(a)
Concept introduction:
Sustainability Standards:
These standards define characteristics of a provided organization that focuses on the environmental performance and set a benchmark for them. Nowadays, it is usually preferred to adopt the sustainability related measures.
To compute:
The annual savings in direct raw material.
(b)
Concept introduction:
Sustainability Standards:
These standards define characteristics of a provided organization that focuses on the environmental performance and set a benchmark for them. Nowadays, it is usually preferred to adopt the sustainability related measures.
To compute:
The economic benefit other than the direct material cost savings.
(c)
Concept introduction:
Sustainability Standards:
These standards define characteristics of a provided organization that focuses on the environmental performance and set a benchmark for them. Nowadays, it is usually preferred to adopt the sustainability related measures.
Themeaning of double-bottom line and triple-bottom line.
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Managerial Accounting
- Bienestar, Inc., has two plants that manufacture a line of wheelchairs. One is located in Kansas City, and the other in Tulsa. Each plant is set up as a profit center. During the past year, both plants sold their tilt wheelchair model for 1,620. Sales volume averages 20,000 units per year in each plant. Recently, the Kansas City plant reduced the price of the tilt model to 1,440. Discussion with the Kansas City manager revealed that the price reduction was possible because the plant had reduced its manufacturing and selling costs by reducing what was called non-value-added costs. The Kansas City manufacturing and selling costs for the tilt model were 1,260 per unit. The Kansas City manager offered to loan the Tulsa plant his cost accounting manager to help it achieve similar results. The Tulsa plant manager readily agreed, knowing that his plant must keep pacenot only with the Kansas City plant but also with competitors. A local competitor had also reduced its price on a similar model, and Tulsas marketing manager had indicated that the price must be matched or sales would drop dramatically. In fact, the marketing manager suggested that if the price were dropped to 1,404 by the end of the year, the plant could expand its share of the market by 20 percent. The plant manager agreed but insisted that the current profit per unit must be maintained. He also wants to know if the plant can at least match the 1,260 per-unit cost of the Kansas City plant and if the plant can achieve the cost reduction using the approach of the Kansas City plant. The plant controller and the Kansas City cost accounting manager have assembled the following data for the most recent year. The actual cost of inputs, their value-added (ideal) quantity levels, and the actual quantity levels are provided (for production of 20,000 units). Assume there is no difference between actual prices of activity units and standard prices. Required: 1. Calculate the target cost for expanding the Tulsa plants market share by 20 percent, assuming that the per-unit profitability is maintained as requested by the plant manager. 2. Calculate the non-value-added cost per unit. Assuming that non-value-added costs can be reduced to zero, can the Tulsa plant match the Kansas City per-unit cost? Can the target cost for expanding market share be achieved? What actions would you take if you were the plant manager? 3. Describe the role that benchmarking played in the effort of the Tulsa plant to protect and improve its competitive position.arrow_forwardYtze Inc. manufactures bath cubicles. The following activity information is available for its cubicles: Management is looking to remove $7.00 of activity cost from the product in order to make the price more competitive. Assume the process improvement is put in place such assembly as well as setup required one-fourth less time to complete per unit. Based on the data, identify the correct statement. a. These process improvements reduced the activity cost of each battery from $49.00 to $43.00, or $6, thus not exceeding the $7.00 target. b. These process improvements reduced the activity cost of each battery from $49.00 to $44.00, or $5, thus not exceeding the $7.00 target. c. These process improvements reduced the activity cost of each battery from $49.00 to $42.00, or $7, thus exceeding the $7.00 target. d. These process improvements reduced the activity cost of each battery from $49.00 to $41.00, or $8, thus exceeding the $7.00 target.arrow_forward(Note: This type of decision is similar to dropping a product line.) Nicholas Company manufactures a fast-bonding glue, normally producing and selling 56,000 litres of the glue each month. This glue, which is known as MJ-7, is used in the wood industry to manufacture plywood. The selling price of MJ-7 is $55 per litre, variable costs are $33 per litre, fixed manufacturing overhead costs in the plant total $322,000 per month, and the fixed selling costs total $431,200 per month. Strikes in the mills that purchase the bulk of the MJ-7 glue have caused Nicholas Company's sales to temporarily drop to only 14,000 litres per month. Nicholas Company's management estimates that the strikes will last for two months, after which sales of MJ-7 should return to normal. Due to the current low level of sales, Nicholas Company's management is thinking about closing down the plant during the strike. If Nicholas Company does close down the plant, fixed manufacturing overhead costs can be reduced by…arrow_forward
