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BUS 590 Entire Course Ashford Latest
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BUS 590 Entire Course Ashford Latest

BUS 590 Week 1 Discussions Ashford

BUS 590 Week 1 Discussions 1

Choose a company in which you are familiar and review their organizational structure and annual report. It is recommended that you use the Mergent database in the Ashford University Library for easy access to company information and financial statements. Explain how the seven key differences between financial and managerial accounting effect the internal and external reporting of the company. Share with us your thoughts on why managerial accounting reports should not be distributed externally. Respond to at least two of your classmates’ posts.

BUS 590 Week 1 Discussions 2

Read the Forbes article, “World's Most Ethical Companies 2014.” Select one of the company’s on the list and research and explain what ethical responsibility they possess.  How does ethical responsibility apply to cost accounting and managerial accounting? Respond to at least two of your classmates’ posts.

BUS 590 Week 1 Assignment 1 Ashford

EXERCISE 1-4 Ethics and the Manager 

Richmond, Inc., operates a chain of 44 department stores. Two years ago, the board of directors of Richmond approved a large-scale remodeling of its stores to attract a more upscale clientele.

Before finalizing these plans, two stores were remodeled as a test. Linda Perlman, assistant controller, was asked to oversee the financial reporting for these test stores, and she and other management personnel were offered bonuses based on the sales growth and profitability of these stores. While completing the financial reports, Perlman discovered a sizable inventory of outdated goods that should have been discounted for sale or returned to the manufacturer. She discussed the situation with her management colleagues; the consensus was to ignore reporting this inventory as obsolete because reporting it would diminish the financial results and their bonuses.


  1. According to the IMA's Statement of Ethical Professional Practice, would it be ethical for Perlman not to report the inventory as obsolete?
  2. Would it be easy for Perlman to take the ethical action in this situation?

EXERCISE 1-10 Corporate Social Responsibility

In his book Capitalism and Freedom, economist Milton Friedman wrote on page 133: “There is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it … engages in open and free competition, without deception or fraud.”


Explain why you agree or disagree with this quote.


EXERCISE 2-7 Differential, Opportunity, and Sunk Costs [LO2-7]

Northwest Hospital is a full-service hospital that provides everything from major surgery and emergency room care to outpatient clinics. The hospital's Radiology Department is considering replacing an old inefficient X-ray machine with a state-of-the-art digital X-ray machine. The new machine would provide higher quality X-rays in less time and at a lower cost per X-ray. It would also require less power and would use a color laser printer to produce easily readable X-ray images. Instead of investing the funds in the new X-ray machine, the Laboratory Department is lobbying the hospital's management to buy a new DNA analyzer.


For each of the items below, indicate by placing an X in the appropriate column whether it should be considered a differential cost, an opportunity cost, or a sunk cost in the decision to replace the old X-ray machine with a new machine. If none of the categories apply for a particular item, leave all columns blank.

PROBLEM 2-21 Cost Classification [LO2-1, LO2-3, LO2-4]

Listed below are costs found in various organizations.

  1. Property taxes, factory.
  2. Boxes used for packaging detergent produced by the company.
  3. Salespersons' commissions.
  4. Supervisor's salary, factory.
  5. Depreciation, executive autos.
  6. Wages of workers assembling computers.
  7. Insurance, finished goods warehouses.
  8. Lubricants for production equipment.
  9. Advertising costs.
  10. Microchips used in producing calculators.
  11. Shipping costs on merchandise sold.
  12. Magazine subscriptions, factory lunchroom.
  13. Thread in a garment factory.
  14. Billing costs.
  15. Executive life insurance.
  16. Ink used in textbook production.
  17. Fringe benefits, assembly-line workers.
  18. Yarn used in sweater production.
  19. Wages of receptionist, executive offices.


Prepare an answer sheet with column headings as shown below. For each cost item, indicate whether it would be variable or fixed with respect to the number of units produced and sold; and then whether it would be a selling cost, an administrative cost, or a manufacturing cost. If it is a manufacturing cost, indicate whether it would typically be treated as a direct cost or an indirect cost with respect to units of product. Three sample answers are provided for illustration

BUS 590 Week 1 Quiz Ashford

Question 1.    In describing the cost equation, Y = a + bX, "a" is:

  1. the dependent variable cost.
  2. the independent variable the level of activity.
  3. the total fixed cost.
  4. the variable cost per unit of activity.

