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PROBLEM 19.7A
BOOKWEB, INC. (concluded)
d.
Activity Books Software
REVENUE $3,900,000 $2,600,000
COSTS:
Receipts $150 × 1,400 = $210,000 $150 × 600 = $ 90,000
The following analysis shows that BookWeb will not achieve 13 percent cost of sales for the
Books line, but will be able to get below the 13 percent goal the Software line.
30 Minutes, Medium PROBLEM 19.8A
VALUE CHAIN, QUALITY, AND EFFICENCY
AT KIMBERLY-CLARK
•
•
…grow our strong positions in personal care by leveraging our brands and
providing innovations.—Concepts: Learning objectives 19-1, 2, 3, 4, and 5:
…For consumer tissue, we seek to bring differentiated, value-added
innovations...while simultaneously focusing on net realized revenue, improving mix
Students answers may vary. Suggested matching concepts for each area are listed below:
SOLUTIONS TO PROBLEMS SET B
PROBLEM 19.1B
QUARTEX CORPORATION
a.
b.
30 Minutes, Medium
Value-added production activities:
Non-value-added production activities:
Cutting materials
PROBLEM 19.1B
QUARTEX CORPORATION (concluded)
d.
Value-Added Activity Days
8
The Quartex total cycle time was computed in part c. Its value-added time is shown below:
Cutting materials ……………………………………………………….
Manufacturing efficiency ratio:
Value-Added Time Total Cycle Time
PROBLEM 19.2B
THE BITMORE COMPANY
a.
60 Minutes, Strong
Target Cost: BIT
Target Cost = Target Price - Target Profit
Target Price = $120
Target Profit = .12 × $120 = $14.40
Target Cost = $120 - $14.40 = $105.60
PROBLEM 19.2B
THE BITMORE COMPANY (continued)
c.
Given that it takes 2 hours ($20 total labor cost per unit/$10 per hr. wage rate) to produce
each unit of BIT and 5 hours ($50 total labor cost per unit/$10 per hr. wage rate) to
produce each unit of MORE, the total expected labor hours needed for the year are:
PROBLEM 19.2B
THE BITMORE COMPANY (continued)
d.
Allocation Rate Overhead Cost
p
er Unit of Activit
y
Total Activity
Units
The allocation rates of each overhead activity are calculated as follows:
=
PROBLEM 19.2B
THE BITMORE COMPANY (continued)
BIT MORE
200,000$ 150,000$
487,500 162,500
Since the cost per unit of BIT is below the target cost of $105.60, it is earning a return
greater than the desired rate. The cost per unit of MORE is above the target cost of $180, so
it is not earning the desired return.
Total fixed overhead allocated per unit:
Setup costs (100 × $2,000, 75 × $2,000) ………………
Purchase orders (300 × $1,625, 100 × $1,625) ………
PROBLEM 19.2B
THE BITMORE COMPANY (concluded)
g
.
BIT MORE
72,500$ 203,000$
Since the cost per unit of BIT is still below the target cost of $105.6, it is earning a return
Setup costs (50 × $1,450, 140 × $1,450) ……………………
…
With the new machine, the allocation rate per setup is calculated as follows:
Total fixed overhead allocated per unit:
