in your second interview with mr banner you presented your well 570704

BANNER MANUFACTURING INC.

In your second interview with Mr. banner, you presented your well

prepared financial analysis of the Banner Manufacturing Company

along with a cash flow statement. Mr. Banner was indeed very

impressed with your personality and knowledge and consequently

offered you a position as a general manager for his company.

With a great deal of confidence and enthusiasm, you began your work

last week. After several days of hard work, you become familiar

with the general operations of the Company. In addition, you found

a copy of comparative financial statements for the first 12 months

of the operations (previous year). However, you were not able to find

reliable and useful information about the unit cost of the

Company’s products.

OPERATING DATA

Banner Company makes two products, X and Y. The manufacturing

operations take place in two producing departments, cutting and

assembly. The Company also has two service departments, general

factory and maintenance. These service departments provide services

to the cutting and assembly departments.

The general factory department handles all purchases and takes care of

the administrating matters. The maintenance department performs all

the maintenance works for the cutting and the assembly departments.

The Company uses material “A” for both products X and Y. Material

“B” is used only for product Y.

Due to the standardization and simplification of production,

unskilled workers have been used in the past year. The Company can

assign worker to either producing departments with minor training.

The material and labor requirements for the products are presented

in appendix C.

All sales of the Company are on credit. Approximately, half of the

customers take advantage of the cash discount and pay with in the

one month discount period.

PLANNING FOR SUCCESS

Having gathered the above information, you are very anxious to

utilize your intelligence and knowledge to improve the operations

of the Banner Company. You have realized that first you need to

determine the behavior of the Company’s various costs in order to

improve planning, cost control, and decision making.

REQUIREMENTS

Determine the cost equations for factory overhead, advertising

expense, salary & commissions, bad debt expense, sales discount,

and purchasing expense by using a simple or multiple regression

model and the data presented in appendices C &D.

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