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    Haskin Company Was Founded 40 Years Ago and Now Has

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    Amit Pandey
    Haskin Company was founded 40 years ago and now has several manufacturing plants. It formed a Capital Budgeting Group in 2010 to review large capital expenditure proposals. The group meets annually to set budget and hurdle rate, and monthly as needed. Profits have declined slightly despite sales growth. The internal audit department is now examining the capital budgeting process and one past capital project in detail to evaluate efficiency and identify cost savings opportunities.

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    Haskin Company Was Founded 40 Years Ago and Now Has

    Uploaded by

    Amit Pandey
    220 views2 pages
    Haskin Company was founded 40 years ago and now has several manufacturing plants. It formed a Capital Budgeting Group in 2010 to review large capital expenditure proposals. The group meets annually to set budget and hurdle rate, and monthly as needed. Profits have declined slightly despite sales growth. The internal audit department is now examining the capital budgeting process and one past capital project in detail to evaluate efficiency and identify cost savings opportunities.

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    Haskin Company was founded 40 years ago and now has several manufacturing plants. It formed a Capital Budgeting Group in 2010 to review large capital expenditure proposals. The group meets annually to set budget and hurdle rate, and monthly as needed. Profits have declined slightly despite sales growth. The internal audit department is now examining the capital budgeting process and one past capital project in detail to evaluate efficiency and identify cost savings opportunities.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    220 views2 pages

    Haskin Company Was Founded 40 Years Ago and Now Has

    Uploaded by

    Amit Pandey
    Haskin Company was founded 40 years ago and now has several manufacturing plants. It formed a Capital Budgeting Group in 2010 to review large capital expenditure proposals. The group meets annually to set budget and hurdle rate, and monthly as needed. Profits have declined slightly despite sales growth. The internal audit department is now examining the capital budgeting process and one past capital project in detail to evaluate efficiency and identify cost savings opportunities.

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    Solved: Haskin Company was founded 40 years ago and

    now has

    Haskin Company was founded 40 years ago and now has several manufacturing plants in the
    Northeast and Midwest. The evaluation of proposed capital expenditures became increasingly
    difficult for management as the company became geographically dispersed and diversified its
    product line. Thus, the Capital Budgeting Group was organized in 2010 to review all capital
    expenditure proposals in excess of $100,000.
    The Capital Budgeting Group conducts its annual planning and budget meeting each
    September for the upcoming calendar year. The group establishes a minimum return for
    investments (hurdle rate) and estimates a target level of capital expenditures for the next year
    based on the expected available funds. The group then reviews the capital expenditure
    proposals that have been submitted by the various operating segments. Proposals that meet
    either the return on investment criterion or a critical need criterion are approved to the extent of
    available funds.
    The Capital Budgeting Group also meets monthly, as necessary, to consider any projects of a
    critical nature that were not expected or requested in the annual budget review. These monthly
    meetings allow the Capital Budgeting Group to make adjustments during the year as new
    developments occur.
    Haskin's profits have been decreasing slightly for the past 2 years despite a small but steady
    sales growth, a sales growth that is expected to continue through 2012. As a result of the profit
    stagnation, top management is emphasizing cost control and all aspects of Haskin's operations
    are being reviewed for cost reduction opportunities.
    Haskin's internal audit department has become involved in the companywide cost reduction
    effort. The department has already identified several areas where cost reductions could be
    realized and has made recommendations to implement the necessary procedures to effect the
    cost savings. Tom Watson, internal audit director, is now focusing on the activities of the Capital
    Budgeting Group in an attempt to determine the efficiency and effectiveness of the capital
    budgeting process.
    In an attempt to gain a better understanding of the capital budgeting process, Watson decided
    to examine the history of one capital project in detail. A capital expenditure proposal of Haskin's
    Burlington Plant that was approved by the Capital Budgeting Group in 2011 was selected
    randomly from a population of all proposals approved by the group at its 2010 and 2011 annual
    planning and budget meetings.
    The Burlington proposal consisted of a request for five new machines to replace equipment that
    was 20 years old and for which preventive maintenance had become expensive.
    Four of the machines were for replacement purposes, and the fifth was for planned growth in
    demand. Each of the four replacement machines was expected to result in annual maintenance
    cost savings of $20,000. The fifth machine was exactly like the other four and was expected to
    generate an annual contribution of $30,000 through increased output. Each machine had a cost
    of $110,000 and an estimated useful life of 8 years.

    Required
    a. Identify and discuss the issues that Haskin Company's internal audit department must

    Reach out to [email protected] for enquiry.


    address in its examination and evaluation of Burlington Plant's 2011 capital expenditure project.
    b. Recommend procedures to be used by Haskin's internal audit department in the audit review
    of Burlington Plant's 2011 capital expenditure project.*

    ANSWER
    https://solvedquest.com/haskin-company-was-founded-40-years-ago-and-now-has/

    Reach out to [email protected] for enquiry.


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