Question 2. For planning, control, and decision-making purposes:

  1. fixed costs should be converted to a per unit basis.
  2. discretionary fixed costs should be eliminated.
  3. variable costs should be ignored.
  4. mixed costs should be separated into their variable and fixed components.

Question 3.  All of the following costs would be found in a company's accounting records except:

  1. sunk cost.
  2. opportunity cost.
  3. indirect costs.
  4. direct costs.

Question 4. A traditional format income statement organizes costs on the basis of behavior.

  1. True
  2. False

Question 5.  A contribution format income statement for a merchandising company organizes costs into two categories—cost of goods sold and selling and administrative expenses.

  1. True
  2. False

Question 6. Cost behavior is considered linear whenever a straight line is a reasonable approximation for the relation between cost and activity.

  1. True
  2. False

Question 7.   Selling costs can be either direct or indirect costs.

  1. True
  2. False

Question 8.  Manufacturing salaries and wages incurred in the factory are period costs.

  1. True
  2. False                        

Question 9.   The costs of the Accounting Department at Central Hospital would be considered by the Surgery Department to be:

  1. direct costs.
  2. indirect costs.
  3. incremental costs.
  4. opportunity costs.

Question 10. Depreciation on office equipment would be included in product costs.

  1. True
  2. False              

BUS 590 Week 2 Discussions Ashford

Week 2 Discussion 1

Review Exercise 31 on page 115 of the text. Compute the company's predetermined overhead rate and explain the four-step process to compute a predetermined overhead rate. How would this rate be effected if the direct labor hours increased to 25,000?  How the rate would be effected if the overhead were to increase to $150,000. Give examples of some of the challenges a manager may have in completing this computation. Respond to at least two of your classmates’ posts.

Week 2 Discussion 2

Review Exercise 4-7 on pages 163-164 of the text. Based on the information given for Chocolatier de Geneve, SA, explain and prepare the journal entries showing the flow of costs through the two processing departments during April. Make sure to show your calculations for the entries. Explain some similarities and differences between job order costing and process costing. Give examples of when each method would be used. Respond to at least two of your classmates’ posts.

BUS 590 Week 2 Assignment Ashford

Exercise 3-5 Prepare T-Accounts, page 116

Jurvin Enterprises recorded the following transactions for the just completed month. The company had no beginning inventories.

  1. $94,000 in raw materials were purchased for cash.
  2. $89,000 in raw materials were requisitioned for use in production. Of this amount, $78,000 was for direct materials and the remainder was for indirect materials.
  3. Total labor wages of $132,000 were incurred and paid. Of this amount, $112,000 was for direct labor and the remainder was for indirect labor.
  4. Additional manufacturing overhead costs of $143,000 were incurred and paid.
  5. Manufacturing overhead costs of $152,000 were applied to jobs using the company's predetermined overhead rate.
  6. All of the jobs in progress at the end of the month were completed and shipped to customers.
  7. Any underapplied or overapplied overhead for the period was closed out to Cost of Goods Sold.


  1. Post the above transactions to T-accounts.
  2. Determine the cost of goods sold for the period.


Exercise 3-15 Departmental Overhead Rates, page 119

White Company has two departments, Cutting and Finishing. The company uses a job-order costing system and computes a predetermined overhead rate in each department. The Cutting Department bases its rate on machine-hours, and the Finishing Department bases its rate on direct labor-hours. At the beginning of the year, the company made the following estimates:


  1. Compute the predetermined overhead rate to be used in each department.
  2. Assume that the overhead rates that you computed in (1) above are in effect. The job cost sheet for Job 203, which was started and completed during the year, showed the following:

Problem 4-14 Analysis of Work in Process T-account - Weighted Average Method, page 167


  1. Determine the equivalent units of production for May.

Exercise 5-13 - Using a Contribution Format Income Statement, page 221

Miller Company's most recent contribution format income statement is shown below:


Prepare a new contribution format income statement under each of the following conditions (consider each case independently):

  1. The number of units sold increases by 15%.
  2. The selling price decreases by $1.50 per unit, and the number of units sold increases by 25%.
  3. The selling price increases by $1.50 per unit, fixed expenses increase by $20,000, and the number of units sold decreases by 5%.
  4. The selling price increases by 12%, variable expenses increase by 60 cents per unit, and the number of units sold decreases by 10%.


