Question 1
Advanced Cost Accounting Questions: Q1) (ACTIVITY BASED MANAGEMENT) Seneca Foods is a regional producer of low-priced private-label snack foods. Seneca contracts with local supermarkets to supply good-tasting packaged snack foods that the retailers sell at significantly lower prices to price-sensitive consumers. Because Seneca?s production costs are low, and it spends no money on advertising and promotion, it can sell its products to retailers at much lower prices than can national-brand snack food companies, such as Frito-Lay. The low purchase prices often allow the retailer to mark this product up and earn a gross margin well above what it earns from brand products, while still keeping and selling price to the consumer well below the price of the brand products. Seneca has recently been approached by several large discount food chains who wish to offer their consumers a high-quality but much lower-priced alternative to the heavily advertised and high-priced national brands. But each discount retailer wants the recipe for the snack foods to be customized to its own tastes. Also, each retailer wants its own name and label on the snack foods it sells. Thus, the retailer, not the manufacturer, would be providing the branding for the private-label product. In addition, the retail chains want their own retailer-branded product to offer a full snack product line, just as the national brands do. Seneca?s managers are intrigued with the potential for quantum growth by becoming the prime producer of retailer-brand snack foods to large, national discount chains. As they contemplated this new opportunity. Dale Williams, the senior marketing manager, proposed that if Seneca enters this business, it can think of even higher growth opportunities. Seneca does not have to sell just to the discount chains that have approached it. Local supermarket chains may also be attracted to the idea of having their own brand of high quality but lower-priced snack products that could compete with the national brands, not just be a low-priced alternative for highly price-sensitive consumers. Perhaps Seneca could launch a marketing effort to regional supermarket chains around the country for a retail-brand snack food product line. Williams noted, however, that the local supermarket chains were not as sophisticated as the national discounters in promoting products under their own brand name. Each supermarket chain likely would need extensive assistance and support to learn how to advertise, merchandise, and promote the store-brand products to be competitive with the national-brand products. John Thompson, director of logistics for Seneca Foods, noted another issue. The national-brand producers used their own salespeople to deliver their products directly to the retailer?s store and even stocked their products on the retailer?s shelves. Seneca, in contrast, delivered to the retailer?s warehouse or distribution center, leaving the retailer to move the product to the shelves of its various retail outlets. The national producers were trying to dissuade the large discount chains from following their proposed private-label (retailer-brand) strategy by showing them studies that the apparently higher margins they would earn on the private label would be eaten away by much higher warehousing, distribution, and stocking costs for these products. Heather Gerald, the controller of Seneca, was concerned with the new initiatives. She felt that Seneca?s current success was due to its focus. It currently offered a relatively narrow range of products aimed at the high-volume snack food segments to supermarket chains in its local region. Seneca got good terms from its relatively few supplier because of the high volume of business it did with each of them. Also, the existing production processes were efficient for the products and product range currently produced. She feared that customizing products for each discount or supermarket retailer, plus adding additional products so that they could offer a full product line, would cause problems with both suppliers and the production process. She also wondered about the cost of providing new services, such as consulting and promtoins, to the supermarket chains and of developing some of the new items required for the proposed full product line strategy. Heather was attracted to the growth prospects offered by becoming the preferred supplier to major discount and supermarket chains. But she was not as optimistic as Dale Williams that these retailers truly believed that selling their own private-label foods would be more profitable than selling the national brands. Perhaps they were only using Seneca as a negotiating ploy, threatening to turn to private labels to increase their power in setting terms with the national manufacturers. Once production geared up, how much volume would these retailers provide to Seneca? How could Seneca convince the large retailers about the profitability associated with the new private-label strategy? Gerald knew that Seneca?s existing cost systems were adequate for their current strategy. Most expenses were related to materials and machine processing, and these costs were well assigned to products with the conventional standard costing system. But the new strategy would seem to involve a lot more spending in areas other than purchasing materials and running machines. She wished she knew how to provide input into the strategic deliberations now under way at Seneca, but she didn?t know how to quantify all the effects of the proposed strategy. REQUIRED: a) How can