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BUS 630 Week 6 DQ 2 Net Present Value Analysis
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BUS 630 Week 6 DQ 2 Net Present Value Analysis
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Complete the following exercise, using this Excel template, and respond to at least two of your fellow students’ postings.. In eight years, Kent Duncan will retire. He is exploring the possibility of opening a self-service car wash. The car wash could be managed in the free time he has available from his regular occupation, and it could be closed easily when he retires. After careful study, Mr. Duncan has determined the following:
A building in which a car wash could be installed is available under an eight-year lease at a cost of $1,700 per month.
Purchase and installation costs of equipment would total $200,000. In eight years the equipment could be sold for about 10% of its original cost.
An investment of an additional $2,000 would be required to cover working capital needs for cleaning supplies, change funds, and so forth. After. eight years, this working capital would be released for investment elsewhere.
Both a wash and a vacuum service would be offered with a wash costing $2.00 and the vacuum costing $1.00 per use.
The only variable costs associated with the operation would be 20 cents per wash for water and 10 cents per use of the vacuum for electricity.
In addition to rent, monthly costs of operation would be: cleaning, $450; insurance, $75; and maintenance, $500.
Gross receipts from the wash would be about $1,350 per week. According to the experience of other car washes, 60% of the customers using the wash would also use the vacuum.
Mr. Duncan will not open the car wash unless it provides at least a 10% return.
Assuming that the car wash will be open 52 weeks a year, compute the expected annual net cash receipts (gross cash receipts less cash disbursements) from its operation. (Do not include the cost of the equipment, the working capital, or the salvage value in these computations.) (Ignore income taxes.)
Would you advise Mr. Duncan to open the car wash? Show computations using the net present value method of investment analysis. Round all dollar figures to the nearest whole dollar. (Ignore income taxes.)
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BUS 630 Week 6 DQ 1 Make Or Buy
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BUS 630 Week 6 DQ 1 Make Or Buy
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Han Products manufactures 30,000 units of part S-6 each year for use on its production line. At this level of activity, the cost per unit for part S-6 is as follows:
Direct materials $ 3.60 Direct labor 10.00 Variable manufacturing overhead 2.40 Fixed manufacturing overhead 9.00 Total cost per part $25.00 An outside supplier has offered to sell 30,000 units of part S-6 each year to Han Products for $21 per part. If Han Products accepts this offer, the facilities now being used to manufacture part S-6 could be rented to another company at an annual rental of $80,000. However, Han Products has determined that two-thirds of the fixed manufacturing overhead being applied to part S-6 would continue even if part S-6 were purchased from the outside supplier. Prepare computations showing how much profits will increase or decrease if the outside supplier’s offer is accepted. Respond to at least two of your fellow students’ postings.
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BUS 630 Week 6 Assignment Final Project
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BUS 630 Week 6 Assignment Final Project
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Submit a paper on one of the major topics listed below using one of the recommended journal articles found in the syllabus as the basis for the paper and incorporating at least two other related articles of the student’s choice:
Cost Management Outsourcing Supply Chain Management Cost Cutting Budgeting Options For more Assignments visit:
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BUS 630 Week 5 DQ 2 Perverse Affects of Some Performance Measures
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BUS 630 Week 5 DQ 2 Perverse Affects of Some Performance Measures
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Complete the following exercise and provide a recommendation for each of the four scenarios presented. There is often more than one way to improve a performance measure. Unfortunately, some of the actions taken by managers to make their performance look better may actually harm the organization. For example, suppose the marketing department is held responsible only for increasing the performance measure “total revenues,” Increases in total revenues may be achieved by working harder and smarter, but they can also usually be achieved by simply cutting prices. The increase in volume from cutting prices almost always results in greater total revenues; however, it does not always lead to greater total profits. Those who design performance measurement systems need to keep in mind that managers who are under pressure to perform may take actions to improve performance measures that have negative consequences elsewhere. For each of the following situations, describe actions that managers might take to show improvement in the performance measure but which do not actually lead to improvement in the organization’s overall performance.
