Answer Happy

More info Based on the following income statement for the year ended November 30, 2020, senior management at Batton have decided to concentrate Patterson's marketing resources on the Maximum model and to begin to phase out the Mammoth model because Maximum generates a much bigger operating income per unit. Patterson Electronics Income Statement for the Fiscal Year Ended November 30, 2020 Mammoth Revenues 23,808,000 $ 15,000,000 Total 7,614,000 S 31,422,000 5,255,400 20,255,400 Cost of goods sold Gross margin 2,358,600 11,166,600 8,808,000 5,952,000 2,856,000 $ 1,522,800 Selling and administrative expense 7,474,800 S 3,691,800 Operating income Units produced and sold 24,000 119.00 S Operating income per unit sold S Details for cost of goods sold for Mammoth and Maximum are as follows: Mammoth Maximum Total Direct materials Direct manufacturing labor (a) Machine costs (b) 5.488,800 S 488,000 3,783.200 9,720,000 $ 5,280,000 15,000,000 $ Per Unit 228.70 S 19.50 156.80 405.00 $ 220.00 625.00 $ Total Per Unit 3.852,000 $ 642.00 273,000 45.50 470,400 78.40 4,595,400 $ 765.90 660,000 110.00 5,255,400 $ Total direct costs S Manufacturing overhead costs (c) S 875.90 Total cost of goods sold (a) Mammoth requires 1.5 hours per unit and Maximum requires 3.5 hours per unit. The direct manufacturing labor cost is $13.00 per hour. Print Done S S Maximum 835,800 $ 6,000 139.30 Previous question Requirements 1. Using activity-based costing, calculate the gross margin per unit of the Maximum and Mammoth models. 2. Explain briefly why these numbers differ from the gross margin per unit of the Maximum and Mammoth models calculated using Patterson's existing simple costing system. 3. Comment on Cooper's concerns about the accuracy and limitations of ABC. 4. How might Patterson find the ABC information helpful in managing its business? 5. What should Sonny Johnson do in response to Cooper's comments? Print Done Data table Units of the Cost-Allocation Base Mammoth Maximum Total 1,420,000 26,000 Activity Center (Cost-Allocation Base) Total Activity Costs Soldering (number of solder points) S 1,065,000 Shipments (number of shipments) 1,261,000 Quality control (number of inspections) 1.141.000 Purchase orders (number of orders) 1,170,000 Machine power (machine-hours) 1,160,000 16,400 51,800 260,000 9,600 18,200 70,000 109,400 195,000 85,600 175,700 15,800 14,300 190,000 57,000 1,248,000 5,940,000 19,200 Machine setups (number of setups) Total manufacturing overhead 35,000 S Print Done X ed More info Cooper does not like what he sees. "If you show headquarters this analysis, they are going to ask us to phase out the Maximum line, which we have just introduced. This whole costing stuff has been a major problem for us. First Mammoth was not profitable and now Maximum isn't. "Looking at the ABC analysis, I see two problems. First, we do many more activities than the ones you have listed. If you had included all activities, maybe your conclusions would be different. Second, you used number of setups and number of inspections as allocation bases. The numbers would be different had you used setup-hours and inspection-hours instead. I know that measurement problems precluded you from using these other cost-allocation bases, but I believe you ought to make some adjustments to our current numbers to compensate for these issues. I know you can do better. We can't afford to phase out either product." Johnson knows that his numbers are fairly accurate. As a quick check, he calculates the profitability of Maximum and Mammoth using more and different allocation bases. The set of activities and activity rates he had used results in numbers that closely approximate those based on more detailed analyses. He is confident that headquarters, knowing that Maximum was introduced only recently. will not ask Patterson to phase it out. He is also aware that a sizable portion of Cooper's bonus is based on division revenues. Phasing out either product would adversely affect his bonus. Still, he feels some pressure from Cooper to do Print Done -X something.
Patterson Electronics, a division of Batton Corporation, manufactures two large-screen television models: the Mammoth, which has been produced since 2016 and sells for $992, and the Maximum, a newer model introduced in early 2018 that sells for $1,269. (Click the icon to view additional information.) Requirement 1. Using activity-based costing, calculate the gross margin per unit of the Maximum and Mammoth models. Begin by calculating the total cost of goods sold for each model. (Round intermediary calculations to the nearest cent.) Mammoth Maximum Direct costs Direct materials Direct manufacturing labor Machine costs Total direct costs Soldering Shipments Quality control Purchase orders Machine power Machine setups Total indirect costs Total cost of goods sold Now calculate the total gross margin and gross margin per unit for each model using activity-based costing. (Round the per unit amounts to the nearest cent) Mammoth Maximum Gross margin-total Gross margin per unit Indirect costs Patterson's controller, Sonny Johnson, is advocating the use of activity-based costing and activity-based management and has gathered information about the company's manufacturing overhead costs for the year ended November 30, 2020. After completing his analysis, Johnson shows the results to Curt Cooper, the Patterson division president. (Click the icon to view the ABC data.) (Click the icon to view Cooper's response.) Read the requirements.
