Horngren's Accounting (11th Edition)
11th Edition
ISBN: 9780133856781
Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 23, Problem 23.1DC
Decision Case 23-1
Suppose you manage the local Scoopy’s ice cream parlor. In addition to selling ice cream cones, you make large batches of a few flavors of milk shakes to sell throughout the day. Your parlor is chosen to test the company's 'Made-for-You' system. This new system enables patrons to customize their milk shakes by choosing different flavors.
Customers like the new system and your staff appears to be adapting, but you wonder whether this new made-to-order system is as efficient as the old system in which you just made a few large batches. Efficiency is a special concern because your performance is evaluated in part on the restaurants efficient use of materials and labor. Your superiors consider efficiency variances greater than 5% to be unacceptable.
You decide to look at your sales for a typical day. You find that the parlor used 390 pounds of ice cream and 72 hours of direct labor to produce and sell 2,000 shakes. The standard quantity allowed for a shake is 0.2 pound of ice cream and 0.03 hour of direct labor. The
Requirements
1. Compute the efficiency variances for direct labor and direct materials.
2. Provide likely explanations for the variances. Do you have reason to be concerned about your performance evaluation? Explain.
3. Write a memo to Snoopy’s national office explaining your concern and suggesting a remedy.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Suppose you manage the local Scoopy’s ice cream parlor. In addition to selling ice cream cones, you make large batches of a few flavors of milkshakes to sell throughout the day. Your parlor is chosen to test the company’s “Made-for-You” system. This new system enables patrons to customize their milkshakes by choosing different flavors.
Customers like the new system and your staff appears to be adapting, but you wonder whether this new made-to-order system is as efficient as the old system in which you just made a few large batches. Efficiency is a special concern because your performance is evaluated in part on the restaurant’s efficient use of materials and labor. Your superiors consider efficiency variances greater than 5% to be unacceptable.
You decide to look at your sales for a typical day. You find that the parlor used 390 pounds of ice cream and 72 hours of direct labor to produce and sell 2,000 shakes. The standard quantity allowed for a shake is 0.2 pounds of ice cream and…
The Robert Baker Bread Company is planning to open a production plant to bake bread for sale and distribution in grocery stores. Robert's customers have already become familiar with his company's name and reputation for quality in visiting his cafés throughout the Midwest. Customers like the ability to customize the amount of seasoning and flavors that Robert puts in the various types of bread. When Robert begins mass production of the bread what should he be most concerned with regarding his customers' reaction?
Group of answer choices
a) His customers have become used to the ability to customize the bread, which they will not have in a mass-produced product sold in grocery stores
b) The cost of the bread in the grocery store will have to be higher than in his café
c) Robert's café operations will lose customers who will simply buy the bread at the grocery store instead
d) Robert will need to open more café locations to sell whatever bread the grocery stores do not sell
Discussion Prompt
Steve and Linda Hom live in Bartlesville, Oklahoma. Two years ago, they visited Thailand. Linda, a professional chef, was impressed with the cooking methods and
the spices used in Thai food. Bartlesville does not have a Thai restaurant, and the Homs are contemplating opening one. Linda would supervise the cooking, and
Steve would leave his current job to be the maître d'. The restaurant would serve dinner Tuesday through Saturday.
Steve has noticed a restaurant for lease. The restaurant has seven tables, each of which can seat four. Tables can be moved together for a large party. Linda is
planning on using each table twice each evening, and the restaurant will be open 50 weeks per year.
