Question:12 Identify the major problems in this situation and explain how they impact the organization. Consider both behavioral and analytical factors. Specifically, how might managerial accounting concepts, tools, or techniques be applied to help resolve this dilemma? What are possible consequences of applying the same to this dilemma? Briefly explain.Orange Electronics has been experiencing declining profit margins and has been looking for ways to increase operating income. It cannot raise selling prices for fear of losing business to its competitors. It must either cut costs or improve productivity. The company uses a standard cost system to evaluate the performance of the soldering department. It investigates all unfavorable variances at the end of the month. The soldering department rarely completes the operations in less time than the standard allows (which would result in a favorable variance).In most months, the variance is zero or slightly unfavorable. Reasoning that the application of lower standard costs to the products manufactured will result in improved profit margins, the production manager has recommended that all standard times for soldering operations be drastically reduced. The production manager has informed the soldering personnel that she expects the soldering department to meet these new standards. Match the descriptions that follow with the corresponding terms. Descriptions: 1. All activities associated with providing a product or service. 2. A method of allocating overhead based on each product's use of activities in making the product. 3. Systems implemented to reduce defects in finished products with the goal of achieving zero defects. 4. A performance-measurement approach that uses both financial and non-financial measures, tied to company objectives, to evaluate a company's operations in an integrated fashion. 5. Inventory system in which goods are manufactured or purchased just as they are needed for use. Terms: a. Activity-based costing b. Balanced scorecard c. Just-in-time (JIT) inventory d. Total quality management (TQM) e. Value chain
Question:12 Identify the major problems in this situation and explain how they impact the organization. Consider both behavioral and analytical factors. Specifically, how might managerial accounting concepts, tools, or techniques be applied to help resolve this dilemma? What are possible consequences of applying the same to this dilemma? Briefly explain.Orange Electronics has been experiencing declining profit margins and has been looking for ways to increase operating income. It cannot raise selling prices for fear of losing business to its competitors. It must either cut costs or improve productivity. The company uses a standard cost system to evaluate the performance of the soldering department. It investigates all unfavorable variances at the end of the month. The soldering department rarely completes the operations in less time than the standard allows (which would result in a favorable variance).In most months, the variance is zero or slightly unfavorable. Reasoning that the application of lower standard costs to the products manufactured will result in improved profit margins, the production manager has recommended that all standard times for soldering operations be drastically reduced. The production manager has informed the soldering personnel that she expects the soldering department to meet these new standards. Match the descriptions that follow with the corresponding terms. Descriptions: 1. All activities associated with providing a product or service. 2. A method of allocating overhead based on each product's use of activities in making the product. 3. Systems implemented to reduce defects in finished products with the goal of achieving zero defects. 4. A performance-measurement approach that uses both financial and non-financial measures, tied to company objectives, to evaluate a company's operations in an integrated fashion. 5. Inventory system in which goods are manufactured or purchased just as they are needed for use. Terms: a. Activity-based costing b. Balanced scorecard c. Just-in-time (JIT) inventory d. Total quality management (TQM) e. Value chain
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Question:12
Identify the major problems in this situation and explain
how they impact the organization. Consider both
behavioral and analytical factors. Specifically, how might
managerial accounting concepts, tools, or techniques be
applied to help resolve this dilemma? What are possible
consequences of applying the same to this dilemma?
Briefly explain.Orange Electronics has been experiencing
declining profit margins and has been looking for ways to
increase operating income. It cannot raise selling prices for
fear of losing business to its competitors. It must either cut
costs or improve productivity. The company uses a
standard cost system to evaluate the performance of the
soldering department. It investigates all unfavorable
variances at the end of the month. The soldering
department rarely completes the operations in less time
than the standard allows (which would result in a favorable
variance).In most months, the variance is zero or slightly
unfavorable. Reasoning that the application of lower
standard costs to the products manufactured will result in
improved profit margins, the production manager has
recommended that all standard times for soldering
operations be drastically reduced. The production manager
has informed the soldering personnel that she expects the
soldering department to meet these new standards.
Match the descriptions that follow with the corresponding
terms.
Descriptions:
1. All activities associated with providing a product or
service.
2. A method of allocating overhead based on each
product's use of activities in making the product.
3. Systems implemented to reduce defects in finished
products with the goal of achieving zero defects.
4. A performance-measurement approach that uses both
financial and non-financial measures, tied to company
objectives, to evaluate a company's operations in an
integrated fashion.
5. Inventory system in which goods are manufactured or
purchased just as they are needed for use.
Terms:
a. Activity-based costing
b. Balanced scorecard
c. Just-in-time (JIT) inventory
d. Total quality management (TQM)
e. Value chain
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