EXAM 3 G13 Review Problems (1)

8/10/2019 EXAM 3 G13 Review Problems (1)

http://slidepdf.com/reader/full/exam-3-g13-review-problems-1 1/17

ACC256 - Review for Final

Comprehensive Multiple Choice1. If a company follows a practice of isolating variances at the earliest point in time, what would be the

appropriate time to isolate and recognize a direct material price variance? A. When material is issued.B. When material is purchased.. When material is used in production.!. When production is completed.

". Which of the following is the most probable reason a company would e#perience an unfavorable laborrate variance and a favorable labor efficiency variance? A. $he mi# of wor%ers assigned to the particular &ob was heavily weighted towards the use of higher paid, e#perienced

individuals.B. $he mi# of wor%ers assigned to the particular &ob was heavily weighted towards the use of new relatively low paid, uns%illed

wor%ers.. Because of the production schedule, wor%ers from other production areas were assigned to assist this particular process.!. !efective materials caused more labor to be used in order to produce a standard unit.

'. $he (eedy ompany uses a standard costing system. $he following data are available for )ovember* Actual direct labor hours wor%ed +,-- hourstandard direct labor rate /0 per hour abor rate variance /1,12- favorable

$he actual direct labor rate for )ovember is*

A. /0."-B. /.-. /.0-!. /0.--

3se the following information for 4uestions 5 6 +. Barric% ompany has established a fle#ible budget for manufacturing overheadbased on direct labor7hours. $otal budgeted costs at "--,--- direct labor7hours are as follows*

8ariable costs 9total:*;ac%ing supplies....................... /1"-,---Indirect labor.............................. /1-,---

<i#ed costs 9total:*3tilities....................................... /1--,---(ent........................................... / 5-,---Insurance................................... / "-,---

5. At an activity level of 1=-,--- direct labor7hours, the fle#ible budget for factory overhead would show the budgeted amount forutilities as* A. / +,---.B. /15-,---.. /12-,---.!. /1--,---.

+. If Barric% ompany plans to operate at 10-,--- direct labor7hours during the ne#t period, the fle#iblebudget would show indirect labor costs of* A. /1=1,---.B. /1-,---.. /115,---.!. /"=-,---.

2. onsider the following three statements*I. A profit center has control over both cost and revenues.II. An investment center has control over invested funds, but not over costs and revenues.III. A cost center has no control over sales.Which statement9s: are correct? A. >nly I.B. >nly II.. >nly I and II.!. >nly I and III.

1



=. A good e#ample of a common cost which normally could not be allocated to products 9a common fi#ed cost: on a segmentedincome statement e#cept on an arbitrary basis would be*

A. direct materials.B. the product managers salary.. product advertising outlays.!. salary of a corporation president.

3se the following information for ompany A for 4uestions 6 0.ales /0--,---)et operating income '2,---toc%holders e4uity 1--,---

Average operating assets 1-,---@inimum re4uired rate of return 1+

. ompany As residual income is* A. /"5,---B. /5+,---. /"1,---!. /0,---

0. ompany As return on investment 9(>I: is* A. '2B. "-. 1+!. 5

1-. Which of the following is most relevant to a manufacturing e4uipment replacement decision? A. >riginal cost of the old e4uipment.B. A lump7sum write7off amount from the disposal of the old e4uipment.. !isposal value of the old e4uipment.!. ain or loss on the disposal of the old e4uipment.

11. @anico ompany produces three products 77 Can, Don, 6 Een 77 with the following characteristics*

Can Don Een

elling price per unit /"- 100% /12 100% /1+ 100%8ariable cost per unit 1" 60% 1" 75% 2 40%ontribution margin per unit / 40% /5 25% /0 60%@achine hours per unit + ' 2

$he company has only ",--- machine7hours available each month. In what se4uence should orders be filled if the company wantsto ma#imize its total contribution margin? A. orders for Een first, Can second, and Don third.B. orders for Can first, Een second, and Don third.. orders for Don first, Can second, and Een third.!. orders for Een first and no orders for Can or Don.

