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Problem 22-5B (60 minutes)
Part 1
Process time ..............................................................................
16.0 hours
Inspection time ..........................................................................
3.5 hours
Move time ...................................................................................
9.0 hours
Wait time ....................................................................................
21.5 hours
Manufacturing cycle time .........................................................
50.0 hours
Part 2
Manufacturing cycle efficiency (16.0 hours/ 50.0 hours) ......
0.32
Part 3
To increase the manufacturing cycle efficiency to 0.80 Best Ink needs to
reduce the total manufacturing cycle time to 20 hours without changing the
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Problem 22-6B (45 minutes)
Part 1
Sadar Company
Departmental Income Statements
Department
Videos
Music
Sales ..............................................................................
$370,500
$279,500
Cost of goods sold .......................................................
320,000
175,000
Gross margin ................................................................
50,500
104,500
Direct expenses
Salaries .....................................................................
35,000
25,000
Maintenance .............................................................
12,000
10,000
Utilities ......................................................................
5,000
4,500
Insurance ..................................................................
4,200
3,700
Total direct expenses ..............................................
56,200
43,200
Departmental contribution to overhead .....................
(5,700)
61,300
Allocated indirect expenses
Advertising* .............................................................
8,550
6,450
Salaries** ..................................................................
16,200
10,800
Office expenses*** ...................................................
2,000
1,200
Total allocated indirect expenses ..........................
26,750
18,450
Departmental net income ............................................
$ (32,450)
$ 42,850
*
Advertising allocation:
Sales
%
Amount
Allocated
Videos
$370,500
57%
$15,000
$ 8,550
Music
279,500
43%
15,000
6,450
Total
$650,000
100%
$15,000
**
Salaries allocation:
Employees
%
Amount
Allocated
Videos
3
60%
$27,000
$16,200
Music
2
40%
27,000
10,800
Total
5
100%
$27,000
***
Office expenses allocation:
Sq. ft.
%
Amount
Allocated
Videos
5,000
62.5%
$3,200
$2,000
Music
3,000
37.5%
3,200
1,200
Total
8,000
100.0%
$3,200
P
Problem 22-6B (Concluded)
Part 2
The video department has both a negative contribution to overhead and a
negative departmental net income. It is not even covering its own direct costs,
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SERIAL PROBLEM — SP 22
Serial Problem, Success Systems (20 minutes)
1. The balance scorecard is a system of performance measures that
requires managers to think of their company from four perspectives:
Customer, internal process, innovation and learning, and financial.
2. Below are some examples of balanced scorecard measures that
Adria could use. Other examples are possible:
Customer: Percentage of computer workstations returned, number of
on-time workstation deliveries, number of on-time
computer system installations, customer satisfaction
survey ratings, number of new customers acquired.
Reporting in Action — BTN 22-1
1. Polaris revenues by product line
($ thousands)
December
31, 2011
December
31, 2010
December
31, 2009
Total revenues .............................................
$2,656,949
$1,991,139
$1,565,887
Off-Road Vehicles* (69%) ...........................
1,833,296
1,373,886
1,080,462
Snowmobiles (11%) ....................................
292,264
219,025
172,248
On-Road Vehicles (5%) ...............................
132,847
99,557
78,294
Parts, Garments & Accessories (15%) ......
398,542
298,671
234,883
* Revenue rounded up so product line total revenues sum to total revenues of $2,656,949.
2. Polaris can divide up the operating expenses into product line direct
and indirect expenses. Some of the direct expenses of a particular
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Comparative Analysis — BTN 22-2
($ in thousands)
1. Profit margin = Net income/Sales
Polaris = $227,575 / $2,656,949 = 8.6%
2. Investment turnover = Investment center sales
Investment center average assets
3. Polaris’s profit margin (8.6%) is higher than Arctic Cat’s (2.8%).
Ethics Challenge — BTN 22-3
1. There is an ethical concern in this situation. Pincus is taking actions
she would not otherwise take. She believes that “minor compromises”
in her behavior do not significantly affect clients. However, the
2. Given that Pincus is aware of her behavior, its potential consequences,
and the source of what’s behind her behavior (in this case the focus by
management on meeting the quarterly responsibility performance
budget), she can approach her superiors (at least one or two she
3. Senior Security (the employer) is ultimately responsible for any action
taken by its employees, including Pincus. Management must establish
an ethical code of conduct to ensure that department managers do not
suggest some revision in the system to mitigate this trade-off.
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Communicating in Practice — BTN 22-4
Sample solution
MEMORANDUM
TO: Name, Store Manager
FROM: Your Name, National Office Manager
SUBJECT: New Performance Reporting
DATE: Current Date
All current and future periods’ performance reports for all managers
include an allocation of home office expenses. These expenses will be
assigned as a percent of store sales.
Taking It to the Net — BTN 22-5
Instructor note: The objective of this assignment is for students to be exposed to the
different accounting and business applications with spreadsheets.
1. The tutorials identified and read by the students will vary. For example,
2. Student responses regarding the usefulness of spreadsheets will
depend on the tutorials accessed. For example, the tutorial “Return on
Investment and Return on Equity Business Model” shows how a
Teamwork in Action — BTN 22-6
1. The student must make decisions about geographic area, type of
business segment, and reporting structure. The objective is to have
2. Having comparable responsibility accounting reports is necessary to
reliably compare performance within a company (and across different
companies). Differences in performance reports can substantially
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Entrepreneurial Decision — BTN 22-7
1. Departmental income statements can be prepared for each department
once expenses have been allocated to it. The expenses will include both
2. If the indirect expenses are a large portion of total expenses, a
departmental income statement might not be the best measure of each
department’s performance. While the department’s income or loss is
department is helping to cover the indirect expenses.
3. United By Blue could use ratings from customer satisfaction surveys,
the number of repeat customers, the percentage of orders returned, and
Hitting the Road — BTN 22-8
1. [Student answers will vary for part (1).] One suggested responsibility
accounting reporting framework is to have (1) concessions and (2)
2. One suggested proposal is
Expense
Allocation Basis
Heat ...............................
Square footage occupied
Rent ...............................
Sales dollars
Insurance ......................
Square footage occupied
Maintenance .................
Time in process—with a standard time to clean a
theater after a show
Global Decision — BTN 22-9
1. Net sales percentage growth [non-percents in € thousands]
Segment
Net sales % change from 2010 to 2011
Two-wheeler ................................
(€1,025.3 - €988.1) / €988.1 = 3.8%
Commercial Vehicles ......................
(€491.1 - €497.3) / €497.3 = -1.2%
2. Percentage growth in net sales is higher in the Two-wheeler segment
(3.8% increase) than in the Commercial Vehicles segment (-1.2%
decrease).
3. The Two-wheeler segment earned more gross margin (profit) in both
4. Piaggio’s management can use this information to help establish long-
term goals and strategies and for resource allocation decisions. An
important factor in the valuation of any company is its ability to grow
