Worley Company buys surgical supplies from a variety of manufacturers and then resells and delivers these supplies to hundreds of hospitals. Worley sets its prices for all hospitals by marking up its cost of goods sold to those hospitals by 8%. For example, if a hospital buys supplies from Worley that cost Worley $100 to buy from manufacturers, Worley would charge the hospital $108 to purchase these supplies.
For years, Worley believed that the 8% markup covered its selling and administrative expenses and provided a reasonable profit. However, in the face of declining profits, Worley decided to implement an activity-based costing system to help improve its understanding of customer profitability. The company broke its selling and administrative expenses into five activities as shown:
| Activity Cost Pool (Activity Measure) | Total Cost | Total Activity | |||
| Customer deliveries (Number of deliveries) | $ | 249,000 | 3,000 | deliveries | |
| Manual order processing (Number of manual orders) | 280,000 | 4,000 | orders | ||
| Electronic order processing (Number of electronic orders) | 242,000 | 11,000 | orders | ||
| Line item picking (Number of line items picked) | 700,000 | 400,000 | line items | ||
| Other organization-sustaining costs (None) | 640,000 | ||||
| Total selling and administrative expenses | $ | 2,111,000 | |||
Worley gathered the data below for two of the many hospitals that it serves—University and Memorial (each hospital purchased medical supplies that had cost Worley $37,000 to buy from manufacturers):
|
Activity |
||
| Activity Measure | University | Memorial |
| Number of deliveries | 13 | 22 |
| Number of manual orders | 0 | 46 |
| Number of electronic orders | 13 | 0 |
| Number of line items picked | 150 | 220 |
Required:
1. Compute the total revenue that Worley would receive from University and Memorial.
2. Compute the activity rate for each activity cost pool.
3. Compute the total activity costs that would be assigned to University and Memorial.
4. Compute Worley’s customer margin for University and Memorial. (Hint: Do not overlook the $37,000 cost of goods sold that Worley incurred serving each hospital.)
In: Accounting
Worley Company buys surgical supplies from a variety of manufacturers and then resells and delivers these supplies to hundreds of hospitals. Worley sets its prices for all hospitals by marking up its cost of goods sold to those hospitals by 8%. For example, if a hospital buys supplies from Worley that cost Worley $100 to buy from manufacturers, Worley would charge the hospital $108 to purchase these supplies. For years, Worley believed that the 8% markup covered its selling and administrative expenses and provided a reasonable profit. However, in the face of declining profits, Worley decided to implement an activity-based costing system to help improve its understanding of customer profitability. The company broke its selling and administrative expenses into five activities as shown: Activity Cost Pool (Activity Measure) Total Cost Total Activity Customer deliveries (Number of deliveries) $ 595,000 7,000 deliveries Manual order processing (Number of manual orders) 380,000 5,000 orders Electronic order processing (Number of electronic orders) 273,000 13,000 orders Line item picking (Number of line items picked) 726,000 440,000 line items Other organization-sustaining costs (None) 680,000 Total selling and administrative expenses $ 2,654,000 Worley gathered the data below for two of the many hospitals that it serves—University and Memorial (each hospital purchased medical supplies that had cost Worley $32,000 to buy from manufacturers): Activity Activity Measure University Memorial Number of deliveries 17 26 Number of manual orders 0 44 Number of electronic orders 14 0 Number of line items picked 160 210 Required: 1. Compute the total revenue that Worley would receive from University and Memorial. 2. Compute the activity rate for each activity cost pool. 3. Compute the total activity costs that would be assigned to University and Memorial. 4. Compute Worley’s customer margin for University and Memorial. (Hint: Do not overlook the $32,000 cost of goods sold that Worley incurred serving each hospital.)
In: Accounting
Worley Company buys surgical supplies from a variety of manufacturers and then resells and delivers these supplies to hundreds of hospitals. Worley sets its prices for all hospitals by marking up its cost of goods sold to those hospitals by 9%. For example, if a hospital buys supplies from Worley that cost Worley $100 to buy from manufacturers, Worley would charge the hospital $109 to purchase these supplies.