Concerned with the slow rate at which new products are brought to market, top management of a consumer electronics company introduces a new performance measure–speed-to-market. The research and development department is given responsibility for this performance measure, which measures the average amount of time a product is in development before it is released to the market for sale.
The CEO of a telephone company has been under public pressure from city officials to fix the large number of public pay phones that do not work. The company’s repair people complain that the problem is vandalism and damage caused by theft of coins from coin boxes–particularly in high-crime areas in the city. The CEO says she wants the problem solved and has pledged to city officials that there will be substantial improvement by the end of the year. To ensure that this is done, she makes the managers in charge of installing and maintaining pay phones responsible for increasing the percentage of public pay phones that are fully functional.
A manufacturing company has been plagued by the chronic failure to ship orders to customers by the promised date. To solve this problem, the production manager has been given the responsibility of increasing the percentage of orders shipped on time. When a customer calls in an order, the production manager and the customer agree to a delivery date. If the order is not completed by that date, it is counted as a late shipment.
Concerned with the productivity of employees, the board of directors of a large multinational corporation has dictated that the manager of each subsidiary will be held responsible for increasing the revenue per employee of his or her subsidiary.
Respond to at least two of your fellow students’ postings.
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BUS 630 Week 5 DQ 1 Variance Analysis in a Hospital
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BUS 630 Week 5 DQ 1 Variance Analysis in a Hospital
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Complete problem 10-15 in the text and answer the three required questions. John Fleming, chief administrator for Valley View Hospital, is concerned about the costs for tests in the hospital’s lab. Charges for lab tests are consistently higher at Valley View than at other hospitals and have resulted in many complaints. Also, because of strict regulations on amounts reimbursed for lab tests, payments received from insurance companies and governmental units have not been high enough to cover lab costs. Mr. Fleming has asked you to evaluate costs in the hospital’s lab for the past month. The following information is available:
Two types of tests are performed in the lab-blood tests and smears. During the past month, 1,800 blood tests and 2,400 smears were performed in the lab. Small glass plates are used in both types of tests. During the past month, the hospital purchased 12,000 plates at a cost of $28,200. This cost is net of a 6% quantity discount. 1,500 of these plates were unused at the end of the month; no plates were on hand at the beginning of the month.
During the past month, 1,150 hours of labor time were recorded in the lab at a cost of $13,800.
The lab’s variable overhead cost last month totaled $7,820.
Valley View Hospital has never used standard costs. By searching industry literature, however, you have determined the following nationwide averages for hospital labs:
Plates: Two plates are required per lab test. These plates cost $2.50 each and are disposed of after the test is completed.
Labor: Each blood test should require 0.3 hours to complete, and each smear should require 0.15 hours to complete. The average cost of this lab time is $14 per hour.
Overhead: Overhead cost is based on direct labor-hours. The average rate for variable overhead is $6 per hour.
Compute a materials price variance for the plates purchased last month and a materials quantity variance for the plates used last month.
For labor cost in the lab:
Compute a labor rate variance and a labor efficiency variance.
In most hospitals, one-half of the workers in the lab are senior technicians and one-half are assistants. In an effort to reduce costs, Valley View Hospital employs only one-fourth senior technicians and three-fourths assistants. Would you recommend that this policy be continued? Explain.
Compute the variable overhead rate and efficiency variances. Is there any relation between the variable overhead efficiency variance and the labor efficiency variance? Explain.
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BUS 630 Week 5 Assignment FedEx Corporation
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BUS 630 Week 5 Assignment FedEx Corporation
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What is FedEx’sstrategy for success in the marketplace? Does the company rely primarily on acustomer intimacy, operations excellence, or product leadership customer valueproposition? What evidence supports your conclusion?
What are FedEx’sfour main business segments? Provide two examples of traceable fixed costs foreach of FedEx’s four business segments. Provide two examples of common costs that are not traceable to the four business segments.
Identify oneexample of a cost center, a profit center, and an investment center for FedEx.
Provide threeexamples of fixed costs that can be traceable or common depending on how FedExdefines its business segments.
Compute themargin, turnover, and return on investment (ROI) in 2005 for each of FedEx’sfour business segments (Hint: page 99 reports total segment assets for eachbusiness segment.)
