Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN: 9781305970663
Author: Don R. Hansen, Maryanne M. Mowen
Publisher: Cengage Learning
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Chapter 3, Problem 2CE
Corazon Manufacturing Company has a purchasing department staffed by five purchasing agents. Each agent is paid $28,000 per year and is able to process 4,000 purchase orders. Last year, 17,800 purchase orders were processed by the five agents.
Required:
- 1. Calculate the activity rate per purchase order.
- 2. Calculate, in terms of purchase orders, the:
- a. total activity availability
- b. unused capacity
- 3. Calculate the dollar cost of:
- a. total activity availability
- b. unused capacity
- 4. Express total activity availability in terms of activity capacity used and unused capacity.
- 5. What if one of the purchasing agents agreed to work half time for $14,000? How many purchase orders could be processed by four and a half purchasing agents? What would unused capacity be in purchase orders?
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Corazon Manufacturing Company has a purchasing department staffed by five purchasingagents. Each agent is paid $28,000 per year and is able to process 4,000 purchase orders. Lastyear, 17,800 purchase orders were processed by the five agents.Required:1. Calculate the activity rate per purchase order.2. Calculate, in terms of purchase orders, the:a. total activity availabilityb. unused capacity3. Calculate the dollar cost of:a. total activity availabilityb. unused capacity4. Express total activity availability in terms of activity capacity used and unused capacity.
5. What if one of the purchasing agents agreed to work half time for $14,000? How many pur-chase orders could be processed by four and a half purchasing agents? What would unused
capacity be in purchase orders?
Caldwell Supply, a wholesaler, has determined that its operations have three primary activities: purchasing, warehousing, and distributing. The firm reports the following operating data for the year just completed:
Activity
Cost Driver
Quantity of Cost Driver
Cost per Unit of Cost Driver
Purchasing
Number of purchase orders
1,060
$156 per order
Warehousing
Number of moves
8,600
$36 per move
Distributing
Number of shipments
560
$86 per shipment
Caldwell buys 100,600 units at an average unit cost of $16 and sells them at an average unit price of $26. The firm also has fixed operating costs of $250,600 for the year.
Caldwell’s customers are demanding a 16% discount for the coming year. The company expects to sell the same amount if the demand for price reduction can be met. Caldwell’s suppliers, however, are willing to give only a 10% discount.
Required:Caldwell has estimated that it can reduce the number of purchase orders to 740 and can…
The production department of a company requires 3,600 kg of raw material for manufacturing a particular item per year. It has been estimated that the cost of placing an order is Rs 36 and the cost of carrying inventory is 25 per cent of the investment in the inventories. The price is Rs 10 per kg. Help the purchase manager to determine: (1) The optimal lot size. (ii) The optimal order cycle time Per year minimum total inventory variable cost Per year minimum total inventory cost (iii) (iv)
Chapter 3 Solutions
Cornerstones of Cost Management (Cornerstones Series)
Ch. 3 - Why is knowledge of cost behavior important for...Ch. 3 - How does the length of the time horizon affect the...Ch. 3 - Prob. 3DQCh. 3 - What is the relationship between flexible...Ch. 3 - What is the relationship between committed...Ch. 3 - Describe the difference between a variable cost...Ch. 3 - Why do mixed costs pose a problem when it comes to...Ch. 3 - Why is a scattergraph a good first step in...Ch. 3 - What are the advantages of the scatterplot method...Ch. 3 - Prob. 10DQ
Ch. 3 - What is meant by the best-fitting line? Is the...Ch. 3 - When is multiple regression required to explain...Ch. 3 - Explain the meaning of the learning curve. How do...Ch. 3 - Assume you are the manager responsible for...Ch. 3 - Some firms assign mixed costs to either the fixed...Ch. 3 - Callies Gym is a complete fitness center. Owner...Ch. 3 - Corazon Manufacturing Company has a purchasing...Ch. 3 - Darnell Poston, owner of Poston Manufacturing,...Ch. 3 - Dohini Manufacturing Company had the following 12...Ch. 3 - Refer to Cornerstone Exercise 3.4 for data on...Ch. 3 - The controller for Dohini Manufacturing Company...Ch. 3 - Prob. 7CECh. 3 - State Universitys football team just received a...Ch. 3 - Classify the following costs of activity inputs as...Ch. 3 - SmokeCity, Inc., manufactures barbeque smokers....Ch. 3 - Cashion Company produces chemical mixtures for...Ch. 3 - For the following activities and their associated...Ch. 3 - Prob. 13ECh. 3 - Vargas, Inc., produces industrial machinery....Ch. 3 - Penny Davis runs the Shear Beauty Salon near a...Ch. 3 - Shirrell Blackthorn is the accountant for several...Ch. 3 - Deepa Dalal opened a free-standing radiology...Ch. 3 - Prob. 18ECh. 3 - The controller of the South Charleston plant of...Ch. 3 - Lassiter Company used the method of least squares...Ch. 3 - Sweet Dreams Bakery was started five years ago by...Ch. 3 - Ginnian and Fitch, a regional accounting firm,...Ch. 3 - Bordner Company manufactures HVAC (heating,...Ch. 3 - Sharon Glessing, controller for Janson Company,...Ch. 3 - The graphs below represent cost behavior patterns...Ch. 3 - Starling Co. manufactures one product with a...Ch. 3 - Alard Manufacturing Company has a billing...Ch. 3 - Prob. 28ECh. 3 - Prob. 29ECh. 3 - Natur-Gro, Inc., manufactures composters. Based on...Ch. 3 - Rolertyme Company manufactures roller skates. With...Ch. 3 - St. Teresas Medical Center (STMC) offers a number...Ch. 3 - Big Mikes, a large hardware store, has gathered...Ch. 3 - Kimball Company has developed the following cost...Ch. 3 - The management of Wheeler Company has decided to...Ch. 3 - DeMarco Company is developing a cost formula for...Ch. 3 - Weber Valley Regional Hospital has collected data...Ch. 3 - Friendly Bank is attempting to determine the cost...Ch. 3 - Randy Harris, controller, has been given the...Ch. 3 - The Lockit Company manufactures door knobs for...Ch. 3 - Harriman Industries manufactures engines for the...Ch. 3 - Thames Assurance Company sells a variety of life...
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