What is the relationship of a standard cost system to the principle of management by exception?

What is the relationship of a standard cost system to

Zodiac Company has decided to introduce a new product, which can be manufactured by either a computer-assisted manufacturing system or a labor-intensive production system. The manufacturing method will not affect the quality of the product. The estimated manufacturing costs by the two methods are as follows:     Labor-Intensive
   Production System     Computer-Assisted
   Manufacturing System   Direct material $ 9.30 $ 8.40   Direct labor .8DLH @ $18.00 14.40 .5DLH @ $22.50 11.25   Variable overhead .8DLH @ $13.50 10.80 .5DLH @ $13.50 6.75   Fixed overhead* $2,430,000 $ 4,110,000   *

These costs are directly traceable to the new product line. They would not be incurred if the new product were not produced.      The companyAc€?cs marketing research department has recommended an introductory unit sales price of $63.00. Selling expenses are estimated to be $840,000 annually plus $3.90 for each unit sold. (Ignore income taxes.)

1.

Calculate ZodiacAc€?cs estimated break-even point in annual UNIT sales of the new product if the company uses the (a) labor-intensive production system; (b) computer-assisted manufacturing system. (Do not round intermediate calculations and round your final answer up to nearest whole number.)

2.

Determine the annual UNIT sales volume at which the firm would be indifferent between the two manufacturing methods. (Do not round intermediate calculations and round your final answer up to nearest whole number.)

Renton Tractor Company was formed at the start of 2012 and produces a small garden tractor. The selling price is $4,800, variable production costs are $2,000 per unit, fixed production costs are $6,400,000 per year, and fixed selling and administrative costs are $3,600,000 per year. Data below indicate net income for 2012-2014 under full costing. In 2012 and 2013, Edward Vendon was the president of Renton Tractor. The board of directors was generally pleased with the company s performance under his leadership-the company hit the break-even point in its first year of operation and had a modest profit in 2013. Edward quit at the end of 2013 and went on to start an e-commerce company selling used cars on the Internet. His replacement, Zac Dalton, was apparently not as successful as Ed.Zac argued that he was improving the company by getting rid of excess inventory, but the board noted that the company showed a $2,360,000 loss in the first year of his leadership. Required a. Recalculate net income for all three years using variable costing. b. Based on the limited information available, comment on the relative job performance of Ed and Zac. c. Note that under full costing, the company is showing a substantial loss in 2014. Based on the limited information available, does it appear that the company should get out of the tractor business?

(CVP analysis; multiproduct) Ted Tyner owns Sixth Man Hotel, a luxury hotel with 60 two-bedroom suites for coaches and their players. Capacity is 10 coaches and 50 players. Each suite is equipped with extra-long king-sized beds, super-tall and extended shower heads, extra-tall bathroom vanities, a laptop, and a printer. Each suite has a Pacific Ocean view. Hotel services include airport limousine pickup and drop-off, a daily fruit basket, champagne on the day of arrival, and a Hummer for transportation. Coaches and players are interviewed about their dietary restrictions and room service requirements before arrival. The hotel’s original cost was $1,920,000, and depreciation is $160,000 per year. Other hotel operating costs include:

Labor

$320,000 per year plus $5 per suite per day

Utilities

$158,000 per year plus $1 per suite per day

Miscellaneous

$100,000 per year plus $6 per suite per day

In addition to these costs, costs are also incurred on food and beverage for each guest. These costs are strictly variable and (on average) are $40 per day for coaches and $15 per day for players.

a. Assuming that the hotel is able to maintain an average annual occupancy of 80 percent in both coach and player suites (based on a 360-day year), determine the minimum daily charge that must be assessed per suite per day to generate $240,000 of income before tax.

b. Assume that the per-day price Tyner charges is $240 for coaches and $200 for players. If the sales mix is 12:48 (12 coach days of occupancy for every 48 player days of occupancy), compute the following:

1. The break-even point in total occupancy days.

2. Total occupancy days required to generate $400,000 of income before tax.

3. Total occupancy days to generate $400,000 of after-tax income. Tyner’s personal tax rate is 35 percent.

c. Tyner is considering adding a massage service for guests to complement current hotel services. He has estimated that the cost of providing such a service would largely be fixed because all necessary facilities already exist. He would, however, need to hire five certified masseurs at a cost of $500,000 per year. If Tyner decides to add this service, how much would he need to increase his daily charges (assume equal dollar increases to coach and player room fees) to maintain the break-even point computed in (b)?

(Graph) The Real Deal is a social organization that performs charitable work in its local community. The club has the following monthly cost and fee information: monthly membership fee per member, $60; monthly variable cost of service per member, $25; and monthly fixed service cost, $3,500. Costs are extremely low because volunteers provide almost all services and supplies. Excess of fees over service cost are used to support charitable activities.

a. Prepare a break-even chart for The Real Deal.

b. Prepare a profit-volume graph for The Real Deal.

c. At this time, The Real Deal has only 120 members. Which of the preceding items (break-even chart or profit-volume graph) would you use in a speech to the membership about the benefits of recruiting additional members? Why?