BUS630 Ashford University Glaser Health Products Week 3 In this case, management needs assistance in evaluating and classifying costs identified within Gl

BUS630 Ashford University Glaser Health Products Week 3

In this case, management needs assistance in evaluating and classifying costs identified within Glaser Health Products in order to implement an activity-based costing system. Please address Questions 1 through 6 at the end of the case. Based on the case questions, you are required to provide a two to four double-spaced written report providing management with the necessary guidance in implementing an activity-based costing system. The written report should be properly formatted according to APA guidelines and demonstrate research and critical thinking skills. Explanations and recommendations should be supported by at least 3 scholarly sources from the Ashford Library or other external sources, excluding the textbook.

For Questions 1 through 3, create a chart to classify and identify a cost driver for each of the costs provided in the text. The chart should be included as an appendix to the written report. Explanations of the classifications and identifications within the chart should be included within the written report, supported by references to the appendix.

Questions 4 through 6 should be addressed in fully developed explanations/instructions as part of your written report. The written analysis should be supported by at least three scholarly sources, excluding the textbook.

Week 3 Written Assignment should:

Demonstrate graduate level work including appropriate research and critical thinking skills.
Be presented as a written analysis (not a question/answer format).
Incorporate case questions into the overall analysis.
Follow APA formatting guidelines including title page, reference page and in-text citations.
Consists of two to four double-spaced pages of content.
Provide at least three scholarly sources, excluding the textbook.

Week 4

In this case, you have been provided financial information about the company in order to create a cash budget. Management is seeking advice or clarification on three main assumptions the company has been operating. Address Questions 1 and 2 at the end of the case. Based on the case questions, you are required to provide a two to four double-spaced written report providing the necessary advice and explanations to management. The written report should be properly formatted according to APA guidelines and demonstrate research and critical thinking skills. Conclusions and recommendations should be supported by at least 2 scholarly sources from the Ashford Library or other external sources, excluding the textbook.

Address Question 1 by using a spreadsheet to prepare the case budget for the fourth quarter. The cash budget should be included as an appendix to the written report and should be referenced in the written report.

Address Question 2 in a fully developed explanation of two to four double spaced pages to present the findings and explain or validate the assumptions stated in item (a) through (c). In addressing Question 2, be sure to use the cash budget prepared in Question 1 as support for your explanation. The written analysis should be supported by at least two scholarly sources, excluding the textbook.

Week 4 Written Assignment should:

Demonstrate graduate level work including appropriate research and critical thinking skills.
Be presented as a written analysis (not a question/answer format).
Incorporate case questions into the overall analysis.
Follow APA formatting guidelines including title page, reference page and in-text citations.
Consists of two to four double-spaced pages of content

