HORNGRENS COST ACCOUNTING W/ACCESS
16th Edition
ISBN: 9781323687604
Author: Datar
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Videos
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.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Compute the Revenue Effect- Growth Component, indicate if
favorable/(unfavorable). *The activity driver for conversion cost
is the direct labor hours.
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
HORNGRENS COST ACCOUNTING W/ACCESS
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)....
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Wellington, Inc., reports the following contribution margin income statement for the month of May. The company has the opportunity to purchase new machinery that will reduce its variable cost per unit by $10 but will increase fixed costs by 20%. Prepare a projected contribution margin income statement for Wellington, Inc., assuming it purchases the new equipment. Assume sales level remains unchanged.arrow_forwardVarious Financial data for 2019 and 2020 follows. Calculate the total productivity measure and the partial measures for labour, raw materials, and energy for this company for both years. 2019 $75,000 Output: Input: Sales Total Productivity Partial Lab Productivity Partial Material Productivity Labour Materials Energy Other 19,150 21,620 12,250 8,300 61,320 For your answers, write value rounded to two decimal points. Include zeros if applicable and do not include any symbols. (Examples: 3.445 should be written as 3.45, 3.000 should be written as 3.00) 2019 2020 2020 $92,300 22,150 25,120 26,730 5,170 79,170 Partial Energy Partial Other For your answers below, type one of the options exactly as provided in the brackets. Based on the results the company overall is The company's best improvement is seen in The company's biggest decline is seen in (improving / declining). (labour / material / energy / other). (labour / material / energy / other).arrow_forwardProduction costs: Direct materials Contribution margin, break-even sales, cost-volume-profit chart, margin of safety, and operating leverage Belmain Co. expects to maintain the same inventories at the end of 2017 as at the beginning of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. With this in mind, the various department heads were asked to submit estimates of the costs for their departments during the year. A summary report of these estimates is as follows: Estimated Estimated Variable Cost Fixed Cost (per unit sold) $15 Direct labor Factory overhead 10 $548,400 8 Selling expenses: Sales salaries and commissions 114,000 3 Advertising 38,600 Travel 8,600 Miscellaneous selling expense 9,400 Administrative expenses: Office and officers' salaries 111,400 Supplies 13,700 1 Miscellaneous administrative expense Total 12,700 $856,800 2 $42 It is expected that 10,200 units will be sold at a price of $168 a unit. Maximum…arrow_forward
- Wolsey Industries Inc. expects to maintain the same inventories at the end of 2016 as at the beginning of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. With this in mind, the various department heads were asked to submit estimates of the costs for their departments during the year. A summary report of these estimates is as follows: 1 Estimated Fixed Cost Estimated Variable Cost (per unit sold) 2 Production costs: 3 Direct materials — $46.00 4 Direct labor — 40.00 5 Factory overhead $200,000.00 20.00 6 Selling expenses: 7 Sales salaries and commissions 110,000.00 8.00 8 Advertising 40,000.00 — 9 Travel 12,000.00 — 10 Miscellaneous selling expense 7,600.00 1.00 11 Administrative expenses: 12 Office and officers’ salaries 132,000.00 — 13 Supplies 10,000.00 4.00 14…arrow_forwardI need help with question is answerarrow_forwardThe financial data for 2017 and 2018 are presented in the table below. Use the data to calculate the total productivity measure and the partial measures for labor, capital, and raw materials for ABCD Company for the two years. Explain what each of measures tell you about this company 2 017 2018Output: Sales $300,000 $320,000Input: Labour 40,000 50,000Raw Materials 45,000 55,000Energy 6,000 7,000Capital 60,000 60,000Other 3,000 4,000arrow_forward
- Required information Cost Classifications (Algo) [The following information applies to the questions displayed below.] Kubin Company's relevant range of production is 28,000 to 31,500 units. When it produces and sells 29,750 units, its average costs per unit are as follows: Average Cost per Unit Direct materials $ 8.80 Direct labor $ 5.80 Variable manufacturing overhead $ 3.30 Fixed manufacturing overhead $ 6.80 Fixed selling expense $ 5.30 Fixed administrative expense $ 4.30 Sales commissions $ 2.80 Variable administrative expense $ 2.30 Exercise 1-10 (Algo) Differential Costs and Sunk Costs [LO1-5] Required: 1. What is the incremental manufacturing cost incurred if the company increases production from 29,750 to 29,751 units? 2. What is the incremental cost incurred if the company increases production and sales from 29,750 to 29,751 units? 3. Assume that Kubin Company produced 29,750 units and expects to sell 29,370 of them. If a new customer unexpectedly emerges and expresses…arrow_forwardYear Production-units Total Cost 2015 100,000 $ 500,000.00 2016 150,000 $ 750,000.00 2017 230,000 $ 1,250,000.00 2018 175,000 $ 850,000.00 2019 350,000 $ 1, 450,000.00 Using the high-low method calculate the fixed cost, showing the answer for each step: Answera) Unit’s difference UNITSb) Cost’s difference c) Unit Cost $d) Fixed cost $arrow_forwardThe Bayblade, Inc. started operations in 2003 with an expected production of 120,000 units and sales volume of 110,000 units. It has a normal operating capacity of 100,000 units. The following data were made available: Variable manufacturing cost per unit Fixed manufacturing cost per unit based on normal capacity Variable selling and administrative cost per unit Annual fixed selling and administrative expenses Plant assets (fixed capital) used in operations Expected ratio of current assets to projected sales P25.40 5.20 6.60 P240,000 900,000 30%arrow_forward
- question: What is the contribution margin per direct labor-hour for each of the company’s five products? Assuming direct labor-hours is the company’s constraining resource, what is the highest total contribution margin the company can earn next year if it makes optimal use of its constrained resource? Assuming next year the company makes optimal use of its 164,990 direct labor-hours, what is the highest direct labor rate per hour Walton Toy Company should be willing to pay for additional capacity (that is, for added direct labor time)? The Walton Toy Company manufactures four dolls and a sewing kit. It provided the following data for next year: Product Demand Next year (units) Selling Price per Unit Direct Materials Direct Labor Debbie 75,000 $ 28.00 $ 5.20 $ 4.80 Trish 67,000 $ 5.70 $ 2.10 $ 1.36 Sarah 60,000 $ 33.50 $ 10.19 $ 7.20 Mike 36,000 $ 18.00 $ 4.50 $ 5.60 Sewing kit 350,000 $ 10.50 $ 5.70 $ 0.96 The following additional information is available: The…arrow_forwardPlease solve this onearrow_forward139) At an activity level of 8,400 units in a month, Braughton Corporation's total variable. maintenance and repair cost is $697,284 and its total fixed maintenance and repai cost is $464,100. What would be the total maintenance and repair cost, both fixed and variable, at an activity level of 8.500 units in a month? Assume that this level of aetivity is within the relevant range. A) S1.175 210 B) $1.169.685 C) $1.161.384 D) $1.168.29 + Q 194 1 64arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Fixed Asset Replacement Decision 1235; Author: Accounting Instruction, Help, & How To;https://www.youtube.com/watch?v=LJRzn9K8Nwk;License: Standard Youtube License