Problem 1 (4 marks) Consider the following series of independent situations in which a firm is about to make a strategic decision. Decisions: (a) Stila Cosmetics is considering introducing an anti-aging facial cream with natural ingredients. (b) Kontron Computers is deliberating to produce a special type of microprocessor with an advanced technology which will reduce the cost of production. (c) Pelican Industries wants to install biometric system in its factory to reduce idle labor time and increase productivity. (d) Coral Health Solutions decides to introduce a unique telemedicine facility for its remote patients. Required: (1) For each decision, state whether the company is following a cost leadership or a product differentiation strategy. (2) For each decision, discuss what information the managerial accountant can provide about the source of competitive advantage for these firms. Problem 2 (4 marks) Consider the following account balances (in thousands) for the Peterson Company: Peterson Company Beginning of 2020 End of 2020 Direct materials inventory $23,000 Work-in-process inventory Finished goods inventory $20,000 Purchases of direct materials Direct manufacturing labor Indirect manufacturing labor $21.000 $26,000 $25,000 $13,000 $74.000 $22.000 $17,000 Plant insurance 57.000 $11,000 53,000 Depreciation plant, building, and equipment Repairs and maintenance plant Marketing, distribution, and customer-service costs General and administrative costs $91,000 $24.000 Required: (1) Prepare a schedule for the cost of goods manufactured for 2020. (2) Revenues for 2020 were $310 million. Prepare the income statement for 2020. Problem 3 (4 marks) Milan Statuary manufactures bust statues of famous historical figures. All statues are the same size. Each unit requires the same amount of resources. The following information is from the static budget for 2020: Expected production and sales 6,100 units Expected selling price per unit $700 Total fixed costs $1,350,000 Standard quantities, standard prices, and standard unit costs follow for direct materials and direct manufacturing labor: Standard Quantity Standard Price Standard Unit Cost Direct materials 16 pounds $14 per pound $224 Direct manufacturing labor 3.8 hours $30 per hour $114 During 2020, actual number of units produced and sold was 5,100, at an average selling price of $730. Actual cost of direct materials used was $1,149,400, based on 70,000 pounds purchased at $16.42 per pound. Actual direct manufacturing labor hours were 17,000, at the rate of $33.70 per hour. As a result, actual direct manufacturing labor costs were $572,900. Actual fixed costs were $1,200,000. There were no beginning or ending inventories. Required: (1) Calculate the sales-volume variance and flexible-budget variance for operating income. (2) Compute price and efficiency variances for direct materials and direct manufacturing labor
