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SOLUTIONS TO EXERCISES
Ex. 19.1 a. Non-value-added activity
b. None (It is more accurately described as activity-based costing.)
c. Value engineering
Ex. 19.2 a. Research and development activities of a management accountant might
include asking managers what types of information they need to make decisions
and what format would be the easiest for them to use. It could also include
determining how well the firm’s information system meets the needs of the
Ex. 19.3 1. Value-added.
2. Non-value-added. Although the materials must be unloaded, it would be more
efficient if they were delivered straight to the Cutting Department as they were
needed.
9. Non-value-added. The process of obtaining cut materials could be improved by
electronically signaling the Cutting Department to produce and send over more
materials.
Ex. 19.4 a.
Billing and
Financial
Activity Category
BLAKE FURNITURE, INC.
Accounts Receivable Department
Ex. 19.5
c.
Ex. 19.6 a.
The original estimated selling price of $40 would yield a profit of $8 per unit
Thus, total yearly profits would be lower under the $36 selling price.
The only value-added activities are assembly and painting.
Ex. 19.7 a.
12,000$
12,000$
Internal failure costs:
Prevention costs:
Machine maintenance ……………………………………………
…
Appraisal costs:
NOGAIN MANUFACTURING
Quality Cost Report
For the Year Ended Dec. 31, 20__
Inspections ………………………………………………………
…
Ex. 19.9
Ex. 19.10 Heavy Duty % Regular %
Total
Activity
Costs
Activity
Cost to
Heavy Duty
A
ctivity
Cost to
Regular
160,000/480,000 320,000/480,000
1,200/1,820 620/1,820 $ 118,300 $ 78,000 $ 40,300
1,600/2,050 450/2,050 112,750 88,000 24,750
Recalls
If each cashier spends five percent of his/her time on helping customers organize
their purchases, then a total of 5 cashiers × 5% = 25% of total cashier time per store
is consumed with organizing customer's purchases. The clerks have enough capacity
to undertake assisting the customer because 10% idle time per clerk × 6 clerks =
service because of this activity.
Activities:
Production
Warranty
Ex. 19.10
(continued)
Ex. 19.11
Ex. 19.12 a. Target cost = $6.50/1.10 = $5.91.
Current cost = $0.95 + $3.80 + $1.35 = $6.10, Pizza Pies
Ex. 19.13 a. Internal failure, non-valued added.
b. Appraisal costs, value-added.
c. Internal failure, non-valued added.
Clearly, the Heavy Duty vacuum has the highest quality cost per unit (over four
times the quality cost per unit of Regular). The manager might want to consider
Items a., b., c., e., and f. might be considered non-value-added activities in a JIT
system. If that is the case, then:
determine if some costs could be cut from packaging. Suppliers of materials
could be approached for price reductions. Internal production processes
could be reviewed for cost savings.
If preparing for shipping is considered value-added then the ratio is 0.21.
Ex. 19.15 a.
b.
Home Depot defines shrink as “the difference between the recorded amount
of inventory and the physical inventory.”
The causes of shrink are theft (non-value-added), loss (non-value-added),
inaccurate records for the receipt of inventory (non-value-added), or
SOLUTIONS TO PROBLEMS SET
A
PROBLEM 19.1A
CASTNER CORPORATION
a.
30 Minutes, Medium
Value-added production activities:
Cutting materials
PROBLEM 19.1A
CASTNER CORPORATION (concluded)
d.
6
5
Manufacturing efficiency ratio: Value-Added Time ÷ Total Cycle Time
Value-Added Activity Days
Castner’s total cycle time was computed in part c above. Its value-added time is shown
below:
Cutting materials ……………………………………………………………
Bending materials …………………………………………………………