Assume that FedExestablished a minimum required rate of return of 15% for each of its businesssegments. Compute the residual income earned in 2005 in each of FedEx’s foursegments.
Assume that thesenior managers of FedEx Express and FedEx Ground each have an investmentopportunity that would require $20 million of additional operating assets andthat would increase operating income by $4 million. If FedEx evaluates all of its senior managersusing ROI, would the managers of both segments pursue the investment opportunity? If FedEx evaluates all ofits senior managers using residual income, would the managers of both segmentspursue the investment opportunity?
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BUS 630 Week 4 DQ 2 Critiquing a Cost Report
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BUS 630 Week 4 DQ 2 Critiquing a Cost Report
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Complete the following exercise: Frank Weston, supervisor of the Freemont Corporation’s Machining Department, was visibly upset after being reprimanded for his department’s poor performance over the prior month. The department’s cost control report is given below:
“I just can’t understand all the red ink,” Weston complained to the supervisor of another department. “When the boss called me in, I thought he was going to give me a pat on the back because I know for a fact that my department worked more efficiently last month than it has ever worked before, instead, he tore me apart. I thought for a minute that it might be over the supplies that were stolen out of our warehouse last month. But they only amounted to a couple of hundred dollars, and just look at this report. Everything is unfavorable.” Direct labor wages and supplies are variable costs; supervision and depreciation are fixed costs; and maintenance and utilities are mixed costs. The fixed component of the budgeted maintenance cost is $92,000; the fixed component of the budgeted utilities cost is $11,700.
Freemont Corporation-Machining Department
Cost Control Report
For the Month Ended June 30
Planning Budget
Actual Results
Variances
Machine-hours 35,000 38,000
Direct labor wages
$80,500
$86,100
$5,600
U
Supplies
21,000
23,100
2,100
U
Maintenance
134,000
137,300
3,300
U
Utilities
15,200
15,700
500
U
Supervision
38,000
38,000
Depreciation
80,000
80,000
Total
$368,700
$380,200
Evaluate the company’s cost control report and explain why the variances were all unfavorable.
Prepare a performance report that will help Mr. Weston’s superiors assess how well costs were controlled in the Machining Department.
Respond to at least two of your fellow students’ postings.
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BUS 630 Week 4 DQ 1 Behavioral Aspects of Budgeting
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BUS 630 Week 4 DQ 1 Behavioral Aspects of Budgeting
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Norton Company, a manufacturer of infant furniture and carriages, is in the initial stages of preparing the annual budget for next year. Scott Ford has recently joined Norton’s accounting staff and is interested to learn as much as possible about the company’s budgeting process. During a recent lunch with Marge Atkins, sales manager, and Pete Granger, production manager. Ford initiated the conversation below. Read the conversation and answer the questions that follow. Respond to at least two of your fellow students’ postings.
Ford:
Since I’m new around here and am going to be involved with the preparation of the annual budget, I’d be interested to learn how the two of you estimate sales and production numbers.
Atkins:
We start out very methodically by looking at recent history, discussing what we know about current accounts, potential customers, and the general state of consumer spending. Then, we add that usual dose of intuition to come up with the best forecast we can.
Granger:
I usually take the sales projections as the basis for my projections. Of course, we have to make an estimate of what this year’s ending inventories will be, which is sometimes difficult.
Ford:
Why does that present a problem? There must have been an estimate of ending inventories in the budget for the current year.
Granger:
Those numbers aren’t always reliable because Marge makes some adjustments to the sales numbers before passing them on to me.
Ford:
What kind of adjustments?
Atkins:
Well, we don’t want to fall short of the sales projections so we generally give ourselves a little breathing room by lowering the initial sales projection anywhere from 5% to 10%.
