1. In the context of this course, you will be asked to address the issues/questions below for GoPro, Inc. (GPRO). When addressing the issues/questions, be sure to do so in the context of this course and GoPro. Your primary sources of information will come from GoPro's website, in particular "Investor Relations" and the "GoPro 2014 Annual Report." Also, look at the web pages for GoPro on Yahoo! Finance and/or Morningstar.com.
a) Discuss the critical success factors and whether or not you believe that GoPro shows evidence of success for these factors.
b) Discuss GoPro in the context of the Theory of Constraints.
c) From the material reviewed, explain whether or not GoPro shows evidence in its operations/results of the perspectives of the balanced scorecard.
d) Discuss which of the activities of the value chain are most important to GoPro.
e) Discuss the concept of customer delivered value in the context of GoPro.
f) Discuss (providing examples) the costs of controlling quality and the costs of failing to control quality in the context of GoPro.
2. Go to YouTube.com and search for the video, what is TOC - Eli Goldratt - www.toc.co.uk. It is a video of 4 minutes and 38 seconds. Please watch the video and summarize the key points in terms of how the concepts presented can be used in the decision making process for a manager.
3. Given the following data:
|
Administrative costs
|
$40,000
|
|
Building depreciation (80% for plant)
|
30,000
|
|
Property, plant and equipment
|
150,000
|
|
Indirect materials and supplies
|
4,000
|
|
Sales commissions
|
15,000
|
|
Accounts receivable
|
15,000
|
|
Direct materials inventory, Jan 1
|
14,000
|
|
Direct labor
|
35,000
|
|
Direct materials inventory, Dec 31
|
17,000
|
|
Finished goods inventory, Jan 1
|
7,000
|
|
Finished goods inventory, Dec 31
|
8,000
|
|
Materials purchases
|
27,000
|
|
Accounts payable
|
12,000
|
|
Work in process inventory, Dec 31
|
12,000
|
|
Supervisory and indirect labor
|
12,000
|
|
Property taxes (80% for plant)
|
10,000
|
|
Utilities and power (90% for plant)
|
30,000
|
|
Work in process inventory, Jan 1
|
8,000
|
|
Sales revenue
|
250,000
|
Required:
a) Determine the cost of goods manufactured the gross profit, and the operating income.
b) From the above list identify, what might be a product cost and what might be a period cost.
c) Explain the terms, cost object and cost driver.
4. Victoria Hair Salon styles hair in three operations - washing, cutting/setting, and drying - and charges $15 per styling. (Each styling is one "unit.") Victoria styles hair on a walk-in basis and does not take appointments; customers who face a wait walk across the street to another salon. Victoria's owners find it has a cutting/setting bottleneck on Saturdays due to a limited number of stylists. The bottleneck exists for a total of eight hours each Saturday. Pertinent information follows:
|
|
Washing
|
Cutting/Setting
|
Drying
|
|
Hourly Capacity
|
30 Units
|
12 Units
|
15 Units
|
|
Saturday Capacity (8 hours)
|
240 Units
|
96 Units
|
120 Units
|
|
Actual Saturday Production
|
96 Units
|
96 Units
|
96 Units
|
|
Fixed Operating Costs per Saturday
|
$10
|
$75
|
$100
|
Each hair styling has variable costs of $5. Victoria's output is constrained by the 96 units of cutting/setting capacity. Two options exist that can relieve the bottleneck at the cutting/setting operation. Consider the differential costs associated with each of the following operations to determine the impact on throughput.
Option a. Victoria can increase bottleneck output by hiring one non-stylist employee to prepare customers for the cutting/setting by washing and combing their hair. This would increase the cutting/setting capacity to 115 each Saturday. The cost for this additional employee is $64 per Saturday.
Option b. Victoria could hire another stylist for each Saturday increasing the cutting/setting capacity to 108 each Saturday and costing an additional $120 per stylist.
Should Victoria's owner go ahead with either of the two options? Why or why not?
