It was the end of the third quarter for Marigold Industries. There had been some discussion in prior quarters about best practices related to carrying ending inventory of its key DM, acetic acid, for making vinegar. Per established standards, 7.1 ounces of acetic acid at a budgeted price of $0.30 per ounce were needed for each gallon of vinegar (128 ounces). The new production manager wants to follow lean practices and buy only what is needed for production, while the former production manager preferred to keep some inventory on hand for emergencies. For the third quarter, 316,800 ounces of acetic acid were purchased on account and used to make 44,000 gallons of vinegar. The purchase price was $88,704. 4

It was the end of the third quarter for Marigold Industries. There had been some discussion in prior quarters about best practices related to carrying ending inventory of its key DM, acetic acid, for making vinegar. Per established standards, 7.1 ounces of acetic acid at a budgeted price of $0.30 per ounce were needed for each gallon of vinegar (128 ounces). The new production manager wants to follow lean practices and buy only what is needed for production, while the former production manager preferred to keep some inventory on hand for emergencies. For the third quarter, 316,800 ounces of acetic acid were purchased on account and used to make 44,000 gallons of vinegar. The purchase price was $88,704. 4

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter14: Quality And Environmental Cost Management

Section: Chapter Questions

Problem 4CE: Nabors Company had actual quality costs for the year ended June 30, 20x5, as given below. At the...