activity-based costing help Heather Gerald assess the attractiveness of the proposed policy? b) Assuming that Seneca starts to supply new customers-large discounters and supermarkets outisde its local region-what ABC systems would be helpful to guide the profitability of the strategy and assist Seneca managers in making decisions? *NOTE: Make sure to think about the totality of Seneca?s operations, including its relationships with both supplier and customers. (i) Discuss how ABC can be used to manage and controls costs for Seneca's manufacturing operations. The ?whale curve? and some of those concepts can apply to this company. (ii) ABC can be used to measure profitability: internal to the companyand external by modeling the customer. (iii) Finally, use ABC to manage the company?s relationship with suppliers. ======================================================================== Q2) (COST-BASED DECISION MAKING) COST COMMITMENT Using published sources, identify the process of cost commitment during various phases of some product?s life cycle. Try to find several examples so that you can contrast the rate of cost commitment for different products. *Note: Provide a minimum of two examples and document the process of cost commitment during various phases of these products' life cycles. In particular, indicate what percentage of the costs will be committed at the design stage. ============================================================================== Q3) (FORMAL MODELS IN BUDGETING AND INCENTIVE CONTRACTS) THE REVELATION PRINCIPLE IN BUDGET SETTING Kentville Orchards grows and sells a wide variety of fruits. Norm Wilson, the vice-president-controller of Kentville Orchards, is responsible for all aspects of budgeting and forecasting in the firm. Norm has becoming both disillusioned and dissatisfied with the traditional approach that Kentville Orchards has taken to budgeting. Norm summarized his concerns as follows: ?The traditional approach, where we set budget objectives and then evaluate performance relative to those objectives, is not working well. First, the budget is focusing attention on the wrong things. The managers are interested in making short-run profit as large as possible and are not doing things to improve long-run profitability. Second, I do not think that the model of evaluating performance based on profits has the scope to evaluate the jobs that the managers are doing. Their jobs are much more complicated than a simple profit measure implies, and we need a more accurate picture of how well they are doing. Finally, the existing system is motivating the managers to build slack into both their standards and performance targets so that they can make budget and earn bonuses. As a result, our forecasting system is unable to predict either sales levels or input usage accurately.? Norm went on to indicate that he was considering recommending to the senior management committee at Kentville Orchards that the current budgeting system be replaced with a new system using participative budggeting techniques. Specifically, the new system would require that the objectives for each management job in the organization be defined relative to the organization?s strategic goals by negotiations between the job?s incumbent and incumbent?s supervisor. From these general objectives, specific performance objectives would be set for each job each year through negotiations between the incumbent and the incumbent?s supervisor. The objectives would be multidimensional and would include performance objectives for all attributes of the job that are considered important. The annual evaluation would reflect two dimensions of performance appraisal. First, the incumbent would be evaluated for innovation in developing ways of carrying out assigned responsibilities. Second, the incumbent?s performance would be evaluated relative to the targets that were negotiated with the supervisor. Norm summarized his feelings as follows: ?The only thing that is holding me back is that I do not think that the proposed changes go far enough. The proposed system deals with the problem of inadequate performance measurement but still provides managers with the incentives to understate their potential, since their performance will be evaluated relative to the targets that each manager negotiates with his supervisor. Moreover, the planned system, like the old system, still has the aspect of checking up on people rather than relying on them to do their jobs. Perhaps we should go even further and implement the proposed system but evaluate managers only on their ability to be innovative in undertaking the tasks that they have been assigned. If they are not evaluated relative to the targets that they set jointly with their supervisors, they will be motivated not to understate their potential. The bottom line is that I think that we should get rid of the concept of standards altogether, irrespective of who sets the standards. As a result of eliminating the concept of standards, the budget will serve to communicate and coordinate rather than be a threat and a means of checking up on the managers.? REQUIRED: Evaluate the initial proposal for the revision of the budgeting system as well as the proposal that would eliminate the use of standards. *Note: Start by identifying the problems with the current budgeting and performance system. Then, comment on the advantages and disadvantages of the proposed new systems: one in which evaluation is based on participative budgeting and innovation and the other in which evaluation is based solely on innovation.
