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business
horngrens cost accounting a managerial emphasis
Questions and Answers of
Horngrens Cost Accounting A Managerial Emphasis
=+16-21 K Non-financial quality measures, on-time delivery OBJECTIVES 2, 4 Snappy Pizza promises to deliver pizzas in 25 minutes or less. If pizzas are not delivered on time, then the customer
=+2 Suppose the estimate of 140 additional printing presses sold is uncertain. What is the minimum number of additional printing presses that Anyprint needs to sell to justify adopting the new
=+Anyprint’s current presses have a quality problem that causes variations in the shade of some colours. Its engineers suggest changing a key component in each press. The new component will cost
=+16-20 KK Quality improvement, relevant costs, relevant revenues OBJECTIVE 4 Anyprint Ltd manufactures and sells 18000 high-technology printing presses each year. The variable and fixed costs of
=+what is included in each time measurement—see Figure 16-6, p. 633.)
=+4 Sphere Ltd is considering how to motivate workers to improve their productivity (output per hour). One proposal is to evaluate and compensate workers in the manufacturing and installation
=+3 Why would manufacturing lead time have increased while customer response time decreased? (It may be useful to describe first
=+2 Referring to the information calculated in requirement 1, explain whether RMPL’s quality and timeliness have improved.
=+d manufacturing lead time as a percentage of total time from order to delivery.
=+c percentage of units reworked during production
=+b customer complaints as a percentage of units shipped Chapter 16: Balanced scorecard: quality, time and the theory of constraints 645 M16_HORN3377_02_LT_C16.indd 645 2/09/13 3:59 PM
=+a percentage of defective units shipped
=+3 A new installation technique has been developed that will enable Sphere Ltd’s engineers to install seven additional units of equipment a year. The new method will increase installation costs by
=+16-19 KK Non-financial measures of quality and time OBJECTIVES 2, 4 Roman Mobile Phones Ltd (RMPL) has developed a mobile phone that can be used anywhere in the world (even in countries like Japan
=+4 Are there any other costs or benefits that Cosy Capsule should consider?
=+3 Cosy Capsule has decided not to increase the quality of the plastic because the cost of increasing the quality exceeds the benefits(saving the cost of lawsuits). What do you think of this
=+2 What will be the total cost of the lawsuits next year if the problem is not corrected?
=+2 Sphere Ltd’s designers have proposed a change in direct materials that would increase direct materials costs by $3000 per unit. This change would enable Sphere Ltd to install 280 units of
=+16-18 K Costs of quality, ethical considerations (continuation of 16-17) OBJECTIVES 2, 4 Cosy Capsule has discovered a more serious problem with the plastic core of its car seats. An accident can
=+7 What factors other than cost should Cosy Capsule consider before changing inspection techniques?
=+6 Cosy Capsule is concerned with the high up-front cost of inspecting all 250000 units. It is considering an alternative internal inspection plan that will cost only $1.00 per car seat inspected.
=+5 What are the total costs of quality?
=+4 Determine the opportunity cost associated with the external failures.
=+3 Calculate the out-of-pocket external failure cost.
=+16-34 K Theory of constraints, throughput contribution, relevant costs OBJECTIVES 3, 5 Sphere Ltd manufactures electronic testing equipment. Sphere Ltd also installs the equipment at customers’
=+2 Calculate the internal failure cost.
=+16-17 K Costs of quality analysis OBJECTIVE 2 Cosy Capsule produces car seats for children from newborn to two years old. The company is worried because one of its competitors has recently come
=+3 Based on the 2012 survey, Amy Morrison believed that Access Ltd had to improve product quality. In making her case to management, how might Amy have estimated the opportunity cost of not
=+2 Based on the results of requirement 1, would you conclude that Access Ltd’s quality program has been successful? Prepare a short report to present your case.
=+16-16 KK Costs of quality (CMA, adapted) OBJECTIVE 2 Access Ltd produces mobile phone equipment. Amy Morrison, Access Ltd’s chief executive officer, decided to devote more resources to the
=+16-15 Describe three ways to improve the performance of a bottleneck operation.
=+16-14 Describe the four key steps in managing bottleneck operations.
=+16-13 Describe the three main measures used in the theory of constraints.
=+16-12 ‘Companies should always make and sell all products whose selling prices exceed variable costs.’ Assuming fixed costs are irrelevant, do you agree? Explain.