12. The Cook Company has two divisions--Eastern and Western. The divisions have thefollowing revenues and expenses:

Fastern Western

ales /++-,--- /+--,---8ariable costs "=+,--- "--,---!irect 9$raceable: fi#ed costs 1-,--- 1+-,--- Allocated corporate costs 1=-,--- 1'+,---

)et Income 9oss: /9=+,---: / 1+,---

$he management of oo% is considering the elimination of the Fastern !ivision. If the Fastern !ivision were eliminated, the directfi#ed costs associated with this division could be avoided. Gowever, corporate costs would still be /'-+,--- in total. iven thesedata, the elimination of the Fastern !ivision would result in an overall company net income 9loss: of* A. /1+,---.B. 9/1++,---:.. 9/=+,---:.!. 9/2-,---:.

"



1'. A sun% cost is* A. a cost that may be saved by not adopting an alternative.B. a cost that may be shifted to the future with little or no effect on current operations.. a cost that cannot be avoided because it has already been incurred.!. a cost which does not entail any dollar outlay but which is relevant to the decision7ma%ing

process.

15. When a decision is made among a number of alternatives, the lost revenue or contribution marginfrom choosing one alternate over another is the*

A. Accrued benefit costB. onversion cost. >pportunity cost!. 3nrealized cost

1+. ;roperty ta#es on a manufacturing plant are an element of*Conversion

cost Period cost

A. Des )oB. Des Des. )o Des!. )o )o

12. In decision ma%ing, managers use* A. financial accounting information e#clusively since it is more ob&ective and precise due to well7

established principles and conventions.B. information regarding the organization as a whole rather than segments of the organization in

order to capture a broader perspective of the companyHs operations.. information that is as precise as humanly possible.!. whatever information is relevant to the decision even though the information may not conform to

generally accepted accounting principles.

1=. $he Wor% in ;rocess inventory account of a manufacturing firm shows a balance of /',--- at the end of an accounting period. $he &ob cost sheets of two uncompleted &obs show charges of /+-- and

/'-- for materials, and charges of /5-- and /2-- for direct labor. <rom this information, it appearsthat the company is using a predetermined overhead rate, as a percentage of direct labor costs, of* A. '.B. 1"-.. 5-.

!. '--.

1. ast month a manufacturing company had the following operating results*

Beginning finished goods inventory.............................................................................

/==,---

Fnding finished goods inventory.............................................................................

/+5,---

ales.............................................................................

/550,---

ross margin.............................................................................

/=+,---

What was the cost of goods manufactured for the month? A. /5"2,---B. /'=5,---

. /'+1,---!. /'0=,---

10. ohansen ompany uses a predetermined overhead rate based on direct labor hours to applymanufacturing overhead to &obs. $he company has provided the following estimated costs for thene#t year*

!irect materials..................................................... / 2,---!irect labor........................................................... "-,---(ent on factory building........................................ 1+,---ales salaries....................................................... "+,---!epreciation on factory e4uipment...... .. ... ... .. .. .. .. . ,---Indirect labor......................................................... 1",---

'



;roduction supervisors salary...... .. .. .. .. .. .. .. .. .. .. .. . 1+,---ohansen estimates that "-,--- direct labor hours will be wor%ed during the year. $he predetermined overhead rate per hour wibe*

A. /".+-.B. /'.+-.. /'.=+.!. /+.-+.

"-. Which of the following is the appropriate formula to calculate a predetermined overhead rate*a. actual overhead divided by budgeted 9planned: activityb. budgeted overhead divided by budgeted activityc. actual overhead divided by actual activity

d. budgeted overhead divided by budgeted activity

"1. When the activity level is e#pected to decline within the relevant range, what effects would be anticipated with respect to each of

the following?Fixed cost Variable

cost per unit per unit

A. Increase )o changeB. Increase Increase. )o change )o change!. )o change Increase

"". Activity7based costing, as compared to traditional costing* A. is a simpler, cheaper way to apply overhead costs B. uses more cost pools, but fewer predetermined overhead rates . results in product costs that more closely reflect the overhead resources consumed in the

products production !. is applied to period rather than product costs

"'. )omb orporation manufactures a variety of products and uses an activity7based costing system formanufacturing overhead costs with three activity cost pools. Information on these cost pools for ne#tyear are as follows*

Activity Cost Pool Activity easure!sti"ated Activity

!sti"ated #ver$ead Cost

@achine etups...................................... )umber of setups 5-- /1+-,---

Juality ontrol...................................... )umber of inspections 1,+-- /1-,---

>ther >verhead...................................... @achine hours '-,--- /5-,---

Information 9on a per unit basis: related to @odel K'2 are as follows*odel &6

!irect material cost......................................................... /+5-

!irect labor cost......................................................... /2--

)umber of setups............................................... .......... '

)umber of inspections............................................... .......... '

)umber of machine hours............................................... ..........

