ARB 1000 Lecture Notes - Lecture 33: Seat Belt

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mauvewildebeest171

26 Apr 2018

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The original questions are (i've already completed them)...

CD7 EXCELTutorial

CURRENT DESIGNS

Current Designs faces anumber of important decisions that require incremental analysis.Consider each

of the following situationsindependently.

Situation 1

Recently, Mike Cichanowski,owner and CEO of Current Designs, received a phone call from thepresident

of a brewing company. He wascalling to inquire about the possibility of Current Designsproducing "floating

coolers" for a promotion hiscompany was planning. These coolers resemble a kayak but are aboutone-third

the size. They are used tofloat food and beverages while paddling down the river on a weekendleisure trip.

The company would be interestin purchasing 100 coolers for the upcoming summer. It is willing topay $250

per cooler. The brewingcompany would pick up the coolers upon completion of theorder.

Mikemet with Diane Buswell, controller, to identify how much it wouldcost Current Designs to produce

the coolers. After carefulanalysis, the following costs were identified.

Current Designs would be ableto modify an existing mold to produce the coolers. The cost ofthese

modifications would beapproximately $2,000.

Instructions

(a)

Prepare an incremental analysis to determinewhether Current Designs should accept this special order to

produce the coolers.

(b)

Discuss additonal factors that Mike and Dianeshould consider if Current Designs is currently operating at

full capacity.

Situation 2

Current Designs is alwaysworking to identify ways to increase efficiency while becoming moreenvironmentally

conscious. During a recentbrainstorming session, one employee suggested to Diane Buswell,controller, that the

company should considerreplacing the current rotomold oven as a way to realize savingsfrom reduced energy

consumption. The ovenoperates on natural gas, using 17,000 therms of natural gas for anentire year. A new,

energy-efficient rotomoldoven would operate on 15,000 therms of natural gas for an entireyear. After seeking out

price quotes from a fewsuppliers, Diane determined that it would cost approximately$250,000 to purchase a new,

energy-efficient rotomoldoven. She determines that the expected useful life of the new ovenwould be 10 years, and

it would have no salvagevalue at the end of its useful life. Current Designs would be ableto sell the current oven for

$10,000

Instructions

(a)

Prepare an incremental analysis to determine ifCurrent Designs should purchase the new rotomold oven,

assuming that the average price for natural gasover the next 10 years will be $0.65 per therm.

(b)

Diane is concerned that natural gas prices mightincrease at a faster rate over the next 10 years. If thecompany

projects that the average natural gas price of thenext 10 years could be as high as $0.85 per therm, discuss

how that might change your conclusion in (a).

I need help with the part below!


After you have completed CD7,consider the following additional questions.
1.	Assume in situation 1, the unit selling pricechanged to $195, fixed overhead changed to $1,800 and
	the cost of modifications changed to $3,000. Showthe impact of these changes on decision to accept or
	reject the special order.

2.	Assume in situation 2, the purchase price of thenew oven changed to $100,000. Would this change
	the decision to retain or replace the oven?

3.	Assume in situation 3, that the estimated numberof seats to be produced changed to 3,500 and the cost topurchase
	one seat from an outside supplier changed to $55.Should Current Designs make or buy the seats?

Comment or give a summary of the following post. Substantive comments should be scholarly, probing, extend the conversation by beginning a dialogue, and continue exploring the concepts

Honduras

I will be providing information on Honduras, which is one of the poorest countries in the western hemisphere. I have had the chance to witness first-hand how poor the country is, and how little the people there have. In both 2015 and 2016, I had the privilege to spend a week there, working with a surgical team in a hospital to do procedures for people free of charge. They ranged from relatively simple hernia repairs and cholecystectomies to more advanced things like moving the esophagus and removal of large tumors. Honduras seemed to rank around the 125-130 mark for most of the information I found.

The country has a population of just over 8 million, with about half residing in urban areas (WHO, 2017). They also ranked around that area for infant mortality, which was 17.7%, and literacy rate runs around 89% (Factbook, n.d.), which surprisingly ranks it as 149th, well below half of the other countries in the world. Life expectancy averaged 71.1 years, broken down to 69.5 years for males and 72.8 years for women (WHO, 2017). Surprisingly, 93% of the population are subscribers of cell phone service (U.N., 2016). Healthy life expectancy at birth was 64.9 years, slightly lower than average life expectancy. Cause of death registration coverage was very low at 17%. Many of the people in the country work either in some type of agricultural setting or working to make textiles. Knit sweaters and knit t-shirts both account for about 12% of exports. Coffee came in at the same percentage. Banana exports are about 4% of total exports, and sadly the major money from that is not kept in-country.

The companies that own the plantations and factories do not have an interest in the country and send the money elsewhere. Insulated wire is another large export with 9% of the exports from that. 1.9% of exports are created from rolled tobacco, mostly cigars (OEC, n.d.). As a cigar aficionado, I believe they produce fine tobacco there. Textile scraps, narrow woven fabric, undergarments, melons and other fruit, fish, vehicle parts, soap, gold, and petroleum each hold less than 2% each of export totals. All are important to the economy of the country. The country ranks very low in many health-related areas. For example, the cause of death registration coverage does not seem very high.