Question 2
See attached document. Requirements 1. Using the file labeled ?Security.? Do you think McAfee?s securities portfolio is consistent with her stated goals of ?maximizing return while minimizing risk of loss from temporary price fluctuations?? Justify your answer. 2. What determines whether marketable securities are to be classified as current or noncurrent on the balance sheet? 3. What are the objectives in the audit of marketable securities? What are the most relevant assertions for the auditor to examine? 4. Enter the market data for each security held at December 31, 2009. 5. Add an audit legend (and explain it at the bottom of the worksheet) regarding how market was determined. 6. Draft Audit Adjustment 8 at the bottom of WP 2 to recognize the understatement of interest revenue. The discrepancy results from failure to recognize accrued interest at 12/31/09 (debit account 1205, ?Accrued Interest Receivable?). 7. Draft Audit Adjustment 9 to adjust the loss on decline of market value to reflect the corrected amount. The wide disparity in this instance arises because Biltrite, in adjusting to market at 12/31/09, compared market at 12/31/09 with the cost of the 12/31/08 portfolio, rather than comparing 12/31/09 market with 12/31/09 carrying values. For this adjustment, use account 9702, ?Loss on Decline of Market Value of Securities,? and account 1102, ?Allowance for Decline of Market Value of Securities.?
Question 3
Designing a Balanced Scorecard for a pharmaceutical company Chadwick, Inc.: The Balanced Scorecard (Abridged)14 Company Background Chadwick, Inc., was a diversified producer of personal consumer products and pharmaceuticals. The Norwalk Division of Chadwick developed, manufactured, and sold ethical drugs for human and animal use. It was one of five or six sizable companies competing in these markets and, while it did not dominate the industry, the company was considered well managed and was respected for the high quality of its products. Norwalk did not compete by supplying a full range of products. It specialized in several niches and attempted to leverage its product line by continually searching for new applications for existing compounds. Norwalk sold its products through several key distributors who supplied local markets, such as retail stores, hospitals and health service organizations, and veterinary practices. Norwalk depended on its excellent relations with the distributors who served to promote Norwalk?s products to end users and also received feedback from the end users about new products desired by their customers. Chadwick knew that its long-term success depended on how much money distributors could make by promoting and selling Norwalk?s products. If the profit from selling Norwalk products was high, then these products were promoted heavily by the distributors and Norwalk received extensive communication back about future customer needs. Norwalk had historically provided many highly profitable products to the marketplace, but recent inroads by generic manufacturers had been eroding distributors? sales and profit margins. Norwalk had been successful in the past because of its track record of generating a steady stream of attractive, popular products. During the second half of the 1980s, however, the approval process for new products had lengthened and fewer big winners had emerged from Norwalk?s R&D laboratories. Research and Development The development of ethical drugs was a lengthy, costly, and unpredictable process. Development cycles now averaged about 12 years. The process started by screening a large number of compounds for potential benefits and use. For every drug that finally emerged as approved for use, up to 30,000 compounds had to be tested at the beginning of a new product development cycle. The development and testing processes had many stages. The development cycle started with the discovery of compounds that possessed the desirable properties and ended many years later with extensive and tedious testing and documentation to demonstrate that the new drug could meet government regulations for promised benefits, reliability in production, and absence of deleterious side effects. Approved and patented drugs could generate enormous revenues for Norwalk and its distributors. Norwalk?s profitability during the 1980s was sustained by one key drug that had been discovered in the late 1960s. No blockbuster drug had emerged during the 1980s, however, and the existing pipeline of compounds going through development, evaluation, and test was not as healthy as Norwalk management desired. Management was placing pressure on scientists in the R&D lab to increase the yield of promising new products and to reduce the time and costs of the product development cycle. Scientists were currently exploring new bioengineering techniques to create compounds that had the specific active properties desired rather than depending on an almost random search through thousands of possible compounds. The new techniques started with a detailed specification of the chemical properties that a new drug should have and then attempted to synthesize candidate compounds that could be tested for these properties. The bioengineering procedures were costly, requiring extensive investment in new equipment and computer-based analyses. A less expensive approach to increase the financial yield from R&D investments was to identify new applications for existing compounds that had already been approved for use. While some validation still had to be submitted for government approval to demonstrate the effectiveness of the drug in the new applications, the cost of extending an existing product to a new application was much, much