ERP cost-benefit analysis (Learning Objective 5) As CEO of Riverside Marine, Rachel Moore knows it is important to control costs and to respond quickly to changes in the highly competitive boat-building industry. When Gerbig Consulting proposes that Riverside Marine invest in an ERP system, she forms a team to evaluate the proposal: the plant engineer, the plant foreman, the systems specialist, the human resources director, the marketing director, and the management accountant . A month later, management accountant Miles Cobalt reports that the team and Gerbig estimate that if Riverside Marine implements the ERP system, it will incur the following costs: a. $390,000 in software costs b. $85,000 to customize the ERP software and load Riverside Marine’s data into the new ERP system c. $112,000 for employee training The team estimates that the ERP system should provide several benefits: a. More efficient order processing should lead to savings of $185,000. b. Streamlining the manufacturing process so that it maps into the ERP system will create savings of $255,000. c. Integrating purchasing, production, marketing, and distribution into a single system will allow Riverside Marine to reduce inventories, saving $215,000. d. Higher customer satisfaction should increase sales, which, in turn, should increase profits by $150,000. Requirements 1. If the ERP installation succeeds, what is the dollar amount of the benefits? 2. Should Riverside Marine install the ERP system? Why or why not? Show your calculations. 3. Why did Moore create a team to evaluate Gerbig’s proposal? Consider each piece of cost-benefit information that management accountant Cobalt reported. Which person on the team is most likely to have contributed each item? ( Hint: Which team member is likely to have the most information about each cost or benefit?)

In today's fast-paced business environment, decision making is a critical task for managers. Making the right decisions is vital to the success of a company, and it requires access to relevant information. Cari Pump (CP) Company manufactures water pumps. An important part of the pump is its electronic component (EC). Cari Pump collects data with the following cost information about the costs of making ECs in 2019 and the expected costs in 2020: Current Costs (2019) Expected Costs (2020) Fixed manufacturing cost Fixed manufacturing overhead costs that can be avoided if ECs are not made 360,000 360,000 Fixed manufacturing overhead costs of plant depreciation, insurance, and administration that cannot be avoided even if ECs are not made 850,000 850,000 Variable manufacturing costs Direct material cost per EC…

Case Study Jumping Flash Pty Ltd is an innovative organisation that produces environmentally friendly pumps for water management. The design of this pump is unique and represents an efficient and environmentally friendly system that may be used on any mine site. These pumps combine positive features of economy, efficiency and innovation. The company has just completed its second year of operations. You are now employed as the management accountant for Jumping Flash Pty Ltd and you have been requested to produce a performance report (using Excel) and the calculate all the relevant variances. Information The following details are available: 1. SALES AND SALES REVENUE Jumping Flash Pty Ltd Units and revenue details for the period 01 July - 30 September 2018 Sales (units) Sales revenue Actual Master (Fixed) Budget 16,500 15,000 $ $ 5,362,500 5,250,000 Note: Both these production levels are within the relevant range. 2. STANDARD COST DETAILS Jumping Flash Pty Ltd Standard cost schedule -…

Vince Malloy and Katy Smith, both systems personnel at Shamrock Steelworks, are designing a new expenditure cycle system. Vince has worked for Shamrock for 12 years and has been involved in many systems development projects. Katy recently began working for Shamrock. She has 4 years of experience in systems development with another comparably sized organization. Yesterday, Vince and Katy met to determine their plan for approaching the conceptual system design. Following is an excerpt of some dialogue that occurred in that meeting.Katy: I really think that the new system can be designed more efficiently if we use an object-oriented design approach. Further, future enhancements and maintenance will be easier if we use an object approach.Vince: The method you are suggesting is a creation of modules. I do not have a problem with that concept in general. I just prefer using a top-down approach to design the system. We have been using that system for the past 12 years, and it has worked out…

