Evian Corporation is a private corporation formed for the purpose of providing
the products and the services needed to irrigate farms, parks, commercial projects,
and private homes. It has a centrally located factory in a U.S. city that manufactures the
products it markets to retail outlets across the nation. It also maintains a division that
provides installation and warranty servicing in six metropolitan areas.
The mission of Evian is to manufacture quality parts that can be used for effective
irrigation projects that also conserve water. By that effort, the company hopes to satisfy
its customers, provide rapid and responsible service, and serve the community and
the employees who represent them in each community.
The company has been growing rapidly, so management is considering new ideas to
help the company continue its growth and maintain the high quality of its products.
Evian was founded by Will Winkman who is the company president and chief
executive officer (CEO). Working with him from the company’s inception was Will’s brother,
Ben, whose sprinkler designs and ideas about the installation of proper systems have been
a major basis of the company’s success. Ben is the vice president who oversees all aspects
of design and production in the company. The factory itself is managed by Todd Senter who hires his line managers to supervise the factory employees. The factory makes all of the parts for the irrigation systems. The purchasing department is managed by Hector Hines.
The installation and training division is overseen by vice president Henry Writer, who
supervises the managers of the six local installation operations. Each of these local managers
hires his or her own local service people. These service employees are trained by the home
office under Henry Writer’s direction because of the uniqueness of the company’s products.
There is a small Human Resources department under the direction of Sally Fenton,
a vice president who handles the employee paperwork, though hiring is actually performed
by the separate departments. Sam Totter is the vice president who heads the sales
and marketing area; he oversees 10 well-trained salespeople.
The accounting and finance division of the company is headed by Abe Headman, who
is the chief financial officer (CFO) and a company vice president; he is a member of the
Institute of Management Accountants and holds a certificate in management accounting.
He has a small staff of Certified Public Accountants, including a controller and a treasurer,
and a staff of accounting input operators who maintain the financial records.
A partial list of Evian’s accounts and their balances for the month of November 2012 follows.
Accounts Receivable $ 245,000
Advertising Expenses 54,000
Cash 250,000
Depreciation—Factory Equipment 16,800
Depreciation—Office Equipment 2,400
Direct Labor 42,000
Factory Supplies Used 16,800
Factory Utilities 10,200
Finished Goods Inventory, November 30 67,700
Finished Goods Inventory, October 31 72,500
Indirect Labor 48,000
Office Supplies Expense 1,600
Other Administrative Expenses 72,000
Prepaid Expenses 41,250
Raw Materials Inventory, November 30 52,600
Raw Materials Inventory, October 31 38,300
Raw Materials Purchases 184,500
Rent—Factory Equipment 47,000
Repairs—Factory Equipment 4,500
Salaries for the office workers 325,500
Sales 1,225,000
Sales Commissions 40,500
Work In Process Inventory October 31 52,700
Work In Process Inventory, November 30 41,000
Instructions for part 1
(a) Based on the information given, construct an organizational chart of Evian
Corporation. (see illustration 1-2 in text)
(b) A list of accounts and their values are given above. From this information, prepare a cost of goods manufactured schedule, a cost of goods sold schedule, an income statement, and the current assets section of the balance sheet for Evian Corporation for the month of November 2012. (see illustrations in the text)
Part 2
Evian has two major public-park projects to provide with comprehensive
irrigation in one of its service locations this month. Job J57 and Job K52 involve 15 acres
of landscaped terrain which will require special-order sprinkler heads to meet the specifications
of the project. Using a job cost system to produce these parts, the following
events occurred during December 2012:
Raw materials were requisitioned from the company’s inventory on December 2 for
$4,995; on December 8 for $960; and on December 14 for $3,306. In each instance, two-
thirds (2/3) of these materials were for J57 and the rest for K52.
Six time tickets were turned in for these two projects for a total amount of 18 hours
of work. All the workers were paid $16.50 per hour. The time tickets were dated December 3,
December 9, and December 15. On each of those days, 6 labor hours were spent on these
jobs, two-thirds (2/3) for J57 and the rest for K52.