=+16-11 ‘There is no trade-off between customer response time and on-time performance.’ Do you agree? Explain.
=+16-10 Distinguish between customer response time and manufacturing lead time.
=+16-9 Explain the difference between internal appraisal and internal failure.
=+3 What other factors should Guardian Ltd consider in choosing between the alternatives in requirement 2?650 Chapter 16: Balanced scorecard: quality, time and the theory of constraints
=+16-8 Give two examples of non-financial measures of internal-business-process quality in a balanced scorecard.
=+16-7 Give two examples of non-financial measures of customer satisfaction relating to quality in a balanced scorecard.
=+16-6 ‘Companies should focus on financial measures of quality because these are the only measures of quality that can be linked to bottom-line performance.’ Do you agree? Explain.
=+16-5 Describe three methods that companies use to identify quality problems.
=+16-4 Distinguish between internal failure costs and external failure costs.
=+16-3 Name two items classified as prevention costs.
=+16-2 Explain the difference between conformance quality and design quality.
=+16-1 The benefits from improving quality always exceed the costs. Do you agree? Explain.
=+2 Sloan Moving is confident about the cost savings from fewer lost or damaged cartons as a result of introducing the new system. Calculate the minimum amount of increase in revenues needed for
=+8 FastTrack Management Roundtable 2004, ‘The Bell Group Uses the Balanced Scorecard with the Theory of Constraints to Keep Sloan Moving expects each percentage point increase in on-time
=+2 Even though A3 has a positive contribution margin, Guardian Ltd’s managers are evaluating whether it should make and sell:(a) only B7 or (b) both B7 and A3. Which proposal will maximise
=+Current performance Expected future performance On-time delivery performance 85% 95%Variable cost per carton lost or damaged $60 $60 Fixed cost per carton lost or damaged $40 $40 Number of cartons
=+Sloan Moving Ltd transports household goods from one city to another within Australia. It measures quality of service in terms of: (a) time required to transport goods; (b) on-time delivery (within
=+What are the steps managers can take to manage bottlenecks?
=+What is customer response time? What are the reasons for and the costs of delays?
=+16-33 KKK Manufacturing lead times, relevant revenues, relevant costs OBJECTIVES 2, 3 Guardian Ltd makes wire harnesses for the aircraft industry. Guardian Ltd is uncertain about when and how many
=+How do managers identify the relevant costs and benefits of quality-improvement programs and use financial and non-financial measures to evaluate quality?
=+What non-financial quality measures of customer satisfaction can managers use in their balanced scorecards?
=+2 Should Highspin Ltd manufacture and sell RAM if the data in Problem 16-31 are changed as follows: selling price per order is$6400, instead of $8400, if average manufacturing lead time per order
=+16-32 KKK Waiting times, relevant revenues, relevant costs (continuation of 16-31) OBJECTIVES 2, 3 Highspin Ltd is still deciding whether it should introduce RAM. The following table provides
=+2 Highspin Ltd is considering introducing a new product, RAM. It expects it will receive 25 orders of RAM (each order for 200 units)in the coming year. Each order of RAM will take 20 hours of
=+◗ direct materials and direct rework labour (variable costs)—$3 per unit◗ fixed costs of equipment, rent and overhead allocation—$4 per unit.Lomax Ltd’s process designers have developed a
=+5 Explain how to manage bottlenecks
=+(row 6 ÷ row 5) $4 000 $4 100 Software-implementation labour-hour costs are variable costs. Software-implementation support costs for each year depend on the software-implementation support
=+5 Manufacturing capacity in units of D4H 250 250 6 Total conversion costs $2 000 000 $2 025 000
=+15-22 K Strategy, balanced scorecard OBJECTIVES 1, 3 Winslow Ltd makes a special-purpose machine, D4H, used in the textile industry. Winslow Ltd has designed the D4H machine for 2015 to be distinct
=+3 What factors, other than cost, should Montville consider before it downsizes administrative capacity?
=+2 Suppose Montville can only add or reduce administrative capacity in increments of 250 customers. What is the maximum amount of costs that Montville can save in 2015 by downsizing administrative
=+15-21 K Identifying and managing unused capacity (continuation of 15-18) OBJECTIVE 6 Refer to Exercise 15-18.Required 1 Calculate the amount and cost of: (a) unused administrative capacity and (b)
=+How successful has Montville been in implementing its strategy? Explain.