The Homs have drawn up the following estimates:
Average revenue, including beverages and
$45 per meal
desserts
Average cost of food
15 per meal
Chef's and dishwasker's salaries
5,100 per month
Rent (premises, equipment)
4,000 per month
Cleaning (linen, premises)
Replacement of dishes,…
Chapter 23 Solutions
Horngren's Accounting (11th Edition)
Ch. 23 - Prob. 1QCCh. 23 - MajorNet Systems is a start-up company that makes...Ch. 23 - MajorNet Systems is a start-up company that makes...Ch. 23 - MajorNet Systems is a start-up company that makes...Ch. 23 - MajorNet Systems has budgeted three hours of...Ch. 23 - MajorNet Systems has budgeted three hours of...Ch. 23 - FrontGrade Systems allocates manufacturing...Ch. 23 - FrontGrade Systems allocates manufacturing...Ch. 23 - FrontGrade Systems allocates manufacturing...Ch. 23 - The person probably most responsible for the...
Ch. 23 - HajorNet System’s static budget predicted...Ch. 23 - What is a variance?Ch. 23 - Explain the difference between a favorable and an...Ch. 23 - What is a static budget performance report?Ch. 23 - How do flexible budgets differ from static...Ch. 23 - How is a flexible budget used?Ch. 23 - What are the two components of the static budget...Ch. 23 - What is a flexible budget performance report?Ch. 23 - What is a standard cost system?Ch. 23 - Explain the difference between a cost standard and...Ch. 23 - Give the general formulas for determining cost and...Ch. 23 - How does the static budget affect cost and...Ch. 23 - List the direct materials variances, and briefly...Ch. 23 - List the direct labor variances, and briefly...Ch. 23 - List the variable overhead variances, and briefly...Ch. 23 - List the fixed overhead variances, and briefly...Ch. 23 - How is the fixed overhead volume variance...Ch. 23 - What is management by exception?Ch. 23 - List the eight product variances and the manager...Ch. 23 - Briefly describe how journal entries differ in a...Ch. 23 - What is a standard cost income statement?Ch. 23 - Matching terms Learning Objective 1 Match each...Ch. 23 - Prob. S23.2SECh. 23 - Prob. S23.3SECh. 23 - Matching terms Learning Objective 2 Match each...Ch. 23 - Identifying the benefits of standard costs...Ch. 23 - Prob. S23.6SECh. 23 - Prob. S23.7SECh. 23 - Interpreting material and labor variances Learning...Ch. 23 - Prob. S23.9SECh. 23 - Prob. S23.10SECh. 23 - Prob. S23.11SECh. 23 - Prob. S23.12SECh. 23 - Prob. S23.13SECh. 23 - Prob. S23.14SECh. 23 - Prob. E23.15ECh. 23 - Prob. E23.16ECh. 23 - Prob. E23.17ECh. 23 - Prob. E23.18ECh. 23 - Prob. E23.19ECh. 23 - Prob. E23.20ECh. 23 - Prob. E23.21ECh. 23 - Prob. E23.22ECh. 23 - Preparing journal entries Hayesvillc Company uses...Ch. 23 - Prob. E23.24ECh. 23 - Prob. P23.25APGACh. 23 - Preparing a flexible budget computing standard...Ch. 23 - Prob. P23.27APGACh. 23 - P23-28A Computing and journalizing standard cost...Ch. 23 - Prob. P23.29APGACh. 23 - Prob. P23.30BPGBCh. 23 - Preparing a flexible budget computing standard...Ch. 23 - P23-32B Computing standard cost variances and...Ch. 23 - P23-33B Computing and journalizing standard cost...Ch. 23 - Preparing a standard cost income statement...Ch. 23 - Prob. P23.35CPCh. 23 - Decision Case 23-1 Suppose you manage the local...Ch. 23 - Fraud Case 23-1 Drew Castello, general manager of...
