Greetings Case 2 Questions

In: Business and Management

Submitted By paratrooper76
Words 2342
Pages 10
Case 2

Greetings Inc.
Greetings Inc.: Activity-Based Costing
Developed by Thomas L. Zeller, Loyola University Chicago, and Paul D. Kimmel, University of Wisconsin–Milwaukee

The Business Situation
Mr. Burns, president of Greetings Inc., created the Wall Décor unit of Greetings three years ago to increase the company’s revenue and profits. Unfortunately, even though Wall Décor’s revenues have grown quickly, Greetings appears to be losing money on Wall Décor. Mr. Burns has hired you to provide consulting services to Wall Décor’s management. Your assignment is to make Wall Décor a profitable business unit. Your first step is to talk with the Wall Décor work force. From your conversations with store managers you learn that the individual Greetings stores are very happy with the Wall Décor arrangement. The stores are generating additional sales revenue from the sale of unframed and framed prints. They are especially enthusiastic about this revenue source because the online nature of the product enables them to generate revenue without the additional cost of carrying inventory. Wall Décor sells unframed and framed prints to each store at product cost plus 20%. A 20% markup on products is a standard policy of all Greetings intercompany transactions. Each store is allowed to add an additional markup to the unframed and framed print items according to market pressures. That is, the selling price charged by each store for unframed and framed prints is determined by each store manager. This policy ensures competitive pricing in the respective store locations, an important business issue because of the intense mall competition. While the store managers are generally happy with the Wall Décor products, they have noted a significant difference in the sales performance of the unframed prints and the framed prints. They find it difficult to sell unframed prints at a competitive…...

Similar Documents

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...

Words: 1342 - Pages: 6

Case 2 Greetings Inc.: Activity Based Costing

...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......

Words: 843 - Pages: 4

Case 2 Greetings Inc.: Activity Based Costing

...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......

Words: 286 - Pages: 2

Question 2

...Question 2: Accounting for Goodwill has been a contentious issue for many years. a. Using examples, explain alternative accounting methods that can be used in practice with respect to the treatment of goodwill arising on consolidation. b. Discuss the advantages and disadvantages of allowing different treatments to be used under international accounting standards for items such as goodwill. Answer. Goodwill means an intangible asset which provides a competitive advantage, such as a strong brand, reputation, or high employee morale. In an acquisition, goodwill appears on the balance sheet of the acquirer in the amount by which the purchase price exceeds the net tangible assets of the acquired company (www.investorwords.com). There are two types of goodwill, one is internally generated goodwill and another one is external or purchased goodwill. Internally generated goodwill is supposed to reflect the reputation and other positive characteristics of the business which are all difficult to put a value on (www.staffs.ac.uk). Internally generated goodwill is based on the value of a business as a whole and the value of its net assets. Because of internal goodwill has not been paid and it does not have an ‘objective’ value, and goodwill changes every day, internally generated goodwill should not appear on the Balance Sheet. Purchased goodwill is the excess of purchase price over fair value of the net assets of the business acquired by the purchaser. Purchased......

Words: 790 - Pages: 4

Chapter 2 Petrie's Electronics Case Questions

...Chapter 2 – Case Questions: Petrie’s Electronics 1) Information systems projects arise out of need. In the case of Petrie’s Electronics, Jim has been assigned the task of managing a project that will improve the company’s relationships with its customers. Petrie’s has a need to not only stay viable but to flourish and be a major competitor in today’s global technological marketplace. Upper management at an organization realizes at some point that in order to stay competitive they cannot stand still. They must grow and prosper. In this case, Ella the CFO along with other top management figures saw an area for improvement and Jim has been bestowed this opportunity to help the company. In this particular case, the organization’s information system needs may have resulted from issues associated with poor customer relations possibly having a history of high turnover rates for customers. Furthermore, key decision makers at Petrie’s most likely realized they could further capitalize on their current customer base through improvements in their current information technology system. 2) Organizational information systems should not only reinforce and support a company’s strategy they should aim to improve and complement it as well. Similar to a company’s strategy, information systems need to encompass a strategic vision that establishes an Information system’s main purpose and direction, sets core principals as guidelines, identifies clear objectives for monitoring the......