Week 5
In this case, management is presented with several decision options. For this assignment, you are required to provide a two to three single-spaced written memo evaluating options and providing recommendations. The written memo should be properly formatted according to APA guidelines and demonstrate research and critical thinking skills. Evaluations and recommendations should be supported by at least four scholarly sources from the Ashford University Library or other external sources, excluding the textbook.
In Question 1, evaluate each decision separately in full detail including calculations, as necessary. The evaluation should be included as part of the memo discussion, not a separate component. Evaluations can be included as appendices, exhibits or figures; however must be properly referenced within the written content.In Question 2, prepare a comprehensive business memo addressing each decision and your recommendation. The memo should be properly formatted as a business memo and formatted according to APA guidelines.An example of a properly formatted business memo can be found at this link http://owl.english.purdue.edu/owl/resource/590/04/ (Links to an external site.).Week 5 Written Assignment should:
Demonstrate graduate level work including appropriate research and critical thinking skills.
Be presented as a business memo (not a question/answer format).
Incorporate case questions into the overall analysis.
Follow APA formatting guidelines including title page, reference page and in-text citations.
Consists of two to three single-spaced pages of content.
Provide at least four scholarly sources, excluding the textbook.
. CASE 5A — GLASER HEALTH PRODUCTS
Glaser Health Products of Ranier Falls, Georgia, is organized functionally into three divisions: Operations,
Sales, and Administrative. Purchasing, receiving, materials and production control, manufacturing, factory
personnel, inventory stores, and shipping activities are under the control of the vice-president for
operations, George Gottlieb. Advertising, market research, and sales are the responsibility of the vicepresident for sales, Jake Bogan. Accounting, budgeting, the firm’s computer center, and general office
management are delegated to the corporate controller (Administrative), Charlie Kaplan. The following
cost categories are found in the company as a whole:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(l)
(m)
(n)
(o)
(p)
(q)
(r)
(s)
(t)
(u)
(v)
Depreciation on factory equipment.
Depreciation on office equipment.
Depreciation on factory building.
Advertising manager’s salary.
Assembly foreman’s salary.
Salespersons’ salaries.
Salespersons’ travel expenses.
Supplies for the Machining Department.
Advertising supplies used.
Electricity for the Assembly Department.
Lost materials (scrap) in a Machining Department.
Direct labor in the Assembly Department.
Supplies for the sales office.
Sales commissions.
Packing supplies.
Cost of hiring new employees.
Payroll fringe benefits for workers in the Shipping Department.
Supplies for Production Scheduling.
Cost of repairing parts improperly manufactured in the Machining Department.
Paint for the Assembly Department.
Heat, light, and power for the factory.
Leasing of computer equipment for the Accounting Department.
Required:
1. Identify each of the costs with the appropriate division: Operations, Sales, Administrative.
2. Identify each of the costs with one of the following:
(a) Unit-level activities.
(c) Product-level activities.
(b) Batch-level activities.
(d) Facility-level activities.
Organize these classifications by division: Operations, Sales, Administrative.
3. Specify an appropriate cost driver for tracing costs associated with the various levels of activities to
the next cost objective or products, whichever is appropriate.
4. Glaser Health Products is interested in using activity-based costing to identify as many costs as
possible with the products. These costs will be used for planning and control decisions rather than for
inventory valuation. The controller decided that all operation costs will be related to products but only
those sales and administrative costs that are classified as unit-level, batch-level, or product-level costs
should be related to products. Using preliminary stage cost drivers, explain how individual items of
costs will be traced to activity groupings.
5. Using primary stage cost drivers, show how the costs should be related to products.
6. Explain why it is necessary to use preliminary stage and primary stage cost drivers.
CASE 6B – CHESTER & WAYNE
Chester & Wayne is a regional food distribution company. Mr. Chester, CEO, has asked your
assistance in preparing cash-flow information for the last three months of this year. Selected
accounts from an interim balance sheet dated September 30, have the following balances:
Cash
Marketable securities
Accounts receivable
Inventories
$142,100
200,000
$1,012,500
150,388
Accounts payable
Other payables
$354,155
53,200
Mr. Wayne, CFO, provides you with the following information based on experience and
management policy. All sales are credit sales and are billed the last day of the month of sale.
Customers paying within 10 days of the billing date may take a 2 percent cash discount. Forty
percent of the sales is paid within the discount period in the month following billing. An
additional 25 percent pays in the same month but does not receive the cash discount. Thirty
percent is collected in the second month after billing; the remainder is uncollectible. Additional
cash of $24,000 is expected in October from renting unused warehouse space.
Sixty percent of all purchases, selling and administrative expenses, and advertising expenses is
paid in the month incurred. The remainder is paid in the following month. Ending inventory is
set at 25 percent of the next month’s budgeted cost of goods sold. The company’s gross profit
averages 30 percent of sales for the month. Selling and administrative expenses follow the
formula of 5 percent of the current month’s sales plus $75,000, which includes depreciation of
$5,000. Advertising expenses are budgeted at 3 percent of sales.
Actual and budgeted sales information is as follows:
Actual:
August
September
$750,000
787,500
Budgeted:
October
November
December
January
$826,800
868,200
911,600
930,000
The company will acquire equipment costing $250,000 cash in November. Dividends of $45,000
will be paid in December.
The company would like to maintain a minimum cash balance at the end of each month of
$120,000. Any excess amounts go first to repayment of short-term borrowings and then to
investment in marketable securities. When cash is needed to reach the minimum balance, the
company policy is to sell marketable securities before borrowing.
The company will acquire equipment costing $250,000 cash in November. Dividends of $45,000
will be paid in December.
The company would like to maintain a minimum cash balance at the end of each month of
$120,000. Any excess amounts go first to repayment of short-term borrowings and then to
investment in marketable securities. When cash is needed to reach the minimum balance, the
company policy is to sell marketable securities before borrowing.
Questions (use of spreadsheet software is recommended):
1. Prepare a cash budget for each month of the fourth quarter and for the quarter in total.
Prepare supporting schedules as needed. (Round all budget schedule amounts to the
nearest dollar.)
