Author Question: The ____________ is a book or file containing the activity by accounts of a business. a. general ... (Read 61 times)

P68T · **on:** Jul 6, 2018

The ____________ is a book or file containing the activity by accounts of a business.
a. general ledger
b. journal
c. trial balance
d. income statement

Question 2

Budgeted costs, Kaizen improvements.

Trendy T-Shirt Factory manufactures plain white and solid- colored T-shirts. Inputs include the following:

Additionally, the colored T-shirts require 3 ounces of dye per shirt at a cost of 0.40 per ounce. The shirts sell for 14 each for white and 18 each for colors. The company expects to sell 12,000 white T-shirts and 60,000 colored T-shirts uniformly over the year.
Trendy has the opportunity to switch from using the dye it currently uses to using an environmentally friendly dye that costs 1.25 per ounce. The company would still need 3 ounces of dye per shirt. Trendy is reluctant to change because of the increase in costs (and decrease in profit), but the Environmental Protection Agency has threatened to fine the company 120,000 if it continues to use the harmful but less expensive dye.

Required:
1. Given the preceding information, would Trendy be better off financially by switching to the environmentally friendly dye? (Assume all other costs would remain the same.)
2. Assume Trendy chooses to be environmentally responsible regardless of cost, and it switches to the new dye. The production manager suggests trying Kaizen costing. If Trendy can reduce fabric and labor costs each by 1 per month, how close will it be at the end of 12 months to the profit it would have earned before switching to the more expensive dye? (Round to the nearest dollar for calculating cost reductions.)
3. Refer to requirement 2. How could the reduction in material and labor costs be accomplished? Are there any problems with this plan?

kescobar@64 · **Reply #1 on:** Jul 6, 2018

Answer to Question 1

a

Answer to Question 2

1.
Increase in Costs for the Year
Assume Trendy uses New Dye
Units to dye 60,000
Cost differential (1.25 0.40) per ounce 3 ounces 2.55
Increase in costs 153,000

Because the fine is only 120,000, Trendy would be financially better off by not switching.

2. If Trendy switches to the new dye, costs will increase by 153,000.
If Trendy implements Kaizen costing, costs will be reduced as follows:

Original monthly costs

Input Unit cost Number of units Total cost Annual cost
Fabric 7.00 6,000 42,000 504,000
Labor 3.50 6,000 21,000 252,000
Total 63,000 756,000
(12,000 + 60,000)/12 months = 6,000 units

Monthly decrease in costs
Fabric Labor cost
Month 1 42,000 Month 1 21,000
Month 2 41,580 Month 2 20,790
Month 3 41,164 Month 3 20,582
Month 4 40,753 Month 4 20,376
Month 5 40,345 Month 5 20,173
Month 6 39,942 Month 6 19,971
Month 7 39,542 Month 7 19,771
Month 8 39,147 Month 8 19,573
Month 9 38,755 Month 9 19,378
Month 10 38,368 Month 10 19,184
Month 11 37,984 Month 11 18,992
Month 12 37,604 Month 12 18,802
477,184 238,592 715,776
TOTAL
Difference between costs with and without Kaizen improvements
(756,000 715,776) 40,224

This means costs increase a net amount of 153,000 40,224 = 112,776

3. Reduction in materials can be accomplished by reducing waste and scra