Do-Boy Company manufactures an electronic component, ZP98. This component is significantly less expensive than similar products sold by Do-Boy's competitors. Order-processing time is very short; however, approximately 10% of products are defective and returned by the customer. Returns and promptly. Your Manufacturing, Do-Boy's main competitor, has a higher-priced product with almost no defects but a longer order-processing time i (Click the icon to view the additional information.) (Click the icon to view the data.) Conversion costs in each year depend on production capacity defined in terms of ZP98 units that can be produced, not the actual units produced. Selling and customer-service costs depend on the number of customers that Do-Boy can support, not the actual number of customers it serves. Do-Boy and 80 customers in 2019. At the start of each year, management uses its discretion to determine the number of advertising staff for the year. Advertising staff and its costs have no direct relationship with the quantity of ZP98 units produced and sold or the number of customers who buy ZP98. Required - X - X Requ Required Data table a. b. C. If 1. Calculate the amount and cost of unused capacity for: 2018 2019 a. Manufacturing 1a. Units of ZP98 produced and sold 5,400 6,725 Begin b. Sales and customer service c. Advertising 1b. Units of ZP98 returned 500 250 If you are unable to calculate the amount and cost of unused capacity, explain why. 1c. Net sales in units 4,900 6,475 2. State two reasons Do-Boy might downsize and two reasons it might not downsize. 3. Assume Do-Boy has several product lines, of which ZP98 is only one. The manager for the ZP98 product line is evaluated on the 2. Selling price 45 $ 53 (a) basis of manufacturing and customer sales and service costs, but not advertising costs. The manager wants to increase capacity for 2,600 3,250 (b) customers because he thinks the market is growing, and this will cost an additional $1,098. However, the manager is not going to 3. Direct materials (kilograms) used use this extra capacity immediately, so he classifies it as advertising cost rather than customer sales and service cost. How will the 4. Direct material cost per kilogram 11.00 $ 11.00 (c) deliberate misclassification of this cost affect: a. The operating income overall? 5. Manufacturing capacity in units of ZP98 8,500 8,500 If you b. The growth, price-recovery, and productivity components? 6. Total conversion costs 93,500 $ 153,000 c. The evaluation of the ZP98 manager? We a You are not required to calculate any numbers when answering requirement 3. Only discuss whether the misclassification will have 7 . Conversion cost per unit of capacity 11 9 18 a positive, negative, or no effect and comment on the ethics of the manager's actions. 80 customers Requ 8. Selling and customer-service capacity 80 customers Total selling and customer-service costs 4,400 $ 4,600 Two 10. Selling and customer-service capacity cost per customer 55.00 $ 57.50 Print Done 11. Advertising staff OB 12. Total advertising costs 24,000 $ 29,500 O c 13. Advertising cost per employee 24,000 $ 29,500 D. Currently Do-Boy only operates at partial capacity. Downsizing will allow the company to match resources available with resources consumed and elimina Two reasons to not downsize: (Choose two options.) Print Done Do-Boy may want to maintain some unused capacity for future growth. Do-Boy may choose not to downsize because competitors will view downsizing as a sign of weaknessRequirement 1. Calculate the amount and cost of unused capacity for: a. Manufacturing b. Sales and customer service c. Advertising If you are unable to calculate the amount and cost of unused capacity, explain why. Begin by calculating the amount of unused capacity for each department. Then, calculate the cost. (If it is not possible to calculate the amount or cost of unused capacity, leave the input cells blank. If any amount is zero, enter "0".) Amount of Cost of unused capacity unused capacity (a) Manufacturing 1775 31950 (b) Selling and customer service 0 (c) Advertising If you are unable to calculate the amount and cost of unused capacity, indicate why. We are unable to calculate the amount and cost of unused capacity for due to the Requirement 2. State two reasons Do-Boy might downsize and two rea Two reasons to downsize: (Choose two options.) all three departments A. Do-Boy is focused on product differentiation, and downsizing wil B. Do-Boy knows that there are no future growth opportunities, as i advertising C. Downsizing should lead to cost savings and increased efficiency advertising and manufacturing O D. Currently Do-Boy only operates at partial capacity. Downsizing v ources consumed and eliminate management time and effort in managing unused capacity. advertising and selling and customer service Two reasons to not downsize: (Choose two options.) manufacturing Do-Boy may want to maintain some unused capacity for future gro Do-Boy may choose not to downsize because competitors will viev manufacturing and selling and customer service Do-Boy may be focused on product differentiation, which is key to selling and customer service Do-Boy may choose not to downsize because downsizing may recRequirement 1. Calculate the amount and cost of unused capacity for: a. Manufacturing b. Sales and customer service C. Advertising If you are unable to calculate the amount and cost of unused capacity, explain why. Begin by calculating the amount of unused capacity for each department. Then, calculate the cost. (If it is not possible to calculate the amount or cost of unused capacity, leave the input cells blank. If any amount is zero, enter "0".) Amount of Cost of unused capacity unused capacity (a) Manufacturing 1775 31950 (b) Selling and customer service (c) Advertising If you are unable to calculate the amount and cost of unused capacity, indicate why. We are unable to calculate the amount and cost of unused capacity for due to the Requirement 2. State two reasons Do-Boy might downsize and two reasons it might not downsize. Two reasons to downsize: (Choose two options.) actual units being less than capacity A. Do-Boy is focused on product differentiation, and downsizing will allow Do-Boy to achieve this strategy. B. Do-Boy knows that there are no future growth opportunities, as there was no growth this year. actual units being greater than capacity C. Downsizing should lead to cost savings and increased efficiency that result in higher operating income. lack of budgeted costs for the department D. Currently Do-Boy only operates at partial capacity. Downsizing will allow the company to match resources available with resou effort in managing unused capacity. lack of cause-and-effect relationship Two reasons to not downsize: (Choose two options.) Do-Boy may want to maintain some unused capacity for future growth. Do-Boy may choose not to downsize because competitors will view downsizing as a sign of weakness Do-Boy may be focused on product differentiation, which is key to its strategy, rather than on cost reduction. Do-Boy may choose not to downsize because downsizing may require layoffs, which can hurt employee morale and loyalty.Requirement 3. How will the deliberate misclassification of this cost affect: a. The operating income overall? Misclassification of the cost affect overall operating income because the cost be included in the calculation of operating income. For financial accounting purposes, it be part of selling and administration (period) costs. b. The growth, price-recovery, and productivity components? This cost will not affect the component since the component is calculated using cost data from 2018. Misclassification of the cost will have no effect on the sales and customer service component of the cost effect of because adequate capacity exists in 2018 to produce 2019 output. It will increase the advertising component of the cost effect of the component. Misclassification of this cost will increase the component because the capacity amount for selling and customer service cost will be understated. There will be no effect on advertising because advertising capacity had not changed. The net effect of this misclassification is to decrease the component by increasing the cost effect of for advertising and to increase the component by an equal amount by understating the selling and customer service capacity c. The evaluation of the ZP98 manager? The misclassification will make the performance of the ZP98 manager look than it is because selling and customer service costs that the manager is evaluated on will appear . The higher advertising cost affect the manager's performance evaluation because advertising costs are the manager's performance evaluation measure. The manager's cost classification actions are because the sole purpose of the misclassification of customer service costs as advertising costs is to make the performance look than it is