...1. Activity costing would be appropriate 1. An activity-based costing system may be appropriate for Wall Décor, when overhead allocation based job-order costing provides product cost distortion. As seen on previous case, this distortion happens when one product is manufacturing in high volume and the others are manufacturing in complexity as well as in low volume. In this situation Wall Décor should change its costing system for selling its high volume produced products whereas low-volume produced products have good profit. a. The company has three different products and each uses different resources and so ABC would given a better allocation b. ABC would relate costs to the activities and so would make cost control better. 2. The activity based rates are Activity Overhead Driver Total Activity Activity Rate Picking Prints 36,000 Number of Prints 102,000 0.30 per print Inventory Selection and Management 91,700 Number of components per print item 131,000 0.70 per component Website Optimization- Unframed 25,800 Number of prints at capacity 100,000 0.26 per print Website Optimization- framed 103,200 Number of prints at capacity 25,000 4.13 per print Framing and Matting costs 123,900 Number of components at capacity 59,000 2.10 per component 375,200 3. The cost using ABC is In the first stage we allocate the overhead cost to products ...
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...1. Activity costing would be appropriate 1. An activity-based costing system may be appropriate for Wall Décor, when overhead allocation based job-order costing provides product cost distortion. As seen on previous case, this distortion happens when one product is manufacturing in high volume and the others are manufacturing in complexity as well as in low volume. In this situation Wall Décor should change its costing system for selling its high volume produced products whereas low-volume produced products have good profit. a. The company has three different products and each uses different resources and so ABC would given a better allocation b. ABC would relate costs to the activities and so would make cost control better. 2. The activity based rates are Activity Overhead Driver Total Activity Activity Rate Picking Prints 36,000 Number of Prints 102,000 0.30 per print Inventory Selection and Management 91,700 Number of components per print item 131,000 0.70 per component Website Optimization- Unframed 25,800 Number of prints at capacity 100,000 0.26 per print Website Optimization- framed 103,200 Number of prints at capacity 25,000 4.13 per print Framing and Matting costs 123,900 Number of components at capacity 59,000 2.10 per component 375,200 3. The cost using ABC is In the first stage we allocate the overhead cost to products a. Lance Armstrong...
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...|Case 2 | | Greetings Inc.: Activity-Based Costing | |This case is from the book: Managerial Accounting: Tools for Business Decision | |Making, 5th Edition | |Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso | |©2010 | |And was answered by some students. | | | | | 1. Activity Based Costing benefits businesses that are more complex in nature. In this case, Greetings. INC has added a new product line, Wall Decor, which permits them to grow without expanding their physical stores; however, they have significantly raised their overhead costs by multiplying their cost drivers. Not to mention the fact that they have incorporated a largely automated system into their product line, which we know calls for an ABC system. The main reason to move to ABC though, I’d say, would be because it will allow management to make better decisions and move away from the “cash machine” and “lemonade stand” metaphor simply because overhead costs will be allocated in such...
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...(http://www.thecasesolutions.com) >> Business Case Studies (http://www.thecasesolutions.com/business-case-solutions) >> American Greetings ← Previous Post (http://www.thecasesolutions.com/simons-hostile-tender-for-taubman-22197) Next Post→ (http://www.thecasesolutions.com/yokohama-corp-ltd-a-22201) American Greetings Harvard Case Solution & Analysis AN INDUSTRY IN DECLINE Greeting card industry was faced massive changes as it had attained maturity and was now in decline. Overall greeting card sales had been contracting in the U.S. for some years and negative growth was expected in the next five years to 2015 (Exhibit 4). Hallmark was the largest card company in the U.S. that was privately owned by the Hall family with $4 billion of revenues. The organization had expanded its operations in more than hundred nations and thus it was well-diversified geographically. Overall, the U.S. card industry was contracting with 9% reduction in last six years and the trend was expected to continue with a minimum of 4% decline over next 4 years and 16% in a worst case scenario. Major cause and diver of this decline in demand was changing social interaction norms and advent of alternative forms of communications through social networking and digital imaging. Increase in use of these alternatives by the populace to express their love and keep in touch with their close ones was reducing the need to send paper based greeting cards. As a result, greeting card companies were increasingly moving to electronic...
