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Managerial accounting wiley answers
Managerial accounting wiley answers
Three importance of managerial accounting
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Managerial Accounting: John Deere Component Works
John Deere Component Works (JDCW), subdivision of John Deere and Co. was in charged specifically of the manufacturing of tractor component parts. The demand for JDCW’s products had problems due to the collapse of farmland value and commodity prices. Numerous and constant failures in JDCW’s competition for bids, alerted top management to start questioning their current costing methods. As an outcome, the analysis has to be guided to research on the current costing methods with the intention of establishing legitimacy and to help the company in adopting a more appropriate costing system.
Q1. How did the competitive environment change for John Deere Company between the 1970 and 1980?
• Sales increased through 1982 but then started to decline.
• Deer adjusted its level of operations downward, cut costs where possible, increased emphasis on pushing decision making downward and restructured manufacturing processes.
• Deere took floor space out of production, reduced personnel by 38.5% (right-sizing), encouraged early retirements, and did not replace most of those who left.
• To improve their operations and to make a more efficient flow through production they separated three subdivisions: Hydraulics, Drive- Train Division, & Gear and Special Products division.
• The collapse of farmland values and commodity prices in the 1980's increased the competition.
• The high dollar reduced US Exports, therefore hurting both American farming and American Farming manufacturer producers.
Q2. What caused the existing cost system to fail in the 1980's? What are symptoms of Cost System Failure?
• The fact that John Deere had previously been using a Standa...
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...rice and also selling it to others at a price that just barely covers my direct costs. I wouldn’t like to assume that an accountant's allocation of costs into categories (e.g. overhead and direct costs) matches the categories that I’d want in order to make economic decisions.
In the John Deere case, they were calling a lot of things overhead that weren't truly overhead (e.g. scrap, which is probably proportional to the amount produced). We discussed with my group how the internal transfer pricing arrangement probably encouraged the managers to think this way, since it awarded contracts on the basis of direct costs but, by the books, the actual transfer price was supposed to be the full price. In summary, the John Deere case was an exercise in thinking about how not to make pricing decisions.
From 1865 to 1900, production of crops increased, and prices dropped. Document A. These crops were shipped east, where they were eaten and exported to other countries. This was due to technology, but government policy caused economic conditions in the west to barely improve as a result. In fact, despite the success many farmers experienced, many in the West still struggled to put food on the table.
After the civil war, America found itself with a high production rate, resulting in overproduction and falling of prices, as well as an increase on economic stress and the beginning of panic and prosperity cycles. The wars demand for products had called for a more efficient production system; therefore new machinery had come into place. New tools, such as the reaper, shown in document D, the wheat harvest of 1880, were introduced and facilitated production for farmers, making overproduction more probable. Variation on prices than begun to occur as shown in document A, Agriculture prices in 1865-1900, where a greater amount of goods became available for a more convenient price. This had farmers in distress, for they were losing more money than they were making.
The Roaring Twenties approached and the citizens in Colorado were facing rough times. In 1920, many people such as farm owners, manufacturers, and even miners were having a hard time making a living due to an economic downfall. The farmers especially, where facing the toughest of times. The price of various farm-grown goods like wheat, sugar beets, and even cattle was dropping because their goods were no longer needed by the public. Wheat had dropped in price from $2.02 in 1918 to $0.76 by the time 1921 came around. Sadly, the land that they were using to grow wheat became dry and many farmers had to learn to grow through “dryland farming” which became very popular in the eastern plains from 1910 to 1930 (Hard Times: 1920 - 1940). Apple trees began to die due to the lack of desire for apples, poor land, and decreased prices. Over the course of World War I, the prices of farm goods began to increase slowly. Farmers were not the only one facing this economic hardship while others in big cities were enjoying the Roaring Twenties.
However, whereas Caterpillar and John Deere manufacture machinery that are substitutes for each other, the success of complementary products are also crucial. Whereas Caterpillar is a company that is based on construction equipment, John Deere is first and foremost an agricultural company. More specifically, a corn-driven company. This is never more evident than when looking at 2015. The 16% drop in stock price in 2015 coincided with a very poor corn harvest, but things are looking up. The USDA recently forecasted a record-high in corn-production, along with soybean production. Corn production is expected to increase by 11% in 2016 compared to 2015, which will greatly help with John Deere equipment sales. In addition, corn prices are finally expected to begin to recover in the next three years (Clark, 2015), which provides yet another positive factor for the growth in sales of John
American farmers found themselves facing hard times after the Civil War. In the West, the railroad had opened up enormous opportunities. Farmers were now able to cultivate land that had previously been to far from the Eastern markets to make a profit. However, that opportunity came at a price. The farmers increasing dependence on the railroads and other commercial interests made them an easy target for exploitative business practices.
