Chapter 22: Q5DQ (page 986)
Suggest several reasons why a 2:1 current ratio might not be adequate for a particular company
2:1 current ratio shows the defensive style of business operation, low investment for growth and limited opportunity.
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Mervyn Company has two operating departments: mixing and bottling. Mixing has 300 employees and bottling has 200 employees. Indirect factory costs include administrative costs of $160,000. Administrative costs are allocated to operating departments based on the number of workers. Determine the administrative costs allocated to each operating department.
Oakwood Company produces maple bookcases. The following information is available for the production of a recent order of 500 bookcases.
Process time | 6.0 days | Move time | 3.2 days |
Inspection time | 0.8 days | Wait time | 5.0 days |
1. Compute the company’s manufacturing cycle time.
2. Compute the company’s manufacturing cycle efficiency. Interpret your answer.
3. Management believes it can reduce move time by 1.2 days and wait time by 2.8 days by adopting lean manufacturing techniques. Compute the company’s manufacturing cycle efficiency assuming the company’s predictions are correct.
Mervon Company has two operating departments: mixing and bottling. Mixing occupies 22,000 square feet. Bottling occupies 18,000 square feet. Indirect factory costs include maintenance costs of $200,000. If maintenance costs are allocated to operating departments based on square footage occupied, determine the amount of maintenance costs allocated to each operating department.
Nombre Company management predicts \(390,000 of variable costs, \)430,000 of fixed costs, and a pretax income of \(155,000 in the next period. Management also predicts that the contribution margin per unit will be \)9. Use this information to compute the
(1) total expected dollar sales for next period and
(2) number of units expected to be sold next period.
The windshield division of Fast Car Co. makes windshields for use in Fast Car’s assembly division. The windshield division incurs variable costs of \(200 per windshield and has capacity to make 500,000 windshields per year. The market price is \)450 per windshield. The windshield division incurs total fixed costs of $3,000,000 per year. If the windshield division has excess capacity, what is the range of possible transfer prices that could be used on transfers between the windshield and assembly divisions? Explain.
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