Intro: Woodward Farm Inc has two divisions; farm equipment and farm supplies. In regards to the farm equipment, they produce two models: AZ42 and AZ45. The company is deciding whether or not to stop producing Model AZ42 because its revenues are much less than the revenues of the AZ45. Their competitor, Taylor Company, is selling more of Model AZ42 but Woodward farms does not seem to care since their AZ45 model is bringing in much more revenue. Joanne, in accounting, uses direct labour hours as the base for computing the overhead rates and does not want to change that. The overhead costs are $2,700,000. Janet, the plant manager, is concerned about how complex it is to produce Model AZ45. As well the company is facing a decision about their …show more content…
The first issue consists of whether we should discontinue the process of AZ42 production and only make AZ45. Although the financials figures reveal that the AZ45 produces a greater bottom line, a more intuitive analysis has to be undertaken in order to understand whether that is really the case. Determining cost per unit can be computed using the Traditional or the ABC costing method. The VP of Woodward Farm Inc. cannot stress enough how important it is to sell a greater quantity of the AZ45 in order to conquer a greater market share. Issue 2: Whether to change suppliers or purchase company trucks? The second issue deals with the shipping supplier. The company 's original majority shipping supplier increased its rates by 10%. Now the company must decide if it will change suppliers or purchase its own company trucks in order to achieve the target budgeted net income of …show more content…
should not use the traditional method over the ABC costing method. Although the Traditional method is easier to implement, this method doesn’t take into account that Woodward Farm Inc. uses an automated process in order to produce goods.Therefore in this method, due to the automated process, direct labour hours is most frequently used in order to calculate the overhead cost. Under the traditional method other cost drivers such as quality control and soldering activities would not be accounted for which results in an inaccurate representation of the actual image of the company 's progress. Therefore if traditional method is used to compute the overhead, this could lead to inaccurate and wrong managerial
“Linen company A” cleans linens for local hotels and restaurants. The linen company has had a drastic increase in their amounts of work to the point that their labor force is insufficient. To hire more labor is feasible, but they would like to keep from doing this, allowing themselves to save money in the long run. They’re problem is lack of labor, and the want to maximize efficiency in the workplace.
John Deere Component Works (JDCW), subdivision of John Deere and Co. was in charged specifically of the manufacturing of tractor component parts. The demand for JDCW’s products had problems due to the collapse of farmland value and commodity prices. Numerous and constant failures in JDCW’s competition for bids, alerted top management to start questioning their current costing methods. As an outcome, the analysis has to be guided to research on the current costing methods with the intention of establishing legitimacy and to help the company in adopting a more appropriate costing system.
The Coop has no major market research to go off of in order to effectively position them in a changing market. R&D doesn't seem to be supported by good research in the market segments.
The sales director proposed that if the firm were to reduce the price of Item 345 to FF15.00/m, they would be able to increase sales to 175,000 units (or 25% of industry volume). But if they were to keep the price at the current value of FF20.00/m, they would be able to sell not less than 75,000 units (or 11% of industry volume).
Throughout time new developments have taken a toll over our lives, but in the industry field things have taken a dramatic change, changing the farming methods used to produce. As Mark Hyman states in one of his quotes, “In the 21st century our taste buds, our brain chemistry, our biochemistry, our hormones and our kitchens have been hijacked by the food industry,” the government and industry companies have corrupted our mind set. Food, Inc., released in 2009, addresses the topic of corporate farming, and argues that the industries are producing unhealthy food for society. Director Robert Kenner filmed this documentary to aware all consumers of the dangers corporates are doing, which is only benefiting them and harming the society with the food they are producing and that in some cases is killing people due to the bacteria it contains. Corporate industries, government agencies, and private
Use the following data to complete a table showing the established rate (Column A), contracted rate (Column B) and the difference (Column A minus Column B) as a contractual allowance for each payer. Then, briefly discuss how one could increase or decrease revenue in this system. A physician office's revenue for visit code 99214 has a full established rate of $72.00. There are 10 different payers; there are nine different contracted rates, as follows:
Happy Chips, Inc. is faced with a serious problem, with only having one mass merchandise customer called “Buy 4 Less” being unhappy with the company’s operating performance. Buy 4 Less had several problems cited including frequent stock outs, poor customer service responsiveness, and high prices for the products being supplied. Buy 4 Less came up with solutions they think seem fit to fix the problems they found with Happy Chips, Inc. and if Happy Chips, Inc. wishes to remain a supplier to their company they will have to incorporate these changes. The problem however with this scenario, is that employees of Happy Chip, Inc. are not happy with the demands Buy 4 Less has bestowed upon them which include providing direct store delivery four times a week instead of three, installing an automated order inquiry system to increase customer service responsiveness, and decreasing product prices by 5%. Even though the easiest thing for Happy Chips, Inc. to do is to agree to the changes Buy 4 Less wants them to do, Wendell Worthmann, the manager of logistics cost analysis doesn’t agree to the changes right away. The main problem with this case is that Buy 4 Less is Happy Chips, Inc. one and only mass merchandise customer that accounts for 400,000 annual unit sales and 12% of annual revenue. With the mass merchandise segment having such a high profit potential, Happy Chips, Inc.
