a
Concept Introduction:
Pricing waterfall: Granting heavy discounts and special allowances can also lead to unprofitable customers, before increasing the price the company should examine the ways to reduce the effective pricing the customer pays.
The total sales discount percentage for customer 1 and customer 2.
b
Concept Introduction:
Pricing waterfall: Granting heavy discounts and special allowances can also lead to unprofitable customers, before increasing the price the company should examine the ways to reduce the effective pricing the customer pays.
The reason why R company management is not aware of the large total discount offered to customers.
c
Concept Introduction:
Pricing waterfall: Granting heavy discounts and special allowances can also lead to unprofitable customers, before increasing the price the company should examine the ways to reduce the effective pricing the customer pays.
Advise for R Company regarding managing discounts and allowances.
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Management Accounting
- The following series of statements or phrases are associated with product life-cycle viewpoints. Identify whether each one is associated with the marketing, production, or customer viewpoint. Where possible, identify the particular characteristic being described. If the statement or phrase fits more than one viewpoint, label it as interactive. Explain the interaction. a. Sales are increasing at an increasing rate. b. The cost of maintaining the product after it is purchased. c. The product is losing market acceptance and sales are beginning to decrease. d. A design is chosen to minimize post-purchase costs. e. Ninety percent or more of the costs are committed during the development stage. f. The length of time that the product serves the needs of a customer. g. All the costs associated with a product for its entire life cycle. h. The time in which a product generates revenue for a company. i. Profits tend to reach peak levels during this stage. j. Customers have the lowest price sensitivity during this stage. k. Describes the general sales pattern of a product as it passes through distinct life-cycle stages. l. The concern is with product performance and price. m. Actions taken so that life-cycle profits are maximized. n. Emphasizes internal activities that are needed to develop, produce, market, and service products.arrow_forwardRequired information Skip to question [The following information applies to the questions displayed below.] Zenon Computer competes at the retail level on the basis of customer service. It has invested significant resources in its customer service department. Recently, the company has installed a traditional activity-based costing (ABC) system to provide better cost information for pricing, decision making, and customer profitability analysis. Most of the costs of running the customer service department are considered committed (i.e., short-term fixed) costs (principally, personnel and equipment costs). The budgeted cost for the upcoming period is $832,000. Activity analysis, recently conducted when the ABC system was implemented, revealed the following information: Activities Percentage of Employee Time Estimated (Budgeted) Cost Driver Quantity Handling customer orders 75% 8,320 customer orders Processing customer complaints 10 416 customer complaints Conducting customer credit checks…arrow_forwardActivity-Based Management, Non-Value-Added Costs, Target Costs, Kaizen Costing Joseph Hansen, president of Electronica, Inc., was concerned about the end-of-the-year marketing report that he had just received. According to Asha Kumar, marketing manager, a price decrease for the coming year was again needed to maintain the company's annual sales volume of integrated circuit boards (CBs). This would make a bad situation worse. The current selling price of $27 per unit was producing a $3-per-unit profit—half the customary $6-per-unit profit. Foreign competitors keep reducing their prices. To match the latest reduction would reduce the price from $27 to $21. This would put the price below the cost to produce and sell it. How could the foreign firms sell for such a low price? Determined to find out if there were problems with the company's operations, Joseph decided to hire Ahmed Kumar, a well-known consultant and brother of Asha, who specializes in methods of continuous improvement. Ahmed…arrow_forward
- Rizzo Goal Inc. produces and sells hockey equipment, often custom made for online orders. The company has the following performance metrics on its balanced scorecard: days from ordered to delivered, number of shipping errors, customer retention rate, and market share. A measure map illustrates that the days from ordered to delivered and the number of shipping errors are both expected to directly affect the customer retention rate, which affects market share. Additional internal analysis finds that: Every shipping error over three shipping errors per month reduces the customer retention rate by 1.5%. On average, each day above three days from ordered to delivered yields a reduction in the customer retention rate of 1%. Each day before three days from order to delivery yields an