Now calculate the total gross margin and gross margin per unit for each model using activity-based costing. (Round the per unit amounts to the nearest cent) Mammoth Maximum Gross margin-total Gross margin per unit Requirement 2. Explain briefly why these numbers differ from the gross margin per unit of the Maximum and Mammoth models calculated using Patterson's existing simple costing system. Patterson's simple costing system allocates all manufacturing overhead other than machine costs on the basis of . Consequently, the Mammoth per unit compared to Maximum, profitable. The simple costing system amount of manufacturing overhead is allocated to Mammoth. The ABC system recognizes Maximum's Mammoth and so made it appear ▼profitable. ABC analysis shows that Mammoth is Requirement 3. Comment on Cooper's concerns about the accuracy and limitations of ABC. (Select all that apply.) A. Using inspection-hours and setup-hours as allocation bases would also probably lead to more accurate cost information, but it would increase measurement costs. B. Adding more activities would have no impact on the complexity of the system and should be inexpensive to implement. It would not necessarily improve the accuracy of cost information and therefore may not improve decision making. C. Adding more activities would make the system harder to understand and more costly to implement, but it would probably improve the accuracy of cost information, which, in turn, would help Patterson make better decisions. D. When designing and implementing ABC systems, it is not necessary for managers and management accountants to trade off the costs of the system against its benefits. E. Using inspection-hours and setup-hours as allocation bases would probably not lead to more accurate cost information and would also have no effect on measurement costs. F. Cooper's comments about ABC implementation are not valid. G. Cooper's comments about ABC implementation are valid. H. When designing and implementing ABC systems, managers and management accountants need to trade off the costs of the system against its benefits. Requirement 4. How might Patterson find the ABC information helpful in managing its business? (Select all that apply.) A. Activity-based management (ABM) is the use of information from activity-based costing to make improvements in a firm. B. For the long term, activity-based costing can assist management in making decisions regarding the productivity of the employees. C. Activity-based management is an integrative philosophy of management for continuously improving the quality of products and processes by focusing primarily on the direct labor costs. per unit that a product needs, the the manufacturing overhead allocated to it using the simple costing system. Because use of manufacturing overhead and results in Maximum showing profitability. By the same token, the
Patterson Electronics, a division of Batton Corporation, manufactures two large-screen television models: the Mammoth, which has been produced since 2016 and sells for $992, and the Maximum, a newer model introduced in early 2018 that sells for $1,269. Patterson's controller, Sonny Johnson, is advocating the use of activity-based costing and activity-based management and has gathered information about the company's manufacturing overhead costs for the year ended November 30, 2020. After completing his analysis, Johnson shows the results to Curt Cooper, th Patterson division president. (Click the icon to view additional information.) (Click the icon to view the ABC data.) (Click the icon to view Cooper's response.) Read the requirements. Requirement 3. Comment on Cooper's concerns about the accuracy and limitations of ABC. (Select all that apply.) A. Using inspection-hours and setup-hours as allocation bases would also probably lead to more accurate cost information, but it would increase measurement costs. B. Adding more activities would have no impact on the complexity of the system and should be inexpensive to implement. It would not necessarily improve the accuracy of cost information and therefore may not improve decision making. C. Adding more activities would make the system harder to understand and more costly to implement, but it would probably improve the accuracy of cost information, which, in turn, would help Patterson make better decisions. D. When designing and implementing ABC systems, it is not necessary for managers and management accountants to trade off the costs of the system against its benefits. E. Using inspection-hours and setup-hours as allocation bases would probably not lead to more accurate cost information and would also have no effect on measurement costs. F. Cooper's comments about ABC implementation are not valid. G. Cooper's comments about ABC implementation are valid. H. When designing and implementing ABC systems, managers and management accountants need to trade off the costs of the system against its benefits. Requirement 4. How might Patterson find the ABC information helpful in managing its business? (Select all that apply.) A. Activity-based management (ABM) is the use of information from activity-based costing to make improvements in a firm. B. For the long term, activity-based costing can assist management in making decisions regarding the productivity of the employees. C. Activity-based management is an integrative philosophy of management for continuously improving