☑ Paragraph Styles ☑ Case Study 2 Cariman Limited is a manufacture of special plant pots. Cariman has the following budgeted sales for the next six-month period: Month Unit Sales June 45,000 July 60,000 August 105,000 September 75,000 October 90,000 November 60,000 There were 15,000 units of finished goods in inventory at the beginning of June. Plans are to have an inventory of finished products that equal 20% of the unit sales for the next month. Five kilograms of materials are required for each unit produced. Each kilogram of material costs $8. Inventory levels for materials are equal to 30% of the needs for the next month. Materials inventory on June 1 was 7,500 kilograms. 3.Cariman contracts delivery drivers to service customers. Cariman owns the vans and pays for the gas. With reference to the following independent situations for Cariman, determine where (a) responsibility and (b) controllability lie. Suggest what might be done to solve the problem or to improve the situation: a) In the manufacturing plant the production manager is not happy with the material that the purchasing manager has been purchasing. In May the production manager stops requesting materials from the supply warehouse, and starts purchasing them directly from a different materials supplier. Actual materials costs in May are higher than budgeted. b) Overhead costs in the manufacturing plant for June are much higher than budgeted. Investigation reveals a utility rate hike in effect that was not figured into the budget. c) Gasoline costs for each van are budgeted based on the service area of the van and the amount of driving expected for the month. The driver of van 3 routinely has monthly gasoline costs exceeding the budget for van 3. After investigating, the delivery manager finds that the driver has been driving the van for personal use. d) Cariman's delivery drivers are paid an hourly wage, with overtime pay if they exceed 40 hours per week, excluding driving time. Speedy Gonzales, one of the delivery drivers, frequently exceeds 40 hours per week. Customers are happy with Speedy's work, but the delivery manager talks to him constantly about working more quickly. Speedy's overtime causes the actual costs of delivery to exceed the budget almost every month.
☑ Paragraph Styles ☑ Case Study 2 Cariman Limited is a manufacture of special plant pots. Cariman has the following budgeted sales for the next six-month period: Month Unit Sales June 45,000 July 60,000 August 105,000 September 75,000 October 90,000 November 60,000 There were 15,000 units of finished goods in inventory at the beginning of June. Plans are to have an inventory of finished products that equal 20% of the unit sales for the next month. Five kilograms of materials are required for each unit produced. Each kilogram of material costs $8. Inventory levels for materials are equal to 30% of the needs for the next month. Materials inventory on June 1 was 7,500 kilograms. 3.Cariman contracts delivery drivers to service customers. Cariman owns the vans and pays for the gas. With reference to the following independent situations for Cariman, determine where (a) responsibility and (b) controllability lie. Suggest what might be done to solve the problem or to improve the situation: a) In the manufacturing plant the production manager is not happy with the material that the purchasing manager has been purchasing. In May the production manager stops requesting materials from the supply warehouse, and starts purchasing them directly from a different materials supplier. Actual materials costs in May are higher than budgeted. b) Overhead costs in the manufacturing plant for June are much higher than budgeted. Investigation reveals a utility rate hike in effect that was not figured into the budget. c) Gasoline costs for each van are budgeted based on the service area of the van and the amount of driving expected for the month. The driver of van 3 routinely has monthly gasoline costs exceeding the budget for van 3. After investigating, the delivery manager finds that the driver has been driving the van for personal use. d) Cariman's delivery drivers are paid an hourly wage, with overtime pay if they exceed 40 hours per week, excluding driving time. Speedy Gonzales, one of the delivery drivers, frequently exceeds 40 hours per week. Customers are happy with Speedy's work, but the delivery manager talks to him constantly about working more quickly. Speedy's overtime causes the actual costs of delivery to exceed the budget almost every month.
Chapter19: Pricing Concepts
Section: Chapter Questions
Problem 6DRQ
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Case Study 2
Cariman Limited is a manufacture of special plant pots. Cariman has the following budgeted
sales for the next six-month period:
Month Unit Sales June 45,000 July 60,000 August 105,000 September 75,000 October 90,000
November 60,000 There were 15,000 units of finished goods in inventory at the beginning of
June. Plans are to have an inventory of finished products that equal 20% of the unit sales for the
next month. Five kilograms of materials are required for each unit produced. Each kilogram of
material costs $8. Inventory levels for materials are equal to 30% of the needs for the next
month. Materials inventory on June 1 was 7,500 kilograms.
3.Cariman contracts delivery drivers to service customers. Cariman owns the vans and pays for
the gas. With reference to the following independent situations for Cariman, determine where
(a) responsibility and (b) controllability lie. Suggest what might be done to solve the problem or
to improve the situation:
a) In the manufacturing plant the production manager is not happy with the material that the
purchasing manager has been purchasing. In May the production manager stops requesting
materials from the supply warehouse, and starts purchasing them directly from a different
materials supplier. Actual materials costs in May are higher than budgeted.
b) Overhead costs in the manufacturing plant for June are much higher than budgeted.
Investigation reveals a utility rate hike in effect that was not figured into the budget.
c) Gasoline costs for each van are budgeted based on the service area of the van and the
amount of driving expected for the month. The driver of van 3 routinely has monthly gasoline
costs exceeding the budget for van 3. After investigating, the delivery manager finds that the
driver has been driving the van for personal use.
d) Cariman's delivery drivers are paid an hourly wage, with overtime pay if they exceed 40 hours
per week, excluding driving time. Speedy Gonzales, one of the delivery drivers, frequently
exceeds 40 hours per week. Customers are happy with Speedy's work, but the delivery manager
talks to him constantly about working more quickly. Speedy's overtime causes the actual costs
of delivery to exceed the budget almost every month.
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