Comparative data on three companies in the same service industry are given below

Comparison of Performance Using Return on Investment (ROI)

Comparative data on three companies in the same service industry are given below:

                                                                                                                     Company 

                                                                                                   A                      B                       C

Sales                                                                               $4,000,000       $1,500,000       $     ?

Net operating income                                                    $560,000       $210,000          $      ?  

Average operating assets                                           $2,000,000               ?                 $3,000,000

Margin                                                                                   ?                          ?                        3.5%

Turnover                                                                                ?                          ?                        2

Return on investment (ROI)                                               ?                          7%                    ?

Required:

1. What advantages are there to breaking down the ROI computation into two separate elements, margin and turnover?

2. Fill in the missing information above, and comment on the relative performance of the three companies in as much detail as the data permit. Make specific recommendations about how to improve the ROI.

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Topaz Company makes one product and has set the following standards for materials and labor

Materials and Labor Variances; Computations from Incomplete Data

Topaz Company makes one product and has set the following standards for materials and labor:

                    

                                                                                         Direct Materials                   Direct Labor

Standard quantity of hours per unit                          ? pounds                               2.5 hours

Standard price or rate                                                  ? per pound                         $9.00 per hour

Standard cost per unit                                                        ?                                      $22.50

During the past month, the company purchased 6,000 pounds of direct materials at a cost of $16,500. All of this material was used in the production of 1,400 units of product. Direct labor cost totaled $28,500 for the month. The following variances have been computed:

Materials quantity variance                                              $1,200 U

Total materials spending variance                                      $300 F

Labor efficiency variance                                                   $4,500 F

Required:

1. For direct materials:

a. Compute the standard price per pound for materials.

b. Compute the standard quantity allowed for materials for the month’s production.

c. Compute the standard quantity of materials allowed per unit of product.

2. For direct labor.

a. Compute the actual direct labor cost per hour for the month.

b. Compute the labor rate variance.

(Hint: In completing the problem, it may be helpful to move from known to unknown data either by using the variance formulas or by using the columnar format shown in Exhibits 11-5 and 11-6.) 

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Landers Company manufactures a number of products. The standards relating

Basic Variance Analysis, the Impact of Variances on Unit Costs

Landers Company manufactures a number of products. The standards relating to one of these products are shown below, along with actual cost data for May.

                                                                                        Standard Cost per Unit                   Actual Cost per Unit

Direct materials:

Standard: 1.80 feet at $3.00 per foot                          $5.40

Actual: 1.75 feet at $3.20 per foot                                                                                           $5.60

Direct labor:

Standard 0.90 hours at $18.00 per hour                      16.20

Actual: 0.95 hours at $17.40 per hour                                                                                     16.53

Variable overhead

Standard: 0.90 hours at $5.00 per hour                       4.50

Actual: 0.95 hours at $4.60 per hour                                                                                        4.37 

Total cost per unit                                                            $26.10                                                $26.50

Excess of actual cost over standard cost per unit                                       $0.40

The production superintendent was pleased when he saw this report and commented: “This $0.40 excess cost is well within the 2% limit management has set for acceptable variances. It’s obvious that there’s not much to worry about with this product.” Actual production for the month was 12,000 units. Variable overhead cost is assigned to products on the basis of direct labor-hours. There was no beginning or ending inventories of materials.


Required:

1. Compute the following variances for May:

a. Materials price and quantity variances.

b. Labor rate and efficiency variances.

c. Variable overhead rate and efficiency variances.