Words: 414 - Pages: 2

Case 2

...Case 2 Greet ings Inc. Greetings Inc.: Activity-Based Costing Developed by Thomas L. Zeller, Loyola University Chicago, and Paul D. Kimmel, University of Wisconsin–Milwaukee The Business Situation Mr. Burns, president of Greetings Inc., created the Wall Décor unit of Greetings three years ago to increase the company’s revenue and profi ts. Unfortunately, even though Wall Décor’s revenues have grown quickly, Greetings appears to be losing money on Wall Décor. Mr. Burns has hired you to provide consulting services to Wall Décor’s management. Your assignment is to make Wall Décor a profi table business unit. Your fi rst step is to talk with the Wall Décor work force. From your conversations with store managers you learn that the individual Greetings stores are very happy with the Wall Décor arrangement. The stores are generating additional sales revenue from the sale of unframed and framed prints. They are especially enthusiastic about this revenue source because the online nature of the product enables them to generate revenue without the additional cost of carrying inventory. Wall Décor sells unframed and framed prints to each store at product cost plus 20%. A 20% markup on products is a standard policy of all Greetings intercompany transactions. Each store is allowed to add an additional markup to the unframed and framed print items according to market pressures. That is, the selling price charged by each store for unframed and framed prints is......

Words: 2386 - Pages: 10

Disney Case Study Mba 5501 Question 1-2

...Unit 3 – Question 1 pg 179 The first question in the text book is a question that a lot of companies are asking themselves because of what Disney has been able to do with its brand. The question is as follows: What does Disney do best to connect with its core consumers? It can be seen from the passage that by the early 1970s Disney determined on clientele encompass of kids, relatives and adults. From the early to mid 1980s, it implemented policies to get in touch with older viewers. Now its advertising to all ages and civilization. Now it is one of the principal vary global entertainment business which consists of five divisions which include the following: The Walt Disney Studios, Parks and Resorts, Disney Consumer Products, Media Networks, and Interactive Media. This diversity supplies adequate probability for all category of consumers to first-rate services. They used up-and-coming knowledge to attach with patrons. This assists clientele to be provided with more expediently and amusingly. Disney’s nucleus values, as dedicated by its president in saying their greatest confrontation is to keeping up with a 90-year-old trademark pertinent and existing to its central part spectators while wait factual to its inheritance and core trade name principles. Today, the company is one of the planets main medium activity corporation in the globe having a unsurpassed correlation with core patrons. From the time when it began in 1923 by the Disney brothers, Disney has stayed......

Words: 1004 - Pages: 5

Greetings Inc Case 2

...Greetings Inc. Activities Estimated Annual Overhead Cost ÷ Cost Driver Activity-Based Overhead Rates Picking prints $30,600 102,000 Number of prints $0.30 per print ...

Words: 452 - Pages: 2

Case 2 Assignment Questions

...product available that they are currently working on. This lends to problems due to the medical field rapid changes, someone else could be developing a product that could make theirs irrelevant. The have little marketing strength needed to reach all of the physicians and hospitals in the country or globally. The product they are developing also requires many regulatory guidelines and issues that can be very expensive to adhere too. Biosonics is developing new applications of their product to improve the uses and making it more versatile. This requires more research and more money. They could focus on the original product a plan which would grow and generate profit. However the downside is having all of your money tied into one product. 2. Threats in the industry and competitive situations include hundreds of other companies providing a wide range of medical products. The rivalry among the firms is very high. Biosonics is a very small company competing with larger companies that can afford to research and develop better products long-term. Their competitors offer “like” or substitute like products, however they are not the same quality as Biosonics. Related technology is rapidly changing and product life usually is only a few years. They compete with an American Company that can do a better job marketing and distributing, which is a huge threat to their success. They also have to defend their patents from competitors who might try and take advantage of them because......