One of the patients I dealt with in the hospital had been in a motorcycle accident and had a severe closed head injury. He eventually died, but they continued to manually ventilate him until his heart stopped on its own. His heart rate fluctuated for many hours due to the swelling in his head, but I am unsure how they documented his death, whether it be cardiac arrest or a vehicle accident. There is little to no tracking of patients in a hospital, and there are many risks associated with that. Patients do not wear identification and their charts are stacked at the nurse's desk. Documentation is all done on paper, which can be misread or even get lost. Access to healthcare is limited to those who can afford it, and I would not say they have much of a public health system. While nurses, physicians, and other healthcare providers are highly educated, many citizens that work other jobs do not have the need or luxury for obtaining further education.

There is an obvious gap between those who have money and those who do not. There is not much of a middle-class, as we have here in the United States. While the country has improved slightly over the past decade, it is still far from being a developed country. Nearby countries like Belize and Costa Rica offer tourism, which can draw in money to improve conditions. Unfortunately, the biggest draw for Honduras tourism is the island of Roatan. This does not provide much income to the country. Hopefully, the trend of improvement will continue for years to come, and increase the level of health in the country.

coffeekangaroo879

Part 1: The Paint Shop (20 points)

The Rookery Company, a large financial services organization,owns and occupies many facilities including a property that islisted on the National Register of Historic Places. Rookerymaintains a Paint Shop. The Paint Shop employs a dozen peopleincluding painters who are especially skilled.

Department executives in the various divisions of Rookery havethe decision rights regarding the choice of painters they engage.At Rookery, it has never been the case that all painting is done bythe in-house Paint Shop. Over the years outside paintingcontractors have been hired in various circumstances. For example,outside contractors were brought in for some major projects andwhen the Paint Shop was overwhelmed or not equipped to tacklejobs.

The Paint Shop is organized as a profit center as are all of theunits of Rookery that would engage the Paint Shop to providepainting services. When a department needs painting work, they cancontact the paint shop for an estimate. If the Paint Shop contractsto do the work, Rookeryâs accounting department charges an expenseagainst the profit of the department requesting the work andcredits the revenue of the Paint Shop. The Paint Shop is a captivesupplier, that is, the paint shop does not do work for anycustomers outside of the Rookery Company.

Department heads have not always been pleased with theturn-around times of the in-house Paint Shop. Also, some in-housecustomers have been displeased with the price charged and theattitude of some of the staff members in the Paint Shop. As aresult, department heads have increasingly been turning to outsidepainters instead of using the Paint Shop.

The CFO noticed the falling revenues and the resulting fall inprofits of the Paint Shop. They are a high fixed cost unit. Inresponse the CFO sent memos to the department executives who havedecision rights over painting contracts to strongly urge them toalways give the Paint Shop the ârightof-first-refusalâ wheneverpainting work needs to be done.

The CFO is a strong supporter of the Paint Shop and believesthat Rookery needs to maintain the inhouse paint shop. However, hisrepeated requests to the department executives to use the PaintShop have not succeeded in creating work. To be candid, many jobsare being out-sourced to independent contractors and it appearsthat the CFOâs memos are being ignored. In fact, the Paint Shopâsrevised pricing structure necessitated by the need to raise pricesto improve their bottom line has only aggravated theirsituation.

The CFO is angry. At best he feels ignored, at worst he regardsthe decision of Rookery units to use outside painters as a disloyalact. But, the CFO lacks authority to require the departmentalexecutives to use the Paint Shop. If he had the authority, he wouldrequire every department within the company to use the Paint Shopunless he decides that for some reason the Print Shop is not ableto do the work.

To put an end to the practice of Rookery units selecting outsidepainting contractors, the CFO has recently communicated to theoutside painting contractors who have been doing most of the workfor Rookery units. He indicated that he does not want the outsidecontractors to accept painting work from any Rookery departmentthat he has not authorized. Of course, the CFO will not authorizeany work to go to outside contractors unless the Paint Shop isunable to complete the work.

The consequence to an independent contractor of performing worknot authorized by the CFO as outlined by the CFO is that whenRookery does need to employ an outside contractor for a majorproject the CFO will remember those who are his friends and thosewho did cooperate with his wishes. Of course, the CFO has access toall invoices making it a simple task to identify any who do notcomply with his wishes.

Required:

1. (10 points) Speculate on why the department heads areignoring the CFOâs wishes with regards to using the services of thePrint Shop.

2. (10 points) When the volume of work declined at the PaintShop, to maintain profitability the Paint Shop increased bidprices. The increase in bid prices resulted in further decreasingthe number of jobs the Paint Shop was winning and the spiralcontinued downwards. This is an illustration of what some refer toas the âdeath spiral.â What other responses could the Paint Shop incollaboration with the CFO have made to feedback received withinthe management control system when the Paint Shop was no longercompetitive with outside contractors? Also, speculate on why itseems to be the case that the leadership of the Paint Shop did notinitiate any of the responses you discussed. Be certain to give acomprehensive response.

ARB 1000 Lecture Notes - Lecture 33: Seat Belt

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