For years, Worley believed that the 9% markup covered its selling and administrative expenses and provided a reasonable profit. However, in the face of declining profits, Worley decided to implement an activity-based costing system to help improve its understanding of customer profitability. The company broke its selling and administrative expenses into five activities as shown:
| Activity Cost Pool (Activity Measure) | Total Cost | Total Activity | |||
| Customer deliveries (Number of deliveries) | $ | 328,000 | 4,000 | deliveries | |
| Manual order processing (Number of manual orders) | 518,000 | 7,000 | orders | ||
| Electronic order processing (Number of electronic orders) | 275,000 | 11,000 | orders | ||
| Line item picking (Number of line items picked) | 1,056,000 | 480,000 | line items | ||
| Other organization-sustaining costs (None) | 650,000 | ||||
| Total selling and administrative expenses | $ | 2,827,000 | |||
Worley gathered the data below for two of the many hospitals that it serves—University and Memorial (each hospital purchased medical supplies that had cost Worley $35,000 to buy from manufacturers):
|
Activity |
||
| Activity Measure | University | Memorial |
| Number of deliveries | 18 | 26 |
| Number of manual orders | 0 | 46 |
| Number of electronic orders | 14 | 0 |
| Number of line items picked | 150 | 250 |
Required:
1. Compute the total revenue that Worley would receive from University and Memorial.
2. Compute the activity rate for each activity cost pool.
3. Compute the total activity costs that would be assigned to University and Memorial.
4. Compute Worley’s customer margin for University and Memorial. (Hint: Do not overlook the $35,000 cost of goods sold that Worley incurred serving each hospital.)
In: Accounting
Worley Company buys surgical supplies from a variety of manufacturers and then resells and delivers these supplies to hundreds of hospitals. Worley sets its prices for all hospitals by marking up its cost of goods sold to those hospitals by 6%. For example, if a hospital buys supplies from Worley that cost Worley $100 to buy from manufacturers, Worley would charge the hospital $106 to purchase these supplies.
For years, Worley believed that the 6% markup covered its selling and administrative expenses and provided a reasonable profit. However, in the face of declining profits, Worley decided to implement an activity-based costing system to help improve its understanding of customer profitability. The company broke its selling and administrative expenses into five activities as shown:
| Activity Cost Pool (Activity Measure) | Total Cost | Total Activity | |||
| Customer deliveries (Number of deliveries) | $ | 332,000 | 4,000 | deliveries | |
| Manual order processing (Number of manual orders) | 438,000 | 6,000 | orders | ||
| Electronic order processing (Number of electronic orders) | 308,000 | 14,000 | orders | ||
| Line item picking (Number of line items picked) | 550,000 | 440,000 | line items | ||
| Other organization-sustaining costs (None) | 670,000 | ||||
| Total selling and administrative expenses | $ | 2,298,000 | |||
Worley gathered the data below for two of the many hospitals that it serves—University and Memorial (each hospital purchased medical supplies that had cost Worley $38,000 to buy from manufacturers):
|
Activity |
||
| Activity Measure | University | Memorial |
| Number of deliveries | 11 | 26 |
| Number of manual orders | 0 | 45 |
| Number of electronic orders | 17 | 0 |
| Number of line items picked | 180 | 250 |
Required:
1. Compute the total revenue that Worley would receive from University and Memorial.
2. Compute the activity rate for each activity cost pool.
3. Compute the total activity costs that would be assigned to University and Memorial.
4. Compute Worley’s customer margin for University and Memorial. (Hint: Do not overlook the $38,000 cost of goods sold that Worley incurred serving each hospital.)
In: Accounting
Worley Company buys surgical supplies from a variety of manufacturers and then resells and delivers these supplies to hundreds of hospitals. Worley sets its prices for all hospitals by marking up its cost of goods sold to those hospitals by 6%. For example, if a hospital buys supplies from Worley that cost Worley $100 to buy from manufacturers, Worley would charge the hospital $106 to purchase these supplies.
For years, Worley believed that the 6% markup covered its selling and administrative expenses and provided a reasonable profit. However, in the face of declining profits, Worley decided to implement an activity-based costing system to help improve its understanding of customer profitability. The company broke its selling and administrative expenses into five activities as shown:
| Activity Cost Pool (Activity Measure) | Total Cost | Total Activity | |||
| Customer deliveries (Number of deliveries) | $ | 567,000 | 7,000 | deliveries | |
| Manual order processing (Number of manual orders) | 450,000 | 6,000 | orders | ||
| Electronic order processing (Number of electronic orders) | 270,000 | 15,000 | orders | ||
| Line item picking (Number of line items picked) | 693,000 | 420,000 | line items | ||
| Other organization-sustaining costs (None) | 660,000 | ||||
| Total selling and administrative expenses | $ | 2,640,000 | |||
Worley gathered the data below for two of the many hospitals that it serves—University and Memorial (each hospital purchased medical supplies that had cost Worley $34,000 to buy from manufacturers):
|
Activity |
||
| Activity Measure | University | Memorial |
| Number of deliveries | 11 | 24 |
| Number of manual orders | 0 | 45 |
| Number of electronic orders | 16 | 0 |
| Number of line items picked | 130 | 230 |
Required:
