I need 1000 words in ASSIGNMENT AND ADVANCED MANAGERIAL

1016-2, L016-3, L016-4,

L016-6

CASE 16.2

The Meadowbrooke Miracle Prescott Manufacturing operates several plants, each of which produces a different product. Early in the currult year, John Walker was hired as the new manager of the Meadowbrooke Plant. At year-end, all the plant managers are [Bked to summarize the operations of their plants at a meeting of the company's board of directors. John Walker displayed the following information on a chart as he made his presentation.

Current Last Year

Inventories of finished goods:

Beginning of the year (30,000 tnits in the current year and 10,000 units last year) $255,000 $ 85,000

End of the year (20.000 units in the current year and

 30,000 units last year)202,000 255,000

Cost of finished goods manufactured . 909,000

Walker made the following statements to the board: "As you know, sales volume has remained constant for the Meadowbrooke Plant. Both this year and last, our sales amounted to 100,000 units. We have made real gains, however, in controlling our manufacturing Through efficient plant operations, we have reduced our cost of finished goods manufactured by over $100,000. These economies are reflected in a reduction of the manufacturing cost per unit sold from $10.20 last year + 100,000 units) to $9.09 in the current year ($909,000 + 100,000 units)."

Father Alan Carter is president of St. Mary's University and is a member of Prescott Manufacturing 's board of directors. However, Father Carter has little in the accounting practices of manufacturing companies, and he asks you for assistance in evaluating Walker's statements.

Instructions

a. As a preliminary step to your analysis, compute the following for the Meadowbrooke Plant in each of the t'A0 years.

1. Cost of goods sold.

2. Number of finished units manufactured.

3. Average cost per unit manufactured.

4. Average cost per unit sold.

b. Evaluate the statements made by Walker. Comment specifically on Walker's computation of the manufacturing cost of units sold and on whether it appears that the reduction in the cost of finished goods sold was in fact achieved through more efficient operations.

1019-2, 1019-3, 1019-4,

1019-5, 1019-6, L019-7

CASE 19.1

Activity-Based Management and Target Costing Dana Martin, president of Mays Electronics, is concerned about the end-of-the-year marketing report. According to Mary O'Brien, marketing manager, a price decrease for the coming year is again needed to maintain the company's market share of integrated circuit boards (CBs). The current selling price of S18 per unit is producing a $2 per-unit profit—half the customary S4 per-unit profit. Foreign competitors keep reducing their prices, and to match their latest reduction, the price must drop from S 18 to S 14. This price drop would put Mays's price the cost to produce and sell a CB. How could other firms sell for such a low price?

Determined to find out if there are problems with the company's operations, Dana has decided to hire a consultant to evaluate the way in which the CBs are produced and sold. After two weeks, the consultant has identified the following activities and ccr;ts associated with producing 120.000 CBs.

Activity

Set-ups 125,000

180,000

122,000

120,000

100,000

170,000

80,000

75.000

500,000

48,000

250,000

150,000

$1920,000

•Integrated circuits and other components are inserted manually into each circuit board.

The consultant indicates that some preliminary [W'tivity analysis shows that per-unit costs can be reduced by at least $7. marketing manager that the market share for the CBs could be increased by 50 percent if the price be reduced to S12.

Instructions

a. For exh activity, determine whether it is value-added or non-value-added.

b. If all the non-value-added activities could be eliminated, by how much would the cost per CB &crease? Was the consultant correct in her preliminary cost reduction assessment?

Critkal Thinking Cases 877

  Compute the target cost required to maintain Mays's current market share while earning the usual profit of $4 per unit. Also compute the target cost required to expand sales by 50 percent, By how much would the cost per unit need to be reduced to achieve each target?

 The consultant also revealed the following: Switching to automated insertion would save $90,000 of direct labor, $20,000 in rework, and $40,000 in warranty costs. The yearly cost of the necessary machinery would be $50,000. With this additional information, what is the IX)tentiaI cost reduction per unit available? Can Mays achieve the target cost to maintain its current market share?

e. In an effort to reach the target cost, Mays solicited suggestions from customers, suppliers, employees, and other consultants. The following were found to be feasible.

• Mays's production manager believes that the factory can be redesigned so that materials handling costs can be reduced by S100000-—which hwuld in turn result in a SIO,OOO savings in rework costs. The cost to redesign the factory would be

• A supplier suggests leasing a machine that would reduce set-up costs by The yearly cost to lease the machine is S 15,000.

• A customer, KD, Inc., proposes setting up a just-in-time delivery system Mays, KD, and Mays's largest raw materials supplier. This would reduce Mays's stœage costs by while increasing shipping costs by only $5,000.

• An employee suggests that Mays train all its employees in quality control measures and then offer a bonus for meeting quality targets. An outside consultant estimates that the cost of the training and bonus would be S-35,000. In return, inspections could be eliminated and rework, customer complaint costs, and warranty work could be reduced by S 120,000.

If all of these suggestions are implemented. including the automation Of the insertion process, would Mays reach the target cost needed to maintain its current market share?

1020-1, 1020-4, L020-5, Purple Cow operates a chain of drive-ins selling primarily ice cream products. The following infor1020-6, L020-7 mation is taken from the records of a typical drive-in now operated by the company.

CASE 20.2

Evaluating Marketing

Strategies Average selling price of ice cream per gallon . 14.80

 Number of gallons sold per month

Variable costs per gallon: 3.000

 Ice cream $4.60

 Supplies (cups, cones. 2.20

 Total variable expenses per gallon 6.80

Fixed costs per month:

Rent on building S 2,200.00

 Utilities and 14)keep 760.00

 Wages. including payroll taxes ... 4,840.00

Manager's salary. including payroll taxes but excluding any bonus 2,500.00

Other fixed expenses 1 ,700.oo

 Total fixed costs per month . . . $12,000.00

Based on these data, tlE monthly break-even sales volume is determined as follows.

$12,000 (fixed costs)

 = 1,500 gallons Or ($22,200)

$8.00 (contribution margin per unit)

Instructions

a. Currently, all store managers have contracts calling for a bonus of 20 cents per gallon for each gallon sold beyond the break-even point. Compute the number of gallons of ice cream that must be sold Ixr month in order to earn a monthly operating income of Sl (round to the nearest gallon).

b. To increase operating income, the company is considering the following two alternatives:

1. Reduce the selling price by an average of per gallon. This action is expected to incœase number of gallons sold by 20 percent. (Under this plan. the manager would be paid a salary of S2,500 per month without a bonus.)

2. Spend $3,000 per month on advertising without any change in selling price. This action is expected to increase the number of gallons sold by 10 percent. (Under this plan, the manager would be paid a salary of per month without a bonus.)

 
918 Chapter20 Cost,V01ume.Profit Analysis 

Which Of these two alternatives would result in the higher monthly operating income? How many gallons must be sold per month under each alternative for a typical outlet to break even? Provide schedules in support of your answers.

c. Draft a memo to management indicating your recommendations with respect to these alternative marketing strategies.