the quality of products and processes focusing primarily on the direct labor costs. D. ABM is an integrated approach that focuses management's attention on analyzing the direct costs incurred in the manufacturing process with the ultimate aim of cost reduction. E Activity-based management (ABM) is a management system where each component in a production line is manufactured only when it is needed in the next step of the process. F. As a whole-company philosophy, ABM focuses on strategic, as well as tactical and operational activities of the company. G. ABM highlights possible improvements, including reduction or elimination of non-value-added activities, selecting lower cost activities, sharing activities with other products, and eliminating waste. H. ABM is an integrated approach that focuses management's attention on activities with the ultimate aim of continuous improvement OL For the long term, activity-based costing can assist management in making decisions regarding the viability of product lines, distribution channels, marketing strategies, etc. Requirement 5. What should Sonny Johnson do in response to Cooper's comments? (Select all that apply.) In assessing the situation, first consider the "Standards of Ethical Conduct for Management Accountants" that could potentially be violated in this situation. A. Confidentiality B. Competence
Patterson Electronics, a division of Batton Corporation, manufactures two large-screen television models: the Mammoth, which has been produced since 2016 and sells for 992, and the Maximum, a newer model introduced in early 2018 that sells for $1,269. Patterson's controller, Sonny Johnson, is advocating the use of activity-based costing and activity-based management and has gathered information about the company's manufacturing overhead costs for the year ended November 30, 2020. After completing his analysis, Johnson shows the results to Curt Cooper, the Patterson division president. 1 (Click the icon to view additional information.) (Click the icon to view the ABC data.) (Click the icon to view Cooper's response.) Read the requirements. A. Activity-based management (ABM) is the use of information from activity-based costing to make improvements in a firm. B. For the long term, activity-based costing can assist management in making decisions regarding the productivity of the employees. C. Activity-based management is an integrative philosophy of management for continuously improving the quality of products and processes by focusing primarily on the direct labor costs. D. ABM is an integrated approach that focuses management's attention on analyzing the direct costs incurred in the manufacturing process with the ultimate aim of cost reduction. E Activity-based management (ABM) is a management system where each component in a production line is manufactured only when it is needed in the next step of the process. F. As a whole-company philosophy, ABM focuses on strategic, as well as tactical and operational activities of the company. G. ABM highlights possible improvements, including reduction or elimination of non-value-added activities, selecting lower cost activities, sharing activities with other products, and eliminating waste. H. ABM is an integrated approach that focuses management's attention on activities with the ultimate aim of continuous improvement 1. For the long term, activity-based costing can assist management in making decisions regarding the viability of product lines, distribution channels, marketing strategies, etc. Requirement 5. What should Sonny Johnson do in response to Cooper's comments? (Select all that apply.) n assessing the situation, first consider the "Standards of Ethical Conduct for Management Accountants" that could potentially be violated in this situation. A. Confidentiality B. Competence C. Credibility D. Integrity E. None of the standards are potentially violated in this situation. What should Sonny Johnson do in response to Cooper's comments? A. Incorrect reporting of ABC costs with the goal of retaining both the Mammoth and Maximum product lines is unethical. Johnson should indicate to Cooper that the product cost calculations are, indeed, appropriate. If Cooper still insists on modifying the product cost numbers, Johnson is not obligated to take any further action because Cooper is his superior. OB. Incorrect reporting of ABC costs with the goal of retaining both the Mammoth and Maximum product lines is unethical. Johnson should indicate to Cooper that the product cost calculations are, indeed, appropriate. If Cooper still insists on modifying the product cost numbers, Johnson should raise the matter with one of Cooper's superiors. If, after taking all these steps, there is continued pressure to modify product cost numbers, Johnson should consider resigning from the company rather than engage in unethical behavior. OC. Incorrect reporting of ABC costs with the goal of retaining both the Mammoth and Maximum product lines is ethical. Johnson has the obligation to follow the wishes of his immediate supervisor. Raising the matter with one of Cooper's superiors would be unethical. OD. Incorrect reporting of ABC costs with the goal of retaining both the Mammoth and Maximum product lines is not unethical as the information is based on estimates rather than historical data. Once the information is communicated to Cooper, Johnson is not obligated to take any further action.
