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Question;66.;Johnson;Marine has the following costs and expected sales for the coming year. Johnson;is considering a number of different methods to determine the price of its;product.;If;Johnson determines price using a desired return on life cycle costs of 30%, the;price is;A.;$262.50;B.;$306.00;C.;$375.00;D.;$364.29;E.;$330.00;67.;Johnson Marine has the;following costs and expected sales for the coming year. Johnson is considering;a number of different methods to determine the price of its product.;If Johnson;determines price using a 20% markup of life cycle cost, the price is;A.;$262.50;B.;$306.00;C.;$375.00;D.;$364.29;E.;$330.00;68. Precision;Instruments, Inc. is a national firm manufacturing a full line of surgical;tools for veterinarians. Recent technological developments have produced a;significantly higher grade of steel to make surgical instruments and tools. All;of Precision's specialized equipment is designed and calibrated to produce;surgical tools using current surgical steel stock. Precision's management wants;to begin using the new grade of surgical steel, but recognizes the need to;redesign and calibrate existing production equipment and/or purchase newly;designed production equipment. Redesign of existing equipment can be done;in-house, but requires components from the Swedish manufacturer of the;equipment. New equipment will also come from Sweden, but its cost is almost double;that paid seven years ago for the existing equipment.;Required;Identify the constraints Precision will face as it chooses to upgrade existing;equipment or purchase new equipment. There isconsiderable market;pressure to shift to use of the new steel stock for production of surgical;tools.;69. DualShaft;Inc. manufactures a wide variety of parts for recreational boating, including;boat engines. The component is purchased by OEM (original equipment;manufacturers) such as Mercury and Honda, for use in the larger and more;powerful outboards. The units sell for $790, and sales volume averages 38,000;units per year. Recently, DualShaft's major competitor lowered the price of the;equivalent part to $710. The market was very competitive, and DualShaft realized;it had to meet the new price or lose significant market share. The controller;assembled the following data for the most recent year.;Cost and Usage for;Production of 38,000 Units;Required;1. Calculate the target cost for maintaining current market share and;profitability.2. How should the company attempt to reduce cost to meet;the new target cost?;70.;Cling;Co. produces and sells three products (X, Y, and Z). The following data relate;to the three products. Labor is a fixed cost.;Required: (1);Which is the most profitable product if there is no labor constraint? (2) Which;is the most profitable product if there is a;labor;constraint?;71.;Pat Baldwin owns and;operates Outstanding Quality Rentals (OQR). OQR offers kayak rentals and;shuttle service on the Petaholee River. Customers can rent kayaks at one;station and enter the river there. They can then exit at one of two designated;locations to catch a shuttle to return them to their vehicles. Following are;the costs involved in providing this service each year.;OQR;began business three years ago with a $36,000 expenditure for a fleet of 50;kayaks. These are expected to last seven more years, at which time a new fleet;will be purchased. Pat is satisfied with the steady average rentals per year of;9,900.;Required;What price should Pat charge per rental for the business to make a thirty;percent life cycle profit?;72.;Bell Company produces and sells three;products (A,B,C). The following data relate to the three products.;Required;(1) Calculate the contribution per labor minute for each product. (2) Determine;the best product mix. Assume there are fiveemployees, and given time;for breaks, training, and regular meetings, there are a total of 2,200 minutes;available per day.;73. The;management accountant at the Huang Manufacturing Company has collected the;following data in preparation for a life cycle analysis on one of its products;a leaf blower;Required;Determine what stage of the sales life cycle the leaf blower is in.;74.Warrenton;Industries manufactures hydraulic components for large automated machine tools.;Myles English, the Vice President for Marketing, has concluded from his market;analysis that sales are dwindling for one of the firm's products main products;a hydraulic valve, because of aggressive pricing by competitors. Warrenton's;product sells for $525 whereas the competition's comparable part is selling in;the $425 range. Mr. English has determined that a price drop to $400 is;necessary to regain market share and annual sales of 1,000 units.;Cost data based on sales;of 1,000 valves;Required;(1);Calculate the current cost and profit per unit.;(2);How much of the current cost per unit is;attributable to non-value added activities?;(3);Calculate the new target;cost per unit for a sales price of $400 if the profit per unit is maintained.;(4);What strategy do you;suggest for Warrenton to attain the target cost calculated in part (3)?;75.;Gail Johnston is the CFO;of Lancet Technologies, a manufacturer of parts and supplies for the cable TV;industry. Gail has developed an analysis of the profitability of the firm's two;main product lines, cable hardware, and cable supplies. Based on the analysis;she concludes that cable hardware is the most profitable of the firm's product;lines.;Required;(1) Explain why Gail may be wrong in her assessment of the relative;performances of the two product lines. (2) Suppose that80 percent of the;R & D and selling expenses are traceable to Hardware line. Prepare;life-cycle income statements for each product and calculate the return on;sales. What does this tell you about the importance of accurate life-cycle;costing?;76. Jamestown;Furniture Co. is a small, but fast-growing manufacturer of living room;furniture. Its two principal products are end tables and sofas. There are five;processes in the manufacturing at Jamestown: Cutting the lumber, cutting the;fabric, sanding, staining, and assembly. Jamestown has one employee working in;fabric cutting and one employee working in staining. These are relatively;skilled workers, and could be replaced only with some difficulty. The cutting;and sanding operations are performed by two workers each, and while there is;some skill to these operations, it is less critical than for staining and for;fabric cutting. Assembly is the least skill-based process, and is currently;done by one full-time employee and a group of part-timers who provide a total;of 175 minutes of working time per week. The other employees work a 40-hour;week, with 5 hours off for breaks, training, and personal time. Assume a four;week month, and that by prior agreement, any of the employees can be switched;from one task to another. The current demand for Jamestown's products and sales;prices are provided below. Jamestown expects demand to increase significantly;in the coming months (this depends on whether it is able to successfully obtain;the order it is negotiating to get from a motel chain). The materials cost for;the table is $150 and $275 for the sofa.;The time required for each activity and;the total time available are shown below.;Required;What is the most profitable production plan for Jamestown? Explain your answer;with supporting calculations.;77. PureSwing;Golf, Inc. manufactures swing analyzer systems for golf instructors. Two of its;systems, Pure1000 and the Pure5000 have these characteristics;The Pure1000;sells for $1,000 installed and the Pure5000 sells for $1,750 installed.;Required;1. What are the current profit margins on both systems? 2. PureSwing's;management believes that it must drop the price on thePure1000 to $800;and on the Pure5000 to $1,450 to remain competitive in the market. Recalculate;profit margins for both products at these price levels. 3. Describe two ways;that PureSwing could cut its costs to get the profit margins back to their;original levels.;78. PharmCo;Manufacturing operates a contract manufacturing plant in London, England. The;plant produces a variety of pharmaceutical drugs for companies around the;world. Cycle time is a critical success factor for PharmCo, which has developed;a number of measures of manufacturing speed. The company has studied the matter;and found that competitive contract manufacturers have manufacturing cycle;efficiency (MCE) time of about 40 percent. When last measured, PharmCo's MCE;was 35 percent. At PharmCo, cycle time is defined as;beginning;at the point when the order taking is complete.;Some;key measures from the most recent month's production, averaged over all the;jobs during the period, are as follows;Required;Determine the MCE time for the most recent month. What can you infer from the;MCE time that you calculated?;79. AirTravel;Inc. manufactures a wide variety of parts for commercial aircraft, including;airplane engines. The component is purchased by OEM (original equipment;manufacturers) such as Boeing, for use in the larger and more powerful;outboards. The units sell for $10,000, and sales volume averages 2,000 units;per year. Recently, AirTravel's major competitor lowered the price of the;equivalent part to $9,500. The market was very competitive, and AirTravel;realized it had to meet the new price or lose significant market share. The;controller assembled the following data for the most recent year;Cost and Usage for;Production of 2,000 Units;Required;Calculate the target cost for maintaining current market share and;profitability.;80.;Amanda Jones owns and;operates Motorcycle Rentals Inc.