The predetermined overhead rate is based on machine hours. The expected machine
hour use for the year is 2,112 hours, and the anticipated overhead costs are $842,688
for the year. The machine were used by workers on projects K52 and J57 on December 3, 9,
and 15. Six machine hours were used for project K52 (2 each day), and 8.5 machine hours
were used for project J57 (2.5 the first day and 3 each of the other days). Both of these
special orders were completed on December 15, producing 235 sprinkler heads for J57
and 145 sprinkler heads for K52.
Additional job order activities during this period of time included:
Dec. 1 Purchased raw materials from Durbin Supply Company on account for $53,200.
Dec. 2 Issued $42,000 of direct materials from the company’s inventory to jobs other than K52 and J57 and $3,000 of indirect materials.
Dec. 12 Paid Evian’s factory salaries and wages in the amount of $67,000.
Dec. 13 Paid the factory’s water bill of $3,000.
Dec. 18 Transferred $50,000 of costs from other completed jobs to finished goods.
Dec. 21 Paid the factory’s electric bill of $12,000 for factory.
Instructions for part 2
(a) Set up the job cost sheets for Job No. J57 and Job No. K52. Determine the total cost for each manufacturing special order for these jobs. (Round unit cost to nearest cent.)
(b) Journalize the activities from these job cost sheets in the general journal. Also journalize the other costs that occurred during this period of time.
(c) Assuming that Manufacturing Overhead has a credit balance of $3,400, determine whether overhead has been under/over applied and make the adjusting entry.
Part 3
Because most of the parts for its irrigation systems are standard, Evian handles
the majority of its manufacturing as a process cost system. There are multiple process
departments. Three of these departments are the Molding, Cutting, and Welding departments.
All items eventually end up in the Package department which prepares items for
sale in kits or individually.
The following information is available for the Molding department for January.
Work in process beginning: 22,000 units , Total costs in beginning work in process $252,854
Costs in work in process inventory: Materials $168,020, Labor 67,564, Overhead 17,270
Units started into production in January 60,000
Units completed and transferred-out in January 58,000
Costs added to production: Materials $264,940, Labor 376,188, Overhead 60,578 =Total costs added into production in January $701,706
Work in process ending:
Units in process 24,000
Stage of completion for materials 100%
Stage of completion for labor and overhead 30%
Instructions for part 3
(a) Prepare a production cost report for Evian using the weighted-average method.
Part 4
Direct labor or machine hours may not be the appropriate cost driver for overhead
in all areas of manufacturing due to the complexities of many manufacturing
processes. Many companies use activity-based costing (ABC) which uses multiple drivers
(items that consume resources) rather than just one driver to apply overhead to their
activities. With ABC, a company can use a cost driver that has a direct cause/effect relationship
in its applied overhead costs.
Evian looked into ABC as a method of costing because of the variety of items it
produces and the many different activities in which it is involved. The activities listed
below are a sample of possible cost pools for Evian.
Assembling
Payroll
Billing
Plant supervision
Digging trenches
Purchasing materials
Machine maintenance
Selling
Machine setups
Testing
Molding
Welding
Packaging
Instructions for part 4
(a) For each of these cost pools, what would be the likely activity cost driver?
(b) Using the following information, determine the overhead rates and the actual cost assigned for each of the activity cost pools in a possible ABC system for Evian.
EVIAN CORPORATION
Expected
Use of Actual
Estimated Cost Drivers Use of
Activity Cost Pools Cost Drivers Overhead per Activity Drivers
Irrigation installation Labor cost $1,999,500 12,900 12,941
Machining (all machine use) Machine hours 1,670,400 33,408,000 33,409,000
Customer orders # of orders 30,636 2,553 2,520
Shipping none (direct) N/A traced directly
Design Cost per design 820 10 7
Selling Number of calls 372,300 21,900 22,100
(d) (1) The results of ABC can provide a more accurate picture of costs. Discuss the value of Evian using this system to determine overhead costs.
(2) How might using ABC affect decision making at Evian?
