COST ACCOUNTING
null Edition
ISBN: 9781323927397
Author: Pearson
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 12, Problem 12.32E
Identifying and managing unused capacity (continuation of 12-29). Refer to Exercise 12-29.
- 1. Calculate the amount and cost of unused architectural support capacity at the beginning of 2017, based on the number of jobs actually done in 2017.
Required
- 2. Suppose Compton can add or reduce its architectural support capacity in increments of 10 units. What is the maximum amount of costs that Compton could save in 2017 by downsizing architectural support capacity?
- 3. Compton, in fact, does not eliminate any of its unused architectural support capacity. Why might Compton not downsize?
12-29 Strategy, balanced scorecard, service company. Compton Associates is an architectural firm that has been in practice only a few years. Because it is a relatively new firm, the market for the firm’s services is very competitive. To compete successfully, Compton must deliver quality services at a low cost. Compton presents the following data for 2016 and 2017.
| 2016 | 2017 | |
| 1. Number of jobs billed | 40 | 50 |
| 2. Selling price per job | $32,000 | $30,000 |
| 3. Architect labor-hours | 24,000 | 27,000 |
| 4. Cost per architect labor-hour | $35 | $36 |
| 5. Architect support capacity (number of jobs the firm can do) | 60 | 60 |
| 6. Total cost of software-implementation support | $168,000 | $180,000 |
| 7. Software-implementation support-capacity cost per job (row 6 ÷ row 5) | $2,800 | $3,000 |
Architect labor-hour costs are variable costs. Architect support costs for each year depend on the Architect support capacity that Compton chooses to maintain each year (that is, the number of jobs it can do each year). Architect support costs do not vary with the actual number of jobs done that year.
- 1. Is Compton Associate’s strategy one of product differentiation or cost leadership? Explain briefly.
Required
- 2. Describe key measures you would include in Compton’s balanced scorecard and your reasons for doing so.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
The overhead costs for a company are presently $Xper month. The management team of the company, in cooperation with the employees, is ready to implement a comprehensive improvement program to reduce these costs. If you (a) consider an observation of actual overhead costs for one month analogous to an output unit, (b) estimate the overhead costs for the first month of program implementation to be 1.15Xdue to extra front-end effort, and (c) consider a 90% improvement curve applicable to the situation, what is your estimate of the percentage reduction in present overhead costs per month after 30 months of program implementation?
The management of Wy Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity at capacity. The company's controller has provided an example to illustrate how this new system would work. In this example, the allocation base ismachine-hours and the estimated amount of the allocation base for the upcoming year is 50,000 machine-hours. In addition, capacity is 59,000 machine-hours and the actual level of activity for the year is 53,300 machine-hours. All of the manufacturing overhead is fixed and is P1,622,500 per year. For simplicity, it is assumed that this is the estimated manufacturing overhead for the year as well as the manufacturing overhead at capacity. It is further assumed that this is also the actual amount of manufacturing overhead for the year. A number of products were worked on during the year, one of which was Product X. This product required 230 machine-hours.
21. If the company bases its predetermined overhead rate on the…
The management of Wy Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity at capacity. The company's controller has provided an example to illustrate how this new system would work. In this example, the allocation base ismachine-hours and the estimated amount of the allocation base for the upcoming year is 50,000 machine-hours. In addition, capacity is 59,000 machine-hours and the actual level of activity for the year is 53,300 machine-hours. All of the manufacturing overhead is fixed and is P1,622,500 per year. For simplicity, it is assumed that this is the estimated manufacturing overhead for the year as well as the manufacturing overhead at capacity. It is further assumed that this is also the actual amount of manufacturing overhead for the year. A number of products were worked on during the year, one of which was Product X. This product required 230 machine-hours.
20. If the company bases its predetermined overhead rate on the…
Chapter 12 Solutions
COST ACCOUNTING
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)....