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...Mary E. Jones 2/27/2011 ACC 560 Week 8: Case 4 Greetings Inc: Capital Budgeting 1. Calculate the net present value using the numbers provided. Assume that annual cash flows occur at the end of the year. Initial investment $800,000 Estimated useful life 5 years Estimated salvage value -0- Estimated annual cash flows Annual cash flow savings for Wall Décor $175,000 Annual additional store cash flow from increased sales 100,000 Sale of ink and paper supplies 10,000 Net annual cash flow $285,000 Present Value at 12% Discount factor for 5 periods 3.60478 Present value of net cash flows $$285,000 X 3.60478 $1,027,362 12% Present value of net cash flows $1,027,362 Capital investment 800,000 Net present value $ 227,362 2. Mr. Burns is concerned that the original estimates may be too optimistic. He has suggested that you do a sensitivity analysis assuming all costs are 10% higher than expected and that all inflows are 10% less than expected. Initial investment $880,000 Estimated useful life 5 years Estimated salvage value -0- Estimated annual cash flows Annual cash flow savings for Wall Décor $157,500 Annual additional store cash flow from increased sales 90,000 Sale of ink and paper supplies 9,000 Net annual cash flow $256,500 Present Value ...
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...Stanley Misty Mitchell, Derek Cowan, and Katherine Miles Accounting 203 Jim Stanley Greetings Inc. Greetings Inc. 1. Wall Décor should use the ABC (Activity-Based Costing) system because there is some significant difference between their framed and unframed products. Each of the four activities Wall Décor produces and sells have different profits and costing. With the Activity-Based Costing they can charge different prices and show how each activity is doing financially. 2. Compute the activity overhead rates for each activity: Activity 1) 91,700/131,000 = .70 Activity 2) 129,000/125,000 = 1.03 Activity 3) 123,900/59,000 = 2.1 Activity 4) 375,200/260,000 = 1.44 3. Product costs for each: a) Lance Armstrong unframed print. b) John Elway print in steel frame, no mat. c) Lambeau Field print in wood frame with mat. 4. In case 1 for Greetings, the overhead allocations using a traditional volume-based approach were $3.36 for Lance Armstrong, $4.48 for John Elway, and $5.60 for Lambeau Field. The total product costs from case 1 were Lance Armstrong $17.36, John Elway $33.48, and Lambeau Field $48.10. The overhead allocation rate for unframed prints, such as the unframed Lance Armstrong print in question 3, decreased under the ABC compared to the amount of overhead that was allocated under the traditional approach in case 1. Why is this the case? What are the potential implications for the company? The overhead allocation for unframed...
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...Managerial Decision Making, Case 2, Greetings Inc. Activity Based Costing |Case 2 | | Greetings Inc.: Activity-Based Costing | |This case is from the book: Managerial Accounting: Tools for Business Decision | |Making, 5th Edition | |Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso | |©2010 | |And was answered by some students. | | | | | 1. Activity Based Costing benefits businesses that are more complex in nature. In this case, Greetings. INC has added a new product line, Wall Decor, which permits them to grow without expanding their physical stores; however, they have significantly raised their overhead costs by multiplying their cost drivers. Not to mention the fact that they have incorporated a largely automated system into their product line, which we know calls for an ABC system. The main reason to move to ABC though, I’d say, would be because it will allow management to make better decisions and move away from the “cash machine” and “lemonade stand” metaphor simply because overhead costs will be allocated in such a way that corresponds to either framed or unframed prints instead of considering the same overhead for both products. By doing so managers will be able to price the prints competitively while still maintaining a profitable margin. An activity-based costing system may be appropriate for Wall Décor, when overhead allocation based job-order costing provides product cost distortion. Wall Décor should change its costing system for selling...