less expensive than developing and creating an entirely new compound. Several valuable suggestions for possible new applications from existing products had come from Norwalk salesmen in the field. The salesmen were now being trained not only to sell existing products for approved applications, but also to listen to end users who frequently had novel and interesting ideas about how Norwalk?s products could be used for new applications. Manufacturing Norwalk?s manufacturing processes were considered among the best in the industry. Management took pride in the ability of the manufacturing operation to quickly and efficiently ramp up to produce drugs once they had cleared governmental regulatory processes. Norwalk?s manufacturing capabilities also had to produce the small batches of new products that were required during testing and evaluation stages. Performance Measurement Chadwick allowed its several divisions to operate in a decentralized fashion. Division managers had almost complete discretion in managing all the critical processes: R&D, production, marketing and sales, and administrative functions such as finance, human resources, and legal. Chadwick set challenging financial targets for divisions to meet. The targets were usually expressed as return on capital employed (ROCE). As a diversified company, Chadwick wanted to be able to deploy the returns from the most profitable divisions to those divisions that held out the highest promise for profitable growth. Monthly financial summaries were submitted by each division to corporate headquarters. The Chadwick executive committee, consisting of the chief executive officer, the chief operating officer, two executive vice presidents, and the chief financial officer met monthly with each division manager to review ROCE performance and backup financial information for the preceding month. The Balanced Scorecard Project Bill Baron, comptroller of Chadwick, had been searching for improved methods for evaluating the performance of the various divisions. Division managers complained about the continual pressure to meet short-term financial objectives in businesses that required extensive investments in risky projects to yield long-term returns. The idea of a Balanced Scorecard appealed to him as a constructive way to balance short-run financial objectives with the long-term performance of the company. Baron brought the article and concept to Dan Daniels, the president and chief operating officer of Chadwick. Daniels shared Baron?s enthusiasm for the concept, feeling that a Balanced Scorecard would allow Chadwick divisional managers more flexibility in how they measured and presented their results of operations to corporate management. He also liked the idea of holding managers accountable for improving the long-term performance of their division. After several days of reflection, Daniels issued a memorandum to all Chadwick division managers. The memo had a simple and direct message: Read the Balanced Scorecard article, develop a scorecard for your division, and be prepared to come to corporate headquarters in 90 days to present and defend the divisional scorecard to Chadwick?s executive committee. John Greenfield, the division manager at Norwalk, received Daniel?s memorandum with some concern and apprehension. In principle, Greenfield liked the idea of developing a scorecard that would be more responsive to his operations, but he was distrustful of how much freedom he had to develop and use such a scorecard. Greenfield recalled: This seemed like just another way for corporate to claim that they have decentralized decision making and authority while still retaining ultimate control at headquarters. Greenfield knew that he would have to develop a plan of action to meet corporate?s request but lacking a clear sense of how committed Chadwick was to the concept, he was not prepared to take much time from his or his subordinates? existing responsibilities for the project. The next day, at the weekly meeting of the Divisional Operating Committee, Greenfield distributed the Daniels memo and appointed a three-man committee, headed by the divisional controller, Wil Wagner, to facilitate the process for creating the Norwalk Balanced Scorecard. Wagner approached Greenfield later that day: I read the Balanced Scorecard article. Based on my understanding of the concept, we must start with a clearly defined business vision. I?m not sure I have a clear understanding of the vision and business strategy for Norwalk. How can I start to build the scorecard without this understanding? Greenfield admitted: ?That?s a valid point. Let me see what I can do to get you started.? Required (a) How does the Balanced Scorecard approach differ from traditional approaches to performance measurement? What, if anything, distinguishes the Balanced Scorecard approach from a ?measure everything, and you might get what you want? philosophy? (b) Develop the Balanced Scorecard for the Norwalk Pharmaceutical Division of Chadwick, Inc. What parts of the business strategy that John Greenfield sketched out should be included? Are there any parts that should be excluded or cannot be made operational? What scorecard measures would you use to implement your scorecard in the Norwalk Pharmaceutical Division? What new measures need to be developed, and how would you go about developing them? (c) How would a Balanced Scorecard for Chadwick, Inc., differ from ones developed in its divisions, such as the Norwalk Pharmaceutical Division? Do you anticipate that there might be major conflicts between divisional scorecards and those of the corporation? If so, should those conflicts be resolved, and, if so, how should they be resolved?
