Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Cost Accounting Expert

Image Is Everything, Inc. (IIE) is located in an rising market.  It focuses in lithographic duplication, catering to demands from the nouveau riche for reproductions of paintings by artists like Rembrandt, Picasso, Van Gogh, etc.  Being the only game in the country, where millionaires are born every minute, IIE finds that demand outstrips capacity.  IIE has a demand for 750 reproductions (jobs) every month.  It charges $500 per job.

The painting reproduction process involves two steps, a “Preprint” step (the PP step), followed by a “Makeready & Print” step (the MP step).  The footnote briefly describes these steps.  Both the PP step and the MP step need expensive, difficult-to-acquire, equipment and IIE has somehow smuggled one of each into the country.  Each step needs a skilled artist.   IIE operates two 10-hour shifts each day, 25 days a month.  Each of the 4 artists employed full-time by IIE is paid $100 per day, and reports for work every day without fail.  Fixed cost expenses for supervision, rent, and so on, amount to $10,000 per month.  Cost of materials (inks, paper, solvents, etc.) adds up to $100 per job.

PP step takes one hour on average.  The equipment for this procedure step breaks down often, and it is therefore unavailable for 20% of the time.  Fortunately, these breakdowns don’t affect the quality of a job in process.  Hence, as soon as the equipment comes back up, job continues from whatever stage it was in before breakdown, without any problem.

MP step needs a setup time (“Makeready” time) of 15 minutes per job followed by the print operation which takes 30 minutes per job.  Additionally, artist executing this step spends one hour at the start of the shift to flush out all the ink from the equipment’s printing plates.

a. What is the monthly operating profit for IIE?

Mike’s Mechanics, a renowned maintenance company, gives two services to improve IIE’s productivity.  For a fee of $5,000 per month it guarantees reducing downtime at the PP step from 20% down to 10%.  Another service given is to install a new Makeready process for a one-time fee of $20,000 that would efficiently eliminate both the setup activity needed at the starting of each shift as well as the setups that should be performed for each job.

b. Should IIE contract with Mike’s Mechanics for either of these two services?  If so, which one(s) should it prepare the contract for and what is the new monthly profit?

Snobs, Inc. is a company located near IIE.  It approaches IIE for a job that only requires use of the MP process.  Snobs wants to contract for as many jobs as IIE can handle over the foreseeable future and offers to pay $200 per job.  Snobs would provide all the material required at no extra cost.  Each of Snobs’ jobs requires 30 minutes from the MP process.  Suppose that the MP process is extremely flexible and can switch between the reproduction work and Snobs’ jobs without any setup delays.  Suppose that the quality of reproductions is not degraded if there are any delays between the PP step and the MP step.  Also assume that  processing times are deterministic and so you can load both equipment (PP and MP) to their full capacity without degrading service.

c. Given this new demand, what must IIE do regarding its contract with Mike’s Mechanics?  How much more money could it make per month, if at all?

d. IIE is aware that Snobs is in desperate need for capacity, and that it could demand a higher price per job from Snobs.  At what price will it become attractive for IIE to abandon its present reproduction jobs (which need both the PP and the MP processes) and dedicate all its capacity to cater to demand from Snobs?

Cost Accounting, Accounting

  • Category:- Cost Accounting
  • Reference No.:- M91651

Have any Question? 


Related Questions in Cost Accounting

Module 3 - slpstrategic choicessimulationin module 3 you

Module 3 - SLP Strategic Choices SIMULATION In Module 3, you will use CVP analysis to inform the pricing of your 3 products. SCENARIO CONTINUATION: You've now completed SLP2, and it the date is (once again) January 1, 20 ...

Quiz1 a process cost system would be used for all of the

QUIZ 1 A process cost system would be used for all of the following products except computer chips. chemicals. motion pictures. soft drinks. 2 Differences between a job order cost system and a process cost system include ...

Questionyou are just from attending a conference on

QUESTION You are just from attending a conference on Activity Based Costing (ABC) and you now wish to put your knowledge to practice by applying the principles of ABC to the four products currently made and sold by your ...

For your assignment you will apply the fundamental concepts

For your Assignment, you will apply the fundamental concepts of accounting and finance that you are studying to complete several problems indicative to real-world business scenarios and challenges. For this Assignment, t ...

Accounting assignmentmotorcade company has three service

Accounting Assignment Motorcade Company has three service departments (S1, S2, and S3) and two production departments (P1 and P2). The following data relate to Motorcade's allocation of service department costs:   Budget ...

Cost of capital assignment questions -1 what does the cost

Cost of Capital Assignment Questions - 1. What does the cost of capital represents? What is should reflect? 2. How do taxes affect the cost of debt? 3. What are the retained earnings? Do they have any costs for the firm? ...

Question 1pringle company distributes a single product the

Question 1. Pringle Company distributes a single product. The company's sales and expenses for a recent month follow:   Total    Per Unit   Sales $ 300,000   $ 20        Variable expenses   210,000     14          Contri ...

Assignment cost accountingoverviewthe final project for

Assignment: Cost Accounting Overview The final project for this course is the creation of a quantitative analysis with a memo to management. Classifying a company's costs allows for an in-depth analysis of the impact tha ...

Assignmentdolan products is a small family owned audio

Assignment Dolan Products is a small, family owned audio component manufacturer. Several years ago, the company decided to concentrate on only three models, which were sold under many brand names to electronic retailers ...

Company expansion - internationallocate the financial

Company Expansion - International Locate the financial information for a company that has only domestic manufacturing operations. Assume management desires to expand into the global market with its current products. The ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen