ADM 3318 Chapter Notes - Chapter 11: Relational Capital, Workforce Productivity, Materials Management
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Following a strategy of product differentiation, Arseniq Company makes a high-end Appliance, XT15. Arseniq presents the following data for the years 2016 and 2017:
2016 2017
Units of XT15 produced and sold 50,000 52,500
Selling price $500 $550
Direct materials (square feet) 150,000 153,750
Direct materials costs per square foot $50 $55
Manufacturing capacity in units of XT15 62,500 62,500
Total conversion costs $6,250,000 $6,875,000
Conversion costs per unit of capacity $100 $110
Selling and customer-service capacity (customers) 150 150
Total selling and customer-service costs $2,250,000 $2,343,750
Selling and customer-service capacity cost per customer $15,000 $15,625
Arseniq produces no defective units but it wants to reduce direct materials usage per unit of XT15. Manufacturing conversion costs in each year depend on production capacity defined in terms of XT15 units that can be produced. Selling and customer-service costs depend on the number of customers that the customer and service functions are designed to support. Arseniq had 140 customers in 2016 and 145 customers in 2017.
Income Statement Amounts in 2016 | Revenue and Cost Effects of Growth Component in 2017 | Revenue and Cost Effects of Price-Recovery Component in 2017 | Cost Effect of Productivity Component in 2017 | Income Statement Amounts in 2017 | |
Revenues ($) | |||||
Direct Materials (Variable) | |||||
Conversion costs (Fixed) | |||||
Selling and customer service costs (Fixed) | |||||
Operating income |
Part (A) of the problem can be disregarded. I need helpfilling in the table in the lower bottom of the problem usinginformation from part (B). Thank you
(A) Strategic Analysis of Profitability of RanshamCompany:
Income Statement Amounts in 2014 | Revenue and Cost Effects of Growth Component in 2015 | Revenue and Cost Effects of Price-Recovery Component in 2015 | Cost Effect of Productivity Component in 2015 | Income Statement Amounts in 2015 | |
Revenues ($) | 34,000 | 10,000 F | 1,000 U | (b) | (e) |
Costs | 23,500 | (a) | 500 U | (c) | 26,100 |
Operating income | 10,500 | 5,500 F | 1,500 U | 2,400 F | (d) |
What is the cost effect of the growth component (a)?
What is the revenue effect of the productivity component(b)?
What is the cost effect of the productivity component (c)?
What is the operating income amount for 2015 (d)?
What is the revenue amount for 2015 (e)?
Out of the two basic strategies, Ransham Companyâs strategyis
(B) Sting Corporation makes a high-end computer monitor,CM7. Sting Corporation presents the following data for the years2012 and 2013:
2012 2013
Units of CM 7 produced andsold 5,000 5,500
Sellingprice $400 $440
Direct materials(pounds) 15,000 15,375
Direct materials costs perpound $40 $44
Manufacturing capacity for CM7(units) 10,000 10,000
Conversioncosts $1,000,000 $1,100,000
Conversion costs per unit ofcapacity $100 $110
Selling and customer-service capacity(customers) 60 58
Total selling and customer-servicecosts $360,000 $362,500
Selling and customer-service capacity costpercustomer $6,000 $6,250
Manufacturing conversion costs in each year depend on productioncapacity defined in terms of CM7 units that can be produced.Selling and customer-service costs depend on the number ofcustomers that the customer and service functions are designed tosupport. Sting Corporation has 100 customers in 2012 and 115customers in 2013. The industry market size for high-end computermonitors increased 5% from 2012 to 2013.
Using the template table used in the Ransham Company exampleabove, build a table reconciling the operating income of 2012 tothe operating income of 2013. Out of the two basic strategies,Sting Corporationâs strategy is ________
Income Statement Amounts in 2012 | Revenue and Cost Effects of Growth Component in 2013 | Revenue and Cost Effects of Price-Recovery Component in 2013 | Cost Effect of Productivity Component in 2013 | Income Statement Amounts in 2013 | |
Revenues ($) | |||||
Costs | |||||
Operating income |