Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN: 9781305970663
Author: Don R. Hansen, Maryanne M. Mowen
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 14, Problem 31P
Panguitch Company manufactures a component for tablet computers. Weight and durability of the component are the two most important quality characteristics for the tablet manufacturers. With respect to the weight dimension, the component has a target value of 100 grams. Specification limits are 100 grams, plus or minus five grams. Products produced at the lower specification limit of 95 grams lose $20. A sample of five units produced the following weight measures:
During the first quarter, 100,000 units were produced.
Required:
- 1. Calculate the loss for each unit. Calculate the average loss for the sample of five.
- 2. Using the average loss, calculate the hidden quality costs for the first quarter.
- 3. Durability is another important quality characteristic. The target value is 20,000 hours of operation before failure. The lower specification limit set by engineering and marketing is 19,000 hours. They agreed that there should be no upper specification limit. They also noted that there is a $750 loss at the lower specification limit. Explain why there would be no upper specification limit. Use the lower limit and the left half of the Taguchi quadratic loss function to estimate the loss for components with the following lives: 6,500 hours, 11,000 hours, and 15,500 hours. What does this reveal about the importance of durability?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
The printing department is considering buying 10,000 additional rolls of gray cloth from an outside supplier at $2,000 per roll, which is much higher than Dover’s cost of weaving the roll. The printing department expects that 10% of the rolls obtained from the outside supplier will result in defective products. Should the printing department buy the gray cloth from the outside supplier? Show your calculations.
Silver Faces, Inc., has done a cost analysis for its production of reflectors. The following activities and cost drivers have been developed:
Activity Cost Formula
Maintenance $15,000 + $4 per machine hour
Machining $35,000 + $1 per machine hour
Inspection $60,000 + $750 per batch
Setups $1,000 per batch
Purchasing $50,000 + $10 per purchase order
What is the budgeted maintenance cost if there was production of 50,000 reflectors that will require 8,000 machine hours, 25 batches, and 15,000 purchase orders?
Sirhuds Inc., a maker of smartwatches, reports the information below on its product. The company uses absorption costing and has a target markup of 40% of absorption cost per unit.
Direct materials cost
$
128
per unit
Direct labor cost
$
58
per unit
Variable overhead cost
$
36
per unit
Fixed overhead cost
$
231,000
per year
Variable selling and administrative expenses
$
17
per unit
Fixed selling and administrative expenses
$
190,000
per year
Expected production (and sales)
22,000
units per year
Compute the target selling price per unit under absorption costing. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
Chapter 14 Solutions
Cornerstones of Cost Management (Cornerstones Series)
Ch. 14 - What is the difference between quality of design...Ch. 14 - Why are quality costs the costs of doing things...Ch. 14 - Prob. 3DQCh. 14 - Describe the Taguchi quality loss function, and...Ch. 14 - Identify and discuss the four kinds of quality...Ch. 14 - Explain why external failure costs can be more...Ch. 14 - Prob. 7DQCh. 14 - Prob. 8DQCh. 14 - Describe the three types of quality performance...Ch. 14 - Prob. 10DQ
Ch. 14 - If a firms annual sales are 200 million, what...Ch. 14 - Explain why it is important for a manager to...Ch. 14 - Prob. 13DQCh. 14 - Explain why the Accounting Department should be...Ch. 14 - Prob. 15DQCh. 14 - What is ecoefficiency?Ch. 14 - Prob. 17DQCh. 14 - Prob. 18DQCh. 14 - Prob. 19DQCh. 14 - What are the four categories of environmental...Ch. 14 - Prob. 21DQCh. 14 - What does full environmental costing mean? Full...Ch. 14 - What information is communicated by the unit...Ch. 14 - Evans Company had total sales of 3,000,000 for...Ch. 14 - Prob. 2CECh. 14 - Ross Company implemented a quality improvement...Ch. 14 - Nabors Company had actual quality costs for the...Ch. 14 - Verde Company reported operating costs of...Ch. 14 - Pinter Company had the following environmental...Ch. 14 - Rachel Boyce, president of a company that...Ch. 14 - Quality attributes such as performance and...Ch. 14 - Stahman, Inc., estimates its hidden external...Ch. 14 - Prob. 10ECh. 14 - Abernathy, Inc., produces two different generators...Ch. 14 - Kang Company reported sales of 3,240,000 in 20x5....Ch. 14 - Gagnon Company reported the following sales and...Ch. 14 - Muskogee Company had sales of 60,000,000 in 20x1....Ch. 14 - Javier Company has sales of 8 million and quality...Ch. 14 - In 20x4, Tru-Delite Frozen Desserts, Inc.,...Ch. 14 - Prob. 17ECh. 14 - Prob. 18ECh. 14 - Achieving sustainable development will likely...Ch. 14 - Classify the following environmental activities as...Ch. 14 - At the end of 20x5, Bing Pharmaceuticals began to...Ch. 14 - Prob. 22ECh. 14 - Coyle Pharmaceuticals produces two organic...Ch. 14 - Prob. 24ECh. 14 - Which of the following quality costs is an...Ch. 14 - Which of the following would be a hidden quality...Ch. 14 - Using the Taguchi quality loss function, an...Ch. 14 - Environmental costs are those costs incurred...Ch. 14 - Two products, Product A and Product B, are...Ch. 14 - Kathy Shorts, president of Oliver Company, was...Ch. 14 - Panguitch Company manufactures a component for...Ch. 14 - Gaston Company manufactures furniture. One of its...Ch. 14 - Classify the following quality costs as...Ch. 14 - Wayne Johnson, president of Banshee Company,...Ch. 14 - Recently, Ulrich Company received a report from an...Ch. 14 - In 20x5, Major Company initiated a full-scale,...Ch. 14 - Paper Products Division produces paper diapers,...Ch. 14 - In 2011, Milton Thayne, president of Carbondale...Ch. 14 - Iona Company, a large printing company, is in its...Ch. 14 - Prob. 40PCh. 14 - The following items are listed in an environmental...Ch. 14 - Refer to Problem 14.41. In the environmental...Ch. 14 - The following environmental cost reports for 20x3,...Ch. 14 - Refer to Problem 14.43. In 20x3, Jack Carter,...