Words: 1037 - Pages: 5

Case Questions

...Case #1: Butler Lumber Company Questions 1. Why does Mr. Butler have to borrow so much money to support this profitable business? 2. Do you agree with his estimate of the company’s loan requirements? How much will he need to borrow to finance his expected expansion in sales (assume a 1991 sales volume of $3.6 million)? 3. As Mr. Butler’s financial advisor, would you urge him to go ahead with, or to reconsider, his anticipated expansion and his plans for additional debt financing? As the banker, would you approve Mr. Butler’s loan request, and, if so, what conditions would you put on the loan? 4. Has Butler Lumber Company created value for shareholders? Hint: It might help you to analyze the case if you conduct the following analyses: 1. 2. 3. 4. Construct a common-size (percentage) income statement. Construct a common-size (percentage) B/S Using information from 1&2 to find out the operating efficiency Assuming the same operating efficiency in 1990, forecast cash needs for the target growth Case #2: Ocean Carriers Questions Ocean Carriers uses a 9% discount rate. 1. Do you expect daily spot hire rates to increase or decrease next year? 2. What factors drive daily hire rates? 3. How would you characterize the long-term prospects of the capesize dry bulk industry? 4. Should Ms Linn purchase the $39M capesize? Make 2 different assumptions. First, assume that Ocean Carriers in a U.S. firm subject to 35% taxation. Second, assume that Ocean Carriers is located in Hong Kong,......

Words: 947 - Pages: 4

American Greetings Case

...AMERICAN GREETINGS Pada awal tahun 2012, suhu udara vukup hangat di Claveland, Ohio, kantor pusat American Greeting. Tetapi, sekalipun suhu udara mulai menghangat, harga saham American greeting mengalami penurunan. Dalam beberapa bulan terakhir, harga pasar saham perusahaan ini mengamali penurunan hingga di level $12.51. Manajemen American Greeting berencana untuk melakukan share buyback. Dengan current valuation, manajemen berencana untuk membeli ssaham mereka kembali dengan total pembelian sebesar $75. 000.000. keputusan yang diambil bergantung pada expected masa yang akan datang. Hallmark adalah kompetisi utama untuk American Greetings. Dalam beberapa tahun terakhir, media sosial telah memberitakan penurunan dalam industri kartu ucapan. Kedua American Greetings dan Hallmark telah mulai membuat kartu elektronik untuk mengambil keuntungan dari revolusi digital. Pada akhir 2012, American Greetings berada di bawah kelompok yang sama, dengan kelipatan rendah EV-EBITDA, market-to-book di bawah 1, rasio 6x PE, dan harga saham dari $ 12,51 yang telah turun secara signifikan dalam bulan sebelumnya. American Greetings secara historis menggunakan strategi pembelian kembali saham pada saat ekuitas rendah. Ini adalah cara yang baik jika harga saham turun sementara, tetapi valuasi rendah juga bisa menjadi tanda dari masalah yang lebih besar di mana akan lebih baik untuk menggunakan cash. Kedua S & P dan Value Line mengantisipasi pertumbuhan moderat untuk American Greetings......

Words: 724 - Pages: 3

Greeting Inc Case Study 1

...sales and production decisions are made based in part on predetermined overhead rates, and the rate was not right, then so too will be the result. * Variation of recognitions. The difference between the actual and the set up can be charged to expense in the current period, which could make a material change in the number of reported profits and asset inventory. * Weak link to historical costs. Use historical information to derive the amount of manufacturing overhead may not apply if there is a spike abruptly or decrease in these costs. * Larger organizations may employ a predetermined overhead rate in each production department which tends to improve the accuracy of overhead application by employing a higher level of precision. 2. What are advantages and disadvantages of using the cost of each print as a manufacturing overhead cost driver? The advantages when using the cost of each print as a manufacturing overhead cost driver are: * Manufacturing cost overhead will be more specific. This is because expensive prints will be more likely framed, while the processing of framing requires in the incurrence of considerably are more overhead cost. Thus, at the same volume levels, manufacturing overhead cost are assigned more to framed prints than unframed prints. In addition, this is done based on the expected volume of unit sold. That is, products that are produced in higher volume are also allocated more overhead costs. * Using the cost of each print as......

