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horngrens cost accounting a managerial emphasis

Questions and Answers of Horngrens Cost Accounting A Managerial Emphasis

=+2 Use the approach in Figure 20-2 (p. 769) to calculate the ROI of each division, incorporating current-cost estimates as of 2015 for depreciation expense and long-term assets. Comment on the
=+3 What advantages might arise from using current-cost asset measures as compared with historical-cost measures for evaluating the performance of the managers of the three divisions?
=+20-29 KKK Evaluating managers, ROI, DuPont method, value chain analysis of cost structure OBJECTIVE 3 Almond Phones Ltd is the largest mobile phone company in the world. The CEO of Almond Phones
=+2 Calculate the percentage of costs in each of the four business-function cost categories for Mobton and Connect in 2014 and 2015. Comment on the results.
=+3 Relate the results of requirements 1 and 2 to the comments made by the electronics magazine. Of Shelley McKay and Jayson Dren, whom would you suggest to be the new CEO of Almond Phones Ltd?788
=+20-30 K ROI, RI and multinational firms OBJECTIVES 3, 4, 7 Normandy Ltd has a division in Australia and another in Malaysia. The investment in the Malaysian assets was made when the exchange rate
=+2 What are the advantages and disadvantages of translating the Malaysian division information from ringgits to dollars?
=+20-31 KKK Multinational firms, differing risk, comparison of profit, ROI and RI OBJECTIVES 3, 4, 7 WhangZutz Multinational has divisions in Australia, Germany and New Zealand. The Australian
=+2 Calculate ROI using after-tax operating profit. Compare between divisions.
=+3 Use after-tax operating profit and the individual cost of capital of each division to calculate residual income, and compare.
=+4 Redo requirement 2 using pre-tax operating profit instead of net income. Why is there a big difference, and what does it mean for performance evaluation?
=+20-32 KKK ROI, RI, DuPont method, investment decisions, balanced scorecard OBJECTIVES 1, 3, 4 Gotcha Group is a private security company with operations in Australia and Malaysia. Summary financial
=+The two division managers’ annual bonuses are based on division ROI (defined as operating profit divided by total assets). If a division reports an increase in ROI from the previous year, its
=+2 Why might Janice Heap be less than enthusiastic about accepting the investment proposal for the new system, despite her belief in the benefits of the new technology?Chapter 20: Performance
=+3 Alma Ameries, CEO of Gotcha, is considering a proposal to base division executive compensation on division RI.
=+a Calculate the 2014 RI of each division.
=+b Would adoption of an RI measure reduce Janice Heaps’s reluctance to adopt the new computerised system investment proposal?
=+4 Alma Ameries is concerned that the focus on annual ROI could have an adverse long-run effect on Gotcha Group’s customers.What other measurements, if any, do you recommend that she use? Explain
=+20-33 KK Division managers’ compensation, levers of control (continuation of 20-32)OBJECTIVES 8, 9 Alma Ameries seeks your advice on revising the existing bonus plan for division managers of
=+2 Alma Ameries is concerned that the pressure for short-run performance may cause managers to cut corners. What systems might she introduce to avoid this problem? Explain briefly.
=+3 Alma Ameries is also concerned that the pressure for short-run performance might cause managers to ignore emerging threats and opportunities. What system might she introduce to prevent this
=+20-34 K Executive compensation, balanced scorecard OBJECTIVES 1, 8 Community Bank recently introduced a new bonus plan for its business unit executives. The company believes that current
=+2 What factors might explain the different improvement rates for net income and customer satisfaction in the three units?