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
- Buenolorl Company produces a well-known cologne. The standard manufacturing cost of the cologne is described by the following standard cost sheet: Management has decided to investigate only those variances that exceed the lesser of 10% of the standard cost for each category or 20,000. During the past quarter, 250,000 four-ounce bottles of cologne were produced. Descriptions of actual activity for the quarter follow: a. A total of 1.35 million ounces of liquids was purchased, mixed, and processed. Evaporation was higher than expected. (No inventories of liquids are maintained.) The price paid per ounce averaged 0.42. b. Exactly 250,000 bottles were used. The price paid for each bottle was 0.048. c. Direct labor hours totaled 48,250, with a total cost of 733,000. Normal production volume for Buenolorl is 250,000 bottles per quarter. The standard overhead rates are computed by using normal volume. All overhead costs are incurred uniformly throughout the year. (Note: Round unit costs to the nearest cent and total amounts to the nearest dollar.) Required: 1. Calculate the upper and lower control limits for materials and labor. 2. Compute the total materials variance, and break it into price and usage variances. Would these variances be investigated? 3. Compute the total labor variance, and break it into rate and efficiency variances. Would these variances be investigated?arrow_forwardCarsen Company produces handcrafted pottery that uses two inputs: materials and labor. During the past quarter, 24,000 units were produced, requiring 96,000 pounds of materials and 48,000 hours of labor. An engineering efficiency study commissioned by the local university revealed that Carsen can produce the same 24,000 units of output using either of the following two combinations of inputs: The cost of materials is 8 per pound; the cost of labor is 12 per hour. Required: 1. Compute the output-input ratio for each input of Combination F1. Does this represent a productivity improvement over the current use of inputs? What is the total dollar value of the improvement? Classify this as a technical or an allocative efficiency improvement. 2. Compute the output-input ratio for each input of Combination F2. Does this represent a productivity improvement over the current use of inputs? Now, compare these ratios to those of Combination F1. What has happened? 3. Compute the cost of producing 24,000 units of output using Combination F1. Compare this cost to the cost using Combination F2. Does moving from Combination F1 to Combination F2 represent a productivity improvement? Explain.arrow_forwardEd Co. manufactures two types of O rings, large and small. Both rings use the same material but require different amounts. Standard materials for both are shown. At the beginning of the month, Edve Co. bought 25,000 feet of rubber for $6.875. The company made 3,000 large O rings and 4,000 small O rings. The company used 14,500 feet of rubber. A. What are the direct materials price variance, the direct materials quantity variance, and the total direct materials cost variance? B. If they bought 10,000 connectors costing $310, what would the direct materials price variance be for the connectors? C. If there was an unfavorable direct materials price variance of $125, how much did they pay per toot for the rubber?arrow_forward
- Chypre, Inc., produces a cologne mist using a solvent mix (water and pure alcohol) and aromatic compounds (the scent base) that it sells to other companies for bottling and sale to consumers. Chypre developed the following standard cost sheet: On May 2, Chypre produced a batch of 1,000 gallons with the following actual results: Required: 1. Calculate the yield ratio. 2. Calculate the standard cost per unit of the yield. (Round to the nearest cent.) 3. Calculate the direct materials yield variance. (Round to the nearest cent.) 4. Calculate the direct materials mix variance. (Round to the nearest cent.)arrow_forwardComputador has a manufacturing plant in Des Moines that has the theoretical capability to produce 243,000 laptops per quarter but currently produces 91,125 units. The conversion cost per quarter is 7,290,000. There are 60,750 production hours available within the plant per quarter. In addition to the processing minutes per unit used, the production of the laptops uses 10 minutes of move time, 20 minutes of wait time, and 5 minutes of rework time. (All work is done by cell workers.) Required: 1. Compute the theoretical and actual velocities (per hour) and the theoretical and actual cycle times (minutes per unit produced). 2. Compute the ideal and actual amounts of conversion cost assigned per laptop. 3. Calculate MCE. How does MCE relate to the conversion cost per laptop?arrow_forwardABC Pharmaceutical Company is planning to produce exactly 40 kilograms of a mixture of new low-price generic multivitamin in which the basic ingredients, Ascorbic Acid and Thiamine, cost P 8.00 per kilo and P 15.00 per kilo, respectively. The present inventory of the company’s raw materials shows that they only have 12 kilos of Ascorbic Acid. The inventory level of the slow-moving Thiamine is more than sufficient so they want to dispose at least 10 kilos of it. Is the problem a maximization or a minimization one?arrow_forward