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...Managerial Decision Making, Case 2, Greetings Inc. Activity Based Costing |Case 2 | | Greetings Inc.: Activity-Based Costing | |This case is from the book: Managerial Accounting: Tools for Business Decision | |Making, 5th Edition | |Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso | |©2010 | |And was answered by some students. | | | | | 1. Activity Based Costing benefits businesses that are more complex in nature. In this case, Greetings. INC has added a new product line, Wall Decor, which permits them to grow without expanding their physical stores; however, they have significantly raised their overhead costs by multiplying their cost drivers. Not to mention the fact that they have incorporated a largely automated system into their product line, which we know calls for an ABC system. The main reason to move to ABC though, I’d say, would be because it will allow management to make better decisions and move away from the “cash machine” and “lemonade stand” metaphor simply because overhead costs will be allocated in such a way that corresponds to either framed or unframed prints instead of considering the same overhead for both products. By doing so managers will be able to price the prints competitively while still maintaining a profitable margin. An activity-based costing system may be appropriate for Wall Décor, when overhead allocation based job-order costing provides product cost distortion. Wall Décor should change its costing system for selling its high volume...
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...Greetings Inc. Greetings Inc.: Job Order Costing Developed by Thomas L.Zeller, Loyola University Chicago, and Paul D.Kimmel, University of Winconsin-Milwaukee The business Situation Greetings Inc. has operated for many years as a nationally recognized retailer of greeting cards and small gift items. It has 1,500 stores throughout the United States located in high-traffic malls. As the stock price of many other companies soared, Greetings’ stock price remained flat. As a result of a heated 2013 shareholders’ meeting, the presiden of Greetings, Robert Burns, came under pressure from shareholders to grow Greetings’ stock value. As a consequence of this pressure, in 2014 Mr.Burns called for a formal analysis of the company’s options with regard to business opportunities. Location was the first issue considered in the analysis. Greetings stores are located in high-traffic malls where rental costs are high. The traditional rental cost was justified, however, by the revenue that resulted from these highly visible locations. In recent years, though, the intense competition from other stores in the mall sellling similar merchandise has become a disadvantage of the mall locations. Mr.Burns felt that to increase revenue in the mall locations, Greetings would need to attract new customers and sell more goods to repeat customers. In order to do this, the company would need to add a new product line. However, to keep cost down, the product line should be...
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...Re: Case 03-05, Accounting Issues Background Trademark, Inc., a public and growing global corporation, creates, assembles, and disburses their products through four main divisions of their corporation: Greeting Cards and Stationery, Calendars, Party Goods, and Specialty Gifts. Their core business comes from their customers in drug stores and supermarket chains. In the early to mid 1990’s, Trademark saw significant growth in response to their IPO issuance in 1992, however, since 1994, they have seen a flat and ultimate declining growth in their product. Issue Recently, Trademark, Inc. has realized an overstatement in their return of damage goods and are considering halting their previously acceptable return of slow-moving merchandise for a full refund for some larger customers. What potential misstatements, if any, related to the issues identified should Nancy, Trademark, Inc.’s auditor, consider? Analysis (1) Return for Damaged Goods Trademark, Inc. soon realized after shipping products to customers that the customers were displeased with their products. The boxes, in which the products were shipped in, were damaging their products, which in return caused customers to return Trademark, Inc.’s products. In response, Trademark changed shipping companies and fixed this problem for customers, ultimately lowering the amount of returns by customers. Should Trademark, Inc. follow their current company policy estimate of 25% or change to 22%? Option #1: Trademark, Inc...
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...Crafting and Executing Strategy Right Greetings Card Company Student name: Course: BUS599 Instructor name: Date: Abstract What can a business professional implement that would help a company to be successful? In an effort for a company to be successful, business professionals should create and execute strategic planning models which outline specific results that are to be achieved and by establishing es a course of action for achieving them. In our current failing economy, business professionals are becoming more aware of the how challenging it is in to starting a business and remaining successful. While most would agree that failures are personally painful and could have been conceivably too often prevented, consensus dissolves around how to take action to the problem? Some businesses owners may believe think that a successful business’ is based solely on luck; while other’s business owners believe may think that their success is based on the location of their business. Although, both concepts could be attributed to success, in this report I provide a solution that could help business owners transit a business toward its success. In this paper, as a business professional for Right Greetings Card Company, I argue in support of and focus on the importance of implementing a strategic plan for the success of this business. Several business owners might disagree with my argument, because...