Unfortunately, the circumstances in the Great Plains all came to a head, resulting in a horrific ten years for citizens of the Great Plains. The Dust Bowl caused government and people to look at farming practices and evaluate their output. These policies resulted in overproduction of crops, causing the prices to fall. The conclusion of World War I and countries that stopped importing foods added to the pain the farmers were already feeling.
Farmers everywhere in the United States during the late nineteenth century had valid reasons to complaint against the economy because the farmers were constantly being taken advantage of by the railroad companies and banks. All farmers faced similar problems and for one thing, farmers were starting to become a minority within the American society. In the late nineteenth century, industrialization was in the spotlight creating big businesses and capitals. The success of industrialization put agriculture and farmers on the down low, allowing the corporations to overtake the farmers. Since the government itself; such as the Republican Party was also pro-business during this time, they could have cared less about the farmers.
As the plows got more popular, John Deere moved his business to Moline, Illinois in 1848 (“John Deere Timeline” para. 5). John Deere’s headquarters is now located in Moline, Illinois (“Deere” para.1). After meeting Leonard Andrus, he became John Deere’s co-partner in plow- making (“John Deere Timeline” para. 4) In 1849, John Deere had built 2,136 plows with only 16 people (“John Deere Timeline” para. 6). The first Deere product was a steel plow that would go through the soil in the midwest prairie without clogging (“Deere” para.2). In 1869 Charles Deere and a guy by the name of Alcah Mansure branched off and made a company, Deere, Masur & Co, which was a distributor of Deere products (“John Deere TImeline” para. 14). John Deeres’ company had five branches off of it in 1889 (“John Deere Timeline” para. 26). John Deere combined their par...
Between 1865 and 1900 technology, economic conditions, and government policy influenced American Agriculture greater than it ever had before. Technologically, Railroads, factories, and farm equipment changed American agriculture by allowing the production of farmed goods to be increased substantially, while economic conditions caused the prices of these goods to go down and then fluctuate. Farmers hurting from the economic disarray began influencing the laws being passed to help them in their economic troubles. Because of the influence of technology, government policy, and economic conditions between the 1865 and 1900 American agriculture was affected.
Crops such as cotton and wheat, once the sustenance of the agriculture industry, were selling at prices so low that it was nearly impossible for farmers to make a profit off them. Furthermore, improvements in transportation allowed foreign competition to materialize, making it harder for American farmers to dispose of surplus crops. Mother Nature was also showing no mercy with grasshoppers, floods, and major droughts that led to a downward spiral of business that devastated many of the nation’s farmers. As a result of the agricultural depression, numerous farms groups, most notably the Populist Party, arose to fight what the farmers saw as the reasons for the decline in agriculture. During the final twenty years of the nineteenth century, many farmers in the United States saw monopolies and trusts, railroads, and money shortages and the loss in value of silver as threats to their way of life, all of which could be recognized as valid complaints.
Most of the reasons concerning agrarian discontent in the late nineteenth century stem from supposed threats posed by monopolies and trusts, railroads, money shortages and the demonetization of silver, though in many cases their complaints were not valid. The American farmer at this time already had his fair share of problems, perhaps even perceived as unfair in regards to the success industrialized businessmen were experiencing. Nevertheless, crops such as cotton and wheat, which were once the staples of an agricultural society, were selling at such low prices that it was nearly impossible for farmers to make a profit off them, especially since some had invested a great deal of money in modern equipment that would allow them to produce twice as many goods. Furthermore, improvements in transportation allowed foreign competition to emerge, making it harder for American Farmers to not only dispose of surplus crop, but to transport crops period. Finally, years of drought in the Midwest and the degeneration of business in the 1890's devastated many of the nation's farmers, and as a result of this agricultural depression' many farm groups, most notably the Populist Party, arose to fight what farmers saw as the reasons for the decline of agriculture.
Prior to the Industrial Revolution, agriculture was where the “common man” spent his working years, but after the I.R began, many went from the fields to the factories. During The Gilded Age (1865-1900) agriculture in the United States took a massive nosedive. The Gilded Age was infamous for government corruption, and this hurt the field of agriculture very much. Things such as changes in agriculture, government policy, and economic conditions changed agriculture in the United States significantly, and farmers had much to say about it.
... the consumer was demanding. With over production the consumer don’t purchase the items that was once in demand and Farmers over produce their products and those products are lowered once it hits the local super market.
There was no defined cost structure set by top management for each division. For Northern’s retail display box project in conjunction with Thompson, the two had only an informal agreement that the former had to reimburse the latter of the out-of-pocket cost of its design and development work.
ABC and High Technology: A Story with a Moral." Management Accounting, March 1996, pp. 37-40. 17. Smith, R.B. "Competitiveness in the '90s."