Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN: 9781305970663
Author: Don R. Hansen, Maryanne M. Mowen
Publisher: Cengage Learning
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Textbook Question
Chapter 14, Problem 44P
Refer to Problem 14.43. In 20x3, Jack Carter, president of Kartel, requested that environmental costs be assigned to the two major products produced by the company. He felt that knowledge of the environmental product costs would help guide the design decisions that would be necessary to improve environmental performance. The products represent two different models of a cellular phone (Model XA2 and Model KZ3). The models use different processes and materials. To assign the costs, the following data were gathered for 20x3:
During 20x3, Kartel’s division produced 200,000 units of Model XA2 and 300,000 units of Model KZ3.
Required:
- 1. Using the activity data, calculate the environmental cost per unit for each model. How will this information be useful?
- 2. Upon examining the cost data produced in Requirement 1, an environmental engineer made the following suggestions: (1) substitute a new plastic for a material that appeared to be the source of much of the hazardous waste (the new material actually cost less than the contaminating material it would replace), and (2) redesign the processes to reduce the amount of air contaminants produced.
As a result of the first suggestion, by 20x5, the amount of hazardous waste produced had diminished to 50 tons, 10 tons for Model XA2 and 40 tons for Model KZ3. The second suggestion reduced the contaminants released by 50 percent by 20x5 (15 tons for Model XA2 and 110 tons for Model KZ3). The need for pollution equipment also diminished, and the hours required for operating this equipment for Model XA2 and Model KZ3 were reduced to 60,000 and 200,000, respectively. Calculate the unit cost reductions for the two models associated with the actions and outcomes described (assume the same production as in 20x3). Do you think the efforts to reduce the environmental cost per unit were economically justified? Explain.
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The Chopin Company has decided to introduce a new product. The new product can be manufactured by either a computer-assisted manufacturing (CAM) or a labor-intensive production (LIP) system. The manufacturing method will not affect the quality of the product. The estimated manufacturing costs for each of the two methods are as follows.
CAM System:
Direct Material = $5.0
Direct Labor (DLH) = 0.5 DLH X $12 = $6
Variable Overhead = 0.5DLHx$6 = $3
Fixed Iverhead* = $ 2,440,000
LIP System:
Direct Material = $5.6
Direct Labor (DLH) = 0.8 DLH X $9 = $7.2
Variable Overhead = 0.8 DLH X $6 = $4.8
Fixed Overhead* = $1,320,000
*These costs are directly traceable to the new product line. They would not be incurred if the new product were not produced.
The company’s marketing research department has recommended an introductory unit sales price of $30. Selling expenses are estimated to be $500,000 annually plus $2 for each unit sold. (Ignore income taxes.)
Required
4. Describe the circumstances under…
The Chopin Company has decided to introduce a new product. The new product can be manufactured by either a computer-assisted manufacturing (CAM) or a labor-intensive production (LIP) system. The manufacturing method will not affect the quality of the product. The estimated manufacturing costs for each of the two methods are as follows.
CAM System:
Direct Material = $5.0
Direct Labor (DLH) = 0.5 DLH X $12 = $6
Variable Overhead = 0.5DLHx$6 = $3
Fixed Iverhead* = $ 2,440,000
LIP System:
Direct Material = $5.6
Direct Labor (DLH) = 0.8 DLH X $9 = $7.2
Variable Overhead = 0.8 DLH X $6 = $4.8
Fixed Overhead* = $1,320,000
*These costs are directly traceable to the new product line. They would not be incurred if the new product were not produced.
The company’s marketing research department has recommended an introductory unit sales price of $30. Selling expenses are estimated to be $500,000 annually plus $2 for each unit sold. (Ignore income taxes.)
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Chapter 14 Solutions
Cornerstones of Cost Management (Cornerstones Series)
Ch. 14 - What is the difference between quality of design...Ch. 14 - Why are quality costs the costs of doing things...Ch. 14 - Prob. 3DQCh. 14 - Describe the Taguchi quality loss function, and...Ch. 14 - Identify and discuss the four kinds of quality...Ch. 14 - Explain why external failure costs can be more...Ch. 14 - Prob. 7DQCh. 14 - Prob. 8DQCh. 14 - Describe the three types of quality performance...Ch. 14 - Prob. 10DQ
Ch. 14 - If a firms annual sales are 200 million, what...Ch. 14 - Explain why it is important for a manager to...Ch. 14 - Prob. 13DQCh. 14 - Explain why the Accounting Department should be...Ch. 14 - Prob. 15DQCh. 14 - What is ecoefficiency?Ch. 14 - Prob. 17DQCh. 14 - Prob. 18DQCh. 14 - Prob. 19DQCh. 14 - What are the four categories of environmental...Ch. 14 - Prob. 21DQCh. 14 - What does full environmental costing mean? Full...Ch. 14 - What information is communicated by the unit...Ch. 14 - Evans Company had total sales of 3,000,000 for...Ch. 14 - Prob. 2CECh. 14 - Ross Company implemented a quality improvement...Ch. 14 - Nabors Company had actual quality costs for the...Ch. 14 - Verde Company reported operating costs of...Ch. 14 - Pinter Company had the following environmental...Ch. 14 - Rachel Boyce, president of a company that...Ch. 14 - Quality attributes such as performance and...Ch. 14 - Stahman, Inc., estimates its hidden external...Ch. 14 - Prob. 10ECh. 14 - Abernathy, Inc., produces two different generators...Ch. 14 - Kang Company reported sales of 3,240,000 in 20x5....Ch. 14 - Gagnon Company reported the following sales and...Ch. 14 - Muskogee Company had sales of 60,000,000 in 20x1....Ch. 14 - Javier Company has sales of 8 million and quality...Ch. 14 - In 20x4, Tru-Delite Frozen Desserts, Inc.,...Ch. 14 - Prob. 17ECh. 14 - Prob. 18ECh. 14 - Achieving sustainable development will likely...Ch. 14 - Classify the following environmental activities as...Ch. 14 - At the end of 20x5, Bing Pharmaceuticals began to...Ch. 14 - Prob. 22ECh. 14 - Coyle Pharmaceuticals produces two organic...Ch. 14 - Prob. 24ECh. 14 - Which of the following quality costs is an...Ch. 14 - Which of the following would be a hidden quality...Ch. 14 - Using the Taguchi quality loss function, an...Ch. 14 - Environmental costs are those costs incurred...Ch. 14 - Two products, Product A and Product B, are...Ch. 14 - Kathy Shorts, president of Oliver Company, was...Ch. 14 - Panguitch Company manufactures a component for...Ch. 14 - Gaston Company manufactures furniture. One of its...Ch. 14 - Classify the following quality costs as...Ch. 14 - Wayne Johnson, president of Banshee Company,...Ch. 14 - Recently, Ulrich Company received a report from an...Ch. 14 - In 20x5, Major Company initiated a full-scale,...Ch. 14 - Paper Products Division produces paper diapers,...Ch. 14 - In 2011, Milton Thayne, president of Carbondale...Ch. 14 - Iona Company, a large printing company, is in its...Ch. 14 - Prob. 40PCh. 14 - The following items are listed in an environmental...Ch. 14 - Refer to Problem 14.41. In the environmental...Ch. 14 - The following environmental cost reports for 20x3,...Ch. 14 - Refer to Problem 14.43. In 20x3, Jack Carter,...
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