Problem 5-19 Break Even Analysis; Pricing, page 223

Minden Company introduced a new product last year for which it is trying to find an optimal selling price. Marketing studies suggest that the company can increase sales by 5,000 units for each $2 reduction in the selling price. The company's present selling price is $70 per unit, and variable expenses are $40 per unit. Fixed expenses are $540,000 per year. The present annual sales volume (at the $70 selling price) is 15,000 units.


  1. What is the present yearly net operating income or loss?
  2. What is the present break-even point in unit sales and in dollar sales?
  3. Assuming that the marketing studies are correct, what is the maximum annual profit that the company can earn? At how many units and at what selling price per unit would the company generate this profit?
  4. What would be the break-even point in unit sales and in dollar sales using the selling price you determined in (3) above (e.g., the selling price at the level of maximum profits)? Why is this break-even point different from the break-even point you computed in (2) above?

BUS 590 Week 2 Quiz Ashford

Question 1. If the actual manufacturing overhead cost for a period exceeds the manufacturing overhead cost applied, then manufacturing overhead would be considered to be underapplied.

Question 2. Both job-order and process costing systems use averaging to compute unit product costs.

Question 3. There are two acceptable methods for closing out any balance of underapplied or overapplied manufacturing overhead. One method involves allocation of the balance among several accounts, whereas the other closes any balance directly to:

Question 4. As total sales increase beyond the break-even point, the degree of operating leverage will decrease.

Question 5. The "costs to be accounted for" portion of the cost reconciliation report includes the cost of beginning work in process inventory and the costs added during the period.

Question 6. Assume a company sells a single product. If Q equals the level of output, P is the selling price per unit, V is the variable expense per unit, and F is the fixed expense, then the break-even point in sales dollars is:

Question 7. When the predetermined overhead rate is based on direct labor-hours, the amount of overhead applied to a job is proportional to the estimated amount of direct labor-hours for the job.

Question 8. In a job-order cost system, direct labor is assigned to a job using information from the employee time ticket.

Question 9. The impact on net operating income of a given dollar change in sales can be computed by multiplying the contribution margin by the dollar change in sales.

Question 10. Job cost sheets are used to record the costs of preparing routine accounting reports.

BUS 590 Week 3 Discussions Ashford

CASE 6-30 Service Organization; Segment Reporting [LO6-4]

Music Teachers, Inc., is an educational association for music teachers that has 20,000 members. The association operates from a central headquarters but has local membership chapters throughout the United States. Monthly meetings are held by the local chapters to discuss recent developments on topics of interest to music teachers. The association's journal, Teachers' Forum, is issued monthly with features about recent developments in the field. The association publishes books and reports and also sponsors professional courses that qualify for continuing professional education credit. The association's statement of revenues and expenses for the current year is presented below.

The board of directors of Music Teachers, Inc., has requested that a segmented income statement be prepared showing the contribution of each segment to the association. The association has four segments: Membership Division, Magazine Subscriptions Division, Books and Reports Division, and Continuing Education Division. Mike Doyle has been assigned responsibility for preparing the segmented income statement, and he has gathered the following data prior to its preparation.

  1. Membership dues are $100 per year, of which $20 is considered to cover a one-year subscription to the association's journal. Other benefits include membership in the association and chapter affiliation. The portion of the dues covering the magazine subscription ($20) should be assigned to the Magazine Subscription Division.
  2. One-year subscriptions to Teachers' Forum were sold to nonmembers and libraries at $30 per subscription. A total of 2,500 of these subscriptions were sold last year. In addition to subscriptions, the magazine generated $100,000 in advertising revenues. The costs per magazine subscription were $7 for printing and paper and $4 for postage and shipping.
  3. A total of 28,000 technical reports and professional texts were sold by the Books and Reports Division at an average unit selling price of $25. Average costs per publication were $4 for printing and paper and $2 for postage and shipping.
  4. The association offers a variety of continuing education courses to both members and nonmembers. The one-day courses had a tuition cost of $75 each and were attended by 2,400 students. A total of 1,760 students took two-day courses at a tuition cost of $125 for each student. Outside instructors were paid to teach some courses.
  5. Salary costs and space occupied by division follow:

Personnel costs are 25% of salaries in the separate divisions as well as for the corporate staff. The $280,000 in occupancy costs includes $50,000 in rental cost for a warehouse used by the Books and Reports Division for storage purposes.

  1. Printing and paper costs other than for magazine subscriptions and for books and reports relate to the Continuing Education Division.
  2. General and administrative expenses include costs relating to overall administration of the association as a whole. The company's corporate staff does some mailing of materials for general administrative purposes.

The expenses that can be traced or assigned to the corporate staff, as well as any other expenses that are not traceable to the segments, will be treated as common costs. It is not necessary to distinguish between variable and fixed costs.


  1. Prepare a contribution format segmented income statement for Music Teachers, Inc. This statement should show the segment margin for each division as well as results for the association as a whole.
  2. Give arguments for and against allocating all costs of the association to the four divisions.


EXERCISE 10-8 Direct Materials and Direct Labor Variances

Dawson Toys, Ltd., produces a toy called the Maze. The company has recently established a standard cost system to help control costs and has established the following standards for the Maze toy:

During July, the company produced 3,000 Maze toys. Production data for the month on the toy follow:

Direct materials: 25,000 microns were purchased at a cost of $0.48 per micron. 5,000 of these microns were still in inventory at the end of the month.

Direct labor: 4,000 direct labor-hours were worked at a cost of $36,000.


  1. Compute the following variances for July:
    1. The materials price and quantity variances.
    2. The labor rate and efficiency variances.
  2. Prepare a brief explanation of the possible causes of each variance.

BUS 590 Week 3 Assignment Ashford

EXERCISE 6-3 Reconciliation of Absorption and Variable Costing Net Operating Incomes [LO6-3]

Jorgansen Lighting, Inc., manufactures heavy-duty street lighting systems for municipalities. The company uses variable costing for internal management reports and absorption costing for external reports to shareholders, creditors, and the government. The company has provided the following data:

The company's fixed manufacturing overhead per unit was constant at $560 for all three years.


  1. Determine each year's absorption costing net operating income. Present your answer in the form of a reconciliation report.
  2. In Year 4, the company's variable costing net operating income was $984,400 and its absorption costing net operating income was $1,012,400. Did inventories increase or decrease during Year 4? How much fixed manufacturing overhead cost was deferred or released from inventory during Year 4?


EXERCISE 6-7 Segmented Income Statement [LO6-4]

Shannon Company segments its income statement into its North and South Divisions. The company's overall sales, contribution margin ratio, and net operating income are $500,000, 46%, and $10,000, respectively. The North Division's contribution margin and contribution margin ratio are $150,000 and 50%, respectively. The South Division's segment margin is $30,000. The company has $90,000 of common fixed expenses that cannot be traced to either division.


Prepare an income statement for Shannon Company that uses the contribution format and is segmented by divisions. In addition, for the company as a whole and for each segment, show each item on the segmented income statements as a percent of sales.


Exercise 7-14 Calculating and Interpreting Activity-Based Costing Data, pages 324-325

Hiram's Lakeside is a popular restaurant located on Lake Washington in Seattle. The owner of the restaurant has been trying to better understand costs at the restaurant and has hired a student intern to conduct an activity-based costing study. The intern, in consultation with the owner, identified three major activities and then completed the first-stage allocations of costs to the activity cost pools. The results appear below.

The above costs include all of the costs of the restaurant except for organization-sustaining costs such as rent, property taxes, and top-management salaries.

A group of diners who ask to sit at the same table are counted as a party. Some costs, such as the costs of cleaning linen, are the same whether one person is at a table or the table is full. Other costs, such as washing dishes, depend on the number of diners served.

Prior to the activity-based costing study, the owner knew very little about the costs of the restaurant. She knew that the total cost for the month (including organization-sustaining costs) was $240,000 and that 15,000 diners had been served. Therefore, the average cost per diner was $16.


  1. According to the activity-based costing system, what is the total cost of serving each of the following parties of diners?
    1. A party of four diners who order three drinks in total.
    2. A party of two diners who do not order any drinks.
    3. A lone diner who orders two drinks.
  2. Convert the total costs you computed in (1) above to costs per diner. In other words, what is the average cost per diner for serving each of the following parties?
    1. A party of four diners who order three drinks in total.
    2. A party of two diners who do not order any drinks.
    3. A lone diner who orders two drinks.
  3. Why do the costs per diner for the three different parties differ from each other and from the overall average cost of $16 per diner?


PROBLEM 10-9 Comprehensive Variance Analysis [LO10-1, LO10-2, LO10-3]

Marvel Parts, Inc., manufactures auto accessories. One of the company's products is a set of seat covers that can be adjusted to fit nearly any small car. The company has a standard cost system in use for all of its products. According to the standards that have been set for the seat covers, the factory should work 2,850 hours each month to produce 1,900 sets of covers. The standard costs associated with this level of production are:

During August, the factory worked only 2,800 direct labor-hours and produced 2,000 sets of covers. The following actual costs were recorded during the month:

At standard, each set of covers should require 5.6 yards of material. All of the materials purchased during the month were used in production.


Compute the following variances for August:

  1. The materials price and quantity variances.
  2. The labor rate and efficiency variances.
  3. The variable overhead rate and efficiency variances.

BUS 590 Week 3 Quiz Ashford

Question 1. Segment margin is a better measure of the long-run profitability of a segment than contribution margin.

Question 2. Under variable costing, product costs consist of direct materials, direct labor, and variable manufacturing overhead.

Question 3. Activity rates in activity-based costing are computed by dividing costs from the second-stage allocations by the activity measure for each activity cost pool.

Question 4. Assuming the LIFO inventory flow assumption, if production equals sales for the period, absorption costing and variable costing will produce the same net operating income.

Question 5. Under conventional absorption costing, the fixed costs associated with idle production capacity are not included as part of the product cost.

Question 6. Waste on the production line will result in an unfavorable materials quantity variance.

Question 7. Because absorption costing emphasizes costs by behavior, it works well with cost-volume-profit analysis.

Question 8. A transaction driver provides a measure of the amount of time required to perform an activity.

Question 9. When using data from a segmented income statement, the dollar sales for a segment to break even is equal to:

Question 10. Under variable costing, variable production costs are not treated as product costs.

BUS 590 Week 4 Discussions Ashford

CASE 8-30 Evaluating a Company's Budget Procedures [LO8-1]

Tom Emory and Jim Morris strolled back to their plant from the administrative offices of Ferguson & Son Manufacturing Company. Tom is manager of the machine shop in the company's factory; Jim is manager of the equipment maintenance department.

The men had just attended the monthly performance evaluation meeting for plant department heads. These meetings had been held on the third Tuesday of each month since Robert Ferguson, Jr., the president's son, had become plant manager a year earlier.

As they were walking, Tom Emory spoke: “Boy, I hate those meetings! I never know whether my department's accounting reports will show good or bad performance. I'm beginning to expect the worst. If the accountants say I saved the company a dollar, I'm called ‘Sir,’ but if I spend even a little too much—boy, do I get in trouble. I don't know if I can hold on until I retire.”

Tom had just been given the worst evaluation he had ever received in his long career with Ferguson & Son. He was the most respected of the experienced machinists in the company. He had been with Ferguson & Son for many years and was promoted to supervisor of the machine shop when the company expanded and moved to its present location. The president (Robert Ferguson, Sr.) had often stated that the company's success was due to the high-quality work of machinists like Tom. As supervisor, Tom stressed the importance of craftsmanship and told his workers that he wanted no sloppy work coming from his department.

When Robert Ferguson, Jr., became the plant manager, he directed that monthly performance comparisons be made between actual and budgeted costs for each department. The departmental budgets were intended to encourage the supervisors to reduce inefficiencies and to seek cost reduction opportunities. The company controller was instructed to have his staff “tighten” the budget slightly whenever a department attained its budget in a given month; this was done to reinforce the plant manager's desire to reduce costs. The young plant manager often stressed the importance of continued progress toward attaining the budget; he also made it known that he kept a file of these performance reports for future reference when he succeeded his father.

Tom Emory's conversation with Jim Morris continued as follows:

Emory: I really don't understand. We've worked so hard to meet the budget, and the minute we do so they tighten it on us. We can't work any faster and still maintain quality. I think my men are ready to quit trying. Besides, those reports don't tell the whole story. We always seem to be interrupting the big jobs for all those small rush orders. All that setup and machine adjustment time is killing us. And quite frankly, Jim, you were no help. When our hydraulic press broke down last month, your people were nowhere to be found. We had to take it apart ourselves and got stuck with all that idle time.

Morris: I'm sorry about that, Tom, but you know my department has had trouble making budget, too. We were running well behind at the time of that problem, and if we'd spent a day on that old machine, we would never have made it up. Instead we made the scheduled inspections of the forklift trucks because we knew we could do those in less than the budgeted time.

Emory: Well, Jim, at least you have some options. I'm locked into what the scheduling department assigns to me and you know they're being harassed by sales for those special orders. Incidentally, why didn't your report show all the supplies you guys wasted last month when you were working in Bill's department?

Morris: We're not out of the woods on that deal yet. We charged the maximum we could to other work and haven't even reported some of it yet.

Emory: Well, I'm glad you have a way of getting out of the pressure. The accountants seem to know everything that's happening in my department, sometimes even before I do. I thought all that budget and accounting stuff was supposed to help, but it just gets me into trouble. It's all a big pain. I'm trying to put out quality work; they're trying to save pennies.


  1. Identify the problems that appear to exist in Ferguson & Son Manufacturing Company's budgetary control system and explain how the problems are likely to reduce the effectiveness of the system.
  2. Explain how Ferguson & Son Manufacturing Company's budgetary control system could be revised to improve its effectiveness.


PROBLEM 11-22 Perverse Effects of Some Performance Measures [LO11-4]

There is often more than one way to improve a performance measure. Unfortunately, some of the actions taken by managers to make their performance look better may actually harm the organization. For example, suppose the marketing department is held responsible only for increasing the performance measure “total revenues.” Increases in total revenues may be achieved by working harder and smarter, but they can also usually be achieved by simply cutting prices. The increase in volume from cutting prices almost always results in greater total revenues; however, it does not always lead to greater total profits. Those who design performance measurement systems need to keep in mind that managers who are under pressure to perform may take actions to improve performance measures that have negative consequences elsewhere.


For each of the following situations, describe actions that managers might take to show improvement in the performance measure but which do not actually lead to improvement in the organization's overall performance.

BUS 590 Week 4 Assignment Ashford

Exercise 8-8 Budgeted Income Statement, page 375

Gig Harbor Boating is the wholesale distributor of a small recreational catamaran sailboat. Management has prepared the following summary data to use in its annual budgeting process:


Prepare the company's budgeted income statement. Use the absorption costing income statement format shown in Schedule 9.

Exercise 8-11Cash Budget Analysis, page 376

A cash budget, by quarters, is given below for a retail company (000 omitted). The company requires a minimum cash balance of at least $5,000 to start each quarter.


Fill in the missing amounts in the above table.


Exercise 9-8 Flexible Budgets and Activity Variances, page 416

Jake's Roof Repair has provided the following data concerning its costs:

For example, wages and salaries should be $23,200 plus $16.30 per repair-hour. The company expected to work 2,800 repair-hours in May, but actually worked 2,900 repair-hours. The company expects its sales to be $44.50 per repair-hour.


Prepare a report showing the company's activity variances for May.


Exercise 11-4 Building a Balanced Scorecard, pages 500-501

Lost Peak ski resort was for many years a small, family-owned resort serving day skiers from nearby towns. Lost Peak was recently acquired by Western Resorts, a major ski resort operator. The new owners have plans to upgrade the resort into a destination resort for vacationers. As part of this plan, the new owners would like to make major improvements in the Powder 8 Lodge, the resort's on-the-hill cafeteria. The menu at the lodge is very limited—hamburgers, hot dogs, chili, tuna fish sandwiches, pizzas, french fries, and packaged snacks. With little competition, the previous owners of the resort had felt no urgency to upgrade the food service at the lodge. If skiers want lunch on the mountain, the only alternatives are the Powder 8 Lodge or a brown bag lunch brought from home.

As part of the deal when acquiring Lost Peak, Western Resorts agreed to retain all of the current employees of the resort. The manager of the lodge, while hardworking and enthusiastic, has very little experience in the restaurant business. The manager is responsible for selecting the menu, finding and training employees, and overseeing daily operations. The kitchen staff prepare food and wash dishes. The dining room staff take orders, serve as cashiers, and clean the dining room area.

Shortly after taking over Lost Peak, management of Western Resorts held a day-long meeting with all of the employees of the Powder 8 Lodge to discuss the future of the ski resort and the new management's plans for the lodge. At the end of this meeting, management and lodge employees created a balanced scorecard for the lodge that would help guide operations for the coming ski season. Almost everyone who participated in the meeting seemed to be enthusiastic about the scorecard and management's plans for the lodge.

