Indicate whether each of the following costs would be considered an ordering cost (O), a carrying cost (C), or a cost of not carrying (N) inventory. For any costs that do not fit these categories, indicate N/A for “not applicable.” a. Telephone call to supplier b. Stationery and purchase order forms c. Purchasing agent’s salary d. Purchase price of product e. Goodwill of customer lost due to unavailability of product f. Postage on purchase order g. Freight-in cost on product h. Insurance for products in inventory i. Wages of receiving clerks j. Preparing and issuing checks to suppliers k. Contribution margin lost due to unavailability of product l. Storage costs for products on hand m. Quantity discounts on products ordered n. Opportunity cost of funds invested in inventory o. Property taxes on warehouses p. Handling costs for products on hand q. Excess ordering and shipping charges for rush orders of standard product lines r. Spoilage of products awaiting use
> BreatheWell is very aware that its scuba diving tanks must be of the highest quality to maintain its reputation of excellence and safety. The company has retained you as a consultant and you have suggested that quantifying the costs would be important to
> Golf courses are demanding in their quest for high-quality carts because of the critical need for lawn maintenance. Antaris Co. manufactures golf carts and is a recognized leader in the industry for quality products. In recent months, company managers ha
> Elijah Electronics makes PDAs. The firm produced 45,000 PDAs during its first year of operation. At year-end, it had no inventory of finished goods. Elijah sold 42,300 units through regular market channels, but 450 of the units produced were so defective
> In mid-2007, numerous findings of unsafe products produced in China were disclosed, including pet food, fish, toothpaste, toys, and fireworks. In early 2008, the FDA pointed to Chinese companies as the source of contaminated heparin, a widely used blood
> Wilson Ceramics manufactures holiday ornaments in its sole plant located in Wisconsin. Because the demand for the company’s products is very seasonal, the company builds inventory throughout the first nine months of the year and draws down inventory the
> After reviewing financial results for 2010, Chicago Cannery’s president sent the following e-mail to his CFO and controller, Willie Logan. Dear Willie: I’m disappointed in the financial results for the year just completed. As you know, profits were $2 mi
> As an accounting intern working for your local police department, you learn that the department is considering starting a citizen’s police academy. In recent years, there have been events that have created friction between the police department and the c
> Your employer, Lawson Brake Systems, implemented an e-procurement system last year for purchasing nonoperating inputs. The installation has been such a success that the firm is now considering using the same system to acquire operating inputs (e.g., dire
> The financial results for the Business Education Department of Omega Educational Services Corporation for November 2010 are presented in the schedule at the end of this problem. Caroline Roper, president of Omega Educational Services, is pleased with the
> Choose letter C (for committed cost) or D (for discretionary cost) to indicate the type of each of the following described costs. Explain the rationale for your choice. a. Control is first provided during the capital budgeting process. b. Typical example
> Open-book management is consistent with another, larger trend in accounting—increased transparency of financial results. This trend follows a period in which many U.S. firms were guilty of generating misleading financial reports and hiding pertinent fact
> Jose Martin founded a firm that manufactures innovative toys. Since its founding in 2000, the firm has experienced steady growth. However, in the past six months, the firm’s products were featured on two major network television shows. As a result of tha
> As the economy entered the new millennium, Internet companies were competing head to head in many markets with established, traditional retailers for the consumer’s dollar. In comparing the financial statements of “e-tailers” relative to traditional reta
> Multinational firms domiciled in the United States do not have to pay U.S. income taxes on foreign earnings, unless those earnings are returned to the United States. Accordingly, the U.S. income tax system acts as a deterrent to firms to bring cash earne
> Birmingham Chemical evaluates performance in part through the use of flexible budgets. The selling expense budgets at three activity levels within the relevant range follow. The following assumptions were used to develop the selling expense flexible bud
> The founder and president of the Institute for Healthcare Improvement, Donald Berwick, is convinced that the U.S. health-care system can reduce costs by 30 percent while improving overall quality—just by getting health care professionals to adopt improve
> Top management of Capital Services observed that the budget for the EDP department had been growing far beyond what was anticipated for the past several years. Each year, the EDP manager would demonstrate that increased usage by the company’s non-EDP dep
> Lucy Liu has been asked to monitor the efficiency and effectiveness of a newly installed machine. The specialized machine has been guaranteed by the manufacturer to package 2,000 engine gaskets per kilowatt hour (kWh). The rate of defects on production i
> Sue and Jim Hansen are preparing their household financial budget for December. They have started with their November budget and are adjusting it to reflect the difference between November and December in planned activities. The Johnsons are expecting ou