2. How much of the $0.40 excess unit cost is traceable to each of the variances computed in (1) above.

3. How much of the $0.40 excess unit cost is traceable to apparent inefficient use of labor time?

4. Do you agree that the excess unit cost is not of concern?

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Barberry, Inc. manufactures a product called Fruta. The company uses a standard

Basic Variance Analysis

Barberry, Inc. manufactures a product called Fruta. The company uses a standard cost system and has established the following standards for one unit of Fruta:

                                                               

                                                                             Standard                  Standard                     Standard

                                                                             Quality                     Price or Rate              Cost

Direct Materials                                                1.5 pounds              $6.00 per pound        $9.00               

Direct Labor                                                       0.6 hours                 $12.00 per hour           7.20

Variable manufacturing overhead                 0.6 hours                 $2.50 per hour             1.50

                                                                                                                                                      $17.70

During June, the company recorded this activity related to production of Fruta:

a. The company produced 3,000 units during June.

b. A total of 8,000 pounds of material were purchased at a cost of $46,000.

c. There was no beginning inventory of materials; however, at the end of the month, 2,000 pounds of material remained in ending inventory.

d. The company employs 10 persons to work on the production of Fruta. During June, they worked an average of 16 hours at an average rate of $12.50 per hour.

e. Variable manufacturing overhead is assigned to Fruta on the basis of direct labor-hours. Variable manufacturing overhead costs during June totaled $3,600.


The company’s management is anxious to determine the efficiency of Fruta production activities.

Required:

1. For direct materials:

a. Compute the price and quantity variances.

b. The materials were purchased from a new supplier who is anxious to enter into a long-term purchase contract. Would you recommend that the company sign the contract? Explain.

2. For labor employed in the production of Fruta:

a. Compute the rate and efficiency variances.

b. In the past, the 10 persons employed in the production of Fruta consisted of 4 senior workers and 6 assistants. During June, the company experimented with 5 senior workers and 5 assistants. Would you recommend that the new labor mix be continued? Explain.

3. Compute the variable overhead rate and efficiency variances. What relation can you see between this efficiency variance and the labor efficiency variance?

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Devry BUSN 115 Week 6 Quiz (A+ Guaranteed)

Devry BUSN 115 Week 6 Quiz

Question 1. (TCO 5) A company whose structure, policies, and capabilities allow employees to respond quickly to customer needs and changes in the business environment is termed as a(n) _____.

agile organization
hyperspecialized organization
formal organization
umbrella organization
mechanistic organization

Question 2. (TCO 5) Which of the following chain-of-command systems was developed to address the need to combine specialization with management control?

Line-and-staff organization
Agile organization
Formal organization
Informal organization

Question 3. (TCO 5) _____ is defined as a pathway for the flow of authority from one management level to the next.

Span of control
Departmentalization
Network structure
Chain of command

Question 4. (TCO 5) Grouping departments according to similarities in product, process, customer, or geography is called _____.

virtual structure
matrix structure
functional structure
divisional structure

5. (TCO 5) Kelly, who had recently joined an organization, participates in all corporate events because she wants to be accepted as a friend by her coworkers. According to David McClelland’s three-needs theory, this desire is known as _____.

need for achievement
need for self-esteem
need for affiliation
need for security

Question 6. (TCO 5) Justin M. Brown, the operations manager at Vernon Manufacturing Company, formulated a strategy to motivate the firm’s employees. Justin addressed employees’ dissatisfaction by increasing their salary and incentives; he employed several industrial counselors to help employees deal with work-related stress; and improved the health insurance plan provided to employees. He also motivated employees by providing greater opportunity for advancement, recognizing employees who perform well and giving employees greater responsibility to foster a sense of achievement in them. Justin’s measures are based on which of the following approaches?

Theory X
Theory Y
Herzberg’s two-factor theory
Scientific management

Question 7. (TCO 5) _____ connects an employee’s efforts to the outcome he or she thinks will result from those efforts.

Herzberg’s two-factor theory
David McClelland’s three needs theory
Expectancy theory
Equity theory

Question 8. (TCO 5) _____ suggests that employee satisfaction depends on the perceived ratio of inputs to outputs.

Herzberg’s two-factor theory
David McClelland’s three-needs theory
Expectancy theory
Equity theory

Question 9. (TCO 5) Which of the following statements is true about management by objectives?

