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QUESTION 1

  1. Value stream costing eliminates most of the transactions associated with conventional cost accounting because it ...

    A.

    makes more extensive use of standard costing.
    B.

    gathers and reports financial data in summary form at the value stream level rather than for each production job or product.
    C.

    automates financial reporting processes.
    D.

    uses more detailed and accurate overhead cost allocations than standard costing.

1 points

QUESTION 2

  1. In value stream costing, the labor costs assigned to a value stream ...

    A.

    include the costs of all personnel assigned to the value stream, plus allocations for support staff in all departments that support the value stream.
    B.

    include the costs of all personnel assigned to the value stream, but few if any allocations for any support staff outside the value stream.
    C.

    include the costs of all direct and indirect labor hours in the value stream, plus allocations of staff outside the value stream providing production support; but exclude any sales, marketing, or administrative personnel in the value stream.
    D.

    include the costs of all direct and indirect labor hours in the value stream, but exclude the costs of any sales, marketing or administrative personnel in the value stream.

1 points

QUESTION 3

  1. Value stream costing simplifies accounting in part by ...

    A.

    centralizing and consolidating the purchasing function.
    B.

    increasing the number of cost centers to more easily expose cost overruns.
    C.

    allocating all overhead using actual direct labor hours or machine hours rather than relying on more complex calculations.
    D.

    eliminating detailed labor reporting, including the distinction between direct and indirect labor.

1 points

QUESTION 4

  1. When using value stream costing, managers evaluate decisions about product rationalization (keeping or dropping a product) by ...

    A.

    examining the effects on overall value stream results of continuing to produce and sell a product versus dropping it.
    B.

    comparing the production cost per unit of all products in the value stream.
    C.

    disregarding the financial impact, and examining instead the effects on the value stream operating measures shown in the box score of continuing to produce and sell a product versus dropping it.
    D.

    comparing the gross profit margins for all products.

1 points

QUESTION 5

  1. Exotic Chocolates had material costs of $24,000 and conversion costs of $18,000 in their most recent month containing 20 working days. At the end of the month, Exotic Chocolates had material on hand equal to six days of production, work-in-process equal to three days of production, and finished goods equal to eight days of production. The value for ending inventory using the “days of stock” method is ...

    A.

    $ 28,950
    B.

    $ 32,550
    C.

    $ 35,700
    D.

    $ 42,000

1 points

QUESTION 6

  1. Which of the following is an example of a good use of the value stream box score?

    A.

    Plant and division managers using the box score analyze variances from budgeted standard costs.
    B.

    Plant and division managers using the box score to encourage and evaluate the results of competition between their value streams for best overall performance.
    C.

    Value stream continuous improvement teams using the box score to design high-impact kaizen events and improvement plans.
    D.

    Employees in the production cells using the box score to manage daily performance.

1 points

QUESTION 7

  1. The box score measures three dimensions of performance in the value stream: operational, financial, and ...

    A.

    quality.
    B.

    capacity.
    C.

    flow.
    D.

    strategic.

1 points

QUESTION 8

  1. Displaying actual value stream results in a box score with a column for each week in a quarter is a good way to use the box score to ...

    A.

    show the effects of planned lean improvements.
    B.

    track value stream performance and continuous improvement.
    C.

    evaluate the effect of tactical decision alternatives, such as accepting a special order.
    D.

    evaluate the effect of management decision alternatives, such as adding a product line.

1 points

QUESTION 9

  1. Displaying current state performance and future states based on the expected results of pursuing different strategy alternatives. is a good way to use the box score to ...

    A.

    evaluate the effect of strategic decision alternatives, such as adding a product line.
    B.

    track value stream performance and continuous improvement.
    C.

    show the effects of planned lean improvements.
    D.

    show the impact of actual lean improvements.

1 points

QUESTION 10

  1. A good way to use the box score to evaluate the impact of lean improvements is to ...

    A.

    display current state performance and a future state based on planned improvements.
    B.

    display current state performance and future states based on the expected results of pursuing different strategy alternatives.
    C.

    display actual box score results for all the weeks in a quarter to show the trends in performance.
    D.

    display current performance for the most current week or month, without reference to expected future states or performance trends.