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
- Bakery Your bakery makes a variety of products: cookies, cupcakes, muffins and donuts. You want to maximize your profit by optimizing the mix of products you make. You cannot use any more materials or labor than is available, nor do you want to make any more than demanded because they would go to waste. We are only going to make batches of a complete dozen, so be sure to make sure the changing cells are integers. Use Solver to calculate the optimal number of dozens of product to make. Use Solver to calculate the optimal number of dozens of product to make. Be sure to save your work.arrow_forwardQ: If you were at Alice's place, what would you opt and why? Alicia WongAlicia Wong, Corporate Supply Manager, Thain Foods Limited, wanted to prepare a proposal to manufacture mustardin-house. Mustard, an important ingredient in many of thecompany’s products, was currently purchased from an outside supplier. She hoped a comprehensive proposal could beprepared in one-month’s time for the CEO’s approval. GENERAL COMPANY BACKGROUNDThain Foods Limited (TFL) had been in business for morethan 30 years. Its products included a wide range of syrups,fudges, cone dips, sauces, mayonnaise, and salad dressings. Its customers were major food chains, hotels, andrestaurants in North America and Europe.TFL believed in continuous improvement to itsoperations. Over the last two years, it invested more than$2 million in plant facilities, the bulk of it new, state-ofthe-art process equipment and process control. All production and process control functions were computerized formaximum efficiency.TFL…arrow_forwardLaboratory Exercise No. 18 Filename: Lab_exer18 A mobile phone store wants you to create a simple application. The program will start by asking the brand of the phone. The user will then enter 10 different prices of that phone for the past months. From the prices entered, be able to count the number of price that is more than 100. Determine also the average price of all the amount. Sample output: Enter price 1 120 Enter price 2 : 50 Enter price 3 75 Enter price 4 : 105 Enter price 5 35 Enter price 6 : Enter price 7 : Enter price 8 : 20 80 115 Enter price 9 : 50 Enter price 10 : 75 Number of prices that is more than 100 : 2 Average of all prices : 72.5arrow_forward
- Decision Case 20-1 Steve and Linda Hom live in Bartlesville, Oklahoma. Two years ago, they visited Thailand. Linda, a professional chef, was impressed with the cooking methods and the spices used in Thai food. Bartlesville does not have a Thai restaurant, and the Homs are contemplating opening one. Linda would supervise the cooking, and Steve would leave his current job to be the maître d'. The restaurant would serve dinner Tuesday through Saturday. Steve has noticed a restaurant for lease. The restaurant has seven tables, each of Linda is planning which can seat four. Tables can be moved together for a large party. open 50 weeks two seatings per evening, and the restaurant will be The Homs have drawn up the following estimates: per year. Average revenue, including beverages and desserts Average cost of food Chef's and dishwasher's salaries Rent (premises, equipment) Cleaning (linen, premises) Replacement of dishes, cutlery, glasses Utilities, advertising, telephone Seora $ 45 per meal…arrow_forwardi-Case One Running and Growing a Business Sherri has always loved to fix healthy snacks for family and friends and about a year ago she started to sell boxes of them at the local farmer’s market. Last week she heard from a local grocery chain that also wants to stock them. When Sherri was treating her snacks as a hobby, she never paid attention to the costs. Now, she needs to get a better understanding of the costs and cost behavior patterns. At this point she plans to rent a small space for the snack operation and to store inventory. She also has arranged for some part time help to support the snack making operation. These part-time workers will be paid a flat amount per box of snacks and will only be called into work if the volume of business makes it necessary. She also plans to hire someone to help stimulate additional sales. This salesperson’s compensation will include a small salary and a commission of a $1.00 for each box of snacks sold. For question 1-3 determine the most…arrow_forwardIdentifying responsibility centers after decentralization Grandpa Jim’s Cookie Company sells homemade cookies made with organic ingredients. His sales are strictly Web based. The business is taking off more than Grandpa Jim ever expected, with orders coming from across the country from both consumers and corporate event planners. Grandpa decides to decentralize and hires a full-time baker who will manage production and product costs and a Web site designer/sales manager who will focus on increasing sales through the Web site. Grandpa Jim can no longer handle the business on his own, so he hires a business manager to work with the other employees to ensure the company is best utilizing its assets to produce profit. Grandpa will then have time to focus on new product development. Now that Grandpa Jim’s Cookie Company has decentralized, identify the type of responsibility center that each manager is managing.arrow_forward