> The managers and partners [who] were interviewed listed reduced manpower costs as the major advantage for utilizing paraprofessionals [in CPA firms]. It seems that these savings were realized in a number of ways. First, there were significant savings in
> Temporary or part-time employees may be used rather than full-time employees in each of the following situations: a. To teach undergraduate accounting courses at a university. b. To serve as security guards. c. To staff a health clinic in a rural area. d
> In many large business organizations today, it is common that the financial experts are physically located separately from operational personnel. One effect of this isolation is that the people with financial expertise often lack understanding of importa
> A list of committed and discretionary costs follows. Annual audit fees Internal audit salaries Annual report preparation and printing Marketing research Building flood insurance Preventive maintenance Charitable contributions Property taxes Corporate adv
> The following graphic indicates where each part of the dollar that a student pays for a new college textbook goes: Students are frustrated with the cost of their textbooks, but most publishers would say that the selling prices have merely kept pace with
> Slydell Industries produces a variety of consumer goods including lamps, home office desks, and storage cabinets. Many products sold by the company are purchased disassembled, and then assembled by the customer. To assist the customer with assembly, Slyd
> With an ERP system, a company can develop a “storefront” on the Internet. Through its storefront connection with customers, the company can gather much information about the market and the demand for specific products. Assume that you are employed by an
> In 2007, Nike settled a class action lawsuit filed on behalf of 400 African American employees of the company’s Niketown store in Chicago. One of the allegations in the suit was that the store segregated African American employees into lower-paying jobs
> In recent years, the financial press reported story after story regarding downsizing and layoffs in the U.S. auto industry. Often the stories discussed multiple rounds of downsizing events (such as those at General Motors). Assume that you are a stock ma
> In the past decade, the Japanese economy has fallen from its lofty levels of the 1980s. As a consequence, many Japanese companies have been forced to downsize. In most companies, one of two strategies can be pursued in downsizing. First, a company can la
> Business process reengineering (BPR) can be an effective tool to aid in achieving breakthroughs in quality improvement and cost management. Total quality management (TQM) is another philosophy about achieving organizational change. Conduct a library or I
> Financial professionals are at the forefront in adopting new technologies, many of which comprise the core of business strategies. Discuss how the increasing reliance of business on technology coupled with the responsibility of the financial professional
> Dayton Industrial produces a variety of chemicals that are used in an array of commercial applications. One popular product, a chemical solvent, contains two very caustic acids, A and B, each of which can present a very serious environmental hazard if no
> Colleges and universities have a variety of internal and external customers. Use a team of three or four individuals to answer the following: a. Who are three internal and two external customers of a college or university? b. How would each of the custom
> Following are descriptions of environmental waste situations. Identify the environmental strategy you would select to deal with each situation and discuss your logic. a. A relatively small amount of low-toxicity waste is produced. This waste is not easil
> You have been hired as a consultant by a company that manufactures plastic and resin toys. Company management is presently discussing ways to improve product quality. Evidence of quality problems is everywhere: high rates of product defects, many product
> ERP software can facilitate the sharing of information throughout the supply chain. For example, an Internet storefront can be used to interact downstream with the final customer. Sales data gathered from the storefront can then be used as a basis for de
> ERP software programs allow tighter linkages within a supply chain than were possible with earlier generations of software. Consider the possibility of a tighter link between the marketing and engineering functions within a firm that makes consumer elect
> Acquisition of new technology is often a perilous event for firms. The successful acquisition and implementation of new systems require much more than merely purchasing hardware and software. For example, costs are likely to be incurred for the following
> Utah Utensil has developed a new kitchen utensil. The firm has conducted significant market research and estimated the following pattern for sales of the new product: If the firm desires to net $3.50 per unit in profit over the life of the product, and
> Joe Giles is a product engineer for a firm that makes various home and office electronic gadgets. Some of this company’s products have long product life cycles and others have life cycles that are as short as 9 months. Giles’s company uses both target co
> StatPro has just been presented the following market and production estimates on Product X27, which has been under development in the company. Use the concept of target costing to integrate the marketing and engineering information and interpret the res