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...Final Case: Friendly Cards, Inc. FINAN 4210 Lutz Jonathan Matsen 05/01/2013 Problem Identification Wendy Beaumont, president of Friendly Cards, is currently faced with 3 time sensitive issues that need to me dealt with immediately. As a relatively small company in the fiercely competitive greeting card industry, Ms. Beaumont must make some quick yet intelligent decisions to ensure the continued success of her company. To be more specific, she must decide upon: The investment in equipment to enable the company to make rather than buy their own envelopes The acquisition of Creative Designs Inc., a small Midwestern manufacturer of studio cards The possibility of going to the market to raise additional equity capital in order to relieve pressure on its financial position Identification of Relevant Facts Friendly’s position in the industry As of early 1988, the main issues facing the greeting card industry were: Continued industry consolidation (a decline of 15% per decade since 1954) Cyclical revenues The presence of high fixed costs Threat of Industry Consolidation Since its inception in 1978, Friendly Cards reacted to the looming threat of industry consolidation by rapidly expanding internally and through various acquisitions. These acquisitions allowed Friendly to access new markets and demographics that would have been previously unavailable to them. For example, through their acquisition of a California firm, the company gained West...
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...Final Case: Friendly Cards, Inc. FINAN 4210 Lutz Jonathan Matsen 05/01/2013 Problem Identification Wendy Beaumont, president of Friendly Cards, is currently faced with 3 time sensitive issues that need to me dealt with immediately. As a relatively small company in the fiercely competitive greeting card industry, Ms. Beaumont must make some quick yet intelligent decisions to ensure the continued success of her company. To be more specific, she must decide upon: The investment in equipment to enable the company to make rather than buy their own envelopes The acquisition of Creative Designs Inc., a small Midwestern manufacturer of studio cards The possibility of going to the market to raise additional equity capital in order to relieve pressure on its financial position Identification of Relevant Facts Friendly’s position in the industry As of early 1988, the main issues facing the greeting card industry were: Continued industry consolidation (a decline of 15% per decade since 1954) Cyclical revenues The presence of high fixed costs Threat of Industry Consolidation Since its inception in 1978, Friendly Cards reacted to the looming threat of industry consolidation by rapidly expanding internally and through various acquisitions. These acquisitions allowed Friendly to access new markets and demographics that would have been previously unavailable...
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...culture and values will facilitate a rapid growth of this new brand. Eventian aims to cater increasing needs of emotional expression among friends and families in today’s highly competitive and fast-pace working environment, where more and more people find it difficult to spare time and energy to connect with their loved ones. The primary marketing objectives are to raise the brand awareness among target customers to over 90% and to achieve a market share of over 50%. The primary financial objective is to gain net profit of HK$670,000 by the end of the third year. 2 Table of Content Executive summary ....................................................................................................................................... 1 1. Introduction ........................................................................................................................................... 4 2. Situation Analysis ................................................................................................................................. 4 2.1 Company & Products Introduction ................................................................................................. 4 2.2 Market and Target Customer .......................................................................................................... 8 2.3 Competitor Analysis .........................................................................................................................
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...Aluminum Shining Bright McVicker Aluminum, Inc. Expanding to Bahrain Prepared for Mr. Virgil McVicker CEO of McVicker Aluminum Dallas, TX, 78243 Prepared by Mr. Michael S. Gordon Dallas, TX, 78243 October 9, 2014 McVicker Aluminum, Inc. 555 Aluminum Way Dallas, TX 78243 October 9, 2014 Mr. Virgil McVicker, CEO McVicker Aluminum, Inc. 555 Aluminum Way Dallas, TX 78243 Dear Mr. McVicker, This document contains the report that you requested in September. I have provided pertinent information and made recommendations on the plan of action to expand McVicker Aluminum, Inc. to the Kingdom of Bahrain. My analysis of the expansion into Bahrain covered four important areas that will help you decide whether or not McVicker Aluminum, Inc. should expand and build an aluminum plant in the Kingdom of Bahrain. I took an extensive look at the current political condition, the current economical condition, the current business condition, and the cultural aspects of working in a Muslim country. I strongly believe that McVicker Aluminum, Inc. can be a successful business in Bahrain. I used several resources to create this report. The most helpful resources were the Bahrain Economic Quarterly June 2014, the book by Philip Dew, Bahrain's Business Environment, and Department of Defense Bahrain Country Handbook. Thank you for choosing me to conduct the research into the Kingdom of Bahrain. If you have any further questions about the research or recommendations...
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