Trainer cost, manuals = 10@ $200= $2000, 3 x10 students= 30 tests @ $50=$150, total cost $2150 budget available $3500. Using the testing information of the 10 students the trainer in conjunction with the metric of students’ pre training performance (50 pieces per-hr.) Organization standard is 100 pieces per- hr.) Production cost is $10 per-hour wages, selling price per piece $20. The 10 students’ pre training was 50 pieces per hour, Organization standard 100 per hour@ $10 per-hour costs $1000 to produce, sells for $20, at 100 per hr. = $2000 - $1000= $1000 x10= $10,000 potential profit, at standard rate. At 50 per hr.at $10 per-hr. cost =$500 sells at $20 = $1000, $1000-$500=$500x10= $5000 potential profit. Post-training had 7 students’ producing 95 pieces per-hour and 3 students’ producing 75 pieces per-hour. The seven (7) students producing 95 pieces at $10 cost = $950, selling at 95x$20 =$1900, $1900-$950=$950 Profit x7 =$6,650. These 7 give the trainer a 95% return on training, the Three (3) producing 75 pieces per hour at $10 = $750
Signode Industries Inc. - Providing Packaging Solutions Executive Summary SIGNODE INDUSTRY: DILEMMA AT HAND: Mr. Gary Reed, President of Signode Industries packaging division, is in a dilemma as what he should be his course of action to meet the 6.8% increase in price of cold rolled steel- the raw material used in manufacture of Signode’s primary product, steel strapping. There are few options given in the case: Increase Signode’s strapping prices to offset the increased price of cold – rolled steel. Maintain Signode’s current book prices as increasing prices would affect sales force morale. Introduce price-flex model as proposed by Jack Davis i.e. a kind of selective discounting or premium charging for customized services. Recommendations Reason: (All data in accordance to 1983) In accordance to Exhibit 1: Sales of Packaging Division of the company = $285,950 In accordance to Table A: Sales of Apex = 33.3% of $285,950 Sales of BBM = 26.8% of $285,950 Sales of HDM = 33.4% of $285,950 Sales of Customized Products = 6.5% of $285,950 In accordance to Exhibit 4: Similarly, For Apex: As it has a capacity utilization of 71% now, Suppose a sale is $100. Then contribution is $39.15 Therefore variable cost is $60.85. Now if we increase the capacity utilization to 100%, Sales becomes $ 141 since production increases by [(100-71)/71] * 100 = 41% Variable Cost = 141% of 60.85 = $85.8 Fixed Cost = 69.38% * 12.3 = $8.53 Total Cost = 85.8+8.53 = $94.33 EBIT = Sales – Variable cost – Fixed Cost = $46.67 % of EBIT = [(46.67/141) * 100] = 33.09% Suppose the company sales 100x units, the total cost was 69.38. Thus per unit cost was .6938. Now the company sells 141x units, the total cost...
BASF’s product which is under business case evaluation comes from a business unit called EV and EV is not producing the chemicals needed for BASF’s innovation chemistry by its own. Hence EV will need to source the chemical from another business unit called EM. During this the product will be charged at transfer price as per BASF transfer price guidelines. Using the ‘Transfer Price calculation method selection’ (proposed my BASF’s ZZ) we can conclude that EV will qualify for cost plus transfer pricing. Referring BASF’s recent cost plus methodology (applicable from January 2014) and adapting it to our situation it can be said ...
In June, raw materials used were machining $18,000 and assembly $4,000. Factory labor costs were machining $12,000 and assembly $5,000. Manufacturing overhead costs were machining $6,000 and assembly $2,500. The company transfers finished units at a cost of $19,000 in the machining department to the assembly department. The assembly department transfers units completed at a cost of $11,000 to finished goods and a product with the cost of $3,000 are sold to customers. The journal entry of these costs to the two processes and the transfer of the units are as
Others feel that ABC would be more widespread in industry if it were marketed better by the cost accounting profession itself [1]. As the dust has settled, ABC has turned out to be less a revolutionary technique than a useful refinement to proven systems. The costs of products and services must be accurate, or management can be misled. Decisions... ...
If the company follow this recommendations, it will obtain a profit of $ 531,000 that represents $180,000 more than with seasonal production
...h the full expenses included. Challenge overseeing and incorporating over a huge supply change and developing patterns.
During the last few years, Harry Davis Industries has been too constrained by the high cost of capital to make many capital investments. Recently, though, capital costs have been declining, and the company has decided to look seriously at a major expansion program that had been proposed by the marketing department. Assume that you are an assistant to Leigh Jones, the financial vice president. Your first task is to estimate Harry Davis’s cost of capital. Jones has provided you with the following data, which she believes may be relevant to your task.