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y It was the end of the third quarter for Marigold Industries. There had been some discussion in prior quarters about best practices. related to carrying ending inventory of its key DM, acetic acid, for making vinegar. Per established standards, 7.1 ounces of acetic acid at a budgeted price of $0.30 per ounce were needed for each gallon of vinegar (128 ounces). The new production manager wants to follow lean practices and buy only what is needed for production, while the former production manager preferred to keep some inventory on hand for emergencies. For the third quarter, 316,800 ounces of acetic acid were purchased on account and used to make 44,000 gallons of vinegar. The purchase price was $88,704. (a1) Determine the DM price and efficiency variances for the third quarter based on the information above. DM price variance $ Your answer is correct. DM efficiency variance $ eTextbook and Media 4 R F V % 5 -T G B $ 6 O Search & 4- 7 YU H J N * 6336 1320 00 8 3 T ( K Favorable…
Cassara, Inc., had the following quality costs for the years ended December 31, 20X1 and 20X2: At the end of 20X1, management decided to increase its investment in control costs by 40% for each categorys items, with the expectation that failure costs would decrease by 25% for each item of the failure categories. Sales were 12,000,000 for both 20X1 and 20X2. Required: 1. Calculate the budgeted costs for 20X2, and prepare an interim quality performance report. 2. Comment on the significance of the report. How much progress has Cassara made?
Management believes it has found a more efficient way to package its products and use less cardboard. This new approach will reduce shipping costs from $2.00 per shipment to $1.42 per shipment. (1) If the company budgets 2,000 shipments this year, what amount of total direct materials costs would appear on the shipping department's flexible budget? (2) How much is this sustainability improvement predicted to save in direct materials costs for this coming year 1. Budgeted direct materiats 2. Cost savings
Nico Parts, Inc., produces electronic products with short life cycles (of less than two years). Development has to be rapid, and the profitability of the products is tied strongly to the ability to find designs that will keep production and logistics costs low. Recently, management has also decided that post-purchase costs are important in design decisions. Last month, a proposal for a new product was presented to management. The total market was projected at 220,000 units (for the two-year period). The proposed selling price was $145 per unit. At this price, market share was expected to be 25 percent. The manufacturing and logistics costs were estimated to be $136 per unit. Upon reviewing the projected figures, Brian Metcalf, president of Nico, called in his chief design engineer, Mark Williams, and his marketing manager, Cathy McCourt. The following conversation was recorded: BRIAN: Mark, as you know, we agreed that a profit of $13 per unit is needed for this new product. Also, as I…
Nico Parts, Inc., produces electronic products with short life cycles (of less than two years). Development has to be rapid, and the profitability of the products is tied strongly to the ability to find designs that will keep production and logistics costs low. Recently, management has also decided that post-purchase costs are important in design decisions. Last month, a proposal for a new product was presented to management. The total market was projected at 220,000 units (for the two-year period). The proposed selling price was $128 per unit. At this price, market share was expected to be 25 percent. The manufacturing and logistics costs were estimated to be $119 per unit. Upon reviewing the projected figures, Brian Metcalf, president of Nico, called in his chief design engineer, Mark Williams, and his marketing manager, Cathy McCourt. The following conversation was recorded: BRIAN: Mark, as you know, we agreed that a profit of $14 per unit is needed for this new product. Also, as I…
Salalah Inc. sells a plastic products to wholesalers. The company's budget for the upcoming year revealed anticipated unit sales of 38500, a selling price of OMR 47, variable cost per unit of OMR 11, and total fixed costs of OMR 390000.what is the safety margin in units for Bahwan Inc.?
In looking over last year’s sales figures, Audio-2-Go’s sales budgeting team recalled thefollowing:a. Model A-1 costs were rising faster than the price could rise. Preparatory to phasing out thismodel, Audio-2-Go, Inc., planned to slash advertising for this model and raise its price by30 percent. The number of units of Model A-1 to be sold was forecast to be 50 percent oflast year’s units.b. Model A-5 was introduced on November 1 of last year. It contains a built-in 20 GB harddrive and can be synchronized with several popular music software programs. Audio-2-Gobrought out this model to match competitors’ audio players, but the price is so much higherthan other Audio-2-Go products, that sales have been disappointing. The company plans todiscontinue this model on June 30 of this year, and thinks that monthly sales will remain atlast year’s level if the sales price remains unchanged.c. Audio-2-Go plans to introduce Model A-6 on July 1 of this year. It will be a high-end playerthat will be…
Bubbles Inc. has observed that their primary product, Apex Wrap is losing market share. Due to this phenomenon, Bubble's operating income was $120,000 in 2017, $100,000 in 2018 and 80,000 in $2019. The management brainstorms on a solution to the company's declining profits and decide to add a softer layer to the product in 2019, change product casing in 2020 and remove the edge lining in 2021. The management is incorporating O Rolling budget O Kaizen budget O Responsibility accounting budget O Flexible budget
Sales Forecast and Budget Audio-2-Go, Inc., manufactures MP3 players. Models A-1, A-2, and A-3 are small and light. They are attached to armbands and use flash memory. Models A-4 and A-5 are somewhat larger and use a built- in hard drive; they can be put into fanny packs for use while working out. It is now early January, and Audio-2-Go's budgeting team is finalizing the sales budget for this year. Sales in units and dollars for last year were as follows: Model Number Sold Price Revenue A-1 18,000 $70 $1,260,000 A-2 40,000 85 3,400,000 A-3 58,000 110 6,380,000 A-4 16,000 120 1,920,000 A-5 2,500 200 500,000 < $13,460,000 In looking over the last year's sales figures, Audio-2-Go's sales budgeting team recalled the following: a. Model A-1 costs were rising faster than the price could rise. Preparatory to phasing out this model, Audio-2-Go, Inc., planned to slash advertising for this model and raise its price by 40 percent. The number of units of Model A-1 to be sold was forecast to be 50…
One Manila Inc.'s president, Zane Cruz, is concerned about the prospects of one of the firm's major products. The president has been reviewing a marketing report with Jom Lara, marketing product manager, for their top-of-the-line stereo amplifier. The report indicates another price reduction is needed to meet anticipated competitors' reduction in sales prices. The current selling price for OMI's amplifier is P35,000 per unit. It is expected that within three months OMI's two major competitors will be selling their comparable amplifiers for P30,000 per unit. This concerns CRUZ because OMI's current cost of producing the amplifiers is P31,500, which yields a P3,500 profit on each unit sold. The situation is especially disturbing because OMI had implemented an activity-based costing (ABC) system about two years ago. The ABC system helped them better identify costs, cost pools, cost drivers, and cost reduction opportunities. Changes made when adopting ABC reduced costs on this…
Supermart Food Stores (SFS) has experienced net operating losses in its frozen food products line in the last few periods. Management believes that the store can improve its profitability if SFS discontinues frozen foods. The operating results from the most recent period are: Order processing Receiving Shelf-stocking Customer support Sales Cost of goods sold SFS estimates that store support expenses, in total, are approximately 20% of revenues. The controller says that not every sales dollar requires or uses the same amount of store support activities. A preliminary analysis reveals store support activities for these three product lines are: Frozen Foods $ 120,000 185,000 Activity (cost driver) Order processing (number of purchase orders) Receiving (number of deliveries) Shelf-stocking (number of hours per delivery) Customer support (total units sold) The controller estimates activity-cost rates for each activity as follows: $ 88 per purchase order 110 per delivery per hour per item…
Scott Incorporated has been in business for several months. Because of increased competition in the region for part adapters, the managers at Scott Incorporated is considering cutting sales price from $26 per adapter to $22 per adapter. New sales price - $22 Variable price per adapter - $17 New contribution margin per adapter - $5 If the variable expenses remain at $17 per adapter and the fixed expenses remain at $7,000, how many adapters will the managers need to sell to break even? Compute the breakeven sales in units.