Shamrock Inc. You crive on it, wak on it, wear it, and even brush your teeth with it. What is it? Limestone. 7s. versatle natural resource found in asphat highways, concrete sidewalks, cosmetics and tooch. paste, to neme a few things. Shamrock inc. has been a primary supplier of quaity limestone products since the mid-1950s. Ovor the years, the company has seen many changes as is business and the local economy have matured. Considered a commodity, imestone rock is extracted from underground mines located 350 teet below the surface. Limestone used to be mined on the surtace, but the supply of qualif surface rock has been exhausted. Engineers estimate that milions of tons of quality limestere rock stil remain to be mined underground. To mine lmestone, the rock is first blasted with dynamite charges to loosen it. The lange pieces of imestone rocks are loeded into 35-ton capacity trucks for transport to rock-crish. ing plants. Shemrock operates 20 rock-crushing plants. Shamrock buys the large imestore pleces trom sevoral mines (quarries), and workers dump them into a crusher that breaks the rocks into smaller pieces. Al rocks are processed in a relatively homogeneous way. These pieces are then loadod onto trucks for customers or moved to a storage pile away from the crushing plant. Pricing is very compettive, so Shamrock's managers keep a close eye on costs to ensure that the operations remain proftable. Ma;or costs tor the business include the cost of the legg limestone rocks, depreciation on the equipment, labor, repairs, maintenance, and safety and envionmantal protection. Eugene Johnson is the corporate controler of Shamrock. Each plant uses a process. costing systern, At the ond of each year, each plant manager submits a production report and a production-cost roport. The cost data have been particularly useful for identifying how wel different plants hevo beon maneging their costs in the very competitive ervironment in which they operate. The production report includes the plant manager's estimates of the percentage of completion of (1) the ending work-in-process as to direct materials and conversion costs and (2) the limestone inventory in the storage pile. Johnson uses these estimates to com: pare costs across plants by computing the equivalont units of work done in each plant and the cost per equvalent unt of work done for both direct materials and conversion costs in each year. Plants are ranked from 1 to 20 based on (a) cost per equivalent unit of direct materials and (b) cost per equivalent unit of conversion costs. Shamrock rewards the three top-ranked plants in each category with a bonus and writes about their achievement in the compary newsiotter. Johnson has been plosesed with the success of his benchmarking program. However, he has ]ust recoked some unsigned setters stating that two plant managers have been manipulating their estimates of percontuge of completion and limestone inventory in an attempt to obtah best in-class status. Required 1. Do you agree wath Sharrock ino. s s ise of a process-costing system? Why? Explain. 2. Why do you think Johnson was benchmarking one plant against anothor? 3. Why and how might plart manegers man puate thoir estimates of percentage of completion and Imestone inventory? 4. Johinson's frst reaction is to contect each plant controller and discuss the problem raised by the unsigned letters. Is that a good idea