=+15-20 KK Analysis of growth, price-recovery and productivity components (continuation of 15-19)Refer to Exercise 15-19. Suppose that the market for silk-screened T-shirts grew by 10% during 2015.
=+3 Comment on your answers in requirement 2. What do each of these components indicate?
=+15-19 KK Strategic analysis of operating profit (continuation of 15-18) OBJECTIVE 4 Refer to Exercise 15-18.Required 1 Calculate Montville’s operating profit in both 2014 and 2015.
=+2 Describe briefly the key elements Montville should include in its balanced scorecard and the reasons it should do so.
=+M15_HORN3377_02_LT_C15.indd 612 2/09/13 3:56 PM Administrative costs depend on the number of customers that Montville has created capacity to support, not on the actual number of customers served.
=+15-18 KKK Strategy, balanced scorecard, merchandising operation OBJECTIVES 1, 3 Montville Ltd buys T-shirts in bulk, applies its own trendsetting silk-screen designs and then sells the T-shirts to
=+2 Explain the productivity component. In general, does it represent savings in only variable costs, only fixed costs, or both variable and fixed costs?
=+15-17 KK Analysis of growth, price-recovery and productivity components (continuation of 15-16)OBJECTIVE 4 An analysis of Corrugation’s operating profit changes between 2014 and 2015 shows the
=+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
=+6 Total cost of software-implementation support $360 000 $369 000 7 Software-implementation support-capacity cost per unit of work
=+5 Software-implementation support capacity (in number of jobs) 90 90
=+3 Software-implementation labour-hours 30 000 32 000 4 Cost per software-implementation labour-hour $60 $63
=+2014 2015 1 Number of jobs billed 60 70 2 Selling price per job $50 000 $48 000
=+15-26 K Strategy, balanced scorecard, service company OBJECTIVES 1, 3 Bytes Ltd is a small information-systems consulting firm that specialises in helping companies implement sales-management
=+3 Winslow Ltd, in fact, does not eliminate any of its unused manufacturing capacity. Why might Winslow Ltd not downsize?
=+2 Suppose Winslow Ltd can add or reduce its manufacturing capacity in increments of 30 units. What is the maximum amount of costs that Winslow could save in 2015 by downsizing manufacturing
=+15-25 K Identifying and managing unused capacity (continuation of 15-22) OBJECTIVE 6 Refer to Exercise 15-22.Required 1 Calculate the amount and cost of: (a) unused manufacturing capacity and (b)
=+b the weighted Shapley value method assuming that lodging is three times as likely to sell as the food.
=+a the Shapley value method
=+3 Because the recreation division is able to hire out the full capacity (100%) of the golf course, the company CEO has decided to revise the getaway package to include only the lodging and food
=+2 What are the pros and cons of the two methods in requirement 1?
=+b the incremental revenue-allocation method (with Recreation first, then Lodging and then Food).
=+15-24 KK Analysis of growth, price-recovery and productivity components (continuation of 15-23)OBJECTIVE 4 Suppose that during 2015, the market for Winslow’s special-purpose machines grew by 3%.
=+Liz Maher, chief executive officer of the Recreation Division, recently asked the CEO of Shangri-La how her division would share in the$1000 revenue from the package. The golf course was operating
=+Two nights’ stay for two in an ocean-view room $800 ($400 per night)Two rounds of golf (can be used by either guest) $375 ($187.50 per round)Candlelight dinner for two at its finest restaurant
=+13-39 KK Revenue allocation, bundled products OBJECTIVE 7 Shangri-La operates a five-star hotel with a world-recognised championship golf course. Shangri-La has a decentralised management
=+2 Assume that all of the work of the IT department could be outsourced to an independent company for $97.50 per hour.If Gladiator Ltd no longer operated its own IT department, 30% of the fixed
=+1 What are the total costs of the production departments (clothing and shoes) after the support-department costs of information technology and human resources have been allocated using:a the direct
=+Information Technology: Number of IT labour-hours worked by department Human Resources: Number of employees supported by department Data on the bases, by department, are given as follows:Department
=+13-38 KK Support-department cost allocations; single-department cost pools; direct, step-down and reciprocal methods OBJECTIVE 3 Gladiator Ltd manufactures athletic shoes and athletic clothing for
=+4 Which basis of allocation makes the most sense in this situation? Explain your answer.
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