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Managerial Accounting
Hewitt Rug Company makes two types of rugs, seasonal and all-purpose. Both types of rugs are hand-made, but the seasonal rugs require significantly more labor because of their decorative designs. The
This problem is an extension of Problem 5-14A, which must be completed first. Hewitt’s accounting staff has disaggregated the $90,000 of overhead costs into the following items. .:.Requireda.
Soloman Academy, is a profit-oriented education business. Soloman provides remedial training for high school students who have fallen behind in their classroom studies. It charges its students $500
Friar Paint Company makes paint in many different colors; it charges the same price for all of its paint regardless of the color. Recently, Friar’s chief competitor cut the price of its white
Morello Sporting Goods Corporation makes two types of racquets, tennis and badminton. The company uses the same facility to make both products even though the processes are quite different. The
Heisler Cameras, Inc., manufactures two models of cameras. Model ZM has a zoom lens; Model DS has a fixed lens. Heisler uses an activity-based costing system. The following are the relevant cost data
Fazel Chairs, Inc., makes two types of chairs. Model Diamond is a high-end product designed for professional offices. Model Gold is an economical product designed for family use. Irene Fazel, the
The following quality cost report came from the records of Nelson Company.Requireda. Explain the strategy that Nelson Company initiated to control its quality costs.b. Indicate whether the strategy
Tucker Manufacturing is developing an activity-based costing system to improve overhead cost allocation. One of the first steps in developing the system is to classify the costs of performing
Provide at least one example of an appropriate cost driver (allocation base) for each of the following activities.a. Workers count completed goods before moving them to a warehouse.b. A logistics
Astro Corporation, a furniture manufacturer, uses an activity-based costing system. It has identified the following selected activities:1. Incurring property taxes on factory buildings.2. Incurring
Understanding the context-sensitive nature of classifying activities RequiredDescribe a set of circumstances in which labor cost could be classified as a unit-level, a batch level, a product-level,
Understanding the context-sensitive nature of classifying activities Mauldin Company makes two types of cell phones. Handy is a thin, pocket-size cell phone that is easy to carry around. Action is a
Computing overhead rates based on different costing drivers Chase Industries produces two surge protectors: VC620 with six outlets and PH630 with eight outlets and two telephone line connections.
Comparing an ABC system with a traditional cost system Use the information in Exercise 5-6B to complete the following requirements. Assume that before shifting to activity-based costing, Chase
Allocating costs with different cost drivers Rigsby Sporting Goods, Inc., produces indoor treadmills. The company allocates its overhead costs using activity-based costing. The costs and cost drivers
Allocating costs with different cost drivers Talton Shoes Corporation produces three brands of shoes, Brisk, Pro, and Runner. Relevant information about Talton overhead activities, their respective
Computing product cost with given activity allocation rates Using automated production processes, Stegall Videos produces two kinds of digital camcorders: N100 for the novice and D200 for the
Allocating facility-level costs and a product elimination decision Adgar Corporation produces two types of juice that it packages in cases of 24 cans per case. Selected per case data for the two
Lucas Weldon, the president of Easeley Industries, Inc., was beaming when he was reviewing the company’s quality cost report. After he had implemented a quality-control program for three years, the
Since its inception, Ray Laboratory, has produced a single product, Product S109. With the advent of automation, the company added the technological capability to begin producing a second product,
Kelvin’s Commemoratives makes and sells two types of decorative plates. One plate displays a hand-painted image of Princess Diana; the other plate displays a machine-pressed image of Marilyn
Assume the same data as in Problem 5-14B with the following additional information. The hours of machine time for processing plates are 1,000 for Diana plates and 2,500 for Monroe plates.Requireda.
Wattson CPA and Associates is a local accounting firm specializing in bookkeeping and tax services. The firm has four certified public accountants who supervise 20 clerks. The clerks handle basic
Yoder Boot and Shoe Company makes hand-sewn boots and shoes. Yoder uses a companywide overhead rate based on direct labor hours to allocate indirect manufacturing costs to its products. Making a pair
Pricing decisions made with ABC system cost data Pittman Furniture Corporation makes two types of dining tables, Elegance for formal dining and Comfort for casual dining, at its single factory. With
Target pricing and target costing with ABC Ricardo Corporation manufactures two models of watches. Model Wonder displays cartoon characters and has simple features designed for kids. Model Marvel has
Cost management with an ABC system Hayne Corporation manufactures two different coffee makers, Professional for commercial use and Home for family use. Dwight Hayne, the president, recently received
Carl Wallace, the president of Ritch Plastic Company, is a famous cost cutter in the plastics industry. Two years ago, he accepted an offer from Ritchs board of directors to help the
Drilling Innovations, Inc., produces specialized cutting heads used by companies that drill for oil and natural gas. The company has recently implemented an ABC system for three of its products and
A dialysis clinic provides two types of treatment for its patients. Hemodialysis (HD), an in house treatment, requires that patients visit the clinic three times each week for dialysis treatments.