It has not been validated by experimental research.
It reduces employee involvement in goal setting and decision making.
It reduces employee stress by removing specific goals and targets.
It ensures that employees’ activities are directly linked to achieving the organization’s long-term goals.

Question 10. (TCO 5) K.M. Retailers, an international consumer products retail chain, gives preference to women and minority-owned suppliers and subcontractors. The firm hires a large number of employees from ethnic minorities and the human resource department keeps the interests of these groups in mind while framing company policies. In this example, K.M. Retailers uses which of the following strategies?

Ethnocentric policies
Decentralization
Deregulation
Diversity initiatives

Question 11. (TCO 5) Quality of hire measures _____.

the level of productivity of employees in the probationary period
how closely incoming employees meet the company’s needs
the percentage of minority groups in a firm’s workforce
the percentage of the workforce that leaves every year

Question 12. (TCO 5) The sequence of activities that takes the longest time from start to finish in a PERT diagram is called the _____ path

lagging
minor
critical
buffered

Question 13. (TCO 5) Polar Refrigerator Company reduces its inventory-carrying costs by having their vendors deliver materials right before they are needed in the production process. This is an example of _____ inventory management.

PERT
JIT
buffered
economic order based

Question 14. (TCO 5) _____ refers to the creation of identical goods or services in large quantities

Batch-of-one production
Mass production
Customized production
Mass personalization

Question 15. (TCO 5) _____ is a comprehensive approach of companywide policies, practices, and procedures to ensure that every product meets quality standards.

Quality assurance
Quality control
Quality directive
Corrective management

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Devry BIS311 Week 1 Quiz (A+ Guaranteed)

Devry BIS311 Week 1 Quiz

Question 1. 1. (TCO 1) A(n) _____ is a container that stores the projects and files for an entire application. (Points : 1)

window
solution
interface
package

Question 2. 2. (TCO 3) The programming process begins with a meeting between the programmer and the client. Which of the following activities is the last activity in the programming process? (Points : 1)

Build the user interface.
Code the application.
Test and debug.
Assemble the documentation.

Question 3. 3. (TCO 1) All the objects in an object-oriented program are created (instantiated) from a _____. (Points : 1)

project
form
class
property

Question 4. 4. (TCO 3) At design time, the programmer can change the form’s background color by changing the form’s _____ property. (Points : 1)

BackGround
Color
BackColor
ForeColor

Question 5. 5. (TCO 1) When you click the ellipsis (…) button in the Settings box of the Font property, _____. (Points : 1)

a list of font styles appears
a color palette appears
a dialog box opens
the attribute is removed

Question 6. 6. (TCO 3) The character used to create an access key by inserting it into a text property is _____. (Points : 1)

~
^
&
+

Question 7. 7. (TCO 1) The Toolbox window _____. (Points : 1)

displays the names of the projects and files included in a solution
displays data connections and servers
displays the tools you use when creating your application’s interface
displays the classes, methods, and properties included in a solution

Question 8. 8. (TCO 3) In Windows applications, pressing the _____ and Tab keys simultaneously moves the focus backwards. (Points : 1)

Shift
Ctrl
Alt
Ctrl + Shift

Question 9. 9. (TCO 1) A label’s _____ property determines the value that appears inside the label on a form. (Points : 1)

Caption
Name
Text
Values

Question 10. 10. (TCO 3) Short, English-like phrases that are written to represent the steps a program must take to solve a particular problem are called _____. (Points : 1)

flowcharts
pseudocode
object code
macro code

Question 11. 11. (TCO 1) The _____ function key will start a Visual Basic 2012 application in the IDE. (Points : 1)

F2
F3
F4
F5


Question 12. 12. (TCO 3) A(n) _____ is a predefined procedure that performs a specific task and then returns a value. (Points : 1)


algorithm
function
Sub procedure
class

Question 13. 13. (TCO 1) A(n) _____ is a predefined procedure that you can call (or invoke) when needed. (Points : 1)

method
object
class
event

Question 14. 14. (TCO 3) In the mathematical expression 4 * 3 + 15 / 3 – 6, which operation is performed last? (Points : 1)

