Cost of Quality and Value-Added/Non-Value-Added Reports for a Service Company

Three Rivers Inc. provides cable TV and Internet service to the local community. The activities and activity costs of Three Rivers are identified as follows:

a. Identify the cost of quality classification for each activity and whether the activity is value-added or non-value-added.

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b. Prepare a cost of quality report. Assume that sales are $2,950,000. If required, round percentages to two decimal places.

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c. Prepare a value-added/non-value-added analysis.

Cain Components manufactures and distributes various plumbing products used in homes and other buildings. Over time, the production staff has noticed that products they considered easy to make were difficult to sell at margins considered reasonable, while products that seemed to take a lot of staff time were selling well despite recent price increases. A summer intern has suggested that the cost system might be providing misleading information.

The controller decided that a good summer project for the intern would be to develop, in one self-contained area of the plant, an alternative cost system with which to compare the current system. The intern identified the following cost pools and, after discussion with some plant personnel, appropriate cost drivers for each pool. There were:

In this particular area, Cain produces two of its many products: Standard and Deluxe. The following are data for production for the latest full year of operations.

Problem 9-62 (Algo) Activity-Based Costing and Predetermined Overhead Rates (LO 9-3, 5, 6)

Required:

a. The current cost accounting system charges overhead to products based on machine-hours. What unit product costs will be reported for the two products if the current cost system continues to be used?

b. The intern suggests an ABC system using the cost drivers identified above. What unit product costs will be reported for the two products if the ABC system is used?

Should Mai Lease or Purchase?

Mai is considering the purchase of a Mini Cooper and has negotiated a final price of $23,450. She’s trying to decide whether to lease or purchase the vehicle.

Use the automobile lease-versus-purchase analysis worksheet that follows to determine the total cost of both the lease and the purchase and then recommend the best strategy for Mai. To complete the worksheet, enter the appropriate values in their corresponding blanks. (Note: Round each value to the nearest whole dollar.)

AUTOMOBILE LEASE-VERSUS PURCHASE-ANALYSIS

Based on this analysis, Mai should:

Kindly, do not hand write, use excel or word document, please let the work be original

Capacity Planning Homework Assignment—To be Submitted

The Baltimore Manufacturing Company’s management forecasts demand for each quarter as follows:

Assume that Arundel, Inc. started the First Quarter with 20 workers and 2000 units in inventory. The company wishes to finish the year with an inventory of 5000 units on hand. The average pay per worker is $9,000 per quarter, including benefits. Production per worker is 100 units per quarter. If necessary, overtime can be used up to 20% during the two peak demand quarters. Overtime time work, if used, is paid at 150% of regular pay. It costs $900 to hire a new worker and $1,200 to lay off a worker. Inventory carrying cost averages $10 per unit per month.  

(A) Using the table below, determine the total cost of using Level strategy.

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(B) Using the table below, determine the cost of using the Chase strategy.

(C) Which strategy do you recommend and why?

For Bonus Points

(D) Management is considering using a mixed strategy. Suppose level strategy plus 10% overtime is used for the two high demand seasons, how many workers will be needed. (You don’t need to compute the total costs in this case. Simply determine the number of workers that will be need.

Job-Order Costing in a Consulting
Firm

JLR Enterprises provides consulting services throughout California and uses a job-order costing system to accumulate the cost of client projects. Traceable costs are charged directly to individual clients; in contrast, other costs incurred by JLR, but not identifiable with specific clients, are charged to jobs by using a predetermined overhead application rate. Clients are billed for directly chargeable costs, overhead, and a markup. JLR’s director of cost management, Brent Dean, anticipates the following costs for the upcoming year:

Cost Percentage of Cost Directly Traceable to Clients

Professional staff salaries ................................ $2,500,000 ..................................... 80%
Administrative support staff ............................. 300,000 ..................................... 60%
Travel ................................................................ 250,000 ..................................... 90%
Photocopying ................................................... 50,000 ..................................... 90%
Other operating costs ...................................... 100,000 ..................................... 50%
Total .............................................................. $3,200,000 .....................................

The firm’s partners desire to make a $640,000 profit for the firm and plan to add a percentage markup on total cost to achieve that figure.

On March 10, JLR completed work on a project for Martin Manufacturing. The following costs were incurred: professional staff salaries, $41,000; administrative support staff, $2,600; travel, $4,500; photocopying, $500; and other operating costs, $1,400.

Required:
1. Determine JLR’s total traceable costs for the upcoming year and the firm’s total anticipated overhead. $2,500,000
2. Calculate the predetermined overhead rate. The rate is based on total costs traceable to client jobs.
3. What percentage of cost will JLR add to each job to achieve its profit target?
4. Determine the total cost of the Martin Manufacturing project. How much would Martin be billed for services performed?
5. Notice that only 50 percent of JLR’s other operating cost is directly traceable to specific client projects. Cite several costs that would be included in this category and difficult to trace to clients.
6. Notice that 80 percent of the professional staff cost is directly traceable to specific client projects. Cite several reasons that would explain why this figure isn’t 100 percent.