1. Compute the total revenue that Worley would receive from University and Memorial.
2. Compute the activity rate for each activity cost pool.
3. Compute the total activity costs that would be assigned to University and Memorial.
4. Compute Worley’s customer margin for University and Memorial. (Hint: Do not overlook the $34,000 cost of goods sold that Worley incurred serving each hospital.)
In: Accounting
Discuss in detail the role of CEO/Top Management in establishing a relationship between ‘Strategic Directions’ and ‘Vision’ of a company.
In: Operations Management
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Case #2 |
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At the beginning of 2014, the Fancy Food Company purchased equipment for $42 million to be used in the manufacture of a new line of gourmet frozen foods. The equipment was estimated to have a 10-year service life and no residual value. The straight-line depreciation method was used to measure depreciation for 2014 and 2015. Late in 2016, it became apparent that sales of the new frozen food line were significantly below expectations. The company decided to continue production for two more years (2017 and 2018) and then discontinue the line. At that time, the equipment will be sold for minimal scrap values. The controller, Shannon Jones, was asked by Jerry Dent, the company's chief executive officer (CEO), to determine the appropriate treatment of the change in service life of the equipment. Shannon determined that there has been an impairment of value requiring an immediate write-down of the equipment of $12,900,000. The remaining book value would then be depreciated over the equipment's revised service life (3 years). The CEO does not like Shannon’s conclusion because of the effect it would have on 2016 income. “Looks like a simple revision in service life from 10 years to 5 years to me,” Dent concluded. “Let's go with it that way, Shannon.” Required: 1. What is the difference in before-tax income between the CEO's and Shannon’s treatment of the situation? (Hint: calculate before-tax income the way the CEO would like and compare to Shannon’s method). 2. Why would the CEO have an incentive to not record the impairment? 3. Discuss Shannon’s ethical dilemma and give her advice on how to handle this situation. |
In: Accounting
1.(B)Worley Company buys surgical supplies from a variety of manufacturers and then resells and delivers these supplies to hundreds of hospitals. Worley sets its prices for all hospitals by marking up its cost of goods sold to those hospitals by 8%. For example, if a hospital buys supplies from Worley that cost Worley $100 to buy from manufacturers, Worley would charge the hospital $108 to purchase these supplies.
For years, Worley believed that the 8% markup covered its selling and administrative expenses and provided a reasonable profit. However, in the face of declining profits, Worley decided to implement an activity-based costing system to help improve its understanding of customer profitability. The company broke its selling and administrative expenses into five activities as shown:
Activity Cost Pool (Activity Measure)Total CostTotal ActivityCustomer deliveries (Number of deliveries)$567,0007,000deliveriesManual order processing (Number of manual orders) 312,0004,000ordersElectronic order processing (Number of electronic orders) 208,00013,000ordersLine item picking (Number of line items picked) 574,000410,000line itemsOther organization-sustaining costs (None) 690,000 Total selling and administrative expenses$2,351,000
Worley gathered the data below for two of the many hospitals that it serves—University and Memorial (each hospital purchased medical supplies that had cost Worley $32,000 to buy from manufacturers):
Activity
Activity MeasureUniversityMemorialNumber of deliveries1228Number of manual orders043Number of electronic orders170Number of line items picked110250
Required:
1. Compute the total revenue that Worley would receive from University and Memorial.
2. Compute the activity rate for each activity cost pool.
3. Compute the total activity costs that would be assigned to University and Memorial.
4. Compute Worley's customer margin for University and Memorial. (Hint: Do not overlook the $32,000 cost of goods sold that Worley incurred serving each hospital.)
In: Accounting
Evaluate the performance of the ceo of FedEx from the perspective of (a) stockholders, (b) employees, (c) customers, and (d) suppliers. What does this evaluation tell you about the ability of the ceo and the priorities that he or she is committed to?
In: Operations Management
evaluate the performance of the ceO of JCPenney from the perspective of (a) stockholders, (b)
employees, (c) customers, and (d) suppliers. What does this evaluation tell you about the ability of
the ceO and the priorities that he or she is committed to?
In: Operations Management