2. You meet with Mr. Chester and Mr. Wayne to present your findings and happen to bring
along your PC with the budget model software. They are worried about your findings in
Part 1. They have obviously been arguing over certain assumptions you were given.
a. Mr. Wayne thinks that the gross margin may shrink to 27.5 percent because of
higher purchase prices. He is concerned about what impact this will have on
borrowings. Comment.
b. Mr. Chester thinks that “stock outs” occur too frequently and wants to see the
impact of increasing inventory levels to 30 and 40 percent of next quarter’s sales
on their total investment. Comment on these changes.
c. Mr. Wayne wants to discontinue the cash discount for prompt payment. He thinks
that maybe collections of an additional 20 percent of sales will be delayed from
the month of billing to the next month. Mr. Chester says “That’s ridiculous! We
should increase the discount to 3 percent. Twenty percent more would be
collected in the current month to get the higher discount.” Comment on the cashflow impacts.
CASE 9A – MIDDLEHURST HOUSE
Middlehurst House is a daycare center/preschool which operates as a partnership of George
Friedman and Bill Compton. The center is in a city that has a large base of twoincome families
who have a need for quality day care. The two men started the center this year. Compton
contributed $40,000 to get the business started—to purchase equipment and to operate through
the early months. Friedman, who previously managed another center, is the director of the center
and draws $2,000 per month for his services. Partnership profits and losses, after Friedman’s
salary, are split 75 percent for Compton and 25 percent for Friedman.
Middlehurst House operates from 6 a.m. to 6 p.m., Monday through Friday. It is in a single
building that has a capacity limit of 120 children and meets city and state regulations. At present,
the center has six classes, all at maximum sizes, structured as follows:
2 to 3
3 to 4
4 to 5
5 to 6
Number
of classes
2
1
1
2
Children
per class
10
15
15
15
Total
children
20
15
15
30
Monthly tuition
per child
$320
280
280
260
Class sizes are determined by state law which sets a limit on the number of children per
instructor. The center uses one instructor per classroom.
Tuition is charged monthly. Minor adjustments are made on an individual basis. In October, the
most recent month with data available, revenues were $21,500 ($22,600 less $1,100
adjustments). Monthly revenues should be rather stable since classes are full most of the time.
Expenses for October were:
Salaries for instructors
Salary of director
Salary of part-time cook
Food expenses
Staff benefits expenses
Supplies expenses
Occupancy and other administrative
expenses
Total expenses
$9,600
2,000
900
2,200
2,450
600
3,250
$21,000
Fixed expenses are the salary of the part-time cook and occupancy and other administrative
expenses. The salary of the director is fixed—as a partnership, this is in reality a distribution of
profits, but it is included in expenses for comparative purposes.
Food is $1.25 per student per day. Staff benefits are 10 percent of salaries plus $200 per person
for benefit programs for instructors and the part-time cook. Variable supplies are $1 per student
per month. Step costs are salaries for instructors, averaging $1,600 per instructor per class.
Friedman wants to increase the quality of service by decreasing class sizes and also by
expanding student enrollments. These alternatives are interrelated. Friedman thinks that class
sizes are too large and that children are not getting the individual attention they require.
Friedman surveyed parents of all 80 students to measure their support for a tuition increase tied
to a reduction in class size. For children ages 2 to 5, most parents would support a 25 percent
tuition increase, and nearly 50 percent would support a 50 percent increase. Of the 5-to-6 age
group parents, nearly three fourths did not want any increase. The remainder said they would
support a 25 percent increase but no more.
Proper class size is very subjective. However, Friedman feels that he could achieve a child/
instructor ratio of 6 to 1 for the 2-to-3 age group, an 8 to 1 ratio for the 3-to-4 and 4-to-5 age
groups, and a 10 to 1 ratio for the 5-to-6 age group.
The center has easily maintained the 80-student level, with each class full. Friedman keeps in
touch with waiting-list parents to make certain each is still interested. This list provides children
when someone leaves the center. The current waiting list is as follows:
Age
group
2 to 3
3 to 4
Number of children
5
7
Age
group
4 to 5
5 to 6
Number of children
4
11
Friedman does not start a new class unless more students are on the waiting list than are required
per class. Obviously, enough students are on the 5-to-6 age group waiting list to start a new class.
Lately, however, he has wondered if the center could make a profit by starting classes with fewer
than the requisite number, taking the chance that new students would appear and could be added
immediately.
Information from his various inquiries implies that a potential market for quality infant care (0 to
24 months) exists. Friedman doesn’t think this expansion would be profitable. However, he has
never done an analysis of the situation and has not thought about an appropriate tuition. He
believes that the infant/instructor ratio in his center should be no higher than 5 infants to one
instructor. The center would have no food costs for the infants.
Compton will only agree to Friedman’s suggested changes if the center will continue to operate
at or above the current profit level.
Friedman does not start a new class unless more students are on the waiting list than are required
per class. Obviously, enough students are on the 5-to-6 age group waiting list to start a new class.
Lately, however, he has wondered if the center could make a profit by starting classes with fewer
than the requisite number, taking the chance that new students would appear and could be added
immediately.
Information from his various inquiries implies that a potential market for quality infant care (0 to
24 months) exists. Friedman doesn’t think this expansion would be profitable. However, he has
never done an analysis of the situation and has not thought about an appropriate tuition. He
believes that the infant/instructor ratio in his center should be no higher than 5 infants to one
instructor. The center would have no food costs for the infants.
Compton will only agree to Friedman’s suggested changes if the center will continue to operate
at or above the current profit level.
Questions:
1. Look at each decision separately, as incremental to the current situation, and evaluate the
marginal profit:
a. If class size is decreased (keeping the same 80 students), what increase in tuition
is necessary to keep the current monthly profit level?
b. Without regard to (a), is it profitable to create the new class from the waiting list?
Explain.
c. Use the new fee structure as found in (a). Is it profitable to move to smaller class
sizes, if new full classes are created and filled to their new maximums using the
waiting list? Show calculations.
d. Is a class for infant care profitable if tuition is the same as the proposed class
tuition for the 2-to-3 age group?
2. Write a brief memo to Friedman and Compton highlighting any concerns that underlie
the analyses you have performed in Part 1.

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