> Recently you read an article regarding a new product introduced late last year by 3G Inc., a consumer products company. The article’s author, although praising 3G Inc. for providing the marketplace with this innovative product, simultaneously criticized
> Everyone in your company seems excited about the suggestion that the firm implement a JIT system. Being a cautious person, however, your company president has asked you to write a report describing situations in which JIT will not work. Prepare such a re
> Brenda Barnes has just been appointed the new director of Youth Hot-Line, a not-for-profit organization that operates a phone bank for teen-age individuals experiencing emotional difficulties. The phones are staffed by qualified social workers and psycho
> Tonight you are going to dine at the restaurant of your choice. To choose the restaurant, you are going to consider the fact that some manage their food production on a push basis and others manage their food production on a pull basis. a. Discuss the di
> The supply management director at Texas Oil Field Services has contracted to purchase $2 million of spare parts that are currently unneeded. His rationale for the contract was that the parts were currently available at a significantly reduced price from
> Rachelle Razer has taken a job as production superintendent in a plant that makes, among other products, jewelry cases. She is trying to determine how many cases to produce on each production run (EPR). Discussions reveal that last year the plant made 15
> A retail cosmetics chain carries three types of skin products: face cream, lotion, and powder. Determine the economic order quantity for each, given the following information: Product Order Cost Carrying Cost Demand Face cream $12 $2.00 2,000 units L
> Xcaliber manufactures high-end flatware. One of the crucial processes in flatware production is polishing. The company normally operates three polishing machines to maintain pace with the upstream and downstream production operations. However, one of the
> Sony Corp. launched its PlayStation 3 in late 2006. It was introduced at a price point of $599 for the top model. At the time of introduction, a California technology firm performed a tear-down of the PlayStation and estimated its cost of production to b
> The installation of a flexible manufacturing system allows firms to produce a variety of products in small batches. Assume Johnson Steel, a metal fabricating company, is considering switching from a traditional assembly line production process to an FMS.
> Duggan Mfg. began implementing a just-intime inventory system several months ago. The production and purchasing managers, however, have not seen any dramatic improvements in throughput. The managers have decided that the problems are related to company s
> Natural Gardens makes recylcable pots for plants and uses JIT to manage inventories and production. The following are standards for a typical 1-gallon pot: Annual Material Standards 32 ounces of Component X ……………………………….$0.02 $0.64 2 ounces of Component
> Find the Web page for Western Digital Corporation in Santa Clara, California. a. What products does this company make? b. Using the information at http://www.nwasoft.com/press/mag_westdig.htm (last accessed 6/2/09), prepare an explanation of how the comp
> Oklahoma Pneumatic uses a JIT system. The following standards are related to materials A and B, which are used to make one unit of the company’s final product: Annual Material Standards 3 pounds of Material A ………………………………..$2.50 $ 7.50 4 pounds of Materi
> Consider the following data pertaining to March 2011 for a firm that has adopted JIT. Production ……………………………………..8,000 units Sales ($20 per unit) ………………………..7,900 units Standard production costs Direct material …………………………………………….$4 Conversion costs ……………
> Mosquito MoJo is developing a propane-powered mosquito zapper for campers. Market research has indicated that potential purchasers would be willing to pay $145 per unit for this product. Company engineers have estimated that first-year production costs w
> The marketing department at Cleveland Furniture Mfg. has an idea for a new product that is expected to have a 6-year life cycle. After conducting market research, the company found that the product could sell for $800 per unit in the first 4 years of lif
> Randomly select annual reports for 10 publicly traded manufacturing companies. On the balance sheet, or in the related footnotes, for each firm, find the amounts for the three inventory accounts: raw material, work in process, and finished goods. Then, c
> In a three-person team, role-play the following individuals who are visiting a local car dealership: (1) a 19-year-old college student, (2) one-half of a young married couple with two children, and (3) a retired person. Each individual is interested in p
> Lois Jilg, the CEO of Minnesota Manufacturing, was concerned about the amount the firm had spent on fuel and energy costs in the previous quarter. Jilg called Alice Briggs, the CFO, and expressed her concern, “Alice, according to our latest 10-Q, we spen
> In October 1979, the Federal Reserve changed its policy of using finely tuned interest rate adjustments and instead began targeting the money supply. Using the data in INTDEF, define a dummy variable equal to 1 for years after 1979. Include this dummy in
> One way to alleviate the multicollinearity problem is to assume that the δj follow a relatively simple pattern. For concreteness, consider a model with four lags: Now, let us assume that the dj follow a quadratic in the lag, j: for paramete
> Suppose you have quarterly data on new housing starts, interest rates, and real per capita income. Specify a model for housing starts that accounts for possible trends and seasonality in the variables.