Words: 1749 - Pages: 7

Case 2: Greetings Inc

...Case 2* Greetings Inc.: Activity-Based Costing The Business Situation Mr. Burns, president of Greetings Inc., created the Wall Décor unit of Greetings three years ago to increase the company’s revenue and profits. Unfortunately, even though Wall Décor’s revenues have grown quickly, Greetings appears to be losing money on Wall Décor. Mr. Burns has hired you to provide consulting services to Wall Décor’s management. Your assignment is to make Wall Décor a profitable business unit. Your first step is to talk with the Wall Décor work force. From your conversations with store managers you learn that the individual Greetings stores are very happy with the Wall Décor arrangement. The stores are generating additional sales revenue from the sale of unframed and framed prints. They are especially enthusiastic about this revenue source because the online nature of the product enables them to generate revenue without the additional cost of carrying inventory. Wall Décor sells unframed and framed prints to each store at product cost plus 20%. A 20% markup on products is a standard policy of all Greetings intercompany transactions. Each store is allowed to add an additional markup to the unframed and framed print items according to market pressures. That is, the selling price charged by each store for unframed and framed prints is determined by each store manager. This policy ensures competitive pricing in the respective store locations, an important business issue......

Words: 2296 - Pages: 10

Case Questions

...Case Questions for April 10, 2010 Discussion Questions for Birch Paper Company Answer each of the following questions independently. 1. Which bid should Norhern Division accept? 2. Should Thompson Division lower its price? If so, to what? 3. What should the Commercial V.P. do? Case 23-5, Berkshire Industries 1. Were Berkshire’s motivations for a new incentive system reasonable? If so, what were their main options for a new system? Was an economic profit-focused system a reasonable choice? 2. Use the data pertaining to the Snack Food Division, as shown in Exhibit TN- 1, to calculate: a. Economic profit for the division for 2000 and 2001. b. The economic profit target for the division for 2001. c. The division manager’s bonus payout (% of salary) for 2000 and 2001. (Assume that the slope of the payoff line for 2000 was arbitrarily set by Berskshire management to equal 1.0). 3. Assume the base salary of the manager of the Snack Foods Division was ₤120,000 in both 2000 and 2001. How much cash would the manager receive from his bonus payouts in 2000 and 2001? 4. Evaluate the Berkshire Industries’ new incentive plan. What changes would you recommend, if any? 5. Should Mr. Embleton make special adjustments of the economic profit figures or the bonus payouts for personnel in the Spirits Division in 2000 and 2001? Why or why not? Sub-Micron Devices (take-home graded case, not due on April 10) Anwer the questions provided in the case...

Words: 253 - Pages: 2

Cases Questions

...2006 CASE QUESTIONS DR. KISS Please allow these questions to serve as a guide when you prepare your case write-up in accordance with the syllabus or other instructions. Table of Contents Page Case: Name and Number, Bruner 5e Note Number I. C12- Best Practices—WACC No Questions II. C2- Bill Miller & Value Trust 2 III. C5- Financial Detective, 2005 Contained in Case IV. C7- Body Shop Intl* Contained in Case, but see page 3 V. C6- Krispy Kreme Doughnuts, Inc. 4 VI. C17- The Investment Detective* Contained in Case VII. C28- Intro. to Debt Policy & Value* No Questions, but review M & M Theory on debt and value of the firm. VIII. HBS Case- “Leveraged Betas and the Cost of Equity No Questions IX. C16- The Boeing 7E 7* 5 X. C26- Jet Blue Airways, IPO Valuation* 6 XI.a C35- Merton Electronics 7 XI.b C36- Carefour S. A.* 8 XI.c C44- Palamon Capital Partners* 9 XII. GM Dividend Policy Negotiation (Information to be provided by Dr. Kiss) * Note: Excel Spreadsheets containing some of the exhibits from the case are available for this case at www.mhhe.com/bruner5e FIN 620, CASE QUESTIONS DR. KISS Please allow these questions to serve as a guide when you prepare your case write-up in accordance with the syllabus or other instructions Case 2- Bill Miller & Value Trust Suggested Questions for Your Preparation of the Case. ...

Words: 1437 - Pages: 6

レーザー装置 | 4 10 2017-10-15The Last Ship - Endgame | Richard Armitage