- Before booth company has the chance to implement of the new raw material, new industry specifications were announced and result in the following changes for the Booth Company. Variable costs will increase by 15% per unit and fixed costs will increase by $46,000. Management feels that a $3 per unit price increase is needed to accommodate the cost increases. However, this will result in a 10% decrease in units sold. Prepare a CVP income statement assuming these changes have been made.arrow_forwardCost of qualityElijah Electronics makes wireless headphone sets. The firm produced 76,500 wireless headphone sets during its first year of operation. At year-end, it had no inventory of finished goods. Elijah sold 71,910 units through regular market channels, but 765 of the units produced were so defective that they had to be sold as scrap. The remaining units were reworked and sold as seconds. For the year, the firm spent $408,000 on prevention costs and $204,000 on quality appraisal. There were no customer returns. An income statement for the year follows. Sales Regular channel $14,382,000 Seconds 363,375 Scrap 26,775 $14,772,150 Cost of goods sold Original production costs $4,889,880 Rework costs 107,100 Quality prevention and appraisal 612,000 $5,608,980 Gross margin $9,163,170 Selling and administrative expenses (all fixed) 2,499,000 Profit before income taxes $6,664,170 a. Compute the total pre-tax profit lost by the company in…arrow_forwardLuke Corporation produces a variety of products, each within their own division. Last year, the managers at Luke developed and began marketing a new chewing gum, Bubbs, to sell in vending machines. The product, which sells for $5.25 per case, has not had the market success that managers expected and the company is considering dropping Bubbs. The product-line income statement for the past 12 months follows: Revenue $ 14,682,150 Costs Manufacturing costs $ 14,440,395 Allocated corporate costs (@5%) 734,108 15,174,503 Product-line margin $ (492,353 ) Allowance for tax (@20%) 98,470 Product-line profit (loss) $ (393,883 ) All products at Luke receive an allocation of corporate overhead costs, which is computed as 5 percent of product revenue. The 5 percent rate is…arrow_forward
- Cost of qualityElijah Electronics makes wireless headphone sets. The firm produced 58,500 wireless headphone sets during its first year of operation. At year-end, it had no inventory of finished goods. Elijah sold 54,990 units through regular market channels, but 585 of the units produced were so defective that they had to be sold as scrap. The remaining units were reworked and sold as seconds. For the year, the firm spent $312,000 on prevention costs and $156,000 on quality appraisal. There were no customer returns. An income statement for the year follows. Sales Regular channel $10,998,000 Seconds 277,875 Scrap 20,475 $11,296,350 Cost of goods sold Original production costs $3,739,320 Rework costs 81,900 Quality prevention and appraisal 468,000 $4,289,220 Gross margin $7,007,130 Selling and administrative expenses (all fixed) 1,911,000 Profit before income taxes $5,096,130 a. Compute the total pre-tax profit lost by the company in…arrow_forwardHH Co. uses corrugated cardboard to ship its product to customers. Currently, the company’s returns department incurs annual overhead costs of $72,000 and forecasts 2,000 returns per year. Management believes it has found a better way to package its products. As a result, the company expects to reduce the number of shipments that are returned due to damage by 5%. In addition, the initiative is expected to reduce the department’s annual overhead by $12,000. Compute the returns department’s standard overhead rate per return (a) before the sustainability improvement and (b) after the sustainability improvement. Round to the nearest cent.arrow_forwardBramble Manufacturing produces basketballs used for indoor and outdoor games. The company has had significant troubles over the past few years, as the number of competitors in the basketball market has increased dramatically. Recently, the company was forced to cut back production in order to reduce its rising inventory level. The following is a list of costs for the company in 2022: Variable costs per unit Rubber $2.85 Other materials—indirect 1.30 Ball makers—direct labour 5.50 Factory electricity usage 0.40 Factory water usage 0.15 Other labour—indirect 0.27 Selling and administrative expenses 0.40 Fixed costs per year Factory property taxes $129,600 Factory sewer usage 54,000 Factory electricity usage 43,200 Selling and administrative expenses 89,640 Bramble Manufacturing had an ending inventory of 91,800 basketballs in 2021. For these units, the fixed…arrow_forward
- Luke Corporation produces a variety of products, each within their own division. Last year, the managers at Luke developed and began marketing a new chewing gum, Bubbs, to sell in vending machines. The product, which sells for $5.25 per case, has not had the market success that managers expected and the company is considering dropping Bubbs. The product-line income statement for the past 12 months follows: Revenue $ 14,682,150 Costs Manufacturing costs $ 14,440,395 Allocated corporate costs (@5%) 734,108 15,174,503 Product-line margin $ (492,353 ) Allowance for tax (@20%) 98,470 Product-line profit (loss) $ (393,883 ) All products at Luke receive an allocation of corporate overhead costs, which is computed as 5 percent of product revenue. The 5 percent rate is computed based on the most recent year’s corporate cost as a percentage of revenue. Data on corporate costs and revenues for the past…arrow_forwardLuke Corporation produces a variety of products, each within their own division. Last year, the managers at Luke developed and began marketing a new chewing gum, Bubbs, to sell in vending machines. The product, which sells for $6.25 per case, has not had the market success that managers expected and the company is considering dropping Bubbs. The product-line income statement for the past 12 months follows: Revenue $ 14,712,150 Costs Manufacturing costs $ 14,450,395 Allocated corporate costs (@5%) 735,608 15,186,003 Product-line margin $ (473,853 ) Allowance for tax (@20%) 94,770 Product-line profit (loss) $ (379,083 ) All products at Luke receive an allocation of corporate overhead costs, which is computed as 5 percent of product revenue. The 5 percent rate is computed based on the most recent year’s corporate cost as a percentage of revenue. Data on corporate costs and revenues for…arrow_forwardBramble Manufacturing produces basketballs used for indoor and outdoor games. The company has had significant troubles over the past few years, as the number of competitors in the basketball market has increased dramatically. Recently, the company was forced to cut back production in order to reduce its rising inventory level. The following is a list of costs for the company in 2022: Variable costs per unit Rubber $2.85 Other materials—indirect 1.30 Ball makers—direct labour 5.50 Factory electricity usage 0.40 Factory water usage 0.15 Other labour—indirect 0.27 Selling and administrative expenses 0.40 Fixed costs per year Factory property taxes $129,600 Factory sewer usage 54,000 Factory electricity usage 43,200 Selling and administrative expenses 89,640 Bramble Manufacturing had an ending inventory of 91,800 basketballs in 2021. For these units, the fixed…arrow_forward
- Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning