Author Question: Irena Company had a beginning normal balance of 35,000 in the cash account. The accountant posted a ... (Read 39 times)

jayhills49 · **on:** Jul 6, 2018

Irena Company had a beginning normal balance of 35,000 in the cash account. The accountant posted a 2,000 credit on June 2, a 350 credit on June 4, and a 5,250 debit on June 20 . What is the balance of cash in the general ledger?
a. 31,400 credit
b. 32,100 debit
c. 37,900 debit
d. 41,900 credit

Question 2

Target costs, effect of process-design changes on service costs.

Sun Systems provides energy audits in residential areas of southern Ohio. The energy audits provide information to homeowners on the benefits of solar energy. A consultant from Sun Systems educates the homeowner about federal and state rebates and tax credits available for purchases and installations of solar heating systems. A successful energy audit results in the homeowner purchasing a solar heating system. Sun Systems does not install the solar heating system, but arranges for the installation with a local company. Sun Systems completes all necessary paperwork related to the rebates, tax credits, and financing. The company has identified three major activities that drive the cost of energy audits: identifying new contacts (that varies with the number of new contacts); traveling to and between appointments (that varies with the number of miles driven); and preparing and filing rebates and tax forms (that varies with the number of clerical hours). Actual costs for each of these activities in 2012 and 2013 are:

In 2013, Sun Systems used value engineering to reduce the cost of the energy audits. Managers at Sun Systems want to evaluate whether value engineering has succeeded in reducing the target cost per audit by 5.
Actual results for 2012 and 2013 for Sun Systems are:

Required:
1. Calculate the cost per audit in 2012.
2. Calculate the cost per audit in 2013.
3. Did Sun Systems achieve the target cost per audit in 2013? Explain.
4. What challenges might managers at Sun Systems encounter in achieving the target cost and how might they overcome these challenges?

xMRAZ · **Reply #1 on:** Jul 6, 2018

Answer to Question 1

c

Answer to Question 2

1. and 2. Audit costs in 2012 and 2013 are as follows:

2012 2013
Total Per unit (2)=
(1) 150 Total Per unit (4)=
(3) 178
Consultation labor
35 2.2 hrs. 150; 35 2 hrs. 178 11,550.00 77.00 12,460.00 70.00
Cost of new contacts, 9 215; 7 275 1,935.00 12.90 1,925.00 10.81
Travel costs, 0.55 1,756; 0.65 1,327 965.80 6.44 862.55 4.85
Preparing and filing costs
9.10 1,218; 9.50 1,367 11,083.80 73.89 12,986.50 72.96
Total 25,534.60 170.23 28,234.05 158.62

3. Target cost per audit in 2013 = Cost per audit in 2012 95
= 170.23 0.95 = 161.72

Actual cost per audit in 2013 was 158.62. Hence, Sun Systems did achieve its target cost per audit of 161.72

In spite of rising transportation costs and clerical wages, the company was able to reduce the cost per audit in 2013. This was possible by reducing the number of miles driven per appointment from 11.7 miles (1,756 150) in 2012 to 7.5 miles (1,327 178) in 2013. This could be due to a implementing a better scheduling system to maximize the number of appointments in a given area. Also, the number of clerical hours per audit decreased from 8.12 hours (1,218 150) in 2012 to 7.68 hours (1,367 178) in 2013. This could be due to process improvements in preparing the required forms. There is also a reduction in consultant labor hours and consultation labor cost per audit. Presumably, there is no reduction in customer satisfaction.

4. The challenges Sun Systems may face in achieving their target cost include employee resistance to changes in processes, unexpected increases in the cost of supplies, fuel, etc, and new compliance requirements imposed from the federal and/or state governments that increase clerical time on each audit. To overcome these challenges, Sun Systems managers should encourage employee participation and celebrate small improvements toward achieving the target cost and set cost-cutting targets after taking into account the external environment such as cost of supplies and new compliance requirements. Managers should create a culture where employees are encouraged to continuously improve the energy audit process.