In: Accounting
Zoysia University must purchase mowers for its landscape department. The university can buy four EVF mowers that cost $7,600 each and have annual, year-end maintenance costs of $1,675 per mower. The EVF mowers will be replaced at the end of Year 4 and have no value at that time. Alternatively, Zoysia can buy six AEH mowers to accomplish the same work. The AEH mowers will be replaced after seven years. They each cost $6,600 and have annual, year-end maintenance costs of $1,875 per mower. Each AEH mower will have a resale value of $800 at the end of seven years. The university’s opportunity cost of funds for this type of investment is 9 percent. Because the university is a nonprofit institution, it does not pay taxes. It is anticipated that whichever manufacturer is chosen now will be the supplier of future mowers. What is the EAC of each type of mower? (Your answers should be a negative value and indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
In: Finance
Zoysia University must purchase mowers for its landscape department. The university can buy four EVF mowers that cost $7,600 each and have annual, year-end maintenance costs of $1,675 per mower. The EVF mowers will be replaced at the end of Year 4 and have no value at that time. Alternatively, Zoysia can buy six AEH mowers to accomplish the same work. The AEH mowers will be replaced after seven years. They each cost $6,600 and have annual, year-end maintenance costs of $1,875 per mower. Each AEH mower will have a resale value of $800 at the end of seven years. The university’s opportunity cost of funds for this type of investment is 9 percent. Because the university is a nonprofit institution, it does not pay taxes. It is anticipated that whichever manufacturer is chosen now will be the supplier of future mowers. What is the EAC of each type of mower? (Your answers should be a negative value and indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
In: Finance
Cullumber Company reports the following operating results for
the month of August: sales $382,500 (units 5,100), variable costs
$247,000, and fixed costs $96,000. Management is considering the
following independent courses of action to increase net
income.
| 1. | Increase selling price by 12% with no change in total variable costs or units sold. | |
| 2. | Reduce variable costs to 57% of sales. |
Compute the net income to be earned under each
alternative.
| 1. | Net Income |
$enter a dollar amount |
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|---|---|---|---|---|
| 2. | Net Income |
$enter a dollar amount |
In: Accounting
You decide to save for retirement with a company that offers 6.3% compounded annually. You have decided to make $5,000 yearly deposits into the account for the next 30 years. Then for the 35 years following your final deposit, you plan on taking out an equal amount of money at the end of every year. (a) How much will you be able to withdraw each year for the 35 years after your last deposit? (b) How much total interest is earned during this entire 65-year process?
In: Finance
| Stockton Company Adjusted Trial Balance December 31 |
||
| Cash | 5,069 | |
| Accounts Receivable | 2,127 | |
| Prepaid Expenses | 670 | |
| Equipment | 14,334 | |
| Accumulated Depreciation | 2,046 | |
| Accounts Payable | 1,548 | |
| Notes Payable | 4,392 | |
| Common Stock | 1,000 | |
| Retained Earnings | 10,316 | |
| Dividends | 717 | |
| Fees Earned | 7,216 | |
| Wages Expense | 2,185 | |
| Rent Expense | 849 | |
| Utilities Expense | 321 | |
| Depreciation Expense | 172 | |
| Miscellaneous Expense | 74 | |
| Totals | 26,518 | 26,518 |
Determine the total assets.
$26,518
$20,154
$22,200
$11,316
In: Accounting
I need show work also
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6.) |
Use the pension formula (including a projection of future salary levels) to determine the retirement benefits earned to date. |
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FACTS: |
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The company has a defined benefit plan |
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Jessica's salary at the end of 2017 is |
$ 119,000 |
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Retirement expected after |
45 |
years of service |
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Retirement period is expected to be |
20 |
years |
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Interest Rate |
4.0% |
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Benefits are calculated as a formula as the product of: |
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Service already provided |
22 |
years |
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Percentage |
3.0% |
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Final year's salary is projected to be |
$ 250,000 |
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In: Accounting
Times-Interest-Earned Ratio
The Morris Corporation has $700,000 of debt outstanding, and it pays an interest rate of 10% annually. Morris's annual sales are $3.5 million, its average tax rate is 35%, and its net profit margin on sales is 3%. If the company does not maintain a TIE ratio of at least 5 to 1, then its bank will refuse to renew the loan, and bankruptcy will result.
1. What is Morris's TIE ratio? Do not round intermediate calculations. Round your answer to two decimal places.
In: Finance
What are costs? What are benefits? What tangible cost and benefits? What are in intangible cost and benefits? What direct and indirect cost?