5. Jasper's Flooring makes three types of flooring products: tile, carpet, and parquet. Cost analysis reveals the following costs (expressed on a per-square-yard basis) are expected for 2016
|
|
TILE
|
CARPET
|
PARQUET
|
|
Direct materials
|
$5.20
|
$3.25
|
$8.80
|
|
Direct labor
|
1.80
|
.40
|
6.40
|
|
Variable overhead
|
1.00
|
.15
|
1.75
|
|
Variable selling expenses
|
.50
|
.25
|
2.00
|
|
Variable administrative expenses
|
.20
|
.10
|
.30
|
|
Fixed overhead
|
$760,000
|
|
Fixed selling expenses
|
240,000
|
|
Fixed administrative expenses
|
200,000
|
Per-yard expected selling prices are: tile, $16.40, carpet, $8.00; and parquet $25.00.
In 2015 sales were as follows and the mix is expected to continue in 2016.
|
|
TILE
|
CARPET
|
PARQUET
|
|
Square yards
|
24,000
|
144,000
|
12,000
|
Review of recent tax returns reveals an expected tax rate of 40 percent.
Required:
a) How many square yards of each product are expected to be sold at the breakeven point?
b) Assume that the company desires an after-tax profit of $680,000. How many square yards of each type of product would need to be sold to generate this profit level? How much revenue would be required?
6. Lakeland Inc. manufactures 1 GB flash drives (jump drives). Price and cost data for a relevant range extending to 200,000 units per month are as follows:
|
Sales price per unit
|
|
|
(Current monthly sales volume is 130,000 units)
|
$ 20.00
|
|
Variables cost per unit:
|
|
|
Direct materials
|
6.20
|
|
Direct labor
|
7.00
|
|
Variable manufacturing overhead
|
2.00
|
|
Variable selling and administrative expenses
|
1.80
|
|
Monthly fixed expenses:
|
|
|
Fixed manufacturing overhead
|
$103,000
|
|
Fixed selling and administrative expenses
|
187,000
|
Lakeland's tax rate is 40 percent.
Requirements:
a) What would the company's operating income be if it sold 160,000 units?
b) What would the company's monthly operating income be if it had sales of $4,000,000?
c) What is the breakeven point in units? In sales dollars?
d) How many units would the company have to sell to earn a monthly net income of $260,100?
7. Platt Sports Products manufactures and distributes three types of golf clubs: beginners, intermediate, and advanced. The materials used in these clubs increases in each level and allows for more precise balancing and longer wear. Production is highly automated for the beginners' clubs, whereas the intermediate and advanced clubs require a varying degree of labor, depending on the intricacy of the balancing process. Platt applies all indirect costs according to a predetermined rate based on direct labor hours. A consultant recently suggested that Platt switch to an activity-based costing (ABC) system, and identified the following cost breakdown for the upcoming year:
|
Activity
|
Estimated
|
|
Recommended Cost Drivers
|
Costs
|
Cost Driver
|
|
Order processing
|
Number of orders
|
$52,500
|
125 orders
|
|
Production setup
|
Number of production runs
|
210,000
|
75 runs
|
|
Materials handling
|
Pounds of materials used
|
375,000
|
125,000 lbs
|
|
Machine depr. and Maintenance
|
Machine hours
|
322,000
|
20,000 hours
|
|
Quality control
|
Number of inspections
|
80,000
|
40 inspections
|
|
Packing
|
Number of units
|
14,000
|
280,000 units
|
In addition, management estimates 50,000 direct labor hours will be used in the upcoming year at a rate of $14 per hour.
Assume that the following activity took place in the first month of the upcoming year:
|
|
Beginners
|
Intermediate
|
Advanced
|
|
Number of units produced
|
20,000
|
8,000
|
3,000
|
|
Direct material costs
|
$20,800
|
$13,000
|
$8,000
|
|
Direct labor hours
|
500
|
1,000
|
2,000
|
|
Number of orders
|
6
|
4
|
3
|
|
Number of production runs
|
2
|
2
|
3
|
|
Pounds of material
|
8,000
|
3,200
|
1,500
|
|
Machine hours
|
1,200
|
300
|
200
|
|
Number of inspections
|
3
|
3
|
2
|
|
Number of units shipped
|
18,000
|
7,500
|
2,500
|
Required:
a) Compute the production costs for one unit of each product in the first month of the upcoming year using direct labor hours as the allocation base.
b) Compute the production costs for one unit of each product in the first month of the upcoming year using activity based costing.
c) Comment on the results.