Question 4
"mason company has prepared consolidated financial statements for the current year and is now gathering information in connection with the following five operating segments it has identified. Determine the reportable segments by performing each applicable test Company total sales to outside parties 1547 intersegment sales 421 interest income - external 97 interest income - intersegment loans 147 assets Expenses: operating expenses 3398 intersegment sales 198 interest expense - external 107 interest expense - intersegment loans 177 income tax expense (savings) 21 general corporate expenses 55 unallocated operating costs 80 Books sales to outside parties 121 intersegment sales 24 interest income - external 60 interest income - intersegment loans 0 assets 206 Expenses: operating expenses 115 intersegment sales 70 interest expense - external 0 interest expense - intersegment loans 21 income tax expense (savings) 12 general corporate expenses 0 unallocated operating costs 0 Computers sales to outside parties 696 intersegment sales 240 interest income - external 0 interest income - intersegment loans 0 assets Expenses: 1378 operating expenses 818 intersegment sales 51 interest expense - external 0 interest expense - intersegment loans 71 income tax expense (savings) (41) general corporate expenses 0 unallocated operating costs 0 Maps sales to outside parties 416 intersegment sales 39 interest income - external 0 interest income - intersegment loans 0 assets 248 Expenses: operating expenses 304 intersegment sales 31 interest expense - external 0 interest expense - intersegment loans 38 income tax expense (savings) 27 general corporate expenses 0 unallocated operating costs 0 Travel sales to outside parties 314 intersegment sales 118 interest income - external 0 interest income - intersegment loans 0 assets 326 Expenses: operating expenses 190 intersegment sales 46 interest expense - external 0 interest expense - intersegment loans 47 income tax expense (savings) 31 general corporate expenses 0 unallocated operating costs 0 Finance sales to outside parties 0 intersegment sales 0 interest income - external 37 interest income - intersegment loans 147 assets 1240 Expenses: operating expenses 33 intersegment sales 0 interest expense - external 107 interest expense - intersegment loans 0 income tax expense (savings) (8) general corporate expenses 0 unallocated operating costs 0"
Question 5
"Ergonomic Requirements" - Please search the web. You may want to look at the AFL-CIO and U.S. Chamber of Commerce sites for information on OSHA and ergonomic requirements. Ergonomics is the science that deals with the correct design of equipment, including desks, chairs, and workstations for the purpose of minimizing the chances of employee injuries. Here are the questions to answer below do not make this complicated for yourself at all they don't need to be long make them short answer them 100 words or less or better yet 75 words or less it is not an essay for each question I repeat it is not an essay it is just for a discussion class board. so don't make it complicated. pleas don't make it complicated. please answer under the question keeping the actual question on the page. Please thank you. 1. Why have OSHA's ergonomic requirements been a source of controversy? 2. What position do you think OSHA should take on ergonomics? 3. Where do you see the future of ergonomics in the workplace in the context of employment law? 4. here we will explore a hotly debated issue that many employees face in today's workplace. Are OSHA's laws sufficient to protect workers from workplace injuries caused by improper ergonomics?