+
-
*
/

Question 15. 15. (TCO 2) Software developers and programmers use _____ to develop the logic of a solution prior to coding the solution. (Points : 1)

flowcharts and pseudocode
algorithms
instructions
All of the above

Question 16. 16. (TCO 2) The third column in a TOE chart lists _____. (Points : 1)

objects to be used in an application’s tasks
tasks the application must perform
events that cause the application to perform tasks
errors that may occur when running the application

Question 17. 17. (TCO 3) A rectangle on a flowchart represents _____. (Points : 1)

an input or output operation
the beginning of the application
a processing step such as a calculation
the end of the application

Question 18. 18. TCO 2) In the V-Model of systems development, usability and acceptance testing verifies the correctness of _____. (Points : 1)

implementation
design
analysis
unit testing

Question 19. 19. (TCO 2) Correcting coding defects found in an application is called _____. (Points : 1)

deploying
documenting
debugging
designing

Question 20. 20. (TCO 3) The backslash () operator in Visual Basic performs _____. (Points : 1)

exponentiation
integer division
multiplication
negation

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Mom’s Cookies, Inc. is considering the purchase of a new cookie oven

Project Cash Flows

Mom’s Cookies, Inc. is considering the purchase of a new cookie oven.  The original cost of the old oven was $30,000; it is now five years old, and it has a current market value of $13,333.33.  The old oven is being depreciated over a 10-year life toward a zero estimated salvage value on a straight-line basis, resulting in a current book value of $15,000 and an annual depreciation expense of $3,000.  The old oven can be used for six more years but has no market value after its depreciable life is over.  Management is contemplating the purchase of a new oven whose cost is $25,000 and whose estimated salvage value is zero.  Expected before-tax cash savings from the new oven are $4,000 a year over its full MACRS depreciable life.  Depreciation is computed using MACRS over a five-year life, and the cost of capital is 10 percent.  Assume a 40 percent tax rate.  What will the cash flows for this project be?

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You are evaluating a project for The Ultimate recreational tennis racket

Project Cash Flows

You are evaluating a project for The Ultimate recreational tennis racket, guaranteed to correct that wimpy backhand.  You estimate the sales price of The Ultimate to be $400 per unit and sales volume to be 1,000 units in year 1; 1,250 units in year 2; and 1,325 units in year 3.  The project has a three-year life.  Variable costs amount to $225 per unit and fixed costs are $100,000 per year.  The project requires an initial investment of $165,000 in assets, which will be depreciated straight-line to zero over the three-year project life.  The actual market value of these assets at the end of year 3 is expected to be $35,000.  NWC requirements at the beginning of each year will be approximately 20 percent of the projected sales during the coming year.  The tax rate is 34 percent and the required return on the project is 10 percent.  What will the cash flows for this project be?

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If the lathe in the previous problem can be sold for $5,000 at the end of year 3

After-tax Cash Flow from Sale of Assets

If the lathe in the previous problem can be sold for $5,000 at the end of year 3, what is the after-tax salvage value?

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KADS, Inc. has spent $400,000 on research to develop a new computer game

Project Cash Flows

KADS, Inc. has spent $400,000 on research to develop a new computer game.  The firm is planning to spend $200,000 on a machine to produce the new game.  Shipping and installation costs of the machine will be capitalized and depreciated; they total $50,000.  The machine has an expected life of three years, a $75,000 estimated resale value, and falls under the MACRS seven-year class life.  Revenue from the new game is expected to be $600,000 per year, with costs of $250,000 per year.  The firm has a tax rate of 35 percent, an opportunity cost of capital of 15 percent, and it expects net working capital to increase by $100,000 at the beginning of the project.  What will the cash flows for this project be?

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