1. Platt Sports Products manufactures and distributes three types of golf clubs: beginners, intermediate, and advanced. The materials used in these clubs increases in each level and allows for more precise balancing and longer wear. Production is highly automated for the beginners clubs, whereas the intermediate and advanced clubs require a varying degree of labor, depending on the intricacy of the balancing process. Platt applies all indirect costs according to a predetermined rate based on direct labor hours. A consultant recently suggested that Platt switch to an activity-based costing (ABC) system, and identified the following cost breakdown for the upcoming year:

Estimated

Activity Recommended Cost Drivers Costs Cost Driver

Order processing Number of orders $52,500 125 orders

Production setup Number of production runs 210,000 75 runs

Materials handling Pounds of materials used 375,000 125,000 lbs

Machine depr. and

Maintenance Machine hours 322,000 20,000 hours

Quality control Number of inspections 80,000 40 inspections

Packing Number of units 14,000 280,000 units

In addition, management estimates 50,000 direct labor hours will be used in the upcoming year at a rate of $14 per hour.

Assume that the following activity took place in the first month of the upcoming year:

BeginnersIntermediateAdvanced

Number of units produced 20,000 8,000 3,000

Direct material costs $20,800 $13,000 $8,000

Direct labor hours 500 1,000 2,000

Number of orders 6 4 3

Number of production runs 2 2 3

Pounds of material 8,000 3,200 1,500

Machine hours 1,200 300 200

Number of inspections 3 3 2

Number of units shipped 18,000 7,500 2,500

Required:

a) Compute the production costs for one unit of each product in the first month of the upcoming year using direct labor hours as the allocation base.

b) Compute the production costs for one unit of each product in the first month of the upcoming year using activity based costing.

c) Comment on the results.

2. Down South Lures makes fishing lures in its manufacturing facility in Alabama. Data concerning these products appear below.

FrogMinnowWorm

Normal annual sales volume 100,000 200,000 300,000

Unit selling price $ 2.00 $ 1.40 $ 0.80

Variable cost per unit $ 1.20 $ 0.80 $ 0.50

Total fixed expenses for the entire company are $282,000 per year.

All three products are sold in highly competitive markets, so the company is unable to raise its prices without losing unacceptable numbers of customers.

The company has no work in process or finished goods inventories due to an extremely effective just-in-time manufacturing system.

Required:

What is the company's overall break-even point in total sales dollars?

Marketing believes that if $75,000 is spent on advertising to create higher brand awareness, the normal sales volume for each product will increase by 10 percent. Show computations to indicate whether or not the $75,000 in advertising should be spent.

3. Boston Chocolates makes and packages fine chocolates in two departments, Production and Packaging. The capacity per month is 70,000 units in the Production Department and 50,000 units in the Packaging Department. The only variable cost of the product is direct material of $15 per unit for the chocolates and $2 per unit for the packaging materials. All other costs of operating the two departments are fixed costs. Boston Chocolates could sell up to 80,000 units at a selling price of $45 per unit.

Required:

Boston Chocolates Production managers believe that they could increase the capacity in their department by 10,000 units, if they were able to increase fixed costs by $50,000. Should the money be spent? Explain.

An outside contractor offers to do packaging for 10,000 units at a cost of $20,000. Should Boston Chocolates accept the offer from the subcontractor? Show calculations.

4. Consider the following information for American Marine Craft, Inc. for the year ended December 31, 2016:

Accumulated depreciation $ 250,000

Depreciation expense (80%-Plant) 80,000

Direct labor Wages 435,000

Direct materials inventory, Dec. 31, 2016 25,000

Direct materials inventory, Jan. 1, 2016 18,000

Direct material purchases 144,000

Finished goods inventory, Dec. 31, 2016 28,000

Finished goods inventory, Jan. 1, 2016 15,000

Heat, light & power (80%-Plant) 36,000

Indirect labor 25,000

Property taxes (70%-Plant) 34,000

Sales representatives salaries 445,000

Sales revenue 1,500,000

Plant supervisors salary 56,000

Accounts receivable 200,000

Supplies (90%-Plant) 23,000

Accounts payable 150,000

Work-in-Progress inventory, Dec. 31, 2016 12,000

Work-in-Progress inventory, Jan. 1, 2016 23,000

Determine:

a) The cost of goods manufactured.

b) The gross profit.

c) The operating income (loss).

d) From the above list of accounts indicate one item that is an example of a(n):

i. Product cost

ii. Period cost

iii. Indirect cost

iiii. Direct cost

5. In the context of this course, you will be asked to address the issues/questions below for Amazon.com, Inc. (AMZN). When addressing the issues/questions, be sure to do so in the context of this course and Amazon. Your primary sources of information will come from the Amazon website, in particular Investor Relations and the 2015 Annual Report. Also, look at the web pages for Amazon on Yahoo! Finance and/or Morningstar.com.

a) Discuss the critical success factors and whether or not you believe thatAmazon shows evidence of success for these factors. b) Discuss Amazon in the context of the Theory of Constraints.

c) From the material reviewed, explain whether or not Amazon showsevidence in its operations/results of the perspectives of the balanced scorecard.

d) Discuss which of the activities of the value chain are most important toAmazon.

e) Discuss the concept of customer delivered value in the context ofAmazon.

f) Discuss the cost of controlling quality and the cost of failing to controlquality in the context of Amazon.