Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
16th Edition
ISBN: 9780134475585
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Textbook Question
Chapter 12, Problem 12.28E
Identifying and managing unused capacity (continuation of 12-25). Refer to Exercise 12-25.
- 1. Calculate the amount and cost of (a) unused manufacturing capacity and (b) unused selling and customer-service capacity at the beginning of 2017 based on actual production and actual number of customers served in 2017.
Required
- 2. Suppose Stanmore can add or reduce its manufacturing capacity in increments of 30 units. What is the maximum amount of costs that Stanmore could save in 2017 by downsizing manufacturing capacity?
- 3. Stanmore, in fact, does not eliminate any of its unused manufacturing capacity. Why might Stanmore not downsize?
12-25 Strategy, balanced scorecard. Stanmore Corporation makes a special-purpose machine, D4H, used in the textile industry. Stanmore has designed the D4H machine for 2017 to be distinct from its competitors. It has been generally regarded as a superior machine. Stanmore presents the following data for 2016 and 2017.
| 2016 | 2017 | |
| 1. Units of D4H produced and sold | 200 | 210 |
| 2. Selling price | $40,000 | $42,000 |
| 3. Direct materials (kilograms) | 300,000 | 310,000 |
| 4. Direct material cost per kilogram | $8 | $8.50 |
| 5. Manufacturing capacity in units of D4H | 250 | 250 |
| 6. Total conversion costs | $2,000,000 | $2,025,000 |
| 7. Conversion cost per unit of capacity (row 6 ÷ row 5) | $8,000 | $8,100 |
| 8. Selling and customer-service capacity | 100 customers | 95 customers |
| 9. Total selling and customer-service costs | $1,000,000 | $940,500 |
| 10. Selling and customer-service capacity cost per customer (row 9 ÷ row 8) | $10,000 | $9,900 |
Stanmore produces no defective machines, but it wants to reduce direct materials usage per D4H machine in 2017. Conversion costs in each year depend on production capacity defined in terms of D4H units that can be produced, not the actual units produced. Selling and customer-service costs depend on the number of customers that Stanmore can support, not the actual number of customers it serves. Stanmore has 75 customers in 2016 and 80 customers in 2017.
- 1. Is Stanmore’s strategy one of product differentiation or cost leadership? Explain briefly.
Required
- 2. Describe briefly key measures that you would include in Stanmore’s balanced scorecard and the reasons for doing so.
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PROBLEM: Financial Perspective
Gloria Corporation presents the following information for year 2020 & 2021
2020
2021
Sales
P 45, 000
P 38, 000
Production Expenses
Direct materials
9, 504
8, 976
12,000
Direct labor
10,000
Factory overhead
Gross Profit
5, 000
P 14, 520
5, 000
P 18, 000
Operating Expenses
13,000
13, 000
Operating income
P5, 000
P1, 520
During the year 2020, the corporation was able to sell 10, 000 units which is 25% above the sales in
2021. The same capacity was used for factory overhead and operating expenses for years 2020 and
2021. Other data are as follows:
2020
2021
Raw materials used ( kg)
1, 200
720
Direct labor hours
1, 000
816
Manufacturing costs for product X include direct materials $18 per unit,
direct labor $4 per unit, variable overhead $2 per unit, and fixed overhead
$3 per unit, for a total of $27 per unit. If production volume is increased by
10 units, how much will total manufacturing costs change in the short
term? Assume that the new production volume is in the relevant range.
(hint: the total cost equation might be useful here)
increase by $240
not enough information need to know the original volume
increase by $220
increase by $250
O increase by $270
(b) Additional information regarding the costs of the company are given:
Manufacturing costs
Variable cost per unit
Budgeted fixed manufacturing overhead per year $32,400,000
$25
Selling and administrative costs
Variable cost per unit
Total fixed cost
$5
$5,000,000
Actual production in 2020
7,600,000 units
Actual Sales in 2020
7,000,000 units
Selling price
Actual fixed manufacturing overhead in 2020
$50 per unit
$32,000,000
The practical capacity level is used to calculate the budgeted fixed manufacturing cost
per unit. There are no variable cost variances. Fixed manufacturing overhead cost
variances are written off to cost of goods sold in the period in which they occur. There
has been no beginning inventory in 2020.
Chapter 12 Solutions
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
Ch. 12 - Define strategy.Ch. 12 - Describe the five key forces to consider when...Ch. 12 - Prob. 12.3QCh. 12 - What is a customer preference map, and why is it...Ch. 12 - Prob. 12.5QCh. 12 - What are four key perspectives in the balanced...Ch. 12 - What are the five types of conditions to consider...Ch. 12 - Describe three features of a good balanced...Ch. 12 - What are three important pitfalls to avoid when...Ch. 12 - Describe three key components in doing a strategic...
Ch. 12 - Why might an analyst incorporate the...Ch. 12 - How does an engineered cost differ from a...Ch. 12 - What is downsizing?Ch. 12 - What is a partial-productivity measure?Ch. 12 - Prob. 12.15QCh. 12 - Jacobs Inc. is a relatively new company that has...Ch. 12 - The balanced scorecard describes all of the...Ch. 12 - Canarsie Corporation uses a balanced scorecard to...Ch. 12 - Balanced scorecard. Pineway Electric manufactures...Ch. 12 - Analysis of growth, price-recovery, and...Ch. 12 - Strategy, balanced scorecard, merchandising...Ch. 12 - Strategic analysis of operating income...Ch. 12 - Analysis of growth, price-recovery, and...Ch. 12 - Identifying and managing unused capacity...Ch. 12 - Strategy, balanced scorecard. Stanmore Corporation...Ch. 12 - Strategic analysis of operating income...Ch. 12 - Analysis of growth, price-recovery, and...Ch. 12 - Identifying and managing unused capacity...Ch. 12 - Strategy, balanced scorecard, service company....Ch. 12 - Strategic analysis of operating income...Ch. 12 - Analysis of growth, price-recovery, and...Ch. 12 - Identifying and managing unused capacity...Ch. 12 - Balanced scorecard and strategy. Scott Company...Ch. 12 - Strategic analysis of operating income...Ch. 12 - Analysis of growth, price-recovery, and...Ch. 12 - Identifying and managing unused capacity...Ch. 12 - Balanced scorecard. Following is a random-order...Ch. 12 - Balanced scorecard. (R. Kaplan, adapted) Petrocal,...Ch. 12 - Balanced scorecard. Vic Corporation manufactures...Ch. 12 - Balanced scorecard, environmental, and social...Ch. 12 - Balanced scorecard, social performance. Comtex...Ch. 12 - Balanced scorecard, environmental, and social...Ch. 12 - Partial-productivity measurement. Gable Company...Ch. 12 - Total factor productivity (continuation of 12-43)....
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