What is earned value (EV)? Explain how earned value management can be used to control costs and measure project performance.
In: Operations Management
Scott Cohen, an expert on performance management, says: “Performance Management programs represent a lost opportunity for most companies. These systems, if designed and implemented properly, can have a strong positive impact on individual performance and financial results – our studies suggest a possible 20 percent improvement in shareholder value.” Cohen goes on to observe that too many companies use performance management programs merely as “window dressing” rather than to add real value.
One key to having a successful pay-for-performance plan is to have an organizational culture that embraces pay for performance. Such a culture will emphasize goal setting, rating and/or ranking of performance, and performance dialogue between supervisors and subordinates. A performance-based culture places a premium on obtaining desired behaviours and results, recognizes that the organization’s success depends on the employees’ successful performance, lets strategic outcomes and goals drive the work of the organization, and rewards desired performance but not poor performance.
H e w l e t t – P a c k a r d ’ s
P e r f o r m a n c e –B a s e d C u l t u r e
Hewlett-Packard’s, operating in 178 countries and doing business in more than ten languages, is a company with a performance-based culture. Employing more than 140,000 people, Hewlett-Packard is known as a great place to work. Hewlett –Packard values ideas and believes that ideas are best developed in a teamwork culture. “That is why everyone at every level in every function is encouraged to have original ideas to express them, and to share them.” Each employee is valued for the unique skills, experiences, and perspectives that he or she brings to the job and organization.
Hewlett-Packard provides employees “every opportunity to learn, grow, and develop skills to drive the company toward achieving its business goals.” It encourages employees “to develop their work and life skills in order to achieve personal as well as career goals.” Hewlett-Packards encourages employees to plan individual development paths that are discussed with their respective managers. Employees and their managers reach mutual agreement upon the individual development paths. Learning within the context of these development plans is intended to be flexible, fast, and rewarding. Hewlett-Packard pride itself on having an “empowering culture that allows people to make the most of their skills, personality, and career.”
Not only is goal setting an important part of employees’ development plans, but it is also a crucial element in on-the-job performance management. Employees have three sets of goals: threshold, target, and aspiration. Threshold goals represent the minimum acceptable performance. Target goals represent the desired and expected level of performance. Aspirational goals exceed the desired and expected level of performance by a significant amount. Attainment of these goals is evaluated using appropriate criteria.
H e w l e t t –P a c k a r d ’ s
T o t a l R e w a r d s p r o g r a m
Performance management at Hewlett-Packard relies, in part, on a Total Rewards program that encourages employees to contributes ideas and attain a high level of achievement. The Total Rewards program includes six major components: competitive base pay, performance-related pay, comprehensive benefits, stock ownership, work life navigation, and sports and social facilities.
While the Total Rewards program differs from nation to nation and by organizational level, all employees are paid market rates for their locations and have benefits packages that are designed to address needs of the location. For instance, differences occur in benefits plans from country to country because of the different laws and regulations that govern the distribution of benefits. In the United States, for example, the benefits package includes a variety of programs for managing work and life demands (e.g. flexible work hours, flexible work arrangement, and educational assistance, among others), staying healthy (e.g. medical, dental, and vision plans), and protecting employees (e.g. life insurance and disability insurance).
All employees also receive performance –related pay that is linked to their attainment of threshold, target, and aspirational goals. “When aspirational goals are met, employees may exceed their target pay potential. Conversely, when minimal thresholds are not met, no variable payment will be made,” this provides employees the opportunity to share in HP’s success.
Performance-related pay may be one of three types: a company performance bonus, pay for results, or sales incentives. The company performance bonus links individual rewards to HP’s overall success. The pay for results variable incentive links compensation for executives and managers to individual, business organization, and company performance results. Sales incentives link the compensation of sales professionals to the attainment of individual, business organization, and company performance goals.
The ultimate effect of and justification for Hewlett –Packard Total Rewards program is perhaps best captured in its corporate rewards philosophy: “Our philosophy on rewards is simple: We believe that when excellent performance is acknowledged is rewarded, people are more motivated and work smarter.”
Discussion Questions
1. What are the primary characteristics of an organizational culture that strongly supports performance management?
2. How does Hewlett-Packard's organizational culture support its performance-management philosophy?
In: Operations Management