The following performance measures were included on the balanced scorecard for the Powder 8 Lodge:

a)     Weekly Powder 8 Lodge sales

b)     Weekly Powder 8 Lodge profit

c)     Number of menu items

d)     Dining area cleanliness as rated by a representative from Western Resorts management

e)     Customer satisfaction with menu choices as measured by customer surveys

f)      Customer satisfaction with service as measured by customer surveys

g)     Average time to take an order

h)     Average time to prepare an order

i)      Percentage of kitchen staff completing basic cooking course at the local community college

j)      Percentage of dining room staff completing basic hospitality course at the local community college


Western Resorts will pay for the costs of staff attending courses at the local community college.


  1. Using the above performance measures, construct a balanced scorecard for the Powder 8 Lodge. Use Exhibit 11-5 as a guide. Use arrows to show causal links and indicate with a + or − whether the performance measure should increase or decrease.
  2. What hypotheses are built into the balanced scorecard for the Powder 8 Lodge? Which of these hypotheses do you believe are most questionable? Why?
  3. How will management know if one of the hypotheses underlying the balanced scorecard is false?


Problem 11-17 Comparison of Performance Using Return on Investment (ROI), page 507

Comparative data on three companies in the same service industry are given below:


  1. What advantages are there to breaking down the ROI computation into two separate elements, margin and turnover?
  2. Fill in the missing information above, and comment on the relative performance of the three companies in as much detail as the data permit. Make specific recommendations about how to improve the ROI.

BUS 590 Week 4 Quiz Ashford

Question 1. An unfavorable activity variance indicates that activity was too high for the amount of sales.

Question 2. The cash budget is typically prepared before the direct materials budget.

Question 3. In companies that do not have "no lay-off" policies, the total direct labor cost for a budget period is computed by multiplying the total direct labor hours needed to make the budgeted output of completed units by the direct labor wage rate.

Question 4. Move time is considered value-added time.

Question 5. The first budget a company prepares in a master budget is the production budget.

Question 6. Residual income is the net operating income that an investment center earns above the minimum required return on the investment in fixed assets.

Question 7. A flexible budget should not be used when making comparisons to actual results such as actual expenses.

Question 8. Comparing actual results to a budget based on the actual activity for the period is possible with the use of a:

Question 9. Manufacturing Cycle Efficiency (MCE) is computed as:

Question 10. Return on investment (ROI) equals margin multiplied by turnover.

BUS 590 Week 5 Discussions Ashford

BUS 590 Week 5 Discussion 1

Review Problem 12-23 on pages 572-573 of the text and answer questions 1 and 2. Based on the information given, should Silven Industries make or buy the tubes? Show calculations to support your answer. What would be the maximum purchase price acceptable to Silven Industries? Explain. Respond to at least two of your classmates’ posts.

BUS 590 Week 5 Discussion 2

Review Problem 13-21on page 614 of the text. Compute the project profitability index for each investment project, and rank the four projects. Which ranking do you prefer? Why?  Respond to at least two of your classmates’ posts.

BUS 590 Week 5 Assignment Ashford

Week Five Problems and Exercises

Complete the following problems and exercises from the text, showing all work, and submit in the classroom.

  • Exercise 12-1 Identifying Relevant Costs, pages 561-561
  • Exercise 12-17 Dropping or Retaining a Segment, page 568
  • Exercise 13-1 Payback Method, page 609
  • Exercise 13-14 Comparison of Projects Using Net Present Value, page 612

BUS 590 Week 5 Quiz Ashford

Question 1. The term joint cost is used to describe the costs incurred after the split-off point in a process involving joint products.

Question 2. A cost that is traceable to a segment through activity-based costing may or may not be an avoidable cost for decision making.

Question 3. Fixed costs may or may not be relevant in decisions about whether a product should be dropped.

Question 4. The project profitability index is used to compare the net present values of two investments that require different amounts of investment funds.

Question 5. The simple rate of return in any one year may be less than or greater than the internal rate of return of a project.

Question 6. A cost that can be avoided by choosing one alternative over another is not relevant for decision purposes.

Question 7. When a company has a production constraint, total contribution margin will be maximized by emphasizing the products with the lowest contribution margin per unit of the constrained resource.

Question 8. The investment required for the project profitability index should:

Question 9. In the payback method, depreciation is deducted from net operating income when computing the annual net cash flow.

Question 10. Joint costs are relevant in the decision to sell a product at the split-off point or to process the product further.




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