Assignment:
Problem 1:
Many companies have made shortening the production rate of various processes their primary goal. Most of these companies have reviewed costs and eliminated as much product as feasible. Now the focus is on speed. The commitment to speed affects every phase of a company's business. Administration, sales, engineering and production are all expected to complete tasks faster and more efficiently than ever before. Improved computer technologies have allowed companies to organise, synthesise and analyse information, giving firms that can operate a competitive advantage.
Required
i. Explain how faster processes can be applied in areas such as engineering and administration. How can reduced process times in these areas help a company be more competitive?
ii. Explain why improved quality is essential to a company that is able to work faster and reduce process times.
iii. What are potential problems that may arise from the increased speed of processes?
Problem 2:
Steve Smith is a manager of operations for XYZ Ltd. He is responsible for the operations of the company's two manufacturing factories, one in Brisbane and one in Adelaide. Each factory has a manager who oversees the daily operations. During a recent review of the operations for the year, prepared using absorption costing, Steve noted that the Brisbane factory reported a net profit and that the balance in Finished goods inventory had grown significantly over the year. The Adelaide factory showed no net profit, but its inventory fell over the year. According to XYZ's policy, the Brisbane factory manager will receive a bonus this year based on the profit generated at the factory; Adelaide manager will not receive a bonus.
Required
Comment on Steve's observation. What conflicts are created when a company determines its manager's bonuses based on net profit alone?
Problem 3: Dream Housing Ltd produces prefabricated modular housing. The company manufactures four styles of homes and uses a standard cost accounting system. The company uses a single account for capturing material variances and another account for recording labour variances. During a review of the general ledger for the past operation period, Mr Dreamer, the managing director, notes that the material variances were favourable and the labour variances were unfavourable.
Required
i. In general, what do these variances indicate regarding production costs for the period?
ii. What further information would management find useful in analysing production costs and variances for the period?
Problem 4:
Always Right is a manufacturer of calculators. In the budget-setting process, budget A was put together by lower and middle management. Budget B was put together by senior management.
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A |
B |
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Unit sales
|
20,000
|
30,000
|
|
Dollar sales
|
600,000
|
900,000
|
|
Less Variable expenses:
|
|
Direct materials
|
260,000
|
360,000
|
|
Direct labour
|
40,000
|
60,000
|
|
Variable overhead
|
60,000
|
75,000
|
|
Variable selling and administrative expense
|
60,000
|
60,000
|
|
Total variable expenses
|
420,000
|
555,000
|
|
Contribution margin
|
180,000
|
345,000
|
|
Less Fixed expenses:
|
|
Manufacturing overhead
|
60,000
|
50,000
|
|
Selling and administrative
|
100,000
|
80,000
|
|
Taxes and interest
|
10,000
|
10,000
|
|
Total fixed expenses
|
170,000
|
140,000
|
|
Net profit (loss)
|
10,000
|
205,000
|