28) LO.4 (EVA) Mountain Mist Inc.’s cost of capital is 11 percent. In 2008, one of the firm’s division generated and EVA of $1,130,000. The fair market value of the capital investment in that division was $26,500. How much after-tax income was generated by the division in 2008?
39) LO.4 (ROI) Spruce Enterprises operates a chain of lumber stores. In 2008, corporate management examined industry-level data and determined the following performance targets for lumber retail stores:
Asset turnover 1.7
Profit margin 8.0%
The actual 2008 results for the company’s lumber retail stores follow:
Total assets at beginning of year $10,200,000
Total assets at end of year 12,300,000
Sales 28,250,000
Operating expenses 25,885,000
a. For 2008, how did the lumber retail stores perform relative to their industry norms?
b. Where, as indicated by the performance measures, are the most likely areas to improve performance in the retail lumber stores?
c. What are the advantages and disadvantages of setting a performance target at the start of the year compared with one that is determined at the end of the year based on actual industry performance?
48) LO.6-LO.8 (Performance measurement; BSC) For each of the following items, indicate two performance measurement that could be obtained from a cost management system. Classify each item into one of the four balanced scorecard perspectives.
a. Quality
b. Cost
c. Production line flexibility
d. People productivity and development
e. Inventory management
f. Lead time
g. Responsive after-sale service
h. Customer satisfaction and retention
i. Product and process design
j. Manufacturing planning process
k. Procurement process
l. Manufacturing process
m. Management accomplishments
n. Marketing/sales and customer service
o. Delivery performance
p. Financial accounting services
Exercises Chapter 18
21) LO.4 (Target costing) Taurus Tools has develop a new kitchen utensil. The firm has conducted significant market research and estimated the following pattern for sales of the new product:
Expected Price
Year Expected Volume per Unit
1 38,000 units $19
2 48,000 units 18
3 90,000 units 16
4 40,000 units 12
If the firm desires to net $4.50 per unit in profit over the life of the product, what is the target cost to product the new utensil?
29) LO.5 (JIT implementation) William Manufacturing Company began implementing a just-in time inventory system several months ago. The production and purchasing managers, however, have not seen any dramatic improvements in throughput. They have decided that the problems are related to their supplies. The company’s three supplies seem to send the wrong materials at the wrong times. Prepare a discussion of the problems that might exist in this situation. Be certain to address the following items: internal and external communication; possible engineering changes and their impacts; number, quality, and location of supplies; and length of system implementation.
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