=+3 Community Bank’s board of directors is concerned that the 2014 bonus awards may not actually reflect the executives’ overall performance. In particular, it is concerned that executives can
=+20-35 KK Ethics, manager’s performance evaluation (A. Spero, adapted) OBJECTIVES 8, 9 BioChips manufactures specialised chips for electronic devices that sell for $5.40 each. BioChips’s
=+2 Would it be unethical for Kelly Slatery, the general manager of BioChips, to produce more units than can be sold in order to show better operating results? Kelly’s compensation has a bonus
=+3 Would it be unethical for Kelly to ask distributors to buy more product than they need? BioChips follows the industry practice of booking sales when products are shipped to distributors and
=+20-36 K Ethics, levers of control (R. Madison, adapted, Strategic Finance, January 2000) OBJECTIVE 9 United Forest Products (UFP) is a large timber and wood processing plant. UFP’s performance
=+1 What should Amy Kimbell do?
=+2 Which lever of control is UFP emphasising? What changes, if any, should be made?
=+20-37 KKK ROI, RI, division manager’s compensation, balanced scorecard OBJECTIVES 1, 3, 4, 8 Key information for the Durban Division (DD) of Bloem Industries for 2014 follows:Revenues $11 000 000
=+DD’s managers are evaluated and rewarded on the basis of ROI defined as operating profit divided by total assets. Bloem expects its divisions to increase ROI each year.
=+Next year, 2015, appears to be a difficult year for DD. DD had planned a new investment to improve quality but, in view of poor economic conditions, has postponed the investment. ROI for 2015 was
=+2 a By how much would DD need to cut costs in 2015 to achieve its target ROI of 14%, assuming no change in total assets between 2014 and 2015?
=+b By how much would DD need to decrease total assets in 2015 to achieve its target ROI of 14%, assuming no change in operating profit between 2014 and 2015?
=+3 Calculate DD’s RI in 2014 assuming a required rate of return on investment of 11%.
=+4 DD wants to increase RI by 25% in 2015. Assuming it could cut costs by $25000 in 2015, by how much would DD need to decrease total assets in 2015?
=+5 Bloem Industries is concerned that the focus on cost cutting, asset sales and no new investments will have an adverse long-run effect on DD’s customers. Yet Bloem wants DD to meet its financial
=+4 If labour capacity in the semiconductor division were 60000 hours instead of 45000 hours, would you answer differently to requirement 3 above? Show your calculations.
=+3 What transfer price or range of prices, would ensure goal congruence among the division managers? Show your calculations.
=+2 The Process Control Division expects to sell 5000 process control units this year. From the viewpoint of AIC as a whole, should 5000 Super-chips be transferred to the Process Control Division to
=+A joint research project has just revealed that a single Super-chip could be substituted for the circuit board currently used to make the process control unit. Direct labour cost of the process
=+Annual overhead in the Semiconductor Division totals $400000, all fixed. Due to the high skill level necessary for the craftspeople, the Semiconductor Division’s capacity is set at 45000 hours
=+19-39 KKK Transfer pricing, utilisation of capacity (J. Patell, adapted) OBJECTIVES 7, 8 The Australian Instrument Company (AIC) consists of the Semiconductor Division and the Process Control
=+4 Assume that Jackson chooses to acquire Harvest Moon. What steps can Jackson take to improve goal congruence between store managers and the larger company?
=+3 Would stores in each chain be considered cost centres, revenue centres, profit centres or investment centres? How does that tie into the evaluation of store managers?
=+2 Would you describe Harvest Moon as having a centralised or decentralised structure? Discuss some of the benefits and costs of that type of structure.
=+19-38 K Benefits and costs of decentralisation OBJECTIVES 1, 2 Jackson Ltd, a chain of traditional supermarkets, is interested in gaining access to the organic and health food retail market by
=+3 The Fabrication Division manager suggests that $5.00 is now the market price for recycled sheet aluminium, and that this should be the new transfer price. Jupiter’s corporate management tends
=+2 Is the purchase in the best interest of Jupiter Ltd? Show you calculations. What is the cause of this goal incongruence?