Granger:
So, you can see why this year’s budget is not a very reliable starting point. We always have to adjust the projected production rates as the year progresses and, of course, this changes the ending inventory estimates. By the way, we make similar adjustments to expenses by adding at least 10% to the estimates; I think everyone around here does the same thing.
a. Marge Atkins and Pete Granger have described the use of what is sometimes called budgetary slack.
i. Explain why Atkins and Granger behave in this manner and describe the benefits they expect to realize from the use of budgetary slack.
ii. Explain how the use of budgetary slack can adversely affect Atkins and Granger.
b. As a management accountant, Scott Ford believes that the behavior described by Marge Atkins and Pete Granger may be unethical. By referring to the IMA’s Statement of Ethical Professional Practice in chapter 1, explain why the use of budgetary slack may be unethical.
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BUS 630 Week 4 Assignment Master Budget Exercise
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BUS 630 Week 4 Assignment Master Budget Exercise
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Complete the following three exercises and submit to your instructor. Be sure to show your work for calculations to earn full credit.
Sales and Production Budgets (8-12): The marketing department of Jessi Corporation has submitted the following sales forecast for the upcoming fiscal year (all sales are on account):
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Units to be produced
11,000
12,000
14,000
13,000
The selling price of the company’s product is $18.00 per unit. Management expects to collect 65% of sales in the quarter in which the sales are made, 30% in the following quarter, and 5% of sales are expected to be “‘uncollectible. The beginning balance of accounts receivable, all of which is expected to be collected in the first quarter, is $70,200. The company expects to start the first quarter with 1,650 units in finished goods inventory. Management desires an ending finished goods inventory in each quarter equal to 15% of the next quarter’s budgeted sales. The desired ending finished goods inventory for the fourth quarter is 1,850 units.
· Prepare the company’s sales budget and schedule of expected cash collections.
· Prepare the company’s production budget for the upcoming fiscal year.
Direct Materials and Direct Labor Budgets (8-13): The production department of Hareston Company has submitted the following forecast of units to be produced by quarter for the upcoming fiscal year:
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Units to be produced
7,000
8,000
6,000
5,000
In addition, the beginning raw materials inventory for the first quarter is budgeted to be 1,400 pounds and the beginning accounts payable for the first quarter is budgeted to be $2,940. Each unit requires 2 pounds of raw material that costs $1.40 per pound. Management desires to end each quarter with an inventory of raw materials equal to 10% of the following quarter’s production needs. The desired ending inventory for the fourth quarter is 1,500 pounds. Management plans to pay for 80% of raw material purchases in the quarter acquired and 20% in the following quarter. Each unit requires 0.60 direct labor-hours and direct labor-hour workers are paid $14.00 per hour.
· Prepare the company’s direct materials budget and schedule of expected cash disbursements for purchases of materials for the upcoming fiscal year.
· Prepare the company’s direct labor budget for the upcoming fiscal year, assuming that the direct labor workforce is adjusted each quarter to match the number of hours required to produce the forecasted number of units produced.
Direct Labor and Manufacturing Overhead Budgets (8-14): The production department of Raredon Corporation has submitted the following forecast of units to be produced by quarter for the upcoming fiscal year:
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Units to be produced
12,000
14,000
13,000
11,000
Each unit requires 0.70 direct labor-hours, and direct labor-hour workers are paid $10.50 per hour.
In addition, the variable manufacturing overhead rate is $1.50 per direct labor-hour. The fixed
manufacturing overhead is $80,000 per quarter. The only noncash element of manufacturing overhead is depreciation, which is $22,000 per quarter.
· Prepare the company’s direct labor budget for the upcoming fiscal year, assuming that the direct labor workforce is adjusted each quarter to match the number of hours required to produce the forecasted number of units produced.
· Prepare the company’s manufacturing overhead budget.
Carefully review the Grading Rubric for the criteria that will be used to evaluate your assignment.