(MRI). Customers can rent a motorcycle in one;city and then return it at one of three designated cities. Following are the;costs involved in providing this service each year;Motorcycle;Rentals Inc. began business two years ago with a $400,000 expenditure for a;fleet of 45 motorcycles. These are expected to last five more years, at which;time a new fleet will be purchased. Jeremy is satisfied with the steady average;rentals per year of 10,000. Required: 1. What price should Jeremy charge;per rental for the business to make a twenty percent life-cycle profit?;2.;What price should Jeremy charge per rental for the business to make a;before-tax thirty percent return on investment?;81.;Excel;Manufacturing has received an order for 5,000 units of its only product;Excel-A. Excel is considering a variety of methods to determine the price of;the order. Some key information about Excel follows;Required: 1.;Determine the price using the markup of 40% of full manufacturing costs.;2.;Determine the price;using a 20% markup on life-cycle costs.;3.;Determine the price;assuming a desired 50% gross margin percentage.;4.;Determine the price;assuming a desired 30% return on life-cycle costs.;5.;Determine the price;assuming a desired 20% return on investment;82. Marchand's;Restaurant had developed an excellent reputation in recent years for its price;menu, and atmosphere. The restaurant is now completing a strategic analysis to;determine whether it should make adjustments in its menu, pricing, or wait;service, to better meet customer needs and to become more competitive.;Marchand's has chosen to use Quality Function Deployment (QFD) to analyze;customer preferences and its cost structure. The analysis focuses on costs that;can be managed in the short term, and therefore excludes facility related;costs.;The data that Marchand's;has collected so far includes information about customer preferences;(Marchand's surveyed customers regarding their preferences for taste, comfort;and atmosphere) and the unit cost of the three key elements of its service;food preparation, wait staff, and food ingredients.;Next;Marchand completed an analysis, using the expertise of its managers, wait staff;and kitchen staff, to determine the contribution of each of the three elements;of its service to satisfying the three components of customer satisfaction.;Required;Determine which of the three cost elements (food preparation, wait staff, and;food ingredients) should be given increased ordecreased emphasis based;on a QFD analysis. Explain your answer with appropriate calculations.;83. High;Point Furniture manufactures a high-quality dining table, which is offered in;both oak and walnut. The demand for the tables is 800 units for the oak table;and 1500 for the walnut table. The tables are priced at $495 and $995 for the;oak and walnut tables, respectively. The materials cost is $210 for the oak;table and $430 for the walnut table. In addition, High Point has the following;manufacturing information for the four manufacturing processes (receiving;preparation, assembly, and finishing), showing the amount of time (in minutes);required for each table for each process, and the total minutes of time;available for each process.;Required: 1.;Which process(es), if any, are constraints for the current level of demand?;2.;Given any constraints;identified in part (1) above, determine the best production and sales plan for;the two types of tables.;3.;What is the overall;contribution from the production plan you determined in part (2) above?;84.;Life Cycle Costing Income Statements;The following revenue;and cost data are for Turner Manufacturing's two radial saws. The L40 is for;the commercial market and the L50 is for industrial customers. Both products;are expected to have three-year life cycles.;Required;1. How would a product life-cycle income statement differ from the above income;statements? 2. Prepare a three-year life-cycle income statement for both;products. Which product appears to be more profitable and why?;Prepare;a schedule showing each cost category as a percentage of total annual costs.;What do you think this indicates about the profitability of each product over;the three-year life cycle?


Paper#44935 | Written in 18-Jul-2015

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