ACC 312 Study Guide - Midterm Guide: Swot Analysis, Financial Statement
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LOOKING FOR SOLUTION TO PART 2,3,4
Section I: Cost-Volume-Profit Analysis
The Hampshire Company manufactures umbrellas that sell for$12.50 each. In 2014, the company made and sold 60,000 umbrellas.The company had fixed manufacturing costs of $216,000. It also hadfixed costs for administration of $79,525. The per-unit costs ofeach umbrella are as follows:
Direct Materials: $3.00
Direct Labor: $1.50
Variable Manufacturing Overhead:$0.40
Variable Selling Expenses: $1.10
Using the information above, perform a cost-volume-profit (CVP)analysis by completing the steps below. All CVP calculations shouldbe completed in the Hampshire Company Spreadsheet. Note:The CVP analysis satisfies Part A of Section I.
Compute net income before tax.
Compute the unit contribution margin in dollars and thecontribution margin ratio for one umbrella.
Calculate the break-even point in units and dollars of revenue.Note: This is a required part of the CVP analysis andsatisfies Part C of Section I.
Calculate the margin of safety:
In units
In sales dollars
As a percentage
Calculate the degree of operating leverage.
Assume that sales will increase by 20% in 2015. Calculate thepercentage of before-tax income for this increase. Providecalculations to prove that your percentage increase is correctbased on the operating leverage calculated in step 5.
Compute the number of umbrellas that Hampshire is required tosell if it plans to earn $150,000 in income before taxes by usingthe target income formula. Proof your calculation.
A company that specializes in tours in England has offered topurchase 5,000 umbrellas at $11 each from Hampshire. The variableselling costs of these additional units will be $1.30 as opposed to$1.10 per unit. Also, this production activity will incur another$15,000 of fixed administrative costs. Should Hampshire agree tosell these additional 5,000 umbrellas to the touring business?Provide calculations to support your decision.
Additionally, complete Parts B and D of Section I as outlined inthe Final Project Guidelines and Rubric document.
Section II: Inventory Management
The information below represents the beginning and endinginventory amounts along with the production and sales for the monthin umbrella units.
Beginning Inventory: 0 Umbrellas
Production: 80,000 Umbrellas
Sales: 60,000 Umbrellas
Ending Inventory: 20,000Umbrellas
Using the information provided above and the costs and salesinformation provided in Section I, complete the following in theHampshire Company Spreadsheet in order to assist you in respondingto all components of Section II:
Prepare a variable costing income statement.
Prepare an absorption costing income statement.
Additionally, complete Parts A through E of Section II asoutlined in the Final Project Guidelines and Rubric document.
Section III: Benchmarking
The management of the Hampshire Company would like to implementbenchmarking. Standard costs have been established and arepresented below. You will want to complete a variance analysis toinclude efficiency and price variances for materials (cloth andhandle assemblies) and labor based on the following data:
Units Produced = 80,000
Units Sold = 60,000
Direct Materials Purchased and Used
Actual square yards of cloth purchased and used: 128,000
Actual price incurred per yard: $1.25
Actual handles purchased and used: 80,808
Actual price per handle/rib/stretcher assembly: $0.99
Direct Manufacturing Labor Used
Actual direct labor hours used: 15,748
Actual price per hour: $7.62
Direct labor costs: $120,000
Standard Rates
Standard labor hours per unit: 0.20
Standard labor price per hour: $7.50
Square yards material per unit: 1.50
Standard price per yard: $1.15
Handle/rib/stretcher assembly per unit: 1
Standard price per handle assembly: $1.05
Companies can use variance analysis and benchmarking to measureperformance within their own company and against competitors. Thiscan be done by setting standards/budgets and comparing a completedvariance analysis to results from prior periods or comparing themto competitorsâ results. Using the information provided above,complete the following calculations (steps 1 and 2) in theHampshire Company Spreadsheet. This will assist you in respondingto all components of Section III.
Calculate price variances for material and labor and denotewhether they are favorable or unfavorable.
Calculate efficiency variances for material and labor and denotewhether they are favorable or unfavorable.
In order to measure performance and make use of the varianceanalysis completed, management understands the need to compareresults with their competitors. Following the steps outlined below,you will research benchmarking and propose the most effectiveapproach for your company. Respond to Parts A through C of SectionIII as outlined in the Final Project Guidelines and Rubricdocument.
Section IV: Alternative Costing Method
Hampshire has always produced stick umbrellas. However, it isconsidering expanding its production to include collapsibleumbrellas. This consideration has been spurred by Tours Today, atouring company that is interested in providing its customers withcollapsible umbrellas imprinted with its logo. The management atHampshire is currently working out a deal with the touring companyto produce 3,000 collapsible umbrellas and believes it can sellthose umbrellas for $14.00 each. Here are the costs that can bedirectly traced to this special order:
Direct Materials: $9,300
Direct Labor Hours: 600
Hourly Rate of Direct labor:$8.00
In the traditional costing approach, overhead is applied at therate of $24.60 per labor hour. This expansion in production willadd additional overhead costs. The total overhead costs (assumingproduction of the stick and collapsible umbrellas) to include thecost pools and cost drivers are provided in Table 2.