increase in the customer retention rate of 1%, on average. Rizzo Goal Inc.s current customer retention rate is 60%. The company estimates that for every 1% increase or decrease in the customer retention rate, market share changes 0.5% in the same direction. Rizzo Goal Inc.s current market share is 21.4%. Ignoring any other factors, if the company has six shipping errors this month and an average of 3.5 days from ordered to delivered, determine (a) the new customer retention rate and (b) the new market share that Rizzo Goal Inc. expects to have.arrow_forwardKathy Shorts, president of Oliver Company, was concerned with the trend in sales and profitability. The company had been losing customers at an alarming rate. Furthermore, the company was barely breaking even. Investigation revealed that poor quality was at the root of the problem. At the end of 20x5, Kathy decided to begin a quality improvement program. As a first step, she identified the following costs in the accounting records as quality related: Required: 1. Prepare a quality cost report by quality cost category. 2. Calculate the relative distribution percentages for each quality cost category. Comment on the distribution. 3. Using the Taguchi loss function, an average loss per unit is computed to be 15 per unit. What are the hidden costs of external failure? How does this affect the relative distribution? 4. Shortss quality manager decided not to bother with the hidden costs. What do you think was his reasoning? Any efforts to reduce measured external failure costs will also reduce the hidden costs. Do you agree or disagree? Explain.arrow_forwardContinuous improvement is the governing principle of a lean accounting system. Following are several performance measures. Some of these measures would be associated with a traditional standard-costing accounting system, and some would be associated with a lean accounting system. a. Materials price variances b. Cycle time c. Comparison of actual product costs with target costs d. Materials quantity or efficiency variances e. Comparison of actual product costs over time (trend reports) f. Comparison of actual overhead costs, item by item, with the corresponding budgeted costs g. Comparison of product costs with competitors product costs h. Percentage of on-time deliveries i. First-time through j. Reports of value- and non-value-added costs k. Labor efficiency variances l. Days of inventory m. Downtime n. Manufacturing cycle efficiency (MCE) o. Unused (available) capacity variance p. Labor rate variance q. Using a sister plants best practices as a performance standard Required: 1. Classify each measure as lean or traditional (standard costing). If traditional, discuss the measures limitations for a lean environment. If it is a lean measure, describe how the measure supports the objectives of lean manufacturing. 2. Classify the measures into operational (nonfinancial) and financial categories. Explain why operational measures are better for control at the shop level (production floor) than financial measures. Should any financial measures be used at the operational level? 3. Suggest some additional measures that you would like to see added to the list that would be supportive of lean objectives.arrow_forward
- Suspicious Acquisition of Data, Ethical Issues Bill Lewis, manager of the Thomas Electronics Division, called a meeting with his controller, Brindon Peterson, and his marketing manager, Patty Fritz. The following is a transcript of the conversation that took place during the meeting: Bill: Brindon, the variable costing system that you developed has proved to be a big plus for our division. Our success in winning bids has increased, and as a result our revenues have increased by 25%. However, if we intend to meet this years profit targets, we are going to need something extraam I right, Patty? Patty: Absolutely. While we have been able to win more bids, we still are losing too many, particularly to our major competitor, Kilborn Electronics. If we knew more about their bidding strategy, we could be more successful at competing with them. Brindon: Would knowing their variable costs help? Patty: Certainly. It would give me their minimum price. With that knowledge, Im sure that we could find a way to beat them on several jobs, particularly on those jobs where we are at least as efficient. It would also help us to identify where we are not cost competitive. With this information, we might be able to find ways to increase our efficiency. Brindon: Well, I have good news. Ive been talking with Carl Penobscot, Kilborns assistant controller. Carl doesnt feel appreciated by Kilborn and wants to make a change. He could easily fit into our team here. Plus, Carl has been preparing for a job switch by quietly copying Kilborns accounting files and records. Hes already given me some data that reveal bids that Kilborn made on several jobs. If we can come to a satisfactory agreement with Carl, hell bring the rest of the information with him. Well easily be able to figure out Kilborns prospective bids and find ways to beat them. Besides, I could use another accountant on my staff. Bill, would you authorize my immediate hiring of Carl with a favorable compensation package? Bill: I know that you need more staff, Brindon, but is this the right thing to do? It sounds like Carl is stealing those files, and surely Kilborn considers this information confidential. I have real ethical and legal concerns about this. Why dont we meet with Laurie, our attorney, and determine any legal problems? Required: 1. Is Carls behavior ethical? What would Kilborn think? 