The Magrath Repair Shop repairs and services machine tools. A summary of ils costs (by activity) for 2020 is as follows: (Click the icon to view data.) Read the requirements Requirement 1. Classify each cost as value-added, non-value-added, or in the gray area between. a. Materials and labor for servicing machine tools Value-added b. Rework costs Non-value-added C Expediting costs caused by work delays Non-value-added d. Materials-handling costs Gray area e. Materials procurement and inspection costs Gray area f. Preventive maintenance of equipment Gray area g. Breakdown maintenance of equipment Non-value-added Requirement 2. For any cost dassified in the gray area, assume 30% is value-added and 70% is non-value-added. How much of the total of all seven costs is value-added and how much is non-value-added? Compute the total cost for the value-added and nonvalue-added costs, then compute what percentage of the total is value-added and how much is non-value-added. Total percent i Data Table i Requirements Total cost of total costs Value-added Non-value-added % Total costs a. Materials and labor for servicing machine tools $ 900,000 b. Rework costs 150,000 C. Expediting costs caused by work delays 140,000 d. Materials-handling costs 115,000 c. Materials procurement and inspection costs 145,000 t. Preventive maintenance of equipment 130,000 g. Breakdown maintenance of equipment 115,000 1. Classify each cost as value-added, non-value-added, or in the gray area between 2. For any cost classified in the gray area, assume 30% is value-added and 70% Is non-value-added. How much of the total of all seven costs is value-added and how much is non-value-added? 3. Magrath is considering the following changes: (a) introducing quality-Improvement programs whose net effect will be to reduce rework and expediting costs by 70% and materials and labor costs for servicing machine tools by 5%; (b) working with suppliers to reduce materials-procurement and inspection costs by 20% and materials-handling costs by 40%; and (c) increasing preventive-maintenance costs by 50% to reduce breakdown-maintenance costs by 30%. Calculate the effect of programs (a), (b), and (c) on value-added costs, non-value-added costs, and total costs. Comment briefly. Enter any number in the edit fields and then click Check Answer. 5 Permaining Print Done Sunrise Energy Systems (SES) sells solar heating systems in residential areas of eastern Pennsylvania. (Click the icon to view additional information.) Actual results for 2019 and 2020 for SES are: (Click the icon to view the actual results.) After experiencing high costs in 2019, SES used value engineering to reduce the cost of selling solar heating systems. Managers at SES want to evaluate whether value engineering has succeeded in reducing the selling cost per sale by the targeted 6% in 2020. Read the requirements Requirement 1. Calculate the cost per sale in 2019. Determine the 2019 total costs in the first column and the cost per sale in the second column. (Round all calculations and the amounts you input in the cells to the nearest cent.) 2019 total 2019 cost per costs sale i Data Table More Info Cost of new contacts Travel costs Preparing and filing costs Actual Results Actual Results for 2019 for 2020 150 180 Total Sales of heating systems Number of new contacts A successful sale results in the homeowner purchasing a solar heating system and obtaining rebates, tax credits, and financing for which SES completes all the paperwork. The company has identified three major activities that drive the cost of selling heating systems: identifying new contacts (varies with the number of new contacts); traveling to and between appointments (varies with the number of miles driven), and preparing and filling rebates and tax forms (varies with the number of solar systerris sold). Actual costs for each of these activities in 2019 and 2020 are shown below: 220 235 Miles driven 1,900 1,700 2020 2019 Requirements X S 13.00 $ 11.00 Average cost per new contact Travel cost per mile Preparing and filing cost per new system 0.65 0.80 250.00 240.00 1. 2. 3. 4. Calculate the cost per sale in 2019. Calculate the cost per sale in 2020. Did SES achieve the target cost per sale in 2020? Explain. What challenges might managers at SES encounter in achieving the target cost and how might they overcome these challenges? Print Done Print Done Enter any number in the edit fields and then click C ? 5 Permaining Clear All Check Answer Albertronics is going to introduce a combination phone/tablet product. Design and testing will take 8 months. Albertronics expects to sell 22,000 units during the first 6 months of sales. Sales over the next 12 months are expected to be less robust at 18,000. And, sales in the final 6 months of the expected life cycle are expected to be 3,000. Albertronics is budgeting for this product as follows: (Click the icon to view the cost information.) Read the requirements Requirement 1. If Albertronics prices the phone/tablets at $425 each, how much operating income will the company make over the product's life cycle? What is the operating income per unit? Begin by preparing the life cycle income statement in order to determine how much operating income the company will make over the product's life cycle. Projected Life Cycle Income Statement Requirements Data Table Variable costs: Months Variable cost per Unit Months 0-B Months 9.14 Total variable costs Fixed costs: Type of Cost Design costs Production Marketing Distribution Total Fixed Cost for the Period $ 850.000 $ 1,002,000 $ 820,000 $64 per unit $ 426.000 $14 per unit $44 per unit 1. If Albertronics prices the phone/tablets at $425 each, how much operating income will the company make over the product's life cycle? What is the operating income per unit? 2. Excluding the initial product design costs, what is the operating income in each of the three sales phases of the product's life cycle, assuming the price slays at $4257 3. How would you explain the change in budgeted operating income over the product's life cycle? What other factors does the company need to consider before developing the new combination phone/tablet product? 