Part B is needed Marla Baldwin was a bit anxious as she created the year-end performance reports. She remembered how management had hoped theeconomy would make a favorable turn, taking pressure off consumers so they'd feel more comfortable spending on the company'ssplurge Item-a luxurious hooded cotton robe. Alas, actual production and sales ended at 5,100 units, a whopping 1,000 units shy ofthe company's original budget. The following Information presents the company's actual Income statement and other key Informationfor Marla.SalesActual IncomeVarlable costs:DMDLVarlable-MOHContribution marginFixed costs:Fixed-MOHFixed SG&AOperating IncomeStandards are as follows.Direct materialsDirect laborVarlable-MOHFixed-MOH$800,700172,125 (for 11,475 yards purchased and used)75,276(for 3,672 hours used)45,900Selling priceFixed SG&A expense507,399170,978243,100$93,321Standard Quantity per Unit2.30 yards0.70 DL hours2.30 yards2.30 yardsAdditional master budget Information:$175$288,600Standard Price$16.00 per yard$21.00 per DL hour$5.00 per yard$13.00 per yard Present the company's complete flexible budget for the year and compare it to the actual results to determine flexible budgetvarlances for each line Item; Include the amount and sign for all variances.Flexible Budget VarlancesSalesLess:Variablecosts:DirectmaterialsDirect laborVariable-MOHContributionmarginLess: FixedcostsFixed-MOHSG&AOperatingIncome(b1)$800,700 $ActualDM price varlance172,12575,276$507,399Expected DM use45,900170,978243,100$93,321 $$$DM efficiency varlance $91,80015,55530612,75063,80111,41245,5006,889UnfavorableFavorableUnfavorableyardsFavorableUnfavorableFavorableBreak down the DM flexible budget varlance Into the price and efficiency varlances. How many yards of DM did the companyexpect it would use for actual production?FavorableUnfavorableFavorableFavorable$Flexible E

The question is asked about the DM flexible variances. We need to solve only part B of those…

Present the company's complete flexible budget for the year and compare it to the actual results to determine flexible budget varlances for each line Item; Include the amount and sign for all varlances. Flexible Budget Varlances Sales Less: Variable costs: Direct materials Direct labor Variable- MOH Contribution margin Less: Fixed costs Fixed-MOH SG&A Operating Income (b1) Actual $800,700 $ 172,125 Expected DM use 75,276 45.900 $507,399 170,978 243,100 $93,321 DM price varlance DM efficiency varlance $ $ 91,800 15,555 306 12,750 63,901 11,412 45,500 6,889 Unfavorable Favorable Unfavorable yards Favorable Unfavorable Favorable Favorable Unfavorable Break down the DM flexible budget varlance Into the price and efficiency varlances. How many yards of DM did the company expect it would use for actual production? Favorable Favorable $ Flexible E

Present the company's complete flexible budget for the year and compare it to the actual results to determine flexible budget varlances for each line Item; Include the amount and sign for all varlances. Flexible Budget Varlances Sales Less: Variable costs: Direct materials Direct labor Variable- MOH Contribution margin Less: Fixed costs Fixed-MOH SG&A Operating Income (b1) Actual $800,700 $ 172,125 Expected DM use 75,276 45.900 $507,399 170,978 243,100 $93,321 DM price varlance DM efficiency varlance $ $ 91,800 15,555 306 12,750 63,901 11,412 45,500 6,889 Unfavorable Favorable Unfavorable yards Favorable Unfavorable Favorable Favorable Unfavorable Break down the DM flexible budget varlance Into the price and efficiency varlances. How many yards of DM did the company expect it would use for actual production? Favorable Favorable $ Flexible E

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter14: The Balanced Scorecard And Corporate Social Responsibility

Section: Chapter Questions

Problem 3BE: Moses Moonrocks Inc. has developed a balanced scorecard with a measure map that suggests that the...