1. Perpetual Inventory Using FIFO

   Beginning inventory, purchases, and sales data for DVD players are as follows:

   November 1		Inventory	120 units at $39
   10		Sale	90 units
   15		Purchase	140 units at $40
   20		Sale	110 units
   24		Sale	45 units
   30		Purchase	160 units at $43

   The business maintains a perpetual inventory system, costing by the first-in, first-out method.

   a. Determine the cost of goods sold for each sale and the inventory balance after each sale, presenting the data in the form illustrated in Exhibit 3. Under FIFO, if units are in inventory at two different costs, enter the units with the LOWER unit cost first in the Cost of Goods Sold Unit Cost column and in the Inventory Unit Cost column.

   Cost of Goods Sold Schedule
   First-in, First-out Method
   DVD Players
   Date	Quantity Purchased	Purchases Unit Cost	Purchases Total Cost	Quantity Sold	Cost of Goods Sold Unit Cost	Cost of Goods Sold Total Cost	Inventory Quantity	Inventory Unit Cost	Inventory Total Cost
   Nov. 1
   Nov. 10
   Nov. 15
   Nov. 20
   Nov. 24
   Nov. 30
   Nov. 30	Balances

   b. Based upon the preceding data, would you expect the inventory to be higher or lower using the last-in, first-out method?
   

Perpetual Inventory Using FIFO Beginning inventory, purchases, and sales data for portable DVD players are as follows: Apr. 1 Inventory 57 units @ $94 10 Sale 43 units 15 Purchase 23 units @ $100 20 Sale 19 units 24 Sale 8 units 30 Purchase 24 units @ $104 The business maintains a perpetual inventory system, costing by the first-in, first-out method. Determine the cost of the merchandise sold for each sale and the inventory balance after each sale, presenting the data in the form illustrated in Exhibit 3. a. Under FIFO, if units are in inventory at two different costs, enter the units with the LOWER unit cost first in the Cost of Merchandise Sold Unit Cost column and in the Inventory Unit Cost column. Cost of the Merchandise Sold Schedule First-in, First-out Method Portable DVD Players Date Quantity Purchased Purchases Unit Cost Purchases Total Cost Quantity Sold Cost of Merchandise Sold Unit Cost Cost of Merchandise Sold Total Cost Inventory Quantity Inventory Unit Cost Inventory Total Cost Apr. 1 $ $ Apr. 10 $ $ Apr. 15 $ $ Apr. 20 Apr. 24 Apr. 30 Apr. 30 Balances $ $ b. Based upon the preceding data, would you expect the inventory to be higher or lower using the last-in, first-out method?

Perpetual Inventory Using The method of inventory costing based on the assumption that the costs of goods sold should be charged against revenue in the order in which the costs were incurred.FIFO

Beginning inventory, purchases, and sales data for DVD players are as follows:

The business maintains a perpetual inventory system, costing by the first-in, first-out method.

a. Determine the cost of the goods sold for each sale and the inventory balance after each sale, presenting the data in the form illustrated in Exhibit 3. Under FIFO, if units are in inventory at two different costs, enter the units with the LOWER unit cost first in the Cost of Goods Sold Unit Cost column and in the Inventory Unit Cost column.

Beginning inventory, purchases, and sales data for portable game players are as follows:

The business maintains a perpetual inventory system, costing by the first-in, first-out method.

a. Determine the cost of the merchandise sold for each sale and the inventory balance after each sale, presenting the data in the form illustrated in Exhibit 3. Under FIFO, if units are in inventory at two different costs, enter the units with the LOWER unit cost first in the Cost of Merchandise Sold Unit Cost column and in the Inventory Unit Cost column.

b. Based upon the preceding data, would you expect the ending inventory to be higher or lower using the last-in, first-out method?

1. Perpetual Inventory Using FIFO

   Beginning inventory, purchases, and sales data for DVD players are as follows:

   November 1		Inventory	56 units at $97
   10		Sale	44 units
   15		Purchase	27 units at $101
   20		Sale	17 units
   24		Sale	14 units
   30		Purchase	21 units at $106

   The business maintains a perpetual inventory system, costing by the first-in, first-out method.

   a. Determine the cost of the goods sold for each sale and the inventory balance after each sale, presenting the data in the form illustrated in Exhibit 3. Under FIFO, if units are in inventory at two different costs, enter the units with the LOWER unit cost first in the Cost of Goods Sold Unit Cost column and in the Inventory Unit Cost column.

   Cost of the Goods Sold Schedule
   First-in, First-out Method
   DVD Players
   Date	Quantity Purchased	Purchases Unit Cost	Purchases Total Cost	Quantity Sold	Cost of Goods Sold Unit Cost	Cost of Goods Sold Total Cost	Inventory Quantity	Inventory Unit Cost	Inventory Total Cost
   Nov. 1								$	$
   Nov. 10					$	$
   Nov. 15		$	$
   Nov. 20
   Nov. 24
   Nov. 30
   Nov. 30	Balances					$			$

   b. Based upon the preceding data, would you expect the inventory to be higher or lower using the last-in, first-out method?
   

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