2. Is Bill correct in supposing that there are ethical and/or legal problems involved with the hiring of Carl? (Reread the section on corporate codes of conduct in Chapter 1.) What would you do if you were Bill? Explain.arrow_forwardThe controller of Emery, Inc. has computed quality costs as a percentage of sales for the past 5 years (20X1 was the first year the company implemented a quality improvement program). This information is as follows: Required: 1. Prepare a trend graph for total quality costs. Comment on what the graph has to say about the success of the quality improvement program. 2. Prepare a graph that shows the trend for each quality cost category. What does the graph have to say about the success of the quality improvement program? Does this graph supply more insight than the total cost trend graph does? 3. Prepare a graph that compares the trend in relative control costs versus relative failure costs. Comment on the significance of this trend.arrow_forwardThe Chocolate Baker specializes in chocolate baked goods. The firm has long assessed the profitability of a product line by comparing revenues to the cost of goods sold. However, Barry White, the firms new accountant, wants to use an activity-based costing system that takes into consideration the cost of the delivery person. Following are activity and cost information relating to two of Chocolate Bakers major products: Using activity-based costing, which of the following statements is correct? a. The muffins are 2,000 more profitable. b. The cheesecakes are 75 more profitable. c. The muffins are 1,925 more profitable. d. The muffins have a higher profitability as a percentage of sales and, therefore, are more advantageous.arrow_forward
- In 20X1, Don Blackburn, president of Price Electronics, received a report indicating that quality costs were 31% of sales. Faced with increasing pressures from imported goods. Don resolved to take measures to improve the overall quality of the companys products. After hiring a consultant in 20X1, the company began an aggressive program of total quality control. At the end of 20X5, Don requested an analysis of the progress the company had made in reducing and controlling quality costs. The accounting department assembled the following data: Required: 1. Compute the quality costs as a percentage of sales by category and in total for each year. 2. Prepare a multiple-year trend graph for quality costs, both by total costs and by category. Using the graph, assess the progress made in reducing and controlling quality costs. Does the graph provide evidence that quality has improved? Explain. 3. Using the 20X1 quality cost relationships (assume all costs are variable), calculate the quality costs that would have prevailed in 20X4. By how much did profits increase in 20X4 because of the quality improvement program? Repeat for 20X5.arrow_forwardThe controller for Dohini Manufacturing Company felt that the number of purchase orders alone did not explain the monthly purchasing cost. He knew that nonstandard orders (for example, one requiring an overseas supplier) took more time and effort. He collected data on the number of nonstandard orders for the past 12 months and added that information to the data on purchasing cost and total number of purchase orders. Multiple regression was run on the above data; the coefficients shown by the regression program are: Required: 1. Construct the cost formula for the purchasing activity showing the fixed cost and the variable rate. 2. If Dohini Manufacturing Company estimates that next month will have 430 total purchase orders and 45 nonstandard orders, what is the total estimated purchasing cost for that month? (Round your answer to the nearest dollar.) 3. What if Dohini Manufacturing wants to estimate purchasing cost for the coming year and expects 5,340 purchase orders and 580 nonstandard orders? What will estimated total purchasing cost be? What is the total fixed purchasing cost? Why doesnt it equal the fixed cost calculated in Requirement 2? (Round your answers to the nearest dollar.)arrow_forwardBasic Inc., a chain of gasoline service stations, has a strategy of charging discount prices for its gasoline by providing very little service and charging relatively high prices for the goods in its attached mini-market. Its balanced scorecard performance measures include: Increase in operating income through cost reduction (Financial); market share in the overall gasoline market (Customer); wait-time at the pump (Internal Business Processes); and store manager and employee bonus based on number of customers served (Learning and Growth). Indicate whether each of these performance measures is appropriate, given Basics strategy.arrow_forward
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