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Reid Wolff
Reid WolffLv2
28 Sep 2019

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Dakota Motors produces electric motors for commercial use. Until the end of 1994, only 2 models were produced, the “Standard” model” and the “Deluxe” model. The Deluxe model had more expensive components and raw materials, required more quality control and required more labor hours per unit to produce than the Standard model. Both models were produced in fairly large volume. Since 1994, in an attempt to grow its business, and in response to competitive pressures, Dakota Motors has begun producing many different varieties of electric motors, in addition to its regular models. These new models are tailor made to the needs of individual customers and are produced only on demand, and are typically low volume lines.

Dakota Motors has a simple (traditional) costing system which traces the costs of direct materials, components, and direct labor to each of its product lines. All support costs are assigned to product lines via a single plant wide overhead rate based on direct labor hours. Its volume of manufacturing activity has grown from 20,000 direct labor hours in 1994 to 30,000 direct labor hours in 1997.

Dakota Motors’ accounting system is reporting a rapid escalation in the costs per unit of producing the Standard and Deluxe models. Management is puzzled and vexed by these cost increases, since the prices of various production inputs (such as labor, raw materials, components, engineers, supervisors, etc.) have increased only marginally during these years, and the production methods for producing the Standard and Deluxe models have not changed.

Below, is data regarding support activities, annual support costs and driver volumes:

Support Costs
Support Activity Cost driver 1994 1997
Supervision Direct labor hours $144,000 $220,000
Machine maintenance Machine hours $ 80,000 $140,000
Quality control # of inspections $ 40,000

$100,000
Machine set ups # of setups $ 20,000 $120,000
Process engineering Engineering hours $ 10,000 $150,000
Total support costs $294,000

$730,000
Standard Deluxe New Models Total
Direct labor hours 12,000 8,000 10,000 30,000
Machine hours 14,000 12,000 14,000 40,000
# of inspections 400 400 600 1400
# of setups 11 9 100 120
Engineering hours 120 140 1,740 2,000

Assume that the production quantities and driver volumes for the Standard and Deluxe models have not changed between 1994 and 1997.

Questions:

1) Determine the total support costs assigned to the Standard model and to the Deluxe model in 1994 and in 1997 under the traditional costing system.

2) Calculate the cost driver rates and determine the support costs that would be assigned to the Standard, Deluxe and New models in 1997 under an activity based costing system. Be sure to display and label all your calculations.

3) Write a paragraph explaining to top management how the traditional costing system distorts product costs in Dakota Motors. Use the data on engineering hours and direct labor hours to quantitatively support your argument.

POCHTAR CORPORATION

The POCHTAR CORPORATION had used a single plant-wide rate to determine its predetermined overhead rate at the beginning of the year, but it has now decided that the most appropriate method is to use two individual department overhead rates, one for the Machining Department and one for the Assembly Department. In computing the predetermined overhead rate(s), whether a single plant wide rate is used or whether two department overhead rates are used, direct labor hours is used as the cost driver for the operating departments.

At the beginning of the year the POCHTAR CORPORATION has prepared individual department overhead budgets, before any allocations, and identified cost drivers for the departments listed below:

DEPARTMENT OVERHEAD BUDGETS

Support Departments:

Building and grounds (cost driver: square feet) $12,000

Personnel (cost driver: employees) 1,200

General plant administration (cost driver: manufacturing hours) 25,000

Operating Departments:

Machining $35,500

Assembly 46,300

BUDGETED AMOUNT OF EACH COST DRIVER

The budgeted amounts for each cost driver per department are given below:

Department Direct labor hrs. Employees Square feet Manuf. hours

Building & Grounds 0 0 0 0

Personnel 0 0 12,000 0

General plant 0 35 8,000 0

Machining 5,000 50 30,000 8,000

Assembly 15,000 100 50,000 17,000

REQUIRED:

What is the predetermined overhead rate using a single plant-wide rate? If necessary, round to the nearest cent.

What are the two predetermined overhead department rates, using the direct method of allocating support costs to the operating departments. ? If necessary, round to the nearest cent.