4. Albertronics is concemed about the number of units it expects to sell in the first sales phase. The company is considering pricing the phone/tablet at $365 for the first 6 months and then increasing the price to $425 thereafter. With this pricing strategy, Albertronics expects to sell 25,000 units instead of the originally forecast 22.000 units in the first sales phase, and the same number of units for the remaining life cycle. Assuming the same cost structure as given in the problem, which pricing strategy would you recommend? Explain. Months 15-26 $ B00.000 $ Production Marketing Distribution Production $ 1,400,000 310,000 360,000 $14 per unit Total fixed costs Months 27-32 $ $44 per unit Life cycle operating income Marketing $ 490,000 $ 158,000 $11 per unit Distribution Ignore the time value of money. Print Done Print Done Choose from any list or enter any number in the input fields 7 parts 7 remaining Clear All Check Answer Quick Stop makes candy bars for vending machines and sells them to vendors in cases of 30 bars. Although Quick Stop makes a variety of candies, the cost differences are insignificant, and the cases all sell for the same price. Quick Stop has a total capital investment of $13,000,000. It expects to produce and sell 600,000 cases of candy next year. Quick Stop requires a 12% target return on investment. Expected costs for next year are: (Click the icon to view the costs.) Quick Stop prices the cases of candy at full cost plus markup to generate profits equal to the target return on capital. Read the requirements. Requirement 1. What is the target operating income? (Enter the percentage as a whole number.) Target operating income i Data Table A Requirements 1. Variable production costs $4.50 per case Variable marketing and distribution costs $2.50 per case Fixed production costs $1,240,000 Fixed marketing and distribution costs $850.000 Other fixed costs $550,000 What is the target operating income? 2. What is the selling price Quick Stop needs to charge to earn the target operating income? Calculate the markup percentage on full cost. 3. Quick Stop is considering increasing its selling price to $15 per case. Assuming production and sales decrease by 5%, calculate Quick Stop's return on investment. Is increasing the selling price a good idea? Print Done Print Done Choose from any list or enter any number in the input fields and then click Check Answer. ? parts remaining Clear All Check Answer The Magrath Repair Shop repairs and services machine tools. A summary of ils costs (by activity) for 2020 is as follows: (Click the icon to view data.) Read the requirements Requirement 1. Classify each cost as value-added, non-value-added, or in the gray area between. a. Materials and labor for servicing machine tools Value-added b. Rework costs Non-value-added C Expediting costs caused by work delays Non-value-added d. Materials-handling costs Gray area e. Materials procurement and inspection costs Gray area f. Preventive maintenance of equipment Gray area g. Breakdown maintenance of equipment Non-value-added Requirement 2. For any cost dassified in the gray area, assume 30% is value-added and 70% is non-value-added. How much of the total of all seven costs is value-added and how much is non-value-added? Compute the total cost for the value-added and nonvalue-added costs, then compute what percentage of the total is value-added and how much is non-value-added. Total percent i Data Table i Requirements Total cost of total costs Value-added Non-value-added % Total costs a. Materials and labor for servicing machine tools $ 900,000 b. Rework costs 150,000 C. Expediting costs caused by work delays 140,000 d. Materials-handling costs 115,000 c. Materials procurement and inspection costs 145,000 t. Preventive maintenance of equipment 130,000 g. Breakdown maintenance of equipment 115,000 1. Classify each cost as value-added, non-value-added, or in the gray area between 2. For any cost classified in the gray area, assume 30% is value-added and 70% Is non-value-added. How much of the total of all seven costs is value-added and how much is non-value-added? 3. Magrath is considering the following changes: (a) introducing quality-Improvement programs whose net effect will be to reduce rework and expediting costs by 70% and materials and labor costs for servicing machine tools by 5%; (b) working with suppliers to reduce materials-procurement and inspection costs by 20% and materials-handling costs by 40%; and (c) increasing preventive-maintenance costs by 50% to reduce breakdown-maintenance costs by 30%. Calculate the effect of programs (a), (b), and (c) on value-added costs, non-value-added costs, and total costs. Comment briefly. Enter any number in the edit fields and then click Check Answer. 