An alternative costing method that might benefit Hampshire isthe implementation of activity-based costing (ABC).Hampshire would like to implement an ABC approach to analyze theproduction of this special order of collapsible umbrellas. Thecontroller has assembled the following information:
Stick | Collapsible | |
Units Sold | 60,000 | 3,000 |
Selling Price | $12.50 | $14.00 |
Direct Material Cost per Unit | $3 | $3.10 |
Direct Labor Cost per Hour | $7.50 | $8.00 |
Variable Manufacturing Overhead | $0.40 | $0.40 |
Variable Selling Costs | $1.10 | $1.10 |
Labor Hours per Unit | 0.2 | 0.2 |
Sales Orders | 120 | 1 |
Purchase Orders | 50 | 3 |
Production Runs | 45 | 6 |
Material Moves | 86 | 10 |
Machine Setups | 130 | 6 |
Machine Hours | 525 | 32 |
Inspections | 200 | 10 |
Shipments | 60 | 3 |
Table 1: Direct Cost Information and Activities
Activity | Activity Cost | Activity Cost Driver |
Order Processing | $35,000 | Number of Sales Orders |
Purchasing | $36,000 | Number of Purchase Orders |
Material Handing | $28,000 | Material Moves |
Machine Setup | $14,000 | Machine Setups |
Production | $99,000 | Production Runs |
Assembly | $80,000 | Machine Hours |
Inspecting | $11,000 | Number of Inspections |
Shipping | $7,500 | Number of Shipments |
Table 2: Activity Cost Pools and Cost Drivers
Another alternative to traditional costing and ABC istime-driven activity-based costing (TDABC). You will need todetermine which of these three methods would be the best approachfor the Hampshire Company. The following article may assist you inyour analysis: Time-Driven Activity-Based Costing. Additionally,you may want to use the Shapiro Library to conduct further researchon the three methods. You will need to defend your position whenanswering the prompts for the written portion of this section.
Using the information provided above, complete the following inthe Hampshire Company Spreadsheet in order to assist you inresponding to all components of Section IV:
1.Calculate the allocation rates foreach cost driver using ABC.
2.Use the traditional costing approachto calculate the total cost and the unit cost of the stick andcollapsible umbrellas.
3.Use ABC to compute the total costsand the unit cost for the stick and collapsible umbrellas.
4.Compute the difference between theproduct cost per stick and collapsible umbrellas using the unitcost that you computed with the traditional approach and the onethat you computed using ABC.
Based on your calculations from steps 1â4, respond to Parts Athrough C in Section IV as outlined in the Final Project Guidelinesand Rubric document.
Section V: Memo to Management
The management of the Hampshire Company is very interested inmeasuring performance. They would like you to recommend a strategyto increase business performance. They are not sure whether theyshould focus on product differentiation or cost leadership.Research additional performance tools to include the balancedscorecard. During your research, consider what performancemeasurements you would use based on the four perspectives. Provideexamples.
In your recommendation, you will want to include the outcome ofyour previous quantitative analysis and research performed relatedto cost-volume-profit (CVP), variable and absorption costing,just-in-time (JIT), standard costs, variances, and benchmarking.You will want to review key points and make recommendations basedon your current research and prior analysis completed and researchperformed.
Your two- to three-page memo to management must be submitted asa Word document and must include your responses to Parts A throughC of Section V as outlined in the Final Project Guidelines andRubric document.
Budget constraints on marketing research are most likely to leadto:
a wrong interpretation of the research results. | ||
an incorrectly formulated sample size and design. | ||
incorrect reasons regarding why the research is needed. | ||
pretest measurements of competitive brand sales. |
2 points
QUESTION 2
Stacy, a marketing manager at a beverage manufacturing firm,conducts a customer survey to determine the reason for a dip in thesales of Zeal, a cola, in the last quarter. The survey reveals thatthere is an immediate customer demand requiring the use of organicingredients to Zeal. The firm decides to enhance Zeal with theintroduction of organic ingredients. This new product would fallinto the category of ________.
new-to-the-world products | ||
new-to-the-firm products | ||
improvements and revisions of existing products | ||
additions to existing product lines |
2 points
QUESTION 3
Lauren is a brand manager at a company that manufacturestoothpaste. She wants to increase the sales of an existing brand oftoothpaste. To do so, she calls for a meeting with a teamcomprising of members from the administrative department, the humanresource department, and the finance department. All of thesemembers work together to come up with ways to improve the company'stoothpaste brand positioning. Such a team is an example of a________.
category-management system | ||
cross-functional team | ||
departmental team | ||
marketing-management system |
2 points
QUESTION 4
________ are methods used to determine how resources should beallocated among the various strategic business units (SBUs) in anorganization.
