【正文】 50 $57,500 U 3. SQ = 0 and so the volume variance is the capacity acquisition cost: $1,221,000. 4. Formula Resource Fixed Variable 25,000 Cycles (Activity Output) Salaries .......... $ 405,000 — $ 405,000 Leases ........... 36,000 — 36,000 Crates............. — $ 30,000 Fuel ................. — 4,500 Total ........... $ 441,000 $ $ 475,500 Note: Reducing demand permanently to 25,000 cycles requires nine operators. Each operator provides a capacity of 3,000 cycles [(2,000 hours ? 3)/2]。 thus, the activity behaves as if it were nonvalueadded. It seems logical that if the nonvalueadded cost ponent is 100% of the activity cost, then it should be a nonvalueadded activity. Valueadded activities can engender nonvalueadded costs if they are not performed efficiently (but there should be a valueadded cost ponent in the efficient state). 12–10 1. McCawl Company NonValueAdded Cost Trend Report For the Year Ended December 31, 2020 2020 2020 Change Purchasing parts ...................... $ 60,000 $ 30,000 $ 30,000 F Receiving parts ......................... 100,000 40,000 60,000 F Moving parts .............................. 200,000 80,000 120,000 F Setting up equipment .............. 240,000 60,000 180,000 F Total........................................ $ 600,000 $ 210,000 $ 390,000 F Note: The above amounts were puted for each year, using the following formula: (AQ – SQ)SP. 272 12–10 Concluded 2. For nonvalueadded activities, activity reduction can serve to reduce the demand for these activities with the ultimate objective of reducing the demand to zero. For valueadded activities, activity reduction is used to eliminate the nonvalueadded ponent. 3. A trend report allows managers to assess the effectiveness of activity management. It is a critical document that reveals the success of continuous improvement efforts. It also provides some information about additional opportunity for improvement. In 2020, activity management reduced the nonvalueadded costs by $390,000, signaling that the actions taken were good. It also shows that additional opportunity for reduction exists—more effort is needed to reduce the $210,000 of remaining nonvalueadded costs. 12–11 Classification: Situation ActivityBased FunctionalBased 1 A B 2 A B 3 A B 4 B A 5 B A 6 B A 7 A B Comments: Situation 1: In a financialbased system, individuals are held responsible for the efficiency of anizational units, such as the grinding department. In an activitybased system, processes are the control points because they are the units of change。 the mon objective of receiving is to process materials from suppliers and move them to the operations area (., stores or manufacturing)。 and (4) individuals being rewarded or penalized according to management policies. 14. In an activitybased responsibility accounting system, the focus of control shifts from responsibility centers to processes and teams. Management is concerned with how work is done, not with where it is done. Process improvement and process innovation are emphasized. Standards tend to be optimal, dynamic, and process oriented. Performance measurement focuses on processes and activities that define the processes. Finally, there tends to be more emphasis on group rewards rather than on individual rewards. 265 EXERCISES 12–1 1. Plantwide rate = ($1,200,000 + $1,800,000 + $600,000)/60,000 = $60 per machine hour Unit overhead cost = ($60 ? 50,000)/100,000 = $30 Activity rates: Machine rate = $1,800,000/60,000 = $30 per machine hour Testing rate = $1,200,000/40,000 = $30 per testing hour Rework rate = $600,000/20,000 = $30 per rework hour Total overhead cost = ($30 ? 50,000) + ($30 ? 20,000) + ($30 ? 5,000) = $2,250,000 Unit overhead cost = $2,250,000/100,000 = $ Improving the accuracy reduced the cost by $, which is still less than the $10 reduction needed. What this means is that although accuracy has a positive effect on the price, it is not the only problem. It appears that petitors may be more efficient than Timesaver. This oute then signals the need to reduce costs. 2. Since testing and rework costs and setup and rework time are both reduced by 50%, the activity rates remain the same, although the amount of cost assigned to the regular microwave will change: Total overhead cost = ($30 ? 50,000) + ($30 ? 10,000) + ($30 ? 2,500) = $1,875,000 Unit cost = $1,875,000/100,000 = $ The cost now is $ less than the original, which allows management to reduce the price by $10, increasing the petitive position of the regular model. ABC is concerned with how costs are assigned, whereas ABM is not only concerned with how they are assigned but also with how costs can be reduced. Cost accuracy and cost reduction are the dual themes of ABM. 266 12–2 The following are possible sets of questions and answers (provided as examples of what students may suggest): Activity 1: Question: Why is the oil puddle cleaned daily? Answer: Because the production equipment leaks oil every day. Question: Why does the production equipment leak oil? Answer: Because a seal is damaged (root cause). Question: How do we repair the damaged seal? Answer: By replacing it. Activity 2: Question: Why are we giving sales allowances? Answer: Because the product is not working as it should. Question: Why is the product not working as it should? Answer: Usually because it has a defective ponent. Question: Why does it have a defective ponent? Answer: Because our subassembly processes occasionally produce bad ponents. Question: Why do our subassembly processes produce bad po