Question 1:
Better Bagels, Incorporated, manufactures a variety of bagels, which are frozen and sold in grocery stores. The production process consists of the following steps.
Ingredients, such as flour and raisins, are received and inspected. Then they are stored until needed.
Ingredients are carried on hand carts to the mixing room.
Dough is mixed in 40-pound batches in four heavy-duty mixers.
Dough is stored on large boards in the mixing room until a bagel machine is free.
A board of dough is carried into the bagel room. The board is tipped, and the dough slides into the hopper of a bagel machine. This machine pulls off a small piece of dough, rolls it into a cylindrical shape, and then squeezes it into a doughnut shape. The bagel machines can be adjusted in a setup procedure to accommodate different sizes and styles of bagels. Workers remove the uncooked bagels and place them on a tray, where they are kept until a boiling vat is free.
Next the trays of uncooked bagels are carried into an adjoining room, which houses three 50-gallon vats of boiling water. The bagels are boiled for approximately one minute.
Bagels are removed from the vats with a long-handled strainer and placed on a wooden board. The boards full of bagels are carried to the oven room, where they are kept until an oven rack is free. The two ovens contain eight racks that rotate but remain upright, much like the seats on a Ferris wheel. A rack full of bagels is finished baking after one complete revolution in the oven. When a rack full of bagels is removed from the oven, a fresh rack replaces it. The oven door is opened and closed as each rack completes a revolution in the oven.
After the bagels are removed from the oven, they are placed in baskets for cooling.
While the bagels are cooling, they are inspected. Misshapen bagels are removed and set aside. (Most are eaten by the staff.)
After the bagels are cool, the wire baskets are carried to the packaging department. Here the bagels are dumped into the hopper on a bagging machine. This machine packages a half-dozen bagels in each bag and seals the bag with a twist tie.
Then the packaged bagels are placed in cardboard boxes, each holding 24 bags. The boxes are placed on a forklift and are driven to the freezer, where the bagels are frozen and stored for shipment.
Required:
Identify the steps in the bagel-production process that fall into each of the following categories: process time, inspection time, move time, waiting time, storage time.
List the steps in the production process that could be candidates for non-value-added activities.
In light of what you have suggested as potential non-value-added activities, propose a redesigned process flow for Better Bagels, Incorporated, in which at least five of these shortcomings have been addressed. List and describe all of the process steps as was done above.
question2:
Midwest Home Furnishings Corporation (MHFC) manufactures a variety of housewares for the consumer market in the Midwest. The company’s three major product lines are cooking utensils, tableware, and flatware. MHFC implemented activity-based costing four years ago and now has a well-developed ABC system in place for determining product costs. Only recently, however, has the ABC system been systematically used for the purposes of activity-based management. As a pilot project, MHFC’s controller asked the ABC project team to do a detailed activity analysis of the purchasing activity. The following specific activities were identified.
Receipt of parts specifications from the Design Engineering Department.
Follow-up with design engineers to answer any questions.
Vendor (supplier) identification.
Vendor consultations (by phone or in person).
Price negotiation.
Vendor selection.
Ordering (by phone or mail).
Order follow-up.
Expediting (attempting to speed up delivery).
Order receiving.
Inspection of parts.
Return of parts not meeting specifications.
Consultation with design engineers and production personnel if parts do not satisfy intended purpose.
Further consultation and/or negotiation with vendor if necessary.
Ship parts back to vendor if necessary.
If satisfactory, move parts to storage.
Required:
Draw a diagram to depict MHFC’s two-dimensional activity-based costing efforts. The diagram should include the following:
The cost assignment role of ABC, with the cost pools, activities, and product lines represented.
The process view of ABC, with the purchasing activities displayed. Also indicated here will be the linkages among the activities. (To save space, indicate the activities by their numbers.)
The activity evaluation phase of two-dimensional ABC.
Identify the triggers for each of the following activities in MHFC’s purchasing activity analysis:
Follow-up with design engineers (activity 2)
Expediting (activity 9)
Inspection of parts (activity 11)
Return of parts (activity 12)
Consultation with design engineers and production personnel (activity 13)
For each of the activities listed in requirement 2, identify the possible root causes.
Choose four activities in MHFC’s purchasing function, and suggest a performance measure for each of these activities.