Evaluating external failure costs with real world data The federal government maintains a website devoted to providing information about product recalls. To complete this assignment you will need to
Assessing a strategy to control quality cost Lucy Sawyer, who owns and operates Sawyer Toy Company, is a perfectionist. She believes literally in the zero-defects approach to
Conflicts between controlling cost and providing social responsibility to patients This case examines potential ethical issues faced by the dialysis clinic described in ATC 5-2. It is, however, an
Tameron Corporation produces video games in three market categories: commercial, home line, and miniature handheld. Tameron has traditionally allocated overhead costs to the three product categories
Beasley Company makes three types of exercise machines. Data have been accumulated for four possible overhead drivers. Data for these four possible drivers are shown in rows 3 to 7 of the following
To this point we have assumed the Magnificent Modems produced only one type of modem. Suppose instead we assume the company produces several different kinds of modems. The production process differs
Identify the primary qualities of revenues and costs that are relevant for decision making.
Are variable costs always relevant? Explain.
Identify the four hierarchical levels used to classify costs. When can each of these levels of costs be avoided?
Describe the relationship between relevance and accuracy.
It all comes down to the bottom line. The numbers never lie. Do you agree with this conclusion? Explain your position.
Carmon Company invested $300,000 in the equity securities of Mann Corporation. The current market value of Carmon’s investment in Mann is $250,000. Carmon currently needs funds for operating
What is an opportunity cost? How does it differ from a sunk cost?
A local bank advertises that it offers a free noninterest-bearing checking account if the depositor maintains a $500 minimum balance in the account. Is the checking account truly free?
A manager is faced with deciding whether to replace machine A or machine B. The original cost of machine A was $20,000 and that of machine B was $30,000. Because the two cost figures differ, they are
Are all fixed costs unavoidable?
Identify two qualitative considerations that could be associated with special order decisions.
Which of the following would not be relevant to a make-or-buy decision?(a) Allocated portion of depreciation expense on existing facilities.(b) Variable cost of labor used to produce products
What two factors should be considered in deciding how to allocate shelf space in a retail establishment?
What level(s) of costs is (are) relevant in special order decisions?
Why would a company consider outsourcing products or services?
Chris Sutter, the production manager of Satellite Computers, insists that the floppy drives used in the company’s upper-end computers be outsourced since they can be purchased from a supplier at a
Identify some qualitative factors that should be considered in addition to quantitative costs in deciding whether to outsource.
The managers of Wilcox, Inc., are suggesting that the company president eliminate one of the company’s segments that is operating at a loss. Why may this be a hasty decision?
Why would a supervisor choose to continue using a more costly old machine instead of replacing it with a less costly new machine?
Identify some of the constraints that limit a business’s ability to satisfy the demand for its products or services.
Leah Friend is trying to decide which of two different kinds of candy to sell in her retail candy store. One type is a name brand candy that will practically sell itself. The other candy is cheaper
Distinction between relevance and cost behavior Stanley Company makes and sells a single product. Stanley incurred the following costs in its most recent fiscal year.Stanley could purchase the
Distinction between avoidable costs and cost behavior Medallion Company makes fine jewelry that it sells to department stores throughout the United States. Medallion is trying to decide which of two
Costs can be classified into one of four categories including unit-level, batch-level, product-level, or facility-level costs.RequiredClassify each of the items listed below into one of the four
Norman Concrete Company pours concrete slabs for single-family dwellings. Wayne Construction Company, which operates outside Norman’s normal sales territory, asks Norman to pour 40 slabs for
Issa Company manufactures a personal computer designed for use in schools and markets it under its own label. Issa has the capacity to produce 25,000 units a year but is currently producing and
Identifying qualitative factors for a special order decision RequiredDescribe the qualitative factors that Issa should consider before accepting the special order described in Exercise 6-6A.
Using the contribution margin approach for a special order decision Shenyang Company, which produces and sells a small digital clock, bases its pricing strategy on a 35 percent markup on total cost.
Roaming Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-quality racing bikes with limited sales. Roaming produces and sells only
Establishing price for an outsourcing decision Lunn Company makes and sells lawn mowers for which it currently makes the engines. It has an opportunity to purchase the engines from a reliable
Outsourcing decision with qualitative factors Nadir Corporation which makes and sells 79,400 radios annually, currently purchases the radio speakers it uses for $12 each. Each radio uses one speaker.