Vector models | ||
Matrix models | ||
Variable models | ||
Portfolio models |
2 points
QUESTION 5
For high-involvement products that require extensive decisionmaking, marketers should provide consumers with:
ready availability of the products in a variety of outlets andat competitive prices. | ||
factual information that highlights the competitive advantage ofthe products. | ||
minimum information to encourage a quick purchasing process. | ||
eye-catching advertisements and in-store displays to encouragethem to make a purchase. |
2 points
QUESTION 6
The number of times, on average, that audience members areexposed to an advertisement within a given time period is knownas:
frame rate. | ||
time to target market. | ||
reach intensity. | ||
average frequency. |
2 points
QUESTION 7
Ariston Inc. manufactures a wide range of personal careproducts. Its method of sales forecasting involves conductingdetailed surveys of retailers who stock the company's productstoward the end of a fiscal year. The aim of this survey is toestimate the quantity of Ariston's products the retailers arelikely to order in the next fiscal year. Which of the followingapproaches of sales forecasting is Ariston using?
Customer expectations method | ||
Time-series analysis | ||
Sales forecast composite method | ||
Jury of executive opinion method |
2 points
QUESTION 8
________ carry broad product assortments and compete on thebasis of offering a good selection in different product categoriesand offering lower prices on products in their largeassortments.
Specialty stores | ||
Mass merchandisers | ||
Category killers | ||
Convenience stores |
2 points
QUESTION 9
Which of the following best describes personal selling?
Personal selling is a paid form of communications about anorganization, its products, or its activities that is transmittedthrough a mass medium. | ||
Personal selling is an activity that offers customers orresellers a direct inducement for purchasing a product. | ||
Personal selling is a nonpaid form of communication that seeksto influence the attitudes, feelings, and opinions of stockholders,suppliers, employees, and political bodies about anorganization. | ||
Personal selling is face-to-face communication with potentialbuyers to inform them about and persuade them to buy anorganization's product. |
2 points
QUESTION 10
Which of the following best explains why Delicia Co., amanufacturer of potato chips, prices each bag of potato chips at 99cents rather than $1.00?
To encourage consumers to think the chips are less expensive | ||
To increase sales by offering the chips at a discountedprice | ||
To create a signal that these chips are exceptionally fine | ||
To attract those consumers who are not too sure about thequality of the chips |
2 points
QUESTION 11
Which of the following is NOT a step in the marketing researchprocess?
Performance of the research | ||
Plan of the research | ||
Preview of the research | ||
Preparation of the research report |
2 points
QUESTION 12
In the context of product purchasing, the diffusion ofinnovation is:
used to describe the ability of an organization to createentirely new products. | ||
applied to products at the introductory stage of the productlife cycle. | ||
used to describe an audit task. | ||
the spread of a product through the population. |
2 points
QUESTION 13
Distribution allowances are typical examples of ________.
push strategies | ||
profile strategies | ||
pull strategies | ||
mixed promotional strategies |
2 points
QUESTION 14
Which of the following is a benefit of mathematical modeling asa marketing research method?
It is ideal for investigating customer beliefs, attitudes,satisfaction, and other issues. | ||
It generates a substantial number of ideas when compared withother methods. | ||
It is involved in the analysis and interpretation of primarydata exclusively. | ||
It provides an efficient way to study problems with extremelylarge secondary data sets. |
2 points
QUESTION 15
Identify the persuasion objective of the sales force in personalselling.
To reassure consumers of product or service superiority throughdemonstrable actions | ||
To enable prompt delivery of the product or service that exceedscustomer expectations | ||
To ensure immediate follow-up calls and visits to addressunresolved or new concerns | ||
To clearly distinguish attributes of a firm's products orservices from those of competitors |
2 points
QUESTION 16
Which of the following statements is true of the influences ofprice, product, and promotions on consumer behavior?
Consistent bombarding of messages about a product will put offpotential consumers. | ||
Salespeople do not have a direct impact on consumer behavior andits patterns. | ||
Value-conscious consumers buy products on the basis of placerather than other attributes. | ||
Marketing communications play a critical role in informingconsumers about products and services. |
2 points
QUESTION 17
According to the VALS⢠model, Experiencers are:
driven to demonstrate success. | ||
driven by a desire for social or physical activity. | ||
driven by knowledge and principles. | ||
driven by the level of resources and innovation. |
2 points
QUESTION 18
In which of the following stages of the new product developmentprocess is the new product proposal evaluated and responsibilityfor a project assigned to a project team?
Product development | ||
Idea screening | ||
Test marketing | ||
Project planning |
2 points
QUESTION 19
Which of the following is an advantage of secondary data overprimary data?
Secondary data sources are limited, making the information morevaluable. | ||
Secondary data are cheaper to obtain and utilize. | ||
Secondary data are collected specifically for the researchproblem under investigation. | ||
Secondary data are always available for strategy-specificresearch questions. |
2 points
QUESTION 20
An automobile manufacturing firm decides to meet all itssuppliers while planning to manufacture a new automobile that is aminor variant of an existing model in terms of design andperformance. The firm wants to provide its loyal customers withautomobiles at a low price without compromising on performance.According to authors Crawford and DiBenedetto, this new productfalls into the category of ________.
price redemptions | ||
repositionings | ||
price exemptions | ||
cost reductions |