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- In 20x2, Choctaw Company implements a new process affecting labor and materials. The following reported data are provided to evaluate the effect on the companys productivity: Required: 1. Calculate the productivity profile for 20x1. 2. Calculate the productivity profile for 20x2, and comment on the effect of the new production and assembly process. 3. What if the labor hours used in 20x2 were 112,500? What does comparison of the 20x1 and 20x2 profiles now communicate?arrow_forwardThe management of Wy Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity at capacity. The company's controller has provided an example to illustrate how this new system would work. In this example, the allocation base ismachine-hours and the estimated amount of the allocation base for the upcoming year is 50,000 machine-hours. In addition, capacity is 59,000 machine-hours and the actual level of activity for the year is 53,300 machine-hours. All of the manufacturing overhead is fixed and is P1,622,500 per year. For simplicity, it is assumed that this is the estimated manufacturing overhead for the year as well as the manufacturing overhead at capacity. It is further assumed that this is also the actual amount of manufacturing overhead for the year. A number of products were worked on during the year, one of which was Product X. This product required 230 machine-hours. 22. If the company bases its predetermined overhead rate on the…arrow_forwardAssume that Laptop parts assembly company producing 650 laptops during 2019. The management has drawn up a standard cost plan as follows: The standard quantity of direct material is 30 parts, natural loss of parts 3%, damaged parts 1%, the standard price is $ 8/part. While the actual units used are 14,560 parts, each part $ 6. The standard direct labor time is 8 hours, and the standard number of workers is 10. Standard damaged rate is 5%, standard production stops 5%, standard work break is 1.5 hour, standard direct labor wage is 3 plus 1 as a bonus. While in fact, the direct labor hour is 31,325, the actual wage is the same as the standard price but without the bonus. The application standard rate is direct material quantity. And the application standard rate is $ 4/ part. While in actuality, the total overhead cost is $43,000. Requirements; (a) Calculate the standard and actual costs (b) Analyze the deviation for each element and provide a comment in the result of deviation.arrow_forward
- Assume that Laptop parts assembly company producing 350 laptops during 2019. The management has drawn up a standard cost plan as follows: The standard quantity of direct material is 30 parts, natural loss of parts 3%, damaged parts 1%, the standard price is $ 8/part. While the actual units used are 14,560 parts, each part $ 6. The standard direct labor time is 8 hours, and the standard number of workers is 10. Standard damaged rate is 5%, standard production stops 5%, standard work break is 1.5 hour, standard direct labor wage is 3 plus 1 as a bonus. While in fact, the direct labor hour is 31,325, the actual wage is the same as the standard price but without the bonus. The application standard rate is direct material quantity. And the application standard rate is $ 4/ part. While in actuality, the total overhead cost is $43,000. Requirements; 1- Calculate the standard and actual costs 2- Analyze the deviation for each element and provide a comment in the result of deviation.arrow_forwardAssume that Iron company producing 700 laptops during 2018. Standard and actual costs are as follows:: The standard quantity of direct material is 60 KG iron, natural loss of iron 6%, damaged Pieces 2%, the standard price is $ 16/KG. While the actual units used are 29,120 KG, each KG $ 12. The standard direct labor time is 16 hours, and the standard number of workers is 40. Standard damaged rate is 10%, standard production stops 10%, standard work break is 6 hours, standard direct labor wage is 6 plus 2 as a bonus. While in fact, the direct labor hour is 62,650, the actual wage is the same as the standard price but without the bonus. The application standard rate is direct material quantity. And the application standard rate is $ 8/ KG. While in actuality, the total overhead cost is $86,000. Requirements; 1- Calculate the standard and actual costs 2- Analyze the deviation for each element and provide a comment in the result of deviation.arrow_forwardDataSpan, Incorporated, automated its plant at the start of the current year and installed a flexible manufacturing system. The company is also evaluating its suppliers and moving toward Lean Production. Many