3nder the activity7based costing system, what would be the cost of one unit of @odel K'2? A. /1,15-B. /1,1+5. /1,2+1!. /",=+'

3se the following to answer 4uestion "5. tewart ompany is attempting to classify costs according to their cost behavior. !ataconcerning activity and costs are listed below*

'anuary February ales in units................ 1,"-- 1,5--

upplies........................ /=+- /=0-

5



Insurance...................... -- -- Advertising............. ..... .. 0-- 1,-+-

"5. $he costs that tewart ompany would classify as variable would be* A. supplies.B. insurance.. advertising.!. supplies and advertising

"+. $he t7accounts shown below represent which transaction* WI; <

1-- 1--

A. (e4uisition of (aw @aterials into productionB. ompletion of wor% in process

. ale of finished goods!. Application of overhead

"2.$he margin of safety is* A. the e#cess of budgeted or actual sales over budgeted or actual variable e#penses.B. the e#cess of budgeted or actual sales over budgeted or actual fi#ed e#penses.. the e#cess of budgeted or actual sales over the brea%7even volume of sales.!. the e#cess of budgeted net operating income over actual net operating income.

"=. !uring @arch, Adams ompany had sales of /+,---,---, variable e#penses of /',---,---, and fi#ede#penses of /1,+--,---. Assume that cost behavior and unit selling price remain unchanged during April. In order for the company to realize net operating income of /'--,--- for April, sales would haveto be* A. /',=+-,---.B. /5,-+-,---.. /5,+--,---.!. /5,--,---.

". (ider ompany sells a single product. $he product has a selling price of /5- per unit and variablee#penses of /1+ per unit. $he companyHs fi#ed e#penses total /'-,--- per year. $he companyHsbrea%7even point in terms of total dollar sales is* A. /1--,---.B. /-,---.. /2-,---.!. /5,---.

"0. ast month, when 1-,--- units of a product were manufactured, the cost per unit was /2-. At this level of activity, variable costs are +- of the total unit costs. If 1-,+-- units are manufactured ne#t

month and cost behavior patterns remain unchanged, the*

A. total variable cost will remain unchanged.B. total cost per unit will decrease.. fi#ed costs will increase in total.!. variable cost per unit will increase.

'-. Assume that a firm can sell 1-,--- units of a product and that the variable e#penses are /" per unit.<i#ed e#penses are /"-,---, and the firm wishes to earn a net income of /1-,---. What price must the firm be able to charge? A. /+ per unit.B. /5 per unit.. /' per unit.!. /" per unit.

+



'1. <or sales beyond the brea%7even point* A. variable e#penses will remain constant in total.B. the contribution margin ratio begins to decrease.. the total contribution margin changes from negative to positive.!. net income will increase by the unit contribution margin for each additional item sold.

'". olden (estaurant would li%e to estimate the variable and fi#ed components of its utilities cost and has compiled the following datafor the last five months of operations.

@onth @eals erved 3tilities osts!ecember ++- /5-,1--anuary '-- '2,---<ebruary "+- '5,=+-@arch 5-- ',++- April 2-- 51,5--

3sing the high7low method of analysis, the estimated variable utilities cost per meal served is* A. / ""

B. / 10. / ='!. / 20

''. A method of budgeting where, as 4uarter 1 of year 1 is completed, the firm immediately budgets for 4uarter 1 of year ", is called* A. operational budgeting.B. continuous or rolling budgeting.. responsibility accounting.!. zero7based budgeting.

'5. $he (oss ompany has budgeted production for ne#t year as follows*<irst Juarter econd Juarter $hird Juarter <ourth Juarter

;roduction in units 1-,--- 1",--- 12,--- 15,---<our 95: pounds of raw materials are re4uired for each unit produced. (aw materials on hand at the start of the year totals 5,--- lbs.$he raw materials inventory at the end of each 4uarter should e4ual 1- of the ne#t 4uarterHs production needs. Budgetedpurchases of raw materials in the second 4uarter would be*

A. +5,5-- lbs.B. +2,-- lbs.

. 50,2-- lbs!. 5,--- lbs.

