we explored specifics of health care finance, including cost drivers. in a discussion, define cost driver and explain the characteristics of a good driver as opposed to a poor one

SHORT-SIGHTED VIEW OF COST CUTTING

Jamie Ericsson, the controller for Handico, has just compiled a cost report for the second quarter. The report is prepared each quarter for corporate headquarters. She has taken particular notice of several major cost categories that show significant reductions in expenditures when compared to the first quarter. She made the following list of the major cost cuts:

Concerned that there may have been errors in compiling the data, Ericsson scheduled an appointment with her supervisor, Les Winters, the divisional vice president. At the meeting, the conversation went like this.

Ericsson (C): “Les, I'm concerned about these cost cuts. Are these mistakes, or are we really making such substantial cuts in these areas?”

Winters (VP): “Your numbers look right, Jamie. I ordered these cutbacks myself. I think there's a lot of fat in this operation that can be cut, and I'm just getting started.”

Ericsson (C): “But these are all important areas to invest in, Les. I see the invoices for these costs every month, and I don't think it's wasted money at all.”

Winters (VP): “Corporate wants a lean company, Jamie. I'm just trying to give them one.”

Ericsson (C): “Have you thought through the implications, Les? Cutting general employee training will eventually take a toll on our productivity gains. Same thing for the cuts in process improvements. And cutting routine machine maintenance could mean breakdowns later on. Maybe not for a year or so, but eventually it'll take its toll.”

Winters (VP): Becoming annoyed, “Those are my concerns, Ms. Ericsson, not yours.”

Ericsson (C): “Look, Les, we're all on the same team. I'm just concerned, that's all. I feel as though I need to highlight these cost cuts in my report to corporate. They should at least be made aware of these issues. I'll need your authorization for that.”

Winters (VP): “No can do, Jamie. You are instructed to make your usual quarterly report using the standard format.”

After the meeting, Ericsson was commiserating with her close friend, Amy Ling, the chief of engineering.

Ericsson (C): “Amy, I just had a very unsatisfactory meeting with Les Winters. I shouldn't go into the details, but I'm concerned about some things.”

Ling (E): “Well, I have good news for you then. The grapevine has it that Les is on the very short list for taking over as president of our Japanese subsidiary. That would be a huge promotion for him. Word is that all he's got to do is turn in a good performance for the year here. If he does that, the job's his.”

Ericsson (C): “That explains a lot, Amy. Thanks for the heads up. I've got some thinking to do.”

Required:

1. What do you think is going on here?

2. What is the VP, Les Winters, up to? Is he acting ethically?

Why do practitioners and hospitals face daily trade-offs between cost and quantity, cost and access, and so on?

What is your cost object (5pts)? (Do not define cost object; please write down the item or service that you want to produce and sell)
b) What is the Direct Material of your product or service (5pts)?
c) What are the overhead costs of your product or service (5 pts)?
d) Assume that you would like to assign overhead costs to your product or service. Which method you would prefer to use for assigning overhead cost to your product or service (In other words, how do you allocate overhead costs to your product or service) (5 pts)? Why (Please explain the reason of your selection) (5 pts)?
e) Shall we add “the insurance cost of cars used in marketing department” to the cost of your product or service? If not, Why (5 pts)?

Laker Company reported the following January purchases and sales data for its only product.

The Company uses a perpetual inventory system. For specific identification, ending inventory consists of 200 units, where 180 are from the January 30 purchase, 5 are from the January 20 purchase, and 15 are from beginning inventory.

Required:
1. Complete the table to determine the cost assigned to ending inventory and cost of goods sold using specific identification.
2. Determine the cost assigned to ending inventory and to cost of goods sold using weighted average.
3. Determine the cost assigned to ending inventory and to cost of goods sold using FIFO.
4. Determine the cost assigned to ending inventory and to cost of goods sold using LIFO.

Edney Company employs a standard cost system for product costing. The per-unit standard cost of its product is:

The manufacturing overhead rate is based on a normal capacity level of 600,000 direct labor hours. (Normal capacity is defined as the level of capacity needed to satisfy average customer demand over a period of two to four years. Operationally, this level of capacity would take into consideration sales trends and both seasonal and cyclical factors affecting demand.) The firm has the following annual manufacturing overhead budget:

Edney incurred $433,350 in direct labor cost for 53,500 direct labor hours to manufacture 26,000 units in November. Other costs incurred in November include $260,000 for fixed manufacturing overhead and $315,000 for variable manufacturing overhead.

Required:

1. Determine each of the following for November. [Note: Indicate whether each variance is favorable (F) or unfavorable (U).]

a. The variable overhead spending variance.

b. The variable overhead efficiency variance.

c. The fixed overhead spending (budget) variance.

d. The fixed overhead production volume variance.

e. The total amount of under- or overapplied manufacturing overhead (i.e., the total manufacturing overhead cost variance for the period).

2. Prepare the following four journal entries: (a) to record actual variable overhead costs, (b) to record actual fixed overhead costs, (c) to record standard overhead costs applied to production, and (d) to record all four overhead cost variances. The company uses a single account, Factory Overhead, to record all overhead costs. Assume that the actual variable manufacturing overhead consists of utilities payable of $165,000, indirect materials of $100,000 (all materials, direct and indirect, are recorded in a single account, Materials Inventory), and $50,000 depreciation on factory equipment (determined under the units-of-production method). Assume that the fixed manufacturing overhead consists of accrued (i.e, unpaid) salaries of $60,000 and factory depreciation of $200,000. All unpaid salaries should be recorded in a single account, Accrued Payroll.

3. Prepare the appropriate journal entry to close all manufacturing overhead variances to the cost of goods sold (CGS) account. (Assume the cost variances you calculated above are for the year, not the month.)

Which of the following statements regarding absorption cost pricing formulas is/are true?
i. Absorption cost pricing formulas provide a justifiable price that tends to be perceived as equitable by all parties.
ii. Since absorption cost information is necessary for external reporting, it is cost effective to use it for pricing.
iii. Absorption cost-plus pricing formulas generally will result in a higher mark-up percentage than variable manufacturing cost formulas.

Briefly compare the similarities and differences among CBA, CEA & CUA? Cost Benefit Analysis Cost Effective Analysis Cost Utility Analysis

A firm has provided you with the following information:

Output 30, Variable Cost $1,900, Fixed Cost $120,Marginal Cost $50, Price $50

Instructions: To indicate a loss enter a (-) in front of your answer. A positive entry is considered a profit.

1. What is the firm's short-run profit if they produce using the MC=MR rule?

2. What is the firm's short-run profit if they produce nothing?

3. What will be the firm's production decision in the short-run?

a. Shutdown

b. Exit

c. Operate