2.
Total Divisional Income Statements with Service Department Charges Yozamba Technology has two divisions, Consumer and Commercial, and two corporate service departments, Tech Support and Purchasing. The corporate expenses for the year ended December 31, 2017, are as follows: Tech Support Department 5660,000 Purchasing Department 344,000 Other corporate administrative expenses 432,000 Total corporate expense $1,436,000 The other corporate administrative expenses include officers' salaries and other expenses required by the corporation. The Tech Support Department charges the divisions for services rendered, based on the number of computers in the department, and the Purchasing Department charges divisions for services, based on the number of purchase orders for each department. The usage of service by the two divisions is as follows: Tech Support Purchasing Consumer Division 370 computers 6,000 purchase orders Commercial Division 230 11,200 500 computers 17,200 purchase orders The service department charges of the Tech Support Department and the Purchasing Department are considered controllable by the divisions. Corporate administrative expenses are not considered controllable by the divisions. The revenues, cost of goods sold, and operating expenses for the two divisions are as follows: Commercial Revenues $6,197,600 $5,527,700 Cost of goods sold 3,443,100 2,791,200 Operating expenses 1,215,700 1,381,800 Prepare the divisional income statements for the two divisions. Do not round your interim calculations. Yozamba Technology Divisional Income Statements For the Year Ended December 31, 2017 Consumer Division Commercial Division Revenues Cost of goods sold Gross profit Operating expenses Consumer Income from operations before service department charges Service department charges: Tech support department Purchasing department QODI QODI Total service department charges Income from operations 15 18 20 15 20 12 15 10 Reduce Setup Time Hammond Inc. has analyzed the setup time on its computer-controlled lathe. The setup requires changing the type of fixture that holds a part. The average setup time has been 135 minutes, consisting of the following steps: Turn off machine and remove fixture from lathe 10 minutes Go to tool room with fixture Record replacement of fixture to tool room Return to lathe Clean lathe Return to tool room Record withdrawal of new fixture from tool room Return to lathe Install new fixture and turn on machine Total setup time 135 minutes a. Why should management be concerned about improving setup time? A long setup will result in a large production batch, which increases work in process inventory and increases lead time. Large work in process inventory commits working capital that could be used for other purposes. Long lead times decrease the company's ability to respond to changes in customer demand. b. Which of the following are the ways to improve Hammond Inc.'s setup time? a. limit the trips to the tool room to one round trip, rather than two. b. change the location of the fixtures to reduce lathe setup time. c. eliminate the tool room and instead locate the tools in a visible location near the lathe. d. change the entire lathe room layout, so that fewer steps are required to turn the lathe on and off, as well as clean the lathe and change fixtures for the lathe. e. All of these are ways to improve setup time. e C. How much time would be required for a setup, using your suggestion in (b)? X minutes Calculate Lead Time Flint Fabricators Inc. machines metal parts for the automotive industry. Under the traditional manufacturing approach, the parts are machined through two processes: milling and finishing. Parts are produced in batch sizes of 55 parts. A part requires 3 minutes in milling and 9 minutes in finishing. The move time between the two operations for a complete batch is 10 minutes. Under the lean philosophy, the part is produced in a cell that includes both the milling and finishing operations. The operating time is unchanged; however, the batch size is reduced to 3 parts and the move time is eliminated. Determine the value-added, non-value-added, and total lead times, and the value-added ratio under the traditional and lean manufacturing methods. If required, round percentages to one decimal place. Traditional Philosophy Lean Manufacturing Philosophy Value-added time min Non-value-added time min min Total lead time min min Value-added ratio (as a percent) min % %