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BUS 630 Week 3 DQ 2 Profitability
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BUS 630 Week 3 DQ 2 Profitability
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Complete the following exercise and respond to at least two of your fellow students’ postings. Gallatin Carpet Cleaning is a small, family-owned business operating out of Bozeman, Montana. For its services, the company has always charged a flat fee per hundred square feet of carpet cleaned. The current fee is $28 per hundred square feet. However, there is some question about whether the company is actually making any money on jobs for some customers-particularly those located on remote ranches that require considerable travel time. The owner’s daughter, home for the summer from college, has suggested investigating this question using activity-based costing. After some discussion, a simple system consisting of four activity cost pools seemed to be adequate. The activity cost pools and their activity measures appear below:
Activity Cost Pool Activity Measure Activity for the Year
Cleaning carpets Square feet cleaned (00s) 20,000 hundred
square feet
Travel to jobs Miles driven 60,000 miles
Job support Number of jobs 2,000 jobs
Other (costs of idle capacity and organization-sustaining costs) None Not applicable
The total cost of operating the company for the year is $430,000, which includes the following costs:
Wages $ 150,000 Cleaning supplies 40,000 Cleaning equipment depreciation 20,000 Vehicle expenses 80,000 Office expenses 60,000 President’s compensation 80,000 $ 430,000 Resource consumption is distributed across the activities as follows:
Distribution of Resource Consumption Across Activities
Cleaning
Travel to
Job
Carpets
Jobs
Support
Other
Total
Wages
70%
20%
0%
10%
100%
Cleaning supplies
100%
0%
0%
0%
100%
Cleaning equipment depreciation
80%
0%
0%
20%
100%
Vehicle expenses
0%
60%
0%
40%
100%
Office expenses
0%
0%
45%
55%
100%
President’s compensation
0%
0%
40%
60%
100%
Job support consists of receiving calls from potential customers at the home office, scheduling jobs, billing, resolving issues, and so on.
Using Exhibit 7-5 as a guide, prepare the first-stage allocation of costs to the activity cost pools.
Using Exhibit 7-6 as a guide, compute the activity rates for the activity cost pools.
The company recently completed a 5 hundred square foot carpet -cleaning job at the Flying N ranch–a 75-mile round-trip journey from the company’s offices in Bozeman. Compute the cost of this job using the activity-based costing system.
The revenue from the Flying N ranch was $140 (5 hundred square feet @ $28 per hundred square feet). Using Exhibit 7-11 as a guide, prepare a report showing the margin from this job.
What do you conclude concerning the profitability of the Flying N ranch job? Explain.
What advice would you give the president concerning pricing jobs in the future?
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BUS 630 Week 3 DQ 1 Fixed Labor
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BUS 630 Week 3 DQ 1 Fixed Labor
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Far North Telecom, Ltd., of Ontario, has organized a new division to manufacture and sell specialty cellular telephones. The division’s monthly costs are shown in the table below. Far North Telecom regards all of its workers as full-time employees and the company has a long-standing no layoff policy. Furthermore, production is highly automated. Accordingly, the company includes its labor costs in its fixed manufacturing overhead. The cellular phones sell for $150 each. During September, the first month of operations, the following activity was recorded: 12,000 units produced, 10,000 units sold. Comment on the five questions below the table. Respond to at least two of your fellow students’ postings.
Manufacturing costs: Variable costs per unit: Direct Materials $48 Variable manufacturing overhead $2 Fixed manufacturing overhead costs (total) $360,000 Selling and administration costs: Variable 12% of sales Fixed (total) $470,000 a. Compute the unit product cost under: i. absorption costing ii. variable costing
b. Prepare an absorption costing income statement for September
c. Prepare a contribution format income statement for September using variable costing.
d. Assume that the company must obtain additional financing in order to continue operations. As a member of top management, would you prefer to rely n the statement in (b) above or in (3) above when meeting with a group of prospective investors?
e. Reconcile the absorption costing and variable costing net operating incomes in (2) and (3) above.
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BUS 630 Week 3 Assignment JetBlue Airways
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BUS 630 Week 3 Assignment JetBlue Airways
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Complete the following exercise (Research and Application 7-20) and submit to your instructor.
The questions in this exercise are based on JetBlue Airways Corporation. To answer the questions, you will need to download JetBlue’s 10-K/A for the year ended December 31, 2004 (10K/A with a filing date of March 8, 2005). You do not need to print the 10-K/A to answer the questions.
Required:
- What is JetBlue’s strategy for success in the marketplace? Does the company rely primarily on a customer intimacy, operational excellence, or product leadership customer value proposition? What evidence supports your conclusion?