- Refer to Exercise 8.29. Suppose Gene determines that next years Sales Division activities include the following: Researchresearching current and future conditions in the industry Shippingarranging for shipping of mattresses and handling calls from purchasing agents at retail stores to trace shipments and correct errors Jobberscoordinating the efforts of the independent jobbers who sell the mattresses Basic adsplacing print and television ads for the Sleepeze and Plushette lines Ultima adschoosing and working with the advertising agency on the Ultima account Office managementoperating the Sales Division office The percentage of time spent by each employee of the Sales Division on each of the above activities is given in the following table: Additional information is as follows: a. Depreciation on the office equipment belongs to the office management activity. b. Of the 21,000 for office supplies and other expenses, 5,000 can be assigned to telephone costs which can be split evenly between the shipping and jobbers activities. An additional 2,400 per year is attributable to Internet connections and fees, and the bulk of these costs (80 percent) are assignable to research. The remainder is a cost of office management. All other office supplies and costs are assigned to the office management activity. Required: 1. Prepare an activity-based budget for next year by activity. Use the expected level of sales activity. 2. On the basis of the budget prepared in Requirement 1, advise Gene regarding actions that might be taken to reduce expenses. Olympus, Inc., manufactures three models of mattresses: the Sleepeze, the Plushette, and the Ultima. Forecast sales for next year are 15,000 for the Sleepeze, 12,000 for the Plushette, and 5,000 for the Ultima. Gene Dixon, vice president of sales, has provided the following information: a. Salaries for his office (including himself at 65,000, a marketing research assistant at 40,000, and an administrative assistant at 25,000) are budgeted for 130,000 next year. b. Depreciation on the offices and equipment is 20,000 per year. c. Office supplies and other expenses total 21,000 per year. d. Advertising has been steady at 20,000 per year. However, the Ultima is a new product and will require extensive advertising to educate consumers on the unique features of this high-end mattress. Gene believes the company should spend 15 percent of first-year Ultima sales for a print and television campaign. e. Commissions on the Sleepeze and Plushette lines are 5 percent of sales. These commissions are paid to independent jobbers who sell the mattresses to retail stores. f. Last year, shipping for the Sleepeze and Plushette lines averaged 50 per unit sold. Gene expects the Ultima line to ship for 75 per unit sold since this model features a larger mattress. Required: 1. Suppose that Gene is considering three sales scenarios as follows: Prepare a revenue budget for the Sales Division for the coming year for each scenario. 2. Prepare a flexible expense budget for the Sales Division for the three scenarios above.arrow_forwardGoodwill Bobby’s Donuts Donuts & Coffee opened its doors in 2018 on the corner of Geary and Masonic St. in San Francisco, CA. Originally, the owners Lindsey Kline and Carly Repko had planned on catering to the small businesses in the neighborhood and keeping the business a fun side business to their main day jobs. However, soon they found themselves competing with the major local players including the downtown Donuts Shop and other local bakeries in the area. As part of their success, on December 31, 2018 they decided to purchase an existing local donut shop “Bobby’s Donuts” to further positon themselves in the local market. After the acquisition, Bobby’s Donuts continued to operate as a separate company and met the conditions of being a separate reporting unit. The consideration paid on December 31, 2018 directly to the shareholders of Bobby’s Donuts in exchange for all shares was $50,000. The following accounting facts existed at the time of acquisition: During 2019, a…arrow_forwardQuestion 17 Home Builder Supply, a retailer in the home improvement industry, currently operates seven retail outlets in Georgia and South Carolina. Management is contemplating building an eighth retail store across town from its most successful retail outlet. The company already owns the land for this store, which currently has an abandoned warehouse located on it. Last month, the marketing department spent $15,000 on market research to determine the extent of customer demand for the new store. Now Home Builder Supply must decide whether to build and open the new store. Which of the following should be included as part of the incremental earnings for the proposed new retail store? a. The original purchase price of the land where the store will be located. b. The cost of demolishing the abandoned warehouse and clearing the lot. c. The loss of sales in the existing retail outlet, if customers who previously drove across town to shop at the existing outlet become customers of…arrow_forward