quirement 2. Explain briefly why these numbers differ from the gross margin per unit of the Maximum and Mammoth models calculated using Patterson's existing simple costing system. Consequently, the itterson's simple costing system allocates all manufacturing overhead other than machine costs on the basis of ammoth per unit compared to Maximum, profitable. The simple costing system amount of Mammoth BC analysis shows that Mammoth is equirement 3. Comment on Cooper's concerns about the accuracy and limitations of ABC. (Select all that apply. direct labor-hours, an input unit-level cost driver A. Using inspection-hours and setup-hours as allocation bases would also probably lead to more accurate occ B. Adding more activities would have no impact on the complexity of the system and should be inexpensive t C. Adding more activities would make the system harder to understand and more costly to implement, but it v D. When designing and implementing ABC systems, it is not necessary for managers and management acco E. Using inspection-hours and setup-hours as allocation bases would probably not lead to more accurate cos F. Cooper's comments about ABC implementation are not valid. direct labor-hours, an output unit-level cost driver machine-hours, an input unit-level cost driver machine-hours, an output unit-level cost driver units sold, an output unit-level cost driver units sold, an input unit-level cost driver G. Cooper's comments about ABC implementation are valid. Who dorinning and implementing utom appuntants pond to trade per unit that a product needs, the system recognizes Maximum's f cost information and therefore may not improve decision making. th, in turn, would help Patterson make better decisions. costs. the manufacturing overhead allocated to it using the simple costing system. Because profitability. By the same token, the use of manufacturing overhead and results in Maximum showing
Requirement 2. Explain briefly why these numbers differ from the gross margin per unit of the Maximum and Mammoth models calculated using Patterson's existing simple costing system. Patterson's simple costing system allocates all manufacturing overhead other than machine costs on the basis of Mammoth per unit compared to Maximum, profitable. The simple costing system Consequently, the amount of manufacturing overhead is allocated to Mammoth. The ABC system rec Mammoth and so made it appear profitable. ABC analysis shows that Mammoth is Requirement 3. Comment on Cooper's concerns about the accuracy and limitations of ABC. (Select all that apply.) A. Using inspection-hours and setup-hours as allocation bases would also probably lead to more accurate cost information, but it would increase measurement costs. B. Adding more activities would have no impact on the complexity of the system and should be inexpensive to implement. It would not necessarily improve the accuracy of cost infor C. Adding more activities would make the system harder to understand and more costly to implement, but it would probably improve the accuracy of cost information, which, in turn, per unit that a product needs, the more direct labor-hours more machine-hours more units sold the manufacturing overhead allocated to it using the simple costing system. Because profitability. By the same token, the use of manufacturing overhead and results in Maximum showing ve decision making. ecisions.
Total cost of goods sold Now calculate the total gross margin and gross margin per unit for each model using activity-based costing. (Round the per unit amounts to the nearest cent) Mammoth Maximum Gross margin-total Gross margin per unit Requirement 2. Explain briefly why these numbers differ from the gross margin per unit of the Maximum and Mammoth models calculated using Patterson's existing simple costing system. Patterson's simple costing system allocates all manufacturing overhead other than machine costs on the basis of Consequently, the Mammoth per unit that a product needs, the ▼ e of manufacturing o the manufacturing overhead allocated to it using the simple costing system. Because s in Maximum showing profitability. By the same token, the per unit compared to Maximum, profitable. The simple costing system amount of manufacturing overhead is allocated to Mammoth. The ABC system recognizes Maximum's Mammoth and so made it appear profitable. ABC analysis shows that Mammoth is Requirement 3. Comment on Cooper's concerns about the accuracy and limitations of ABC. (Select all that apply.) greater lesser A. Using inspection-hours and setup-hours as allocation bases would also probably lead to more accurate cost information, but it would increase measurement costs. B. Adding more activities would have no impact on the complexity of the system and should be inexpensive to implement. It would not necessarily improve the accuracy of cost information and therefore may not improve decision making. C. Adding more activities would make the system harder to understand and more costly to implement, but it would probably improve the accuracy of cost information, which, in turn, would help Patterson make better decisions. D. When designing and implementing ABC systems, it is not necessary for managers and management accountants to trade off the costs of the system against its benefits. E. Using inspection-hours and setup-hours as allocation bases would probably not lead to more accurate cost information and would also have no effect on measurement costs. F. Cooper's comments about ABC implementation are not valid. G. Cooper's comments about ABC implementation are valid. H. When designing and implementing ABC systems, managers and management accountants need to trade off the costs of the system against its benefits. Requirement 4. How might Patterson find the ABC information helpful in managing its business? (Select all that apply.) A. Activity-based management (ABM) is the use of information from activity-based costing to make improvements in a firm. B. For the long term, activity-based costing can assist management in making decisions regarding the productivity of the employees. C. Activity-based management is an integrative philosophy of management for continuously improving the quality of products and processes focusing primarily on the direct labor costs.