Cost per unit of output S6 per unit Price Quantity $8 per yard $16 per DMLH Fabric 0.75 yard per unit 0.25 DMLH per unit 4 ounces per unit Labor $4 per unit Dye* $0.50 per ounce $2 per unit *For colored T-shirts only Budgeted sales and selling price per unit are as follows: Budgeted Sales Selling Price per Unit White T-shirts 10,000 units $12 per T-shirt Colored T-shirts 50,000 units $15 per T-shirt USA has the opportunity to switch from using the dye it currently uses to using an environmentally friendly dye that costs $1.25 per ounce. The company would still need 4 ounces of dye per shirt. USA is re- luctant to change because of the increase in costs (and decrease in profit), but the Environmental Protection Agency has threatened to fine the company $130,000 if it continues to use the harmful but less expensive dye. 1. Given the preceding information, would USA be better off financially by switching to the environmen- tally friendly dye? (Assume all other costs would remain the same.) 2. Assume USA chooses to be environmentally responsible regardless of cost, and it switches to the new dye. The production manager suggests trying Kaizen costing. If USA can reduce fabric and labor costs each by 1% per month on all the shirts it manufactures, by how much will overall costs decrease at the end of 12 months? (Round to the nearest dollar for calculating cost reductions.) 3. Refer to requirement 2. How could the reduction in material and labor costs be accomplished? Are there any problems with this plan? Required
Cost per unit of output S6 per unit Price Quantity $8 per yard $16 per DMLH Fabric 0.75 yard per unit 0.25 DMLH per unit 4 ounces per unit Labor $4 per unit Dye* $0.50 per ounce $2 per unit *For colored T-shirts only Budgeted sales and selling price per unit are as follows: Budgeted Sales Selling Price per Unit White T-shirts 10,000 units $12 per T-shirt Colored T-shirts 50,000 units $15 per T-shirt USA has the opportunity to switch from using the dye it currently uses to using an environmentally friendly dye that costs $1.25 per ounce. The company would still need 4 ounces of dye per shirt. USA is re- luctant to change because of the increase in costs (and decrease in profit), but the Environmental Protection Agency has threatened to fine the company $130,000 if it continues to use the harmful but less expensive dye. 1. Given the preceding information, would USA be better off financially by switching to the environmen- tally friendly dye? (Assume all other costs would remain the same.) 2. Assume USA chooses to be environmentally responsible regardless of cost, and it switches to the new dye. The production manager suggests trying Kaizen costing. If USA can reduce fabric and labor costs each by 1% per month on all the shirts it manufactures, by how much will overall costs decrease at the end of 12 months? (Round to the nearest dollar for calculating cost reductions.) 3. Refer to requirement 2. How could the reduction in material and labor costs be accomplished? Are there any problems with this plan? Required
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Question
Budgeted costs, Kaizen improvements environmental costs. US Apparel (USA) manufactures plain white and solid-colored T-shirts. Budgeted inputs include the following:
Transcribed Image Text:Cost per unit of output
S6 per unit
Price
Quantity
$8 per yard
$16 per DMLH
Fabric
0.75 yard per unit
0.25 DMLH per unit
4 ounces per unit
Labor
$4 per unit
Dye*
$0.50 per ounce
$2 per unit
*For colored T-shirts only
Budgeted sales and selling price per unit are as follows:
Budgeted Sales
Selling Price per Unit
White T-shirts
10,000 units
$12 per T-shirt
Colored T-shirts
50,000 units
$15 per T-shirt
USA has the opportunity to switch from using the dye it currently uses to using an environmentally
friendly dye that costs $1.25 per ounce. The company would still need 4 ounces of dye per shirt. USA is re-
luctant to change because of the increase in costs (and decrease in profit), but the Environmental Protection
Agency has threatened to fine the company $130,000 if it continues to use the harmful but less expensive dye.
1. Given the preceding information, would USA be better off financially by switching to the environmen-
tally friendly dye? (Assume all other costs would remain the same.)
2. Assume USA chooses to be environmentally responsible regardless of cost, and it switches to the new
dye. The production manager suggests trying Kaizen costing. If USA can reduce fabric and labor costs
each by 1% per month on all the shirts it manufactures, by how much will overall costs decrease at the
end of 12 months? (Round to the nearest dollar for calculating cost reductions.)
3. Refer to requirement 2. How could the reduction in material and labor costs be accomplished? Are
there any problems with this plan?
Required
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