nks in advance,
- Supply Chain Management
John, newly hired supply management director at Wau Industries, Inc., was about to tackle an inventory octopus. Word had just come from the board room that the directors had decreed a $1 million raw materials and supplies inventory reduction to conserve the company’s working capital.
Wau’s president, had told John, during the hiring interview that inventory was one of their biggest problems, and that’s why they were looking for a supply and inventory control person who could show them how to work some of the fat off the company’s inventories. John’s background and experience were expected to turn the trick.
John started to dig into the problem via a visit to each of Wau’s divisions: A, B and C Division.
At the A Division, he heard from the supply superintendent, “Don’t know as how the home office can give us much help’ on inventory, John. We’ve been making machinery here since 1877, and every customer knows he can get a replacement part from us for almost every machine we’ve ever made. That’s the real service that sells our machines. See that pile of raw castings and plates out there? Don’t imagine there’s another company in the country that has such a complete stock of material all ready to be made up to customer orders. It’s taken years to build this up, and it’s worth millions! We figure it’s all gravy after depreciation, too.”
The supply manager at B Division told him, “Sure, I’m trying to get our inventory sales in line with what the top brass at headquarters want. It’s not purchasing materials that’s out of the line now on B Division home hobby shop tools. Our big materials stock last quarter is now in production or in finished tools. Look at them in the warehouse, all backed up for the Christmas selling rush. We’ve been building up finished stock for a big season all summer. I sure hope our sales forecast is right.”
The C Division’s supply manager told John, “We don’t have any inventory problem here in supply. All our money is out there on the shop floor in custom-built components. All gear we buy goes directly into a government space black box. Since our customer is Uncle Sam, we don’t have any finished goods inventory and darn little in the stockroom.”
Wau’s Divisions ran under separate division vice presidents, so John couldn’t tackle the inventory problem himself at each plant. Because he was close to the top brass as a brand new high-powered expert, he was expected to help-the supply managers come up with some results – and fast.
- What are the company’s inventory troubles?/
- How can John cure them?/
- Pricing and Financial Management
The Rumbek Hauling Company contracted with construction firms to haul debris away from construction sites. The company is in the process of buying a new truck in 2020. The last truck they purchased was in 2017, and they paid $160,000 for the new Mercedes truck. He asked the firm’s accountant to see if there were statistics available that would help him decide on how much he should expect to pay for one this year. Idris, the accountant, knew of the Machinery and Equipment Subindex of the Producer Price Industrial Commodities from the Bureau of Labor Statistics. He got the following price index information from that organization:
|Year||Machinery and Equipment Index|
- Given the above index numbers, what could the Rumbek Company expect to pay for the new truck of the same type in 2020?
- Explain in full details on what basis the answer was arrived at.
- Procurement, Accounting and Control
Financial versus managerial accounting: An article in the April 12, 2004 edition of Business Week, “The Costco Way – Higher Wages Mean Higher Profits,” compared Costco Wholesale Corporation data with Wal-Mart’s Sam’s Club data. The tables below present some of the data used to support this claim.
How Costco Spends More on Employees
|Average hourly wage rate||$15,97||$11.53|
|Employees covered by a health-care plan||82%||47%|
|Average annual health-care costs per employee||$5,735||$3,500|
|Employees covered by a retirement p1an||91%||64%|
|Average annual retirement costs per employee||$1,330||$747|
| Benefits to Costco from Spending More on Employees
|Annual employee turnover||6%||21%|
|Labor and overhead cost as a percent of sales||9.8%||17%|
|Annual sa1es per square foot||$795||$516|
|Annual profit per employee||$13,647||$11,039|
- Is the information in the tables above best described as primarily financial accounting data or managerial accounting data in nature? Why or why not, please explain in detail.
- Provide additional examples of managerial and financial accounting information that could apply to Costco.
- Explain why a manager of an individual Costco store needs different kinds of information than someone who is considering lending the company money or investing in its common stock.