5 Permaining Print Done Sunrise Energy Systems (SES) sells solar heating systems in residential areas of eastern Pennsylvania. (Click the icon to view additional information.) Actual results for 2019 and 2020 for SES are: (Click the icon to view the actual results.) After experiencing high costs in 2019, SES used value engineering to reduce the cost of selling solar heating systems. Managers at SES want to evaluate whether value engineering has succeeded in reducing the selling cost per sale by the targeted 6% in 2020. Read the requirements Requirement 1. Calculate the cost per sale in 2019. Determine the 2019 total costs in the first column and the cost per sale in the second column. (Round all calculations and the amounts you input in the cells to the nearest cent.) 2019 total 2019 cost per costs sale i Data Table More Info Cost of new contacts Travel costs Preparing and filing costs Actual Results Actual Results for 2019 for 2020 150 180 Total Sales of heating systems Number of new contacts A successful sale results in the homeowner purchasing a solar heating system and obtaining rebates, tax credits, and financing for which SES completes all the paperwork. The company has identified three major activities that drive the cost of selling heating systems: identifying new contacts (varies with the number of new contacts); traveling to and between appointments (varies with the number of miles driven), and preparing and filling rebates and tax forms (varies with the number of solar systerris sold). Actual costs for each of these activities in 2019 and 2020 are shown below: 220 235 Miles driven 1,900 1,700 2020 2019 Requirements X S 13.00 $ 11.00 Average cost per new contact Travel cost per mile Preparing and filing cost per new system 0.65 0.80 250.00 240.00 1. 2. 3. 4. Calculate the cost per sale in 2019. Calculate the cost per sale in 2020. Did SES achieve the target cost per sale in 2020? Explain. What challenges might managers at SES encounter in achieving the target cost and how might they overcome these challenges? Print Done Print Done Enter any number in the edit fields and then click C ? 5 Permaining Clear All Check Answer Albertronics is going to introduce a combination phone/tablet product. Design and testing will take 8 months. Albertronics expects to sell 22,000 units during the first 6 months of sales. Sales over the next 12 months are expected to be less robust at 18,000. And, sales in the final 6 months of the expected life cycle are expected to be 3,000. Albertronics is budgeting for this product as follows: (Click the icon to view the cost information.) Read the requirements Requirement 1. If Albertronics prices the phone/tablets at $425 each, how much operating income will the company make over the product's life cycle? What is the operating income per unit? Begin by preparing the life cycle income statement in order to determine how much operating income the company will make over the product's life cycle. Projected Life Cycle Income Statement Requirements Data Table Variable costs: Months Variable cost per Unit Months 0-B Months 9.14 Total variable costs Fixed costs: Type of Cost Design costs Production Marketing Distribution Total Fixed Cost for the Period $ 850.000 $ 1,002,000 $ 820,000 $64 per unit $ 426.000 $14 per unit $44 per unit 1. If Albertronics prices the phone/tablets at $425 each, how much operating income will the company make over the product's life cycle? What is the operating income per unit? 2. Excluding the initial product design costs, what is the operating income in each of the three sales phases of the product's life cycle, assuming the price slays at $4257 3. How would you explain the change in budgeted operating income over the product's life cycle? What other factors does the company need to consider before developing the new combination phone/tablet product? 4. Albertronics is concemed about the number of units it expects to sell in the first sales phase. The company is considering pricing the phone/tablet at $365 for the first 6 months and then increasing the price to $425 thereafter. With this pricing strategy, Albertronics expects to sell 25,000 units instead of the originally forecast 22.000 units in the first sales phase, and the same number of units for the remaining life cycle. Assuming the same cost structure as given in the problem, which pricing strategy would you recommend? Explain. Months 15-26 $ B00.000 $ Production Marketing Distribution Production $ 1,400,000 310,000 360,000 $14 per unit Total fixed costs Months 27-32 $ $44 per unit Life cycle operating income Marketing $ 490,000 $ 158,000 $11 per unit Distribution Ignore the time value of money. Print Done Print Done Choose from any list or enter any number in the input fields 7 parts 7 remaining Clear All Check Answer Quick Stop makes candy bars for vending machines and sells them to vendors in cases of 30 bars. Although Quick Stop makes a variety of candies, the cost differences are insignificant, and the cases all sell for the same price. Quick Stop has a total capital investment of $13,000,000. It expects to produce and sell 600,000 cases of candy next year. Quick Stop requires a 12% target return on investment. Expected costs for next year are: (Click the icon to view the costs.) Quick Stop prices the cases of candy at full cost plus markup to generate profits equal to the target return on capital. Read the requirements. Requirement 1. What is the target operating income? (Enter the percentage as a whole number.) Target operating income i Data Table A Requirements 1. Variable production costs $4.50 per case Variable marketing and distribution costs $2.50 per case Fixed production costs $1,240,000 Fixed marketing and distribution costs $850.000 Other fixed costs $550,000 What is the target operating income? 2. What is the selling price Quick Stop needs to charge to earn the target operating income? Calculate the markup percentage on full cost. 3. Quick Stop is considering increasing its selling price to $15 per case. Assuming production and sales decrease by 5%, calculate Quick Stop's return on investment. Is increasing the selling price a good idea? Print Done Print Done Choose from any list or enter any number in the input fields and then click Check Answer. ? parts remaining Clear All Check