Accounting Chapter 15 Homework Cengage Learning All Rights Reserved May Not

Exercise 15.16

1. Productivity profiles:

Base Yeara Current Yearb

Materials productivity ratio ……….. 0.75 1.00

2. Income statements:

Base Year Current Year

Sales …………………. $13,500,000 $16,200,000

3. Profit-linked measurement (where P = $6 and $8, respectively):

PQ* PQ × P AQ AQ × P (PQ × P) – (AQ × P)

Materials … 1,440,000 $ 8,640,000 1,080,000 $ 6,480,000 $ 2,160,000

Exercise 15.16 (Concluded)

4. Total profit change:

Base Year: Revenues ($15 × 900,000) ……… $ 13,500,000

Materials ($5 × 1,200,000)………. (6,000,000)

Current Year: Revenues ($15 × 1,080,000) …… $ 16,200,000

Materials ($6 × 1,080,000)………. (6,480,000)

CPA-TYPE EXERCISES

Exercise 15.17

Exercise 15.18

Exercise 15.19

Exercise 15.20

Exercise 15.21

c. Productivity ratios for each year are as follows:

Year 1 Year 2

PROBLEMS

Problem 15.22

1. Pizza: (3 × 30) + (7 × 30) = 300 slices/10 slices per pizza = 30 pizzas

2. Pizza ($10 × 30) ………….. $300

Root beer ($3 × 30) ……… 90

3. Group (value stream) A:

Pizza: (3 × 30) = 90 slices/10 slices per pizza = 9 pizzas

Root beer: (3 × 30) = 90 glasses/5 glasses = 18 pitchers

Salads: (1 × 30) = 30 bowls

Pizza ($10 × 9) ………… $ 90

Group (value stream) B:

Pizza: (7 × 30) = 210 slices/10 slices per pizza = 21 pizzas

Root beer: (2 × 30) = 60 glasses/5 glasses = 12 pitchers

Salads: (1 × 30) = 30 bowls

Pizza ($10 × 21) ………. $210

Placing customers into groups based on similar consumption patterns is

analogous to placing products in value streams based on usage of similar

processes. Assigning all the costs that relate to the groups is analogous to

Problem 15.22 (Concluded)

ABC cost is based on causal relationships:

Cost per slice of pizza = $10/10 = $1 per slice

Cost per glass of root beer = $3/5 = $0.60

Problem 15.23

1. Group (Light Eaters) A:

Pizza: (2 × 15) + (3 × 15) = 75 slices/10 slices per pizza = 8 pizzas

Root beer: (2 × 15) + (3 × 15) = 75 glasses/5 glasses = 15 pitchers

Salads: (1 × 30) = 30 bowls

Problem 15.23 (Concluded)

Group (Heavy Eaters) B:

Pizza: (6 × 15) + (7 × 15) = 195 slices/10 slices per pizza = 20 pizzas

Root beer: (3 × 15) + (2 × 15) = 75 glasses/5 glasses = 15 pitchers

Salads: (1 × 30) = 30 bowls

ABC cost is based on causal relationships:

Cost per slice of pizza = $10/10 = $1 per slice

Cost per glass of root beer = $3/5 = $0.60

2. The extra capacity created by this reduction is 30 (1 × 30) slices of pizza and

30 (1 × 30) glasses of root beer. Thus, if this excess capacity is eliminated,

3 fewer pizzas (30/10) and 6 fewer pitchers of root beer (30/5) would be need-

ed. This would reduce costs by ($10 × 3) + ( $3 × 6) = $48. Thus, the new aver-

Problem 15.24

1. The operational performance measures that improved for the first six months

all have to do with improving time-based performance. On-time delivery and

dock-to-dock days showed dramatic improvements, reflecting the increased

ability of the firm to produce on demand. From the capacity measures, we see

2. The constant sales per person, coupled with constant total sales, suggest

that the head count has not been reduced. More resources are available for

use by the value stream as reflected by the increase in available capacity. The

3. Accepting the order only promises a contribution of $10,000, or an ROS of 10

percent, using the traditional standard cost. However, the value stream has 50

Problem 15.25

1. a. Standard-costing-based. Materials price variances may encourage buying

in quantity to take advantage of discounts and thus work against the ob-

advanced manufacturing environment).