adjustment problems have been encountered, including problems relating to performance measurement. After much study, the company has decided to use the performance measures below, and it has gathered data relating to these measures for the first four months of operations. Month 1 2 3 4 Throughput time (days) ? ? ? ? Delivery cycle time (days) ? ? ? ? Manufacturing cycle efficiency (MCE) ? ? ? ? Percentage of on-time deliveries 82% 77% 74% 71% Total sales (units) 3830 3667 3479 3347 Management has asked for your help in computing throughput time, delivery cycle time, and MCE. The following average times have been logged over the last four months: Average per Month (in days) 1 2 3 4 Move time per unit 0.8 0.5 0.6 0.6 Process time per unit 2.3 2.2…arrow_forward
- DataSpan, Inc., automated its plant at the start of the current year and installed a flexible manufacturing system. The company is also evaluating its suppliers and moving toward Lean Production. Many adjustment problems have been encountered, including problems relating to performance measurement. After much study, the company has decided to use the performance measures below, and it has gathered data relating to these measures for the first four months of operations. Month 1 2 3 4 Throughput time (days) ? ? ? ? Delivery cycle time (days) ? ? ? ? Manufacturing cycle efficiency (MCE) ? ? ? ? Percentage of on-time deliveries 77 % 72 % 69 % 66 % Total sales (units) 3880 3715 3525 3391 Management has asked for your help in computing throughput time, delivery cycle time, and MCE. The following average times have been logged over the last four months: Average per Month (in days) 1 2 3 4 Move time per unit 0.7…arrow_forwardValencia Manufacturing Company manufactures and sells musical gadgets. The business earned Operating Income of $220,000 in 2018, when selling price per unit was $200, and the president of Valencia is under pressure to increase operating income in 2019. Data for variable cost per unit and total fixed costs were as follows: Variable expenses per unit: Direct Material $40 Direct Labour $32 Variable Manufacturing Overhead $18 Fixed expenses: Fixed Manufacturing Overhead $190,000 Fixed Selling Costs $115,000 Fixed Administrative Costs $135,000 Required: Assume that as a result of reorganizing the production process, Valencia Manufacturing Company was able to reduce direct…arrow_forwardValencia Manufacturing Company manufactures and sells musical gadgets. The business earned Operating Income of $220,000 in 2018, when selling price per unit was $200, and the president of Valencia is under pressure to increase operating income in 2019. Data for variable cost per unit and total fixed costs were as follows: Variable expenses per unit: Direct Material $40 Direct Labour $32 Variable Manufacturing Overhead $18 Fixed expenses: Fixed Manufacturing Overhead $190,000 Fixed Selling Costs $115,000 Fixed Administrative Costs $135,000 Assume that as a result of reorganizing the production process, Valencia Manufacturing Company was able to reduce direct material cost per unit by $5 due to a change in the quality of raw material used in the production process but the expected sales of 6,000 units would decrease by 5% and total fixed costs are expected to increase by $94,000. What must the new selling…arrow_forward
- 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.arrow_forwardJoha, an accountant for Jones, Inc., has decided to estimate the fixed and variable components associated with the company's repair activity. The following data for the past few months has been collected: Repair Hours Total Repair Costs 20 $ 1,000 25 1,250 30 1,400 40 1,550 Required: Estimate the fixed and variable components for the repair costs using the high-low method. Using the cost formula, predict the total cost of repair if 10 hours are used.arrow_forwardXie Company identified the following activities, costs, and activity drivers for 2017. The company manufactures two types of go-karts: Deluxe and Basic. Activity Expected Costs Expected Activity Handling materials $ 625,000 100,000 parts Inspecting product 900,000 1,500 batches Processing purchase orders 105,000 700 orders Paying suppliers 175,000 500 invoices Insuring the factory 300,000 40,000 square feet Designing packaging 75,000 2 models Required:Compute the activity rate for each activity, assuming the company uses activity-based costing. (Round activity rate answers to 2 decimal places.)arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Inspection and Quality control in Manufacturing. What is quality inspection?; Author: Educationleaves;https://www.youtube.com/watch?v=Ey4MqC7Kp7g;License: Standard youtube license