Outsourcing decision affected by opportunity costs Pace Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing
Lynch Freight Company owns a truck that cost $30,000. Currently, the truck’s book value is $18,000, and its expected remaining useful life is four years. Lynch has the opportunity to purchase for
Steve Denmark owns his own taxi, for which he bought an $18,000 permit to operate two years ago. Mr. Denmark earns $36,000 a year operating as an independent but has the opportunity to sell the taxi
Chamberline Company operates three segments. Income statements for the segments imply that profitability could be improved if Segment A were eliminated.Requireda. Explain the effect on profitability
Baich Transport Company divides its operations into four divisions. A recent income statement for Koslov Division follows.Requireda. Should Koslov Division be eliminated? Support your answer by
Safar Corporation is considering the elimination of one of its segments. The segment incurs the following fixed costs. If the segment is eliminated, the building it uses will be sold.Required Based
A machine purchased three years ago for $300,000 has a current book value using straight-line depreciation of $175,000; its operating expenses are $30,000 per year. A replacement machine would cost
Rainger Company is considering replacement of some of its manufacturing equipment. Information regarding the existing equipment and the potential replacement equipment follows.RequiredBased on this
Hardin Company paid $90,000 to purchase a machine on January 1, 2009. During 2011, a technological breakthrough resulted in the development of a new machine that costs $120,000. The old machine costs
Annual versus cumulative data for replacement decision Because of rapidly advancing technology, Andersen Publications Corporation is considering replacing its existing typesetting machine with leased
Joyful Novelties has the capacity to produce either 30,000 corncob pipes or 14,000 cornhusk dolls per year. The pipes cost $4 each to produce and sell for $7 each. The dolls sell for $11 each and
Context-sensitive relevance RequiredRespond to each requirement independently.a. Describe two decision-making contexts, one in which unit-level materials costs are avoidable, and the other in which
Chapman Construction Company is a building contractor specializing in small commercial buildings. The company has the opportunity to accept one of two jobs; it cannot accept both because they must be
Effect of order quantity on special order decision Ellis Quilting Company makes blankets that it markets through a variety of department stores. It makes the blankets in batches of 1,000 units. Ellis
Effects of the level of production on an outsourcing decision Seymour Chemical Company makes a variety of cosmetic products, one of which is a skin cream designed to reduce the signs of aging.
Outsourcing decision affected by equipment replacement Jenkins Bike Company (JBC) makes the frames used to build its bicycles. During 2011, JBC made 20,000 frames; the costs incurred follow.JBC has
Brandt Boot Co. sells men's, women's, and children's boots. For each type of boot sold, it operates a separate department that has its own manager. The manager of the men's department has a sales
Effect of activity level and opportunity cost on segment elimination decision Levert Manufacturing Co. produces and sells specialized equipment used in the petroleum industry. The company is
Comprehensive problem including special order, outsourcing, and segment elimination decisions Huffman Corporation makes and sells state-of-the-art electronics products. One of its segments produces
The following information applies to the products of Kaito Company.RequiredIdentify the product that should be produced or sold under each of the following constraints. Consider each constraint
Julio Sanchez manages the cutting department of Guzman Timber Company. He purchased a tree-cutting machine on January 1, 2011, for $400,000. The machine had an estimated useful life of five years and
Distinction between relevance and cost behavior Joe Awad is planning to rent a small shop for a new business. He can sell either sandwiches or donuts. The following costs pertain to the two
Distinction between relevance and cost behavior Gromyko Company makes and sells a toy plane. Gromyko incurred the following costs in its most recent fiscal year:Gromyko could purchase the toy planes
Distinction between avoidable costs and cost behavior Preston Phones, Inc., makes telephones that it sells to department stores throughout the United States. Preston is trying to decide which of two
Costs can be classified into one of four categories including unit-level, batch-level, product-level, or facility-level costs.RequiredClassify each of the items listed below into one of the four
Ragan Textile Company manufactures high-quality bed sheets and sells them in sets to a well known retail company for $54 a set. Ragan has sufficient capacity to produce 150,000 sets of sheets
Mansour Automotive Company manufactures an engine designed for motorcycles and markets the product using its own brand name. Although Mansour has the capacity to produce 40,000 engines annually, it
Identifying qualitative factors for a special order decision RequiredDescribe the qualitative factors that Mansour should consider before making the decision described in Exercise 6-6B.
Using the contribution margin approach for a special order decision Winchester Company produces and sells a food processor that it prices at a 25 percent markup on total cost. Based on data
Making an outsourcing decision Upton Boats Company currently produces a battery used in manufacturing its boats. The company annually manufactures and sells 5,000 units of a particular model of
Establishing a price for an outsourcing decision Romero Corporation makes and sells skateboards. Romero currently makes the 60,000 wheels used annually in its skateboards but has an opportunity to
Making an outsourcing decision with qualitative factors considered Keating Computers currently purchases for $16 each keyboard it uses in the 50,000 computers it makes and sells annually. Each
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