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At the beginning of the last quarter of 20x1, Youngston, Inc., a consumer products firm, hired Maria Carrillo to take over one of its divisions. The division manufactured small home appliances and was struggling to survive in a very competitive market. Maria immediately requested a projected income statement for 20x1. In response, the controller provided the following statement: After some investigation, Maria soon realized that the products being produced had a serious problem with quality. She once again requested a special study by the controllers office to supply a report on the level of quality costs. By the middle of November, Maria received the following report from the controller: Maria was surprised at the level of quality costs. They represented 30 percent of sales, which was certainly excessive. She knew that the division had to produce high-quality products to survive. The number of defective units produced needed to be reduced dramatically. Thus, Maria decided to pursue a quality-driven turnaround strategy. Revenue growth and cost reduction could both be achieved if quality could be improved. By growing revenues and decreasing costs, profitability could be increased. After meeting with the managers of production, marketing, purchasing, and human resources, Maria made the following decisions, effective immediately (end of November 20x1): a. More will be invested in employee training. Workers will be trained to detect quality problems and empowered to make improvements. Workers will be allowed a bonus of 10 percent of any cost savings produced by their suggested improvements. b. Two design engineers will be hired immediately, with expectations of hiring one or two more within a year. These engineers will be in charge of redesigning processes and products with the objective of improving quality. They will also be given the responsibility of working with selected suppliers to help improve the quality of their products and processes. Design engineers were considered a strategic necessity. c. Implement a new process: evaluation and selection of suppliers. This new process has the objective of selecting a group of suppliers that are willing and capable of providing nondefective components. d. Effective immediately, the division will begin inspecting purchased components. According to production, many of the quality problems are caused by defective components purchased from outside suppliers. Incoming inspection is viewed as a transitional activity. Once the division has developed a group of suppliers capable of delivering nondefective components, this activity will be eliminated. e. Within three years, the goal is to produce products with a defect rate less than 0.10 percent. By reducing the defect rate to this level, marketing is confident that market share will increase by at least 50 percent (as a consequence of increased customer satisfaction). Products with better quality will help establish an improved product image and reputation, allowing the division to capture new customers and increase market share. f. Accounting will be given the charge to install a quality information reporting system. Daily reports on operational quality data (e.g., percentage of defective units), weekly updates of trend graphs (posted throughout the division), and quarterly cost reports are the types of information required. g. To help direct the improvements in quality activities, kaizen costing is to be implemented. For example, for the year 20x1, a kaizen standard of 6 percent of the selling price per unit was set for rework costs, a 25 percent reduction from the current actual cost. To ensure that the quality improvements were directed and translated into concrete financial outcomes, Maria also began to implement a Balanced Scorecard for the division. By the end of 20x2, progress was being made. Sales had increased to 26,000,000, and the kaizen improvements were meeting or beating expectations. For example, rework costs had dropped to 1,500,000. At the end of 20x3, two years after the turnaround quality strategy was implemented, Maria received the following quality cost report: Maria also received an income statement for 20x3: Maria was pleased with the outcomes. Revenues had grown, and costs had been reduced by at least as much as she had projected for the two-year period. Growth next year should be even greater as she was beginning to observe a favorable effect from the higher-quality products. Also, further quality cost reductions should materialize as incoming inspections were showing much higher-quality purchased components. Required: 1. Identify the strategic objectives, classified by the Balanced Scorecard perspective. Next, suggest measures for each objective. 2. Using the results from Requirement 1, describe Marias strategy using a series of if-then statements. Next, prepare a strategy map. 3. Explain how you would evaluate the success of the quality-driven turnaround strategy. What additional information would you like to have for this evaluation? 4. Explain why Maria felt that the Balanced Scorecard would increase the likelihood that the turnaround strategy would actually produce good financial outcomes. 5. Advise Maria on how to encourage her employees to align their actions and behavior with the turnaround strategy.
Oaklands Manufacturing LtdOaklands Manufacturing Ltd. produces a health drink which it sells in health shops and gyms across the country. The business has been doing well and an examination of its results for the month of July showed that it had produced and sold 500 more bottles of the drink than the expected 4,000 units of Product A during July. Despite the increased number of bottles produced the business is pleased to find that its manufacturing costs have actually decreased overall, and management are keen to identify the individual variances to see where savings were made, or where costs increased.The following are the actual results for July as produced by the management accountant. Materials (4,200 litres drink mix) Direct employee labour (15,000 hours) Variable overhead based on labour hrs Fixed overheadsTotal actual manufacturing cost£37,800 63,000 79,500 69,000249,300 The company never carries stocks of materials, finished goods, or work-in-progress.The following was the…