Business
1. (TCO 7) At Lakeside Manufacturing, budgets are the responsibility of everyone. Each department collaborates in determining its expected needs, and sales personnel determine the likely sales volume. Al Talbott, one of the production managers, believes in building plenty of slack into everything, including his estimates of ending inventory of work in process. As the accounting manager, write a memo to Mr. Talbott, explaining why the ending inventory figure should be extremely accurate, with as little slack as possible. (Points : 20) |
2. (TCO 9) Garner Company requires its marketing managers to submit estimated cost behavior data on all requests for new products or expansions of a product line. Judy Oslo is a new manager. Her calculations show a fixed cost for a new project at $100,000 and a variable cost of $5 per unit. Based on these calculations, the low-volume project would not be profitable. She shares her dismay with Nina Smythe, another manager. Nina strongly advises her to revise her estimates. She points out that several of the costs that had been classified as fixed costs could be considered variable, since they are mixed costs. When the data has been revised classifying those costs as variable costs, the project appears viable. Part (a) Who are the stakeholders in this decision?
Part (b) Is it ethical for Judy to revise the costs as indicated? Briefly explain.
Part (c) What should Judy do? (Points : 20) |
3. (TCO 6) Tom Bat became a baseball enthusiast at a very early age. All of his baseball experience has provided him valuable knowledge of the sport, and he is thinking about going into the batting cage business. He estimates that the construction of a state-of-the-art building and the purchase of necessary equipment will cost $630,000. Both the facility and the equipment will be depreciated over 12 years using the straight-line method and are expected to have zero salvage values. His required rate of return is
2. (TCO 9) Garner Company requires its marketing managers to submit estimated cost behavior data on all requests for new products or expansions of a product line. Judy Oslo is a new manager. Her calculations show a fixed cost for a new project at $100,000 and a variable cost of $5 per unit. Based on these calculations, the low-volume project would not be profitable. She shares her dismay with Nina Smythe, another manager. Nina strongly advises her to revise her estimates. She points out that several of the costs that had been classified as fixed costs could be considered variable, since they are mixed costs. When the data has been revised classifying those costs as variable costs, the project appears viable. Part (a) Who are the stakeholders in this decision?
Part (b) Is it ethical for Judy to revise the costs as indicated? Briefly explain.
Part (c) What should Judy do? (Points : 20) |
3. (TCO 6) Tom Bat became a baseball enthusiast at a very early age. All of his baseball experience has provided him valuable knowledge of the sport, and he is thinking about going into the batting cage business. He estimates that the construction of a state-of-the-art building and the purchase of necessary equipment will cost $630,000. Both the facility and the equipment will be depreciated over 12 years using the straight-line method and are expected to have zero salvage values. His required rate of return is