3se the following to answer 4uestions '+ 6 '2*$he Lha%i ompany has the following budgeted sales data*'anuary February arc$ April

redit sales............... /5--,--- /'+-,--- /'--,--- /'"-,---ash sales................ /=-,--- /0-,--- /-,--- /=-,---

$he regular pattern of collection of credit sales is 5- in the month of sale and 2- in the month following sale. $here are no baddebts.

'+. $he budgeted cash receipts for April would be* A. /'-,---.B. /"+-,---.. /'=,---.!. /'5,---.

'2. $he budgeted accounts receivable balance on <ebruary " would be* A. /1",---.B. /10",---.. /"1-,---.!. /"'5,---.

2



'=.3sing the following data for April, calculate the cost of goods manufactured*!irect materials...............................................................!irect materials...............................................................

/"',---

!irect labor...................................................................... /"1,---@anufacturing overhead................................................. /'=,---Beginning wor% in process inventory.............................. /1',---Fnding wor% in process inventory................................... /1,---

$he cost of goods manufactured was* A. /1,---.B. /=2,---.

. /05,---.!. /2,---.

'. <reestone ompany is considering renting @achine D to replace @achine C. It is e#pected that D willwaste less direct materials than does C. If D is rented, C will be sold on the open mar%et. <or this decision, which of the followingfactors is 9are: relevant?

. Cost of dire!t materials used

. "esale value of #a!hine $

%. &nly

'. &nly

C. 'oth and

(. )either nor

'0. Which of the following types of costs would be directly attributable to a segment? A. 8ariable costs of the segment

B. Indirect costs of the segment. ommon <i#ed costs!. un% costs

5-. osts that are significant in the decision7ma%ing process but are )>$ recorded in the accounting records are*

A. >pportunity costsB. !ifferential costs. un% costs

(. &verhead !osts

Review Problems:

P1 Material ariances

Garmon Gousehold ;roducts, Inc. manufactures a number of consumer items for general household use. >ne of

these products, a chopping board, re4uires an e#pensive hardwood. !uring a recent month, the company

manufactured 5,--- chopping boards using 11,--- board feet of hardwood. $he hardwood cost the company

/1,=--. $he companys standards for one chopping board are ".+ board feet of hardwood, at a cost of /1.- per

board foot.

Re!uire":

1. What cost for wood should have been incurred to ma%e 5,--- chopping bloc%s?

". ompute the materials price variance, the materials 4uantity variance and the total variance.

=



P2 #irect $abor ariances

Air@eals, Inc., prepares in7flight meals for a number of ma&or airlines. >ne of the companys products is stuffed

cannelloni with roasted pepper sauce, fresh baby corn, and spring salad. !uring the most recent wee%, the

company prepared 2,--- of these meals using 1,1+- direct labor hours. $he company paid these direct labor

wor%ers a total of /11,+-- for this wor%, or /1- per hour.

According to the standard cost card for this meal, it should re4uire -."- direct labor hours at a cost of /0.+- per

hour.

Re!uire":1. What direct labor cost should have been incurred to prepare 2,--- meals?

". ompute the labor rate variance, labor efficiency variance, and a total variance.

P% Measures of &nternal 'usiness Process Performance

ipe#, td., of Birmingham, Fngland, is interested in cutting the amount of time between when a customer places

an order and when the order is completed. <or the first 4uarter of the year, the following data were reported*

Inspection time -.+ days;rocess time ". daysWait time 12.- daysJueue time 5.- days@ove time -.= days

Re!uire":

1. ompute the throughput time.

". ompute the manufacturing cycle efficiency 9@F: for the 4uarter.

'. What percentage of the throughput time was spent in non7value7added activities?



5. ompute the delivery cycle time.

+. If by using ean ;roduction all 4ueue time can be eliminated in production, what will be the new @F?

0



P4 Standard Cost Variance Analysis:

Alpha ompany produces toys for national distribution. $he standard cost card for one of its products shows thefollowing*

(tan"ar" allowe"

*tandard

!ost per unit

(ire!t #aterials 12 o+s. , ./0 per

o+.

