69. Assume that, due to excess demand, Chelsea is able to raise the selling price on Main Man Robot 10%. To
achieve a return of 30% of total revenues, Chelsea’s monthly cost reduction in dollars will need to be:
Use the following to Ans questions 70-71:
MJK Molding is a specialty molder of plastic jar covers for the cosmetics industry. Because the products sold
are expensive cosmetics, the large cosmetic companies who purchase the jar covers are highly sensitive to the
appearance of the product. Any cuts, nicks, abrasions or pieces of dirt embedded will result in rejection of the
units. The company spends a significant amount of time in the quality control area. The following list of
sub-activities has been developed for quality control:
Hilton – Chapter 05
70. In an activity listing with value-added scores:
71. The sub-activities of this company indicate that:
72. Filing 941 payroll data with the Federal Government:
73. Which of the following statements is true about using external customers to help perform value analysis?
Use the following to Ans questions 74-75:
Consider the following information gathered from the records of TMC Manufacturing Company, a plastic
molder of pieces for children’s games. Pieces are shipped in lots of 500 units each.
All factory labor earns $15 per hour.
Hilton – Chapter 05
74. The savings for each 500-unit order after implementing the process improvements are:
75. The percentage savings for each 500-unit order after implementing the process improvements will be:
76. Classify each of the activities below as value-added (V) or non-value-added (N):
77. Match the descriptions below with the appropriate phrase or term: Anss may be used more than once.
(a) Shipping units to final customer
(b) Marks and tracks all orders electronically
(c) Multiple layers of approval
(d) Spreadsheet function to help in analysis of value added activities
(e) Small scale model of limited scope
(f) Producing to build inventory
(g) Evaluates costs and values of process activities to identify opportunities for improved efficiency
(h) New ABC approach at American Airlines
(i) Focuses on understanding how resources are used in current processes
78. Randolph Molding is a compression molding plastics company that specializes in high priced jar covers for
the cosmetics industry. Because appearance is so important, customers can reject covers even for minor
blemishes that do not affect the cover’s function. Therefore, preventing dust and contamination in the molding
process is an ongoing problem for the company. Each order requires a machine setup that can be complex. The
company recently implemented some major process improvements. The value-added analysis of the
compression molding process for placing good pieces in inventory appears below:
Setup labor is paid $25 per hour. Inspection labor is paid $12 per hour and all other factory labor is paid $15
per hour.
Required:
(a) Calculate the total savings for each 1,000-order jar cover from implementing the process improvements.
(b) Compute the savings in percentage terms.
79. Shrewsbury Corporation has prepared an activity analysis for the molding department. The following
activities and costs were recorded:
Required:
a) Rank the activities and costs from highest customer value (5) to lowest customer value (1).
b) What percentage of the costs represents non-value added activities? Provide justifications for your Anss.
80. Estabrook Insurance Company is reviewing complaints from customers that the processing of insurance
claims for glass damage in automobile accidents is taking an excessive amount of time. Customers complain of
calls not being returned, delayed processing of insurance checks, talking to multiple people in the claims
process and general confusion. It is taking customers up to one month to receive checks for damage claims. The
subactivities involved at a local agency and the elapsed time to complete the activity for an average claim are
presented below:
Required:
(a) Which of the above activities would be viewed as value-added from the eyes of the customer?
(b) What percentage of time is being spent on value–added activities?
(c) Comment on the process and make suggestions for improvement. (Source: Institute of Management
Accountants- Regional Education Assistance Program – Seminar entitled “Process Mapping and Analysis”
81. Below find the results of a process value analysis for Worcester Manufacturing Company:
All factory labor is paid $15 per hour.
Required: Calculate the total cost savings and percentage cost savings of the process improvements.