- Refer to Exercise 10.7 for data. At the end of Year 2, the manager of the Houseware Division is concerned about the divisions performance. As a result, he is considering the opportunity to invest in two independent projects. The first is called the Espresso-Pro; it is an in-home espresso maker that can brew regular coffee as well as make espresso and latte drinks. While the market for espresso drinkers is small initially, he believes this market can grow, especially around gift-giving occasions. The second is the Mini-Prep appliance that can be used to do small chopping and dicing chores that do not require a full-sized food processor. Without the investments, the division expects that Year 2 data will remain unchanged. The expected operating incomes and the outlay required for each investment are as follows: Jarriots corporate headquarters has made available up to 500,000 of capital for this division. Any funds not invested by the division will be retained by headquarters and invested to earn the companys minimum required rate of return, 9 percent. Required: 1. Compute the ROI for each investment. 2. Compute the divisional ROI (rounded to four significant digits) for each of the following four alternatives: a. The Espresso-Pro is added. b. The Mini-Prep is added. c. Both investments are added. d. Neither investment is made; the status quo is maintained. Assuming that divisional managers are evaluated and rewarded on the basis of ROI performance, which alternative do you think the divisional manager will choose?arrow_forwardAssume that you are the division controller for Auntie M’s Cookie Company. Auntie M has introduced a new chocolate chip cookie called Full of Chips, and it is a success. As a result, the product manager responsible for the launch of this new cookie was promoted to division vice president and became your boss. A new product manager, Bishop, has been brought in to replace the promoted manager. Bishop notices that the Full of Chips cookie uses a great deal of chips, which increases the cost of the cookie. As a result, Bishop has ordered that the amount of chips used in the cookies be reduced by 10%. The manager believes that a 10% reduction in chips will not adversely affect sales but will reduce costs and, hence, improve margins. The increased margins would help Bishop meet profit targets for the period. You are looking over some cost of production reports segmented by cookie line. You notice that there is a drop in the materials costs for Full of Chips. On further investigation, you…arrow_forwardAssume you are the division controller for Auntie M’s Cookie Company. Auntie M has introduced a new chocolate chip cookie called Full of Chips, and it is a success. As a result, the product manager responsible for the launch of this new cookie was promoted to division vice president and became your boss. A new product manager, Bishop, has been brought in to replace the promoted manager. Bishop notices that the Full of Chips cookie uses a lot of chips, which increases the cost of the cookie. As a result, Bishop has ordered that the number of chips used in the cookies be reduced by 10%. The manager believes that a 10% reduction in chips will not adversely affect sales, but will reduce costs, and hence improve margins. The increased margins would help Bishop meet profit targets for the period and because Bishop is in line for a big promotion, he believes that by achieving these higher sales, he will fare better for a promotion. To confirm, Bishop has enlisted you to help evaluate it.…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
Essentials of Business Analytics (MindTap Course ...StatisticsISBN:9781305627734Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. AndersonPublisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
College Accounting (Book Only): A Career ApproachAccountingISBN:9781337280570Author:Scott, Cathy J.Publisher:South-Western College Pub
Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
Financial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Essentials of Business Analytics (MindTap Course ...
Statistics
ISBN:9781305627734
Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
College Accounting (Book Only): A Career Approach
Accounting
ISBN:9781337280570
Author:Scott, Cathy J.
Publisher:South-Western College Pub
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Financial And Managerial Accounting
Accounting
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:Cengage Learning,
Elements of cost | Direct and Indirect: Material, Labor, & Expenses; Author: Educationleaves;https://www.youtube.com/watch?v=UFBaj6AHjHQ;License: Standard youtube license