b. Lean-based. Cycle time encourages reduction of the time it takes to pro-

duce products. This is compatible with the pull-through philosophy of JIT

c. Lean-based. This comparison encourages managers to reduce actual

costs to the targeted level. This is compatible with the objective of contin-

d. Standard-costing-based. Materials usage variances may encourage poor

quality or excessive inventory. These outcomes conflict with the objec-

e. Lean-based. Trend reports emphasize the objective of continuous im-

provement. The objective is to encourage managers to produce favorable

trends.

f. Standard-costing-based. Traditional performance reports can encourage

excessive inventory, lack of preventive maintenance, and poor quality, all

g. Lean-based. Benchmarking helps foster change. By identifying the best

practices of competitors, opportunities, as well as the need for increased

efficiency, are noted. This supports the principle of continuous improve-

ment.

h. Lean-based. Improving delivery performance is compatible with the objec-

tives of continuous improvement, service quality, and pull-through pro-

Problem 15.25 (Continued)

i. Lean-based. Quality measures are virtually ignored by a standard-costing

system. Yet, knowing quality performance is fundamental to measuring

and improving quality.

j. Lean-based. Highlighting value- and non-value-added costs is compatible

with the objectives of absolute efficiency and continuous improvement.

k. Standard-costing-based. Labor efficiency variances can encourage poor

quality and inventories, both of which conflict with the objectives of total

l. Lean-based. If the objective is to reduce days of inventory, then this

measure is compatible with the objective of zero inventories. In this case,

the trend in the measure is important and should be declining.

m. Lean-based. Reducing downtime is compatible with total preventive

maintenance, zero inventories, and the pull-through philosophy of JIT. As

downtime is reduced, one of the major reasons for carrying inventory is

eliminated.

n. Lean-based. Manufacturing cycle efficiency is compatible with continuous

improvement and elimination of non-value-added activities. As non-value-

Problem 15.25 (Concluded)

2. Operational: b, h, i, l, m, n, and sometimes q

3. Strategic-based accounting derives its measures from the mission and

strategy of the organization. Thus, the set of measures is strategically linked.

The set of measures expands to cover customer and learning and growth

Problem 15.26

1. Productivity profiles:

Current system:

Materials: 30,000/120,000 = 0.25

2. To compare the alternatives, all inputs must be considered:

Productivity profiles:

Current System Computerized System

Materials …………… 0.25 0.29

Labor ……………….. 0.50 0.67

3. Profit-linked measurement (where P = $5.00, $10.00, 10.00%, and $3.00, re-

spectively):

PQ* PQ × P AQ AQ × P (PQ × P) – (AQ × P)

Materials … 120,000 $ 600,000 105,000 $ 525,000 $ 75,000

Labor …….. 60,000 600,000 45,000 450,000 150,000

Problem 15.27

1. Productivity profiles:

Materialsa Laborb

2014 ……….. 0.50 2.0

2015 ……….. 0.60 2.4

2. Profit-linked measurement (where P = $5.00 and $10, respectively):

PQ* PQ × P AQ AQ × P (PQ × P) – (AQ × P)

Materials … 96,000 $480,000 80,000 $400,000 $ 80,000

3. Price-recovery component:

Total profit change:

2015: Revenues ($20 × 48,000) ……… $ 960,000

Materials ($5.00 × 80,000) …….. (400,000)

Labor ($10 × 20,000) ……………. (200,000)

Problem 15.28

1. Productivity profiles:

Materials Labor

a. 2014 …………………. 1.67 0.83

b. Change I …………… 1.43 1.25

2. Cost

2014: (33,000 × $60) + (66,000 × $15) = $2,970,000

Change I: (38,500 × $60) + (44,000 × $15) = $2,970,000

Cost of productive inefficiency:

2014: $2,970,000 – $1,980,000 = $990,000

Potential improvement for 2015:

Change I: $2,970,000 – $2,970,000 = $0

Change I improves the technical use of labor but does so by trading off mate-

rials for labor inputs. The optimal combination defines the relative mix ratio

Problem 15.28 (Concluded)

3. The profit-linked measurement approach will provide the same outcome with-

out requiring knowledge of the optimal input combination. Since the output is

the same for both years, the inputs that would have been used in 2015 with-

CYBER RESEARCH CASE

15.29

Answers will vary.

The following problems can be assigned within CengageNOW and are auto-

graded. See the last page of each chapter for descriptions of these new assign-

ments.

The Collaborative Learning Exercise Solutions can be found on the