=+Due to increased demand, the Fabrication Division expects to use 60000 kilograms of aluminium next month. Metalife Ltd, an outside manufacturer, has offered to sell 10000 kilograms of recycled
=+Aluminium is transferred from the Recycling Division to the Fabrication Division at 110% of full cost. The Recycling Division purchases recyclable aluminium for $0.50 per kilogram. The division’s
=+19-37 KK Transfer pricing, goal congruence, ethics OBJECTIVES 7, 8 Jupiter Ltd manufactures high-grade aluminium luggage made from recycled metal. The company operates two divisions: Metal
=+2 How would the management controls related to financial and customer perspectives at APL differ between the following three managers: a souvenir shop manager, a park general manager and the
=+19-36 K Evaluating management control systems, balanced scorecard OBJECTIVE 1 Adventure Parks Ltd (APL) operates 10 theme parks. The company’s slogan is ‘Name Your Adventure’, and its mission
=+3 Evaluate whether John Barnes’s comment to Shaun Horton about the variable cost of QT-12 is ethical. Would it be ethical for Shaun Horton to revise the variable cost per unit? What steps should
=+2 What cost-based transfer-price mechanism would you propose for QT-12? Explain briefly.
=+Upper management has asked the two departments to negotiate a transfer price for QT-12. The manager of Department A, John Barnes, is worried that Department B will insist on using variable cost as
=+19-35 K Transfer pricing, goal congruence, ethics OBJECTIVES 3, 5, 6, 7 Hearagain Ltd makes electronic hearing aids. Department A manufactures 10000 units of part QT-12 and Department B uses this
=+c Based on this exercise, at what price would you recommend the transfer price be set?
=+b Are these decisions optimal for Clarity Ltd as a whole?
=+4 Suppose that the transfer price is set to the minimum calculated in requirement 3 plus $2, and the division managers at Clarity Ltd are free to make their own profit-maximising sourcing and
=+3 What is the minimum transfer price per CD player at which the Compact Disc Division would be willing to transfer 20000 CD players to the Assembly Division?
=+Division sells 22000 CD players on the external market and the Assembly Division accepts Vertual Ltd’s offer at: (a) $44 per CD player or (b) $52 per CD player?
=+2 What are the incremental costs minus revenues from sales to external buyers for the company as a whole if the Compact Disc
=+The Compact Disc Division can manufacture at most 22000 CD players annually. It also manufactures as many additional head mechanisms as can be sold. The incremental cost of manufacturing the head
=+A critical component of the CD player is the head mechanism that reads the disc. To ensure the quality of its multisystem music players, Clarity Ltd requires that, if Vertual Ltd wins the contract
=+19-34 KK Transfer pricing, goal congruence OBJECTIVE 8 Clarity Ltd makes and sells 20000 multisystem music players each year. Its Assembly Division purchases components from other divisions of
=+d Suppose Romney Ltd wants to operate in a decentralised manner. What transfer price should Romney Ltd set for IP-2007 so that each division acting in its own best interest takes actions with
=+c Will the Nept Division want to accept this special order? Explain.
=+b Will the Pluto Division want the Nept Division to accept this special order? Why or why not?
=+a Will accepting the special order maximise after-tax operating profit for Romney Ltd as a whole?
=+3 Suppose Romney Ltd uses the transfer price from requirement 2, and each division is evaluated on its own after-tax division operating profit. Now suppose the Nept Division has an opportunity to
=+2 What transfer price would minimise income taxes for Romney Ltd as a whole? Would the Nept and Pluto Divisions want to be evaluated on operating profit using this transfer price?
=+19-33 KKK International transfer pricing, taxes, goal congruence OBJECTIVES 3, 4, 8 The Pluto Division of Romney Ltd is located in Australia. Its effective income tax rate is 30%. Another division
=+4 In addition to tax minimisation, what other factors might Industrial Diamonds consider in choosing a transfer-pricing method?
