selling and customer-service costs | $1,000,000 | $940,500 |
| 10. Selling and customer-service capacity cost per customer (row 9 ÷ row 8) | $10,000 | $9,900 |
Stanmore produces no defective machines, but it wants to reduce direct materials usage per D4H machine in 2017. Conversion costs in each year depend on production capacity defined in terms of D4H units that can be produced, not the actual units produced. Selling and customer-service costs depend on the number of customers that Stanmore can support, not the actual number of customers it serves. Stanmore has 75 customers in 2016 and 80 customers in 2017.
- 1. Is Stanmore’s strategy one of product differentiation or cost leadership? Explain briefly.
Required
- 2. Describe briefly key measures that you would include in Stanmore’s balanced scorecard and the reasons for doing so.
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Identifying and managing unused capacity (continuation of 12-34). Refer to the information for Scott Company in Problem 12-34.
Required
Calculate the amount and cost of (a) unused manufacturing capacity and (b) unused selling and customer-service capacity at the beginning of 2017 based on actual production and actual number of customers served in 2017.
Suppose Scott can add or reduce its selling and customer-service capacity in increments of 10 customers. What is the maximum amount of costs that Scott could save in 2017 by downsizing selling and customer-service capacity?
Scott, in fact, does not eliminate any of its unused selling and customer-service capacity. Why might Scott not downsize?
A factory incurred the following expenditure during the year ended 31 May 2016:Sh.Direct material consumed1,200,000Manufacturing wages700,000Manufacturing overhead – fixed360,000Manufacturing overhead – variable250,000Total cost2,510,000In the financial year ending 31 May 2017, the following changes are expected in production and cost of production.Production will increase due to recruitment of 60% more workers in the factory.Overall efficiency will decrease by 10% as a result of the recruitment of the new workersThere will be an increase of 20% in fixed overhead and 60% in variable overheadThe cost of direct material will decrease by 6% due to anticipated increase in supplyThe company desires to earn a profit of 10% on selling price.You are required to write a management report that compares the total costs for the year ended 31 May 2016 with those expected in 2017.
Wolsey Industries Inc. expects to maintain the same inventories at the end of 2016 as at the beginning of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. With this in mind, the various department heads were asked to submit estimates of the costs for their departments during the year. A summary report of these estimates is as follows:
1
Estimated Fixed Cost
Estimated Variable Cost (per unit sold)
2
Production costs:
3
Direct materials
—
$46.00
4
Direct labor
—
40.00
5
Factory overhead
$200,000.00
20.00
6
Selling expenses:
7
Sales salaries and commissions
110,000.00
8.00
8
Advertising
40,000.00
—
9
Travel
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—
10
Miscellaneous selling expense
7,600.00
1.00
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Administrative expenses:
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Office and officers’ salaries
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Chapter 12 Solutions
HORNGRENS COST ACCOUNTING W/ACCESS
Ch. 12 - Define strategy.Ch. 12 - Describe the five key forces to consider when...Ch. 12 - Prob. 12.3QCh. 12 - What is a customer preference map, and why is it...Ch. 12 - Prob. 12.5QCh. 12 - What are four key perspectives in the balanced...Ch. 12 - What are the five types of conditions to consider...Ch. 12 - Describe three features of a good balanced...Ch. 12 - What are three important pitfalls to avoid when...Ch. 12 - Describe three key components in doing a strategic...
Ch. 12 - Why might an analyst incorporate the...Ch. 12 - How does an engineered cost differ from a...Ch. 12 - What is downsizing?Ch. 12 - What is a partial-productivity measure?Ch. 12 - Prob. 12.15QCh. 12 - Jacobs Inc. is a relatively new company that has...Ch. 12 - The balanced scorecard describes all of the...Ch. 12 - Canarsie Corporation uses a balanced scorecard to...Ch. 12 - Balanced scorecard. Pineway Electric manufactures...Ch. 12 - Analysis of growth, price-recovery, and...Ch. 12 - Strategy, balanced scorecard, merchandising...Ch. 12 - Strategic analysis of operating income...Ch. 12 - Analysis of growth, price-recovery, and...Ch. 12 - Identifying and managing unused capacity...Ch. 12 - Strategy, balanced scorecard. Stanmore Corporation...Ch. 12 - Strategic analysis of operating income...Ch. 12 - Analysis of growth, price-recovery, and...Ch. 12 - Identifying and managing unused capacity...Ch. 12 - Strategy, balanced scorecard, service company....Ch. 12 - Strategic analysis of operating income...Ch. 12 - Analysis of growth, price-recovery, and...Ch. 12 - Identifying and managing unused capacity...Ch. 12 - Balanced scorecard and strategy. Scott Company...Ch. 12 - Strategic analysis of operating income...Ch. 12 - Analysis of growth, price-recovery, and...Ch. 12 - Identifying and managing unused capacity...Ch. 12 - Balanced scorecard. Following is a random-order...Ch. 12 - Balanced scorecard. (R. Kaplan, adapted) Petrocal,...Ch. 12 - Balanced scorecard. Vic Corporation manufactures...Ch. 12 - Balanced scorecard, environmental, and social...Ch. 12 - Balanced scorecard, social performance. Comtex...Ch. 12 - Balanced scorecard, environmental, and social...Ch. 12 - Partial-productivity measurement. Gable Company...Ch. 12 - Total factor productivity (continuation of 12-43)....
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