Cost Management: A Strategic Emphasis

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Managerial Economics
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Chapter 17 / Exercise 3
Managerial Economics
Froeb/McCann
Expert Verified
(2) What amount of sales, in dollars, for the new machine would produce a 10% profit margin (i.e. ratio of profit to sales = 10%)?129. As indicated in the text, sensitivity analysis is an important tool for dealing with uncertainty in the budget preparation process. Which estimates, out of all that management has to deal with, do you think are the most critical in terms of developing the master budget for the typical profit-seeking organization?
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Managerial Economics
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Chapter 17 / Exercise 3
Managerial Economics
Froeb/McCann
Expert Verified
Chapter 10- Strategy and the Master Budget10-54130. One of the behavioral considerations in implementing a budgeting system has to do with the issue of budgetary slack. What are the positive and negative aspects of building slack into budgets from: (1) top management's point of view, and (2) the employee's point of view (i.e., the individual responsible for building slack into the budget)? 131. Omni, Inc. manages a medical-expense reimbursement program for colleges and universities throughout the United States. University employees submit claims for reimbursement of medical expensesfrom reimbursement accounts established each year by the employees. Omni then processes reimbursement requests, verifies the legitimacy of each request, computes the deductible and co-payment required, determines whether the employee's expense reimbursement account has adequate funds available, and, if applicable, issues a reimbursement check to the eligible employee.Omni employs three different types of clerks who manage these reimbursement accounts: managers, clerical staff-1, and clerical staff-2. The managers are each paid $50,000 per year, clerical staff-1 employees are paid $40,000 per year, while clerical staff-2 employees are paid $35,000 per year. Based on prior experience, for every 150,000 claims processed per year, Omni needs to budget for one manager's position, two clerical staff-1 positions, and six clerical staff-2 positions.Last year, Omni processed 2 million reimbursement claims, and employed 14 managers, 30 clerical staff-1 employees, and 83 clerical staff-2 employees.Required:1. Basedon the data provided, calculate the cost savings or excess staffing costs for Omni during the most recent year. (Assume that the policy of the company is to hire only full-time employees.) 2. What managerial insights are suggested on the basis of your analysis? If you were attempting to judge the processing efficiency of Omni's staff, what additional information might you want to have?
Chapter 10- Strategy and the Master Budget10-55

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