0.2

(ire!t a3or 2 hrs. , /./ per hr. 11.

(uring the month of (e!em3er4 %lpha produ!ed 24 units of the produ!t. %!tual pur!hasing

and produ!tion 5gures for the month were:

(ire!t #aterials 6ur!hased: 274 o+s.4 at a total !ost of 184/0

(ire!t #aterials 9sed in 6rodu!tion: 24 o+s.

(ire!t a3or n!urred: 4; hrs. at a total !ost of 22482/

"E<9"E(: Compute the following standard !ost varian!es and !learly indi!ate whether the

varian!e is =avora3le >=? or 9nfavora3le >9?. @ou must show your !al!ulations to re!eive !redit.

#aterials 6ri!e Aarian!e @aterials Juantity 93sage: 8ariance

a3or "ate Aarian!e abor Ffficiency 8ariance

1-



P5 toneWor%s is a company that sells tile. It has three profit centers* ceramic, stone and granite. <inancialinformation for the three centers for the year &ust ended follows*

eramic tone ranite(evenue........................................................................... /1--,--- /1"+,--- /1+-,---<i#ed costs*

osts uni4ue to the profit center................................ '-,--- 5+,--- 25,---osts allocated by the retail store.............................. 2,--- =,--- ,---

8ariable costs as a percentage of sales........................... 5- 2- 2-

1. alculate each profit centers contribution and segment margins and overall company profits. 9I.e. reate acontribution format, segmented income statementM:

P6 ob osting

6repare Bournal entries to re!ord the following transa!tions:

1. "aw materials !osting 24 were pur!hased on a!!ount

2. 04 of raw materials were reuisitioned for use in produ!tion: /4 in dire!t materials and

14 in indire!t materials

. (ire!t la3or !osts in!urred 3ut not paid were 4 for 14 dire!t la3or hours

8. *ales travel !osts were 84 paid in !ash

/. 9tility !osts for the fa!tory were 744 paid in !ash

0. &verhead was applied to Bo3s at the rate of 0./ per dire!t la3or hour

. Do3 D128 was !ompleted at a !ost of 14/

7. *ales of 14 were made on a!!ount. These goods had a !ost of 848 a!!ording to their

Bo3 !ost sheets

(e3it Credit

11



P) #ecentrali*ation

1. $he @F ompany has two divisions* the omputer division and the ;rinter division. ost and revenue information for

the two divisions for the year is as follows*

omputer ;rinter !ivision !ivision

(evenue........................................................................... /1,1--,--- /=+-,---<i#ed costs*osts uni4ue to each division........................... ... .... ... ... ... 5+-,--- '=+,---osts allocated by corporate head4uarters...................... +-,--- =-,---8ariable cost per unit........................................................ = 23nit sales of each divisions product................................. =+,--- +",---

;repare a segment margin income statement showing each divisions contribution and segment margins and theoverall company profit.

1"



P+ Relevant Costs for #ecision Ma,ina. $he @i#edup ompany ma%es two products, arpet ;olish and <loor !eodorizer. >perating information from the previous year is as follows*

arpet ;olish <loor !eodorizer ales price per unit / =.-- / 1-.--8ariable cost per unit 5.-- .--3nits produced 6 sold +,--- 5,---@achine hours used +,--- ",---<i#ed costs of /"-,--- per year are presently allocated evenly between both products. If the product mi# were to change, total fi#ed costs would remainthe same. Assuming everything produced for either product can be sold, how many units of each product should be produced and sold if machine hoursare limited to 1-,---?

b. ound Inc. reported the following results from the sale of "5,--- radios*ales /+",---8ariable manufacturing costs ",---<i#ed manufacturing costs 1"-,---8ariable selling costs +",--<i#ed administration costs '+,"--(hythm o. has offered to purchase ',--- radios at /12 each. ound estimates appro#imately +,--- units could be made with the capacity currentlyavailable in the factory. $he owner of ound is in favor of accepting the order. he feels it would be profitable because no variable selling costs will beincurred. $he plant manager is opposed because his Nfull costO of production is /1=. What would the change in profit be if the special order is accepted?