- What business risks does JetBlue face that may threaten the company’s ability to satisfy stockholder expectations? What are some examples of control activities that the company could use to reduce these risks? (Hint: Focus on pages 17-23 of the 10-K/A.)
- How can the concept of unit-level activities be applies to an airline? More specifically, what are two examples of unit-level activities for JetBlue? What steps has JetBlue taken to manage these unit-level activities more efficiently?
- How can the concept of batch-level activities be applied to an airline? What are two examples of batch-level activities for JetBlue? What steps has JetBlue taken to manage these batch-level activities more efficiently?
• What is one example of a customer-level activity and an organization-sustaining activity for JetBlue?
Noreen, E. W., Brewer, P. B., Garrison R. H. (2011). Managerial accounting for managers (2nd ed.). New York, NY: McGraw Hill. ISBN: 978-0-07-352713-0.
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BUS 630 Week 2 DQ 2 Direct Labor Variable or Fixed Cost
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BUS 630 Week 2 DQ 2 Direct Labor Variable or Fixed Cost
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Throughout the corporate world, businesses are transforming labor into a more flexible (and variable) cost. Among such companies are Hewlett-Packard, General Electric, DuPont, Sun Microsystems, and British Airways. Discuss whether direct labor is a fixed or a variable cost. What are the pros and cons of management treating direct labor as a variable cost? Are there ethical issues to be considered here?
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BUS 630 Week 2 DQ 1 Downsizing and Fixed Cost
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BUS 630 Week 2 DQ 1 Downsizing and Fixed Cost
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Downsizing and Fixed Costs
Industry downsizing has been a major part of the corporate world, even government agencies are downsizing. GovernmentExecutive.com “covers the business of the federal government and its huge departments and agencies – dozens of which dwarf the largest institutions
in the private sector” on its website. Read the assigned Government Executive
article and answer the following questions:
Which industries have substantially reduced fixed cost commitments?
Do you believe this reduction in costs has substantially impaired the ability of these industries to meet the needs of their customers? Respond to at least two of your fellow students’ postings.
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BUS 630 Week 2 Assignment Basic CVP Analysis Fashion Shoe Company
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BUS 630 Week 2 Assignment Basic CVP Analysis Fashion Shoe Company
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Complete the following exercise
(Problem 4-21) and submit to your instructor.
The Fashion Shoe Company operates a chain of women’s shoe shops around the country. The shops carry many styles of shoes that are all sold at the same price. Sales personnel in the shops are paid a substantial commission on each pair of shoes sold (in addition to a small basic salary) in order to encourage them to be aggressive in their sales efforts.
The following worksheet contains cost and revenue data for Shop 48 and is typical of the company’s many outlets:
Per Pair of
Shoes
Selling
price
$
30.00
Variable
expenses:
Invoice
cost
$ 13.50
Sales
commission
4.50
Total variable
expenses
$
18.00
Annual
Fixed
expenses:
Advertising
$ 30,000
Rent
20,000
Salaries
100,000
Total fixed
expenses
$
150,000
Calculate the annual break-even point in dollar sales and in unit sales for Shop 48.
Prepare a CVP graph showing cost and revenue data for Shop 48 from zero shoes up to 17,000 pairs of shoes sold each year. Clearly indicate the break-even point on the graph.
If 12,000 pairs of shoes are sold in a year, what would be Shop 48′s net operating income or loss?
The company is considering paying the store manager of Shop 48 an incentive commission of Shop 48 an incentive commission of 75 cents per pair of shoes (in addition to the salesperson’s commission). If this change is made, what will be the new break-even point in dollar sales and in unit sales?
Refer to the original data. As an alternative to (4) above, the company is considering paying the store manager 50 cents commission on each pair of shoes sold in excess of the break-even point. If this change is made, what will be the shop’s net operating income or loss if 15,000 pairs of shoes are sold?
Refer to the original data. The company is considering eliminating sales commissions entirely in its shops and increasing fixed salaries by $31,500 annually. If this change is made, what will be the new break-even point in dollar sales and in unit sales for Shop 48? Would you recommend that the change be made? Explain.
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