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Cornerstones of Cost Accounting 1st Edition by Don Hansen,Maryanne Mowen
Edition 1ISBN: 978-0538736787Cornerstones of Cost Accounting 1st Edition by Don Hansen,Maryanne Mowen
Edition 1ISBN: 978-0538736787 Exercise 62
TREND, LONG-RANGE PERFORMANCE REPORT
In 2010, Tru-Delite Frozen Desserts, Inc., instituted a quality improvement program. At the end of 2011, the management of the corporation requested a report to show the amount saved by the measures taken during the year. The actual sales and quality costs for 2010 and 2011 are as follows:
Tru-Delite's management believes that quality costs can be reduced to 2.5 percent of sales within the next five years. At the end of 2017, Tru-Delite's sales are projected to grow to $750,000. The projected relative distribution of quality costs at the end of 2017 is as follows:
Required:
1. Profits increased by what amount due to quality improvements made in 2011?
2. Prepare a long-range performance report that compares the quality costs incurred at the end of 2011 with the quality cost structure expected at the end of 2017.
3. Are the targeted costs in the year 2017 all value-added costs? How would you interpret the variances if the targeted costs are value-added costs?
4. What would be the profit increase in 2017 if the 2.5 percent performance standard is met in that year?
In 2010, Tru-Delite Frozen Desserts, Inc., instituted a quality improvement program. At the end of 2011, the management of the corporation requested a report to show the amount saved by the measures taken during the year. The actual sales and quality costs for 2010 and 2011 are as follows:
Tru-Delite's management believes that quality costs can be reduced to 2.5 percent of sales within the next five years. At the end of 2017, Tru-Delite's sales are projected to grow to $750,000. The projected relative distribution of quality costs at the end of 2017 is as follows:
Required:
1. Profits increased by what amount due to quality improvements made in 2011?
2. Prepare a long-range performance report that compares the quality costs incurred at the end of 2011 with the quality cost structure expected at the end of 2017.
3. Are the targeted costs in the year 2017 all value-added costs? How would you interpret the variances if the targeted costs are value-added costs?
4. What would be the profit increase in 2017 if the 2.5 percent performance standard is met in that year?
Explanation
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1. Determination of the profit increase ...
Cornerstones of Cost Accounting 1st Edition by Don Hansen,Maryanne Mowen
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