> When the three event indicators befile6, affile6, and afdec6 are dropped from equation (10.22), we obtain R2 = .281 and R2 = .264. Are the event indicators jointly significant at the 10% level? log(chnimp) = -17.80 + 3.12 log(chempi) + .196 log(gas)
> Suppose yt follows a second order FDL model: Let z* denote the equilibrium value of zt and let y* be the equilibrium value of yt, such that Show that the change in y*, due to a change in z*, equals the long-run propensity times the change in z*: This giv
> Let gGDPt denote the annual percentage change in gross domestic product and let intt denote a short term interest rate. Suppose that gGDPt is related to interest rates by where ut is uncorrelated with intt, intt-1, and all other past values of interest
> Decide if you agree or disagree with each of the following statements and give a brief explanation of your decision: (i) Like cross-sectional observations, we can assume that most time series observations are Independently distributed. (ii) The OLS estim
> In the linear model given in equation (10.8), the explanatory variables xt = (xt1,…., xtk ) are said to be sequentially exogenous (sometimes called weakly exogenous) if so that the errors are unpredictable given current and all past v
> Use the data in APPROVAL to answer the following questions. The data set consists of 78 months of data during the presidency of George W. Bush. (The data end in July 2007, before Bush left office.) In addition to economic variables and binary indicators
> Use the data in MINWAGE for this exercise. In particular, use the employment and wage series for sector 232 (Men’s and Boys’ Furnishings). The variable gwage232 is the monthly growth (change in logs) in the average wage in sector 232, gemp232 is the grow
> (i) Estimate equation (10.2) using all the data in PHILLIPS and report the results in the usual form. How many observations do you have now? (ii) Compare the estimates from part (i) with those in equation (10.14). In particular, does adding the extra yea
> The file TRAFFIC2 contains 108 monthly observations on automobile accidents, traffic laws, and some other variables for California from January 1981 through December 1989. Use this data set to answer the following questions. (i) During what month and yea
> Consider the model estimated in (10.15); use the data in INTDEF. (i) Find the correlation between inf and def over this sample period and comment. (ii) Add a single lag of inf and def to the equation and report the results in the usual form. (iii) Compar
> Use the data in VOLAT for this exercise. The variable rsp500 is the monthly return on the Standard & Poor’s 500 stock market index, at an annual rate. (This includes price changes as well as dividends.) The variable i3 is the return
> Use the data in FERTIL3 for this exercise. (i) Add pet23 and pet24 to equation (10.19). Test for joint significance of these lags. (ii) Find the estimated long-run propensity and its standard error in the model from part (i). Compare these with those obt
> Use the data set CONSUMP for this exercise. (i) Estimate a simple regression model relating the growth in real per capita consumption (of nondurables and services) to the growth in real per capita disposable income. Use the change in the logarithms in bo
> Use the data in FERTIL3 for this exercise. (i) Regress gfrt on t and t2 and save the residuals. This gives a detrended gfrt, say, g
> Use the data in EZANDERS for this exercise. The data are on monthly unemployment claims in Anderson Township in Indiana, from January 1980 through November 1988. In 1984, an enterprise zone (EZ) was located in Anderson (as well as other cities in Indiana
> Use the data in FERTIL3 to verify that the standard error for the LRP in equation (10.19) is about .030. = 95.87 + .073 pe, gfr, (3.28) (.126) 70, R? = .499, R² – .0058 pe,-1 + .034 pe,-2 (.1557) 22.12 ww2, – 31.30 pill, - (.126) (10.73) (3.98) [10.1
> Add the variable log( prgnp) to the minimum wage equation in (10.38). Is this variable significant? Interpret the coefficient. How does adding log( prgnp) affect the estimated minimum wage effect?