John Thomas, vice president of Mallett Company (a producer of a variety of plastic products), has been supervising the implementation of an ABC management system. John wants to improve process efficiency by improving the activities that define the processes. To illustrate the potential of the new system to the president, John has decided to focus on two processes: production and customer service. Within each process, one activity will be selected for improvement: materials usage for production and sustaining engineering for customer service (sustaining engineers are responsible for redesigning products based on customer needs and feedback). Value-added standards are identified for each activity. For materials usage, the value-added standard calls for six pounds per unit of output (the products differ in shape and function, but their weight is uniform). The value-added standard is based on the elimination of all waste due to defective molds. The standard price of materials is 5 per pound. For sustaining engineering, the standard is 58% of current practical activity capacity. This standard is based on the fact that about 42% of the complaints have to do with design features that could have been avoided or anticipated by the company. Current practical capacity (at the end of 20X1) is defined by the following requirements: 6,000 engineering hours for each product group that has been on the market or in development for 5 years or less and 2,400 hours per product group of more than 5 years. Four product groups have less than 5 years experience, and 10 product groups have more. Each of the 24 engineers is paid a salary of 60,000. Each engineer can provide 2,000 hours of service per year. No other significant costs are incurred for the engineering activity. Actual materials usage for 20X1 was 25% above the level called for by the value-added standard; engineering usage was 46,000 hours. A total of 80,000 units of output were produced. John and the operational managers have selected some improvement measures that promise to reduce nonvalue-added activity usage by 40% in 20X2. Selected actual results achieved for 20X2 are as follows: The actual prices paid for materials and engineering hours are identical to the standard or budgeted prices. Required: 1. For 20X1, calculate the nonvalue-added usage and costs for materials usage and sustaining engineering. 2. CONCEPTUAL CONNECTION Using the budgeted improvements, calculate the expected activity usage levels for 20X2. Now, compute the 20X2 usage variances (the difference between the expected and actual values), expressed in both physical and financial measures, for materials and engineering. Comment on the companys ability to achieve its targeted reductions. In particular, discuss what measures the company must take to capture any realized reductions in resource usage.

Subject - Acounting

Meredith had an excellent management science course as part of her MBA program in college, so she realizes that break-even analysis is needed to help make this decision. With this in mind, she instructs several staff members to investigate this prospective product further, including developing estimates of the related costs and revenues as well as forecasting the potential sales. One month later, the preliminary estimates of the relevant financial figures come back. The cost of designing the grandfather clock and then setting up the production facilities to produce this product would be approximately $250,000. There would be only one production run for this limited-edition grandfather clock. The additional cost for each clock produced would be roughly $2,000. The marketing department estimates that their price for selling the clocks can be successfully set at about $4,500 apiece, but a firm forecast of how many clocks can be sold at this price has not yet been obtained. However, it is…

Fanning Academy is a profit-oriented education business. Fanning provides remedial training for high school students who have fallen behind in their classroom studies. It charges its students $730 per course. During the previous year, Fanning provided instruction for 1,000 students. The income statement for the company follows: Revenue Cost of instructors Overhead costs Net income $ 730,000 (434,000) (232,500) $ 63,500 The company president, Andria Rossi, indicated in a discussion with the accountant, Sam Trent, that she was extremely pleased with the growth in the area of computer-assisted instruction. She observed that this department served 300 students using only three part- time instructors. In contrast, the classroom-based instructional department required 28 instructors to teach 700 students. Ms. Rossi noted that the per-student cost of instruction was dramatically lower for the computer-assisted department. She based her conclusion on the following information: Fanning pays its…

Accounting Areen has just been employed as a Trainee Management Accountant by Sarween & Sons, a newly established manufacturing company in Duhok. Areen is one of the seven members of a committee recently set up by the managing director of Sarween & Sons to advise the company on the benefits of changing its product costing method from Absorption costing to Activity Based Costing. As part of this project, Areen has come to you - the Finance Manager to ask for help with understanding the differences between activity-based costing and strategic activity-based management. Required: Explain how you would be of help to Areen?

Classifying quality costs and using these costs to make decisions Clason, Inc. manufactures door panels. Suppose Clason is considering spending the following amounts on a new total quality management (TQM) program: Requirements Classify each cost as a prevention cost, an appraisal cost, an internal failure cost, or an external failure cost. Should Clason implement the new quality program? Give your reason.

RUE BENNETT Company develops software for small businesses and household computers. The majority of the company's computer programmers are working on developing software that will perform relatively specialized functions in a user-friendly manner. Before the working model is released to production for the preparation of masters and additional testing, it undergoes extensive testing. As a result of this meticulous planning, various computer software packages have been developed that have proven to be very successful in the industry. RUE BENNETT Company incurred the following costs during 2020: Cost to reproduce and prepare software for sale 200,002 Amortization of capitalized software development costs from current and prior years 94,321 Expenses related to projects after technological feasibility has been established but before software is available for commercial production 151,323 Salaries and wages of programmers doing research 910,000 Expenses related…

please give some introduction of this example. please give step by step answer.

Hirsch has been given 20 minutes at an upcoming meeting to pitch his idea for a process-improvement program to the rest of the Metropolis leadership team. What should he do before he gives the pitch? How should Hirsch organize this pitch and what information should he include?

Solution Summary: The author explains that the cost-benefit analysis of the ERP system will determine whether to accept the proposal or not.

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