- In XYZ company an annual demand for a machine part is 100,000 units. The part is produced on a high-speed lathe, using 1112 screw-machine steel costing ₱15 per pound. A study was conducted to determine whether it might be cheaper to use brass screw stock, costing ₱72 per pound. Because the weight of steel required per piece was 0.0353 pounds and that of brass was 0.0384 pounds, the material cost per piece was ₱0.50 for steel and ₱75 for brass. However, when the manufacturing engineering department was consulted, it was found that, although 57.1 defect free parts per hour were being produced by using steel, the output would be 102.9 defect-free parts per hour if brass were used. Which material should be used for this part? Machine attendant was paid ₱760/hour, and the variable overhead costs for the turret were estimated to be ₱510/hour.arrow_forwardChemco Enterprises is the manufacturer of Ultra-Dry, a hydrophobic coating that will waterproof anything. Over a 5-year period, the costs associated with the pilot test product line were as follows: first cost of $41,000 and annual costs of $18,000. Annual revenue was $38,000 and used equipment was salvaged for $4,000. What rate of return did the company make on this product? The rate of return the company made on the product isarrow_forwardMartin, Inc. is a manufacturer of lead crystal glasses. The standard direct materials quantity is1.0 pound per glass at a cost of $0.50 per pound. The actual result for one month's production of 6,500 glasses was 1.2 pounds per glass, at a cost of $0.30 per pound. Calculate the direct materials cost variance and the direct materials efficiency variance. Select the formula, then enter the amounts and compute the cost variance for direct materials and identify whether the variance is favorable (F) or unfavorable (U). ( Actual Cost - Standard Cost ) × Actual Quantity = Direct Materials Cost Variancearrow_forward
- The F Inc.’s materials manager is considering the installation of a just-in-time (JIT) inventory system for L-20, one of the chemicals used in the production process. Currently, the chemical is purchased for $30 each pound. The firm uses 4,800 pounds L-20 per year. The controller estimates that it costs $150 to place and receive a typical order of L-20. The annual cost of storing L-20 is $1 per pound. F Inc.’s manufacturing engineering team identifies the following effects of adopting a JIT inventory system: 1) F Inc. will order 100 pounds L-20 each time. 2) The cost of placing an order for L-20 will be reduced to $20. 3) Suppliers would add $4 to the price per pound for frequent deliveries. 4) Currently there is a defect-assessment cost of $120,000 per year. This cost is expected a reduction of 20% under the JIT system. F Inc. requires a 10% annual rate of return on investment Required: From a financial perspective, determine whether it is in the best interest of F to…arrow_forwardFiberworks Company is a manufacturer of fiberglass toy boats. The company has recently implemented a standard cost system and has designed the system to isolate variances as soon as possible. During the month of May, the following results were reported for the production of 25,500 toy boats: Direct materials (fiberglass) purchased 49,900 pounds Direct materials issued into production 39,900 pounds Standard pounds allowed per boat 1.5 pounds Standard price per pound $6.52 Cost of fiberglass purchased $306,386 Required: Calculate the direct materials usage variance for May. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)arrow_forwardManchester Technology, Inc., manufactures several different types of printed circuit boards; however, two of the boards account for the majority of the company’s sales. The first of these boards, a televi-sion circuit board, has been a standard in the industry for several years. The market for this type of board is competitive and price-sensitive. Manchester plans to sell 65,000 of the TV boards in 20x1 at a price of $150 per unit. The second high-volume product, a personal computer circuit board, is a recent addition to Manchester’s product line. Because the PC board incorporates the latest technol-ogy, it can be sold at a premium price. The 20x1 plans include the sale of 40,000 PC boards at $300 per unit.Manchester’s management group is meeting to discuss how to spend the sales and promotion dol-lars for 20x1. The sales manager believes that the market share for the TV board could be expanded by concentrating Manchester’s promotional efforts in this area. In response to…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
Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Managerial Accounting: The Cornerstone of Busines...
Accounting
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
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