What are the two predetermined overhead department rates, using the step method of allocating support costs to the operating departments. ? If necessary, round to the nearest cent.

Based on the following information about two jobs, A and B, determine the total overhead costs for each job by using (1) the single plant-wide rate computed in question 1 above and (2) two predetermined overhead rates using the direct method of allocating support costs to the operating departments computed in question 2 above. Very briefly explain which method makes more sense. Please do not simply say that one method is more accurate than the other.

Direct Labor Hours:

Machining Department Assembly Department

Job A 18 2

Job B 3 17

CASE 6–30 Service Organization; Segment Reporting[LO6–4]

Music Teachers, Inc., is an educational association for musicteachers that has 20,000 members. The association operates from acentral headquarters but has local membership chapters throughoutthe United States. Monthly meetings are held by the local chaptersto discuss recent developments on topics of interest to musicteachers. The association’s journal, Teachers’ Forum, is issuedmonthly with features about recent developments in the field. Theassociation publishes books and reports and also sponsorsprofessional courses that qualify for continuing professionaleducation credit. The association’s statement of revenues andexpenses for the current year is presented below.



d

Page 278

The board of directors of Music Teachers, Inc., has requestedthat a segmented income statement be prepared showing thecontribution of each segment to the association. The associationhas four segments: Membership Division, Magazine SubscriptionsDivision, Books and Reports Division, and Continuing EducationDivision. Mike Doyle has been assigned responsibility for preparingthe segmented income statement, and he has gathered the followingdata prior to its preparation.

Membership dues are $100 per year, of which $20 is considered tocover a one-year subscription to the association’s journal. Otherbenefits include membership in the association and chapteraffiliation. The portion of the dues covering the magazinesubscription ($20) should be assigned to the Magazine SubscriptionDivision.

One-year subscriptions to Teachers’ Forum were sold tononmembers and libraries at $30 per subscription. A total of 2,500of these subscriptions were sold last year. In addition tosubscriptions, the magazine generated $100,000 in advertisingrevenues. The costs per magazine subscription were $7 for printingand paper and $4 for postage and shipping.

A total of 28,000 technical reports and professional texts weresold by the Books and Reports Division at an average unit sellingprice of $25. Average costs per publication were $4 for printingand paper and $2 for postage and shipping.

The association offers a variety of continuing education coursesto both members and nonmembers. The one-day courses had a tuitioncost of $75 each and were attended by 2,400 students. A total of1,760 students took two-day courses at a tuition cost of $125 foreach student. Outside instructors were paid to teach somecourses.

Salary costs and space occupied by division follow:



d

Personnel costs are 25% of salaries inthe separate divisions as well as for the corporate staff. The$280,000 in occupancy costs includes $50,000 in rental cost for awarehouse used by the Books and Reports Division for storagepurposes.

Page 279

Printing and paper costs other than for magazine subscriptionsand for books and reports relate to the Continuing EducationDivision.

General and administrative expenses include costs relating tooverall administration of the association as a whole. The company’scorporate staff does some mailing of materials for generaladministrative purposes.

The expenses that can be traced or assigned to the corporatestaff, as well as any other expenses that are not traceable to thesegments, will be treated as common costs. It is not necessary todistinguish between variable and fixed costs.

Required:

Prepare a contribution format segmented income statement forMusic Teachers, Inc. This statement should show the segment marginfor each division as well as results for the association as awhole.

Give arguments for and against allocating all costs of theassociation to the four divisions.

Somewhat similar to a vignette in literature, this provides anopportunity to look at the application of Managerial Accounting ina diverse set of factual circumstances.

After completing the requirements for the case study, pleaseprovide a short narrative (two to four pages) and analysis of yourimpressions on how these principles and processes can be appliedproductively in settings that you encounter or expect to encounterin your career. Which aspects of the course do you believe you willbe able to apply most productively going forward? Which of thesetechniques are you regularly using in your current positions? Ifyou are using different applications, provide insight of the prosand cons in comparison to the reports and analysis above.

Schedules should be submitted in excel format and any analysisand write-ups should be in a Microsoft Word Document.

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