=+3 If the two division managers are compensated based on after-tax division operating profit, which transfer-pricing method will each prefer? Which transfer-pricing method will maximise the total
=+2 Calculate the after-tax operating profit, in Australian dollars, for each division under the transfer-pricing methods in requirement 1.(Income taxes are not included in the calculation of
=+Variable cost per kilogram of raw diamonds Fixed cost per kilogram of raw diamonds Market price per kilogram of raw diamonds etar xaT %81 Variable cost per kilogram of polished diamonds Fixed cost
=+19-32 KK Multinational transfer pricing, global tax minimisation OBJECTIVES 8, 9 Industrial Diamonds Ltd, based in Perth, has two divisions:◗ South African Mining Division, which mines a rich
=+4 Suggest two problems that may arise if Healthy Harvest Ltd implements the dual transfer prices described in requirement 2.
=+3 Why is the sum of the division operating profits calculated in requirement 2 different from Healthy Harvest Ltd’s operating profit from harvesting and processing 400000 kilograms of
=+2 Mike Hampdon feels that a dual transfer-pricing policy will improve goal congruence. He suggests that transfers out of the Harvesting Division be made at 200% of full cost and transfers into the
=+19-31 KK Goal-congruence problems with cost-plus transfer-pricing methods, dual-pricing system(continuation of 19-30) OBJECTIVES 3, 4, 8 Assume that Mike Hampdon, CEO of Healthy Harvest Ltd, had
=+3 Which transfer-pricing method will each division manager prefer? How might Healthy Harvest Ltd resolve any conflicts that may arise on the issue of transfer pricing?
=+2 Healthy Harvest Ltd rewards its division managers with a bonus equal to 5% of operating profit. Calculate the bonus earned by each division manager in June 2014 for each of the following transfer
=+19-30 KK Effect of different transfer-pricing methods on division operating profit OBJECTIVES 3, 4, 8 Healthy Harvest Ltd is a blackcurrant operation with two divisions: a Harvesting Division and a
=+b Compare the total contributions under the alternatives to show why the transfer price(s) recommended lead(s) to the optimal economic decision.
=+a Using the general guideline, what is (are) the minimum transfer price(s) that should lead to the correct economic decision?Ignore performance evaluation considerations.
=+19-29 KKK Pricing in imperfect markets (continuation of 19-28) OBJECTIVES 3, 4, 8 Refer to Problem 19-28.Required 1 Suppose the manager of Division A has the option of: (a) cutting the external
=+3 Suppose Division A quoted a transfer price of $150 for up to 200 units. What would be the contribution to the company as a whole if a transfer were made? As manager of Division B, would you be
=+2 Assume that Division A’s maximum capacity for this product is 1000 units per month and sales to the intermediate market are now 800 units. Should 200 units be transferred to Division B? At what
=+19-28 KK Pertinent transfer price OBJECTIVES 7, 8 Stradeka Ltd has two divisions, A and B, which manufacture quality pushchairs. Division A produces the pushchair frame and Division B assembles the
=+c If Vision mandates the SD and AD managers to ‘split the difference’ on the minimum and maximum transfer prices they would be willing to negotiate over, what would be the resulting transfer
=+b From the point of view of Vision Ltd’s management, how much of the SD output should be transferred to the AD?
=+a What is the minimum transfer price at which the SD manager would be willing to sell screens to the AD?
=+3 Now suppose that the SD can sell only 70% of its output capacity of 20000 screens per month on the open market. Capacity cannot be reduced in the short run. The AD can assemble and sell more than
=+2 What is the maximum transfer price at which the AD manager would be willing to purchase screens from the SD?
=+19-27 K General guideline, transfer pricing OBJECTIVES 3, 4, 8 Vision Ltd manufactures and sells television sets. Its Assembly Division (AD) buys television screens from the Screen Division (SD)
=+19-26 K Transfer-pricing problem (continuation of 19-25) OBJECTIVES 7, 8 Refer to Exercise 19-25. Assume that Division A can sell the 1000 units to other customers at $155 per unit, with variable

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