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[The following information applies to the questions displayed below.] Westerville Company reported the following results from last years operations: Sales $ 1,400,000 Variable expenses 510,000

[The following information applies to the questions displayed below.]

Westerville Company reported the following results from last years operations:

Sales $ 1,400,000
Variable expenses 510,000
Contribution margin 890,000
Fixed expenses 610,000
Net operating income $ 280,000
Average operating assets $ 875,000

This year, the company has a $175,000 investment opportunity with the following cost and revenue characteristics:

Sales $ 280,000
Contribution margin ratio 50 % of sales
Fixed expenses $ 98,000
The companys minimum required rate of return is 15%.

rev: 04_28_2016_QC_CS-49731

1.

value: 0.50 points

Required information

Required:
1. What is last years margin?

2.

What is last years turnover?

3.

What is last years return on investment (ROI)?

4.

What is the margin related to this years investment opportunity?

5.

What is the turnover related to this years investment opportunity? (

6.

What is the ROI related to this years investment opportunity?

7.

If the company pursues the investment opportunity and otherwise performs the same as last year, what margin will it earn this year?

8.

If the company pursues the investment opportunity and otherwise performs the same as last year, what turnover will it earn this year?

9.

If the company pursues the investment opportunity and otherwise performs the same as last year, what ROI will it earn this year?

10-a.

If Westervilles chief executive officer will earn a bonus only if her ROI from this year exceeds her ROI from last year, would she pursue the investment opportunity?

No
Yes
10-b.

Would the owners of the company want her to pursue the investment opportunity?

Yes

N

11.

What is last years residual income?

12.

What is the residual income of this years investment opportunity?

13.

If the company pursues the investment opportunity and otherwise performs the same as last year, what residual income will it earn this year?

14.

If Westervilles chief executive officer will earn a bonus only if her residual income from this year exceeds her residual income from last year, would she pursue the investment opportunity?

Yes

No

15-a.

Assume that the contribution margin ratio of the investment opportunity was 40% instead of 50%. If Westervilles Chief Executive Officer will earn a bonus only if her residual income from this year exceeds her residual income from last year, would she pursue the investment opportunity?

No
Yes

15-b.

Would the owners of the company want her to pursue the investment opportunity?

Yes

No

DataSpan, Inc., automated its plant at the start of the current year and installed a flexible manufacturing system. The company is also evaluating its suppliers and moving toward Lean Production. Many adjustment problems have been encountered, including problems relating to performance measurement. After much study, the company has decided to use the performance measures below, and it has gathered data relating to these measures for the first four months of operations.

Month

1 2 3 4
Throughput time (days) ? ? ? ?
Delivery cycle time (days) ? ? ? ?
Manufacturing cycle efficiency (MCE) ? ? ? ?
Percentage of on-time deliveries 75% 76% 81% 88%
Total sales (units) 10,480 10,560 10,520 10,500

Management has asked for your help in computing throughput time, delivery cycle time, and MCE. The following average times have been logged over the last four months:

Average per Month (in days)

1 2 3 4
Move time per unit 0.6 0.5 0.6 0.8
Process time per unit 0.4 0.7 0.4 0.7

Wait time per order before start of production

9.4 8.0 5.0 4.0
Queue time per unit 3.3 4.0 2.9 1.1
Inspection time per unit 0.7 0.4 0.7 0.6

Required:
1-a. Compute the throughput time for each month. (Round your answers to 1 decimal place.)

1-b.

Compute the manufacturing cycle efficiency (MCE) for each month. (Round your answers to 1 decimal place (i.e., 0.123 should be entered as 12.3).)

1-c.

Compute the delivery cycle time for each month. (Round your answers to 1 decimal place.)

3-a.

Refer to the move time, process time, and so forth, given for month 4. Assume that in month 5 the move time, process time, and so forth, are the same as in month 4, except that through the use of Lean Production the company is able to completely eliminate the queue time during production. Compute the new throughput time and MCE. (Round your Throughput Time to 1 decimal place. Round your MCE percentage answer to 1 decimal place (i.e., 0.123 should be entered as 12.3).)

3-b.

Refer to the move time, process time, and so forth, given for month 4. Assume in month 6 that the move time, process time, and so forth, are again the same as in month 4, except that the company is able to completely eliminate both the queue time during production and the inspection time. Compute the new throughput time and MCE. (Round your Throughput Time to 1 decimal place. Round your MCE percentage answer to 1 decimal place (i.e., 0.123 should be entered as 12.3).)

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