> Use the data in BARIUM for this exercise. (i) Add a linear time trend to equation (10.22). Are any variables, other than the trend, statistically significant? (ii) In the equation estimated in part (i), test for joint significance of all variables except
> The model that explicitly contains the long-run propensity, θ0, as where we omit the other explanatory variables for simplicity. As always with multiple regression analysis, θ0 should have a ceteris paribus interpretation. Namel
> Use the data in HPRICE1 to obtain the heteroskedasticity-robust standard errors for equation (8.17). Discuss any important differences with the usual standard errors. (ii) Repeat part (i) for equation (8.18). (iii) What does this example suggest about he
> Consider the following model to explain sleeping behavior: (i) Write down a model that allows the variance of u to differ between men and women. The variance should not depend on other factors. (ii) Use the data in SLEEP75 to estimate the parameters of t
> If we start with (6.38) under the CLM assumptions, assume large n, and ignore the estimation error in the
> Suppose we want to estimate the effects of alcohol consumption (alcohol) on college grade point average (colGPA). In addition to collecting information on grade point averages and alcohol usage, we also obtain attendance information (say, percentage of
> The following three equations were estimated using the 1,534 observations in 401K: Which of these three models do you prefer? Why? 80.29 + 5.44 mrate + .269 age – .00013 totemp (.78) (.52) prate (.045) (.00004) R? = .100, R = .098. 97.32 + 5.02 mrat
> When atndrte2 and ACT # atndrte are added to the equation estimated in (6.19), the R-squared becomes .232. Are these additional terms jointly significant at the 10% level? Would you include them in the model? stndfnl = 2.05 - .0067 atndrte 1.63 pri
> In Example 4.2, where the percentage of students receiving a passing score on a tenth-grade math exam (math10) is the dependent variable, does it make sense to include sci11—the percentage of eleventh graders passing a science exam—as an ad
> The following model allows the return to education to depend upon the total amount of both parents’ education, called pareduc: Show that, in decimal form, the return to another year of education in this model is What sign do you expect
> Use the data in 401KSUBS for this question, restricting the sample to fsize 5 1. (i) To the model estimated in Table 8.1, add the interaction term, e401k · inc. Estimate the equation by OLS and obtain the usual and robust standard errors. W
> Using the data in RDCHEM, the following equation was obtained by OLS: (i) At what point does the marginal effect of sales on rdintens become negative? (ii) Would you keep the quadratic term in the model? Explain. (iii) Define salesbil as sales measured i
> Let
> The following two equations were estimated using the data in MEAPSINGLE. The key explanatory variable is lexppp, the log of expenditures per student at the school level. (i) If you are a policy maker trying to estimate the causal effect of per-student s
> The following equation was estimated using the data in CEOSAL1: This equation allows roe to have a diminishing effect on log(salary). Is this generality necessary? Explain why or why not. .00008 roe? log(salary) = 4.322 + .276 log(sales) + .0215 roe
> Let d be a dummy (binary) variable and let z be a quantitative variable. Consider the model this is a general version of a model with an interaction between a dummy variable and a quantitative variable. (i) Since it changes nothing important, set the err
> Suppose you collect data from a survey on wages, education, experience, and gender. In addition, you ask for information about marijuana usage. The original question is: “On how many separate occasions last month did you smoke marijuana?” (i) Write an e
> In equation (7.29), suppose that we define outlf to be one if the woman is out of the labor force, and zero otherwise. (i) If we regress outlf on all of the independent variables in equation (7.29), what will happen to the intercept and slope estimates?
> To test the effectiveness of a job training program on the subsequent wages of workers, we specify the model where train is a binary variable equal to unity if a worker participated in the program. Think of the error term u as containing unobserved worke
