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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Chapter 6, Problem 6.47P
Kaizen budgeting for carbon emissions. Apex Chemical Company currently operates three manufacturing plants in Colorado, Utah, and Arizona. Annual carbon emissions for these plants in the first quarter of 2018 are 125,000 metric tons per quarter (or 500,000 metric tons in 2018). Apex management is investigating improved manufacturing techniques that will reduce annual carbon emissions to below 475,000 metric tons so that the company can meet Environmental Protection Agency guidelines by 2019. Costs and benefits are as follows:
| Total cost to reduce carbon emissions | $10 per metric ton reduced in 2019 below 500,000 metric tons |
| Fine in 2019 if EPA guidelines are not met | $300,000 |
Apex Management has chosen to use Kaizen budgeting to achieve its goal for carbon emissions.
- 1. If Apex reduces emissions by 1% each quarter, beginning with the second quarter of 2018, will the company reach its goal of 475,000 metric tons by the end of 2019?
- 2. What would be the net financial cost or benefit of their plan? Ignore the time value of money.
- 3. What factors other than cost might weigh into Apex’s decision to carry out this plan?
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. Apex Chemical Company currently operates three manufacturing plants in Colorado, Utah, and Arizona. Annual carbon emissions for these plants in the first quarter of 2018 are 125,000 metric tons per quarter (or 500,000 metric tons in 2018). Apex management is investigating improved manufacturing techniques that will reduce annual carbon emissions to below 475,000 metric tons so that the company can meet Environmental Protection Agency guidelines by 2019. Costs and benefits are as follows:
Total cost to reduce carbon emissions $10 per metric ton reduced in 2019 below 500,000 metric tons
Fine in 2019 if EPA guidelines are not met $300,000
Apex Management has chosen to use Kaizen budgeting to achieve its goal for carbon emissions.
Q.What factors other than cost might weigh into Apex’s decision to carry out this plan?
The company is planning to use a new material throughout 2023. This will reduce
variable costs by 10%. Fixed costs are expected to remain unchanged.
As the factory's output is nearing its annual output capacity of 38,000 units, the
company plans to increase the selling price by 5%. This will decrease sales volume by
20%.
Use cost-volume-profit analysis to determine whether the company should proceed
with the plan.
The Manufacturing Division of Ohio Vending Machine Company is considering its Toledo plant's request for a half-inch-capacity automatic screw-cutting machine to be included in the division's 2013 capital budget:1. Name of project: Mazda Automatic Screw Machine2. Project cost: $68,7013 Purpose of project: To reduce the cost of some of the parts that are nowbeing subcontracted by this plant, to cut down on inventory by shorteninglead time, and to better control the quality of the parts. The proposed equipment includes the following cost basis: 4. Anticipated savings: as shown in the accompanying table.5. Tax depreciation method: seven-year MACRS.6. Marginal tax rate: 40%.7 MARR: 15%.
(a) Determine the net after-tax cash flows over the project life of six years. Assume a salvage value of $3.500.(b) Is this project acceptable based on the PW criterion?(c) Determine the IRR for this investment.
Chapter 6 Solutions
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
Ch. 6 - What are the four elements of the budgeting cycle?Ch. 6 - Define master budget.Ch. 6 - Strategy, plans, and budgets are unrelated to ore...Ch. 6 - Budgeted performance is a better criterion than...Ch. 6 - Production managers and marketing managers are...Ch. 6 - Budgets meet the cost-benefit test. They force...Ch. 6 - Define rolling budget. Give an example.Ch. 6 - Outline the steps in preparing an operating...Ch. 6 - The sales forecast is the cornerstone for...Ch. 6 - Prob. 6.10Q
Ch. 6 - Define Kaizen budgeting.Ch. 6 - Prob. 6.12QCh. 6 - Explain how the choice of the type of...Ch. 6 - What are some additional considerations that arise...Ch. 6 - Prob. 6.15QCh. 6 - Master budget. Which of the following statements...Ch. 6 - Operating and financial budgets. Which of the...Ch. 6 - Production budget. Superior Industries sales...Ch. 6 - Responsibility centers. Elmhurst Corporation is...Ch. 6 - Cash budget. Mary Jacobs, the controller of the...Ch. 6 - Sales budget, service setting. In 2017 Hart Sons,...Ch. 6 - Sales and production budget. The Coby Company...Ch. 6 - Direct material budget. Dawson Co. produces wine....Ch. 6 - Material purchases budget. The McGrath Company has...Ch. 6 - Revenues, production, and purchases budgets. The...Ch. 6 - Revenues and production budget. Saphire, Inc.,...Ch. 6 - Budgeting; direct material usage, manufacturing...Ch. 6 - Budgeting, service company. Ever Clean Company...Ch. 6 - Budgets for production and direct manufacturing...Ch. 6 - Activity-based budgeting. The Jerico store of...Ch. 6 - Kaizen approach to activity-based budgeting...Ch. 6 - Responsibility and controllability. Consider each...Ch. 6 - Responsibility, controllability, and stretch...Ch. 6 - Cash flow analysis, sensitivity analysis....Ch. 6 - Budget schedules for a manufacturer. Hale...Ch. 6 - Budgeted costs, Kaizen improvements environmental...Ch. 6 - Revenue and production budgets. (CPA, adapted) The...Ch. 6 - Budgeted income statement. (CMA, adapted) Smart...Ch. 6 - Prob. 6.39PCh. 6 - Comprehensive problem with ABC costing. Animal...Ch. 6 - Cash budget (continuation of 6-40). Refer to the...Ch. 6 - Comprehensive operating budget. Skulas, Inc.,...Ch. 6 - Cash budgeting, budgeted balance sheet....Ch. 6 - Comprehensive problem; ABC manufacturing, two...Ch. 6 - Cash budget. (Continuation of 6-44) (Appendix)...Ch. 6 - Budgeting and ethics. Jayzee Company manufactures...Ch. 6 - Kaizen budgeting for carbon emissions. Apex...Ch. 6 - Comprehensive budgeting problem; activity-based...
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