P. Relevant Costs for #ecision Ma,in1. Gaynes ompany has been approached by a new customer with an offer to purchase 1,+-- units of Gayness product at a price of / each.

$he new customer is geographically separated from Gayness customers, and there would be no effect on e#isting sales. Gaynes normally produces

1-,--- units but only plans to produce and sell ,--- in the coming year. $he normal sales price is /11.+- per unit. 3nit cost information is as follows*

!irect @aterials /'.--!irect abor 1.2-8ariable >verhead 1.'-<i#ed >verhead 5.--

3nit ost /0.0-

If Gaynes accepts the order, no fi#ed manufacturing activities will be affected because there is sufficient e#cess capacity. Gowever, the distribution

center at the warehouse is operating at full capacity and would need to add capacity costing /",---.

(e4uired* !etermine the impact on the companys profits if the special order is accepted.

". arro ompany is currently manufacturing part L0, producing 5-,--- units annually. $he part is used in the production of several products

made by arro. $he cost per unit for L0 is as follows*

!irect @aterials /15.--!irect abor 2.--8ariable >verhead '.--

<i#ed >verhead +.--3nit ost /".--

>f the total fi#ed overhead assigned to L0, /12-,--- is direct fi#ed overhead 9the lease of production machinery and salary of a production line

supervisor P neither of which will be needed if the line is dropped:. $he remaining fi#ed overhead is common fi#ed overhead. An outside supplier has

offered to sell the part to arro for /"2. $here is no alternative use for the facilities currently used to produce the part.

(e4uired* hould arro ma%e or buy part L0? how computations to support your answer.

1'



ACC256 / Practice 0am for Final / ($34&(

A(0R( 4 M3$4&P$0 C7&C0 830(4&(:

1. B 11. B "1. A '1. !". A 1". B "". '". B'. B 1'. "'. ! ''. B

5. ! 15. "5. '5. +. A 1+. A "+. B '+. 2. ! 12. ! "2. '2. =. ! 1=. B "=. '=. B. ! 1. ". ! '. 0. B 10. A "0. B '0. A1-. "-. B '-. A 5-. A

A(0R( 4 PR'$0M(:

P1

1. ee below77/1,---". Actual Juantity of Inputs, at

Actual ;rice

Actual Juantity of Inputs, at

tandard ;rice

tandard Juantity Allowed

for >utput, at tandard ;rice

9AJ Q A;: 9AJ Q ;: 9J Q ;:

/1,=-- 11,--- board feet Q /1.- per

board foot

1-,--- board feet Q /1.- per

board foot

R /10,-- R /1,---

↑ ↑ ↑

;rice 8ariance,/1,1-- <

Juantity 8ariance,/1,-- 3

Total Aarian!e4 9

Alternatively*

@aterials ;rice 8ariance R AJ 9A; P ;:

11,--- board feet 9/1.=- per board footS P /1.- per board foot: R

/1,1-- <

S/1,=-- T 11,--- board feet R /1.=- per board foot.

@aterials Juantity 8ariance R ; 9AJ P J:

/1.- per board foot 911,--- board feet P 1-,--- board feet: R

/1,-- 3

1. ee below. /11,5--

". Actual Gours of

Input, at the Actual (ate

Actual Gours of Input, at the

tandard (ate

tandard Gours

Allowed for >utput, at the

15



tandard (ate

9AGUQU A(: 9AGUQU(: 9GUQU(:

1,1+- hours Q

/1-.-- per hour

1,1+- hours Q

/0.+- per hour

1,"-- hours Q

/0.+- per hour

R /11,+-- R /1-,0"+ R /11,5--

↑ ↑ ↑

(ate 8ariance,

/+=+ 3

Ffficiency 8ariance,

/5=+ <

$otal 8ariance, /1-- 3

Alternatively, the variances can be computed using the formulas*

abor rate variance R AG9A( P (:

R 1,1+- hours 9/1-.-- per hour P /0.+- per hour:

R /+=+ 3

a3or e!ien!y varian!e F *">%G H *G?

F ;./ per hour >141/ hours H 142 hours?F 8/ =

P%

1. $hroughput time R ;rocess time V Inspection time V @ove time V Jueue time

R ". days V -.+ days V -.= days V 5.- days

R .- days

". >nly process time is value7added time therefore the manufacturing cycle efficiency 9@F: is*

Aalue-added time 2.7 days#CEF F F.:/ Throughput time 7. days

'. If the @F is '+, then the complement of this figure, or 2+ of the time, was spent in non7value7added activities.

5. !elivery cycle time R Wait time V $hroughput time

R 12.- days V .- days

R "5.- days

+. If all 4ueue time in production is eliminated, then the throughput time drops to only 5 days 9-.+ V ". V -.=:. $he @F

becomes*

Aalue-added time 2.7 days#CEF F F.1

Throughput time 8. days

$hus, the @F increases to =-. $his e#ercise shows 4uite dramatically how the lean production approach can

improve operations and reduce throughput time.

1+



P9 (4A#AR# C(4 AR&AC0 AA$(&(

@A$F(IA ;(IF 8A(IA)F* /1,1"- <@A$F(IA J3A)$I$D 8A(IA)F /1,2- 3AB>( (A$F 8A(IA)F / 0=+ 3AB>( F<<IIF)D 8A(IA)F / ++- <

P5 (ement Reportin ; #ecentrali*ation

1. alculate each profit centers contribution and segment margins and overall company profits.

$otal ompany eramic tone ranite(evenue /'=+,--- /1--,--- /1"+,--- /1+-,---7 8ariable osts 7 "-+,--- 7 5-,--- 7 =+,--- 7 0-,---ontribution @argin. 1=-,--- 2-,--- +-,--- 2-,---7 $raceable <i#ed osts 1'0,--- '-,--- 5+,--- 25,---egment @argin '1,--- '-,--- +,--- 95,---:7 ommon <i#ed osts "1,---)et Income 1-,---

P6 <ob costin(e3it Credit

1 "aw #aterials >"#? nventory 24

%!!ounts 6aya3le >%I6? 24

2 Work in 6ro!ess >W6? nventory /4

#anufa!turing &verhead >#&G? 14

"# nventory 0.

W6 nventory 4

Wages 6aya3le 4

8 *elling Expense 84 Cash 84

/ #&G 7.

Cash 74

0 W6 nventory 04/

#&G 04/

=inished Joods nventory 14/

W6 nventory 14/

7 %!!ounts "e!eiva3le 14

*ales "evenue 14

; Cost of Joods *old 848

=inished Joods nventory 848

12



P) (ement Reportin ; #ecentrali*ation

1. egment Income tatement$otal ompany omputer

!ivision;rinter !ivision

(evenue /1,+-,--- /1,1--,--- /=+-,---7 8ariable osts 7 '=,--- 7 +"+,--- 7 '1",---ontribution @argin 1,-1',--- +=+,--- 5',---7 $raceable <i#ed osts 7 "+,--- 7 5+-,--- 7'=+,---

!ivision 9egment: @argin 1,--- 1"+,--- 2',---7 ommon <i#ed osts 7 1"-,---)et Income / 2,---

P+ Relevant Costs for #ecision-Ma,in

a.

arpet ;olish <loor !eodorizer @ per unit /' /"Grs re4uired per unit 1 -.+

@ X machine hour /' /5

With no limit on demand, we would produce only the <loor !eodorizer

b. ;er unit $otal 9',--- units:Incremental (evenue /12 /5,---Incremental osts 1" '2,---Incremental Income /5 /1",---

P. Relevant Costs for #ecision Ma,in

1= ;er 3nit $otal 91,+-- units:Incremental (evenue* / .-- / 1",---Incremental osts*

!irect @aterials /'.-- 5,+--!irect abor 1.2- ",5--8ariable >verhead 1.'- 1,0+-

Addl Warehouse ost 1.'' ",---Incremental Income if accepted / .== / 1,1+-

2= ;er 3nit $otal 95-,--- units:Incremental ost to Buy* /"2.-- /1,-5-,---

Incremental ost to @a%e*!irect @aterials /15.-- /+2-,---!irect abor 2.-- "5-,---8ariable >verhead '.-- 1"-,---

<i#ed >verhead 5.-- 12-,---$otal /"=.-- /1,--,---

#ecision: 'u>in it is ?9@@@@ cheaper B?1 per unit

1=

Documents

EXAM 3 G13 Review Problems (1)