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managerial accounting
Questions and Answers of
Managerial Accounting
In general, do you think people stop to think about how their actions will affect other people (for example, the elderly in California who suffered due to electricity blackouts), or do they just
Why do you think some people can so easily justify (at least to themselves) their unethical behaviour?
Do you think you could be tempted to follow if the leadership at your company had the same mentality as the leadership at Enron, or do you think you would have the courage to “just say no” or
How important is the “tone at the top” (the tone set by company leadership)?
Do you think such behaviour is common at other companies, or do you think this was a fairly isolated event?
Nature’s Elixir Corporation operates three divisions that process and bottle natural fruit juices. The historical-cost accounting system reports the following information for 2011:
The Dexter division of AMCO sells car batteries. AMCO’s corporate management gives Dexter management considerable operating and investment autonomy in running the division. AMCO is considering how
Carter Corporation recently announced a bonus plan to be awarded to the manager of the most profitable division. The three division managers are to choose whether ROI or RI will be used to measure
Performance Auto Company operates a new car division (that sells high performance sports cars) and a performance parts division (that sells performance improvement parts for family cars). Some
Bleefl Corporation manufactures furniture in several divisions, including the patio furniture division. The manager of the patio furniture division plans to retire in two years. The manager receives
Summit Equipment specializes in the manufacture of medical equipment, a field that has become increasingly competitive. Approximately two years ago, Ben Harrington, president of Summit, decided to
Superior Motor Company makes electric cars and has only two products, the Simplegreen and the Superiorgreen. To produce the Simplegreen, Superior Motor employed assets of $13,500,000 at the beginning
The Outdoor Sports Company produces a wide variety of outdoor sports equipment. Its newest division, Golf Technology, manufactures and sells a single product—AccuDriver, a golf club that uses
Return on investment (ROI) is often expressed as follows:
Crango Products is a cranberry cooperative that operates two divisions, a harvesting division and a processing division. Currently, all of harvesting’s output is converted into cranberry juice by
Refer to Problem 22-28.Required1. Suppose the manager of division A has the option of (a) cutting the external price to $195, with the certainty that sales will rise to 1,000 units or (b) maintaining
Europa, Inc., has two divisions, A and B, that manufacture expensive bicycles. Division A produces the bicycle frame, and division B assembles the rest of the bicycle onto the frame. There is a
Refer to Exercise 22-25. Assume that division A can sell the 1,000 units to other customers at $155 per unit, with variable marketing cost of $5 per unit.Required Determine whether
Ajax Corporation has two divisions. The mining division makes toldine, which is then transferred to the metals division. The toldine is further processed by the metals division and is sold to
British Columbia Lumber has a raw lumber division and a finished lumber division. The variable costs are as follows:Raw lumber division: $100 per 100 board-feet of raw lumberFinished lumber division:
Fenster Corporation manufactures windows with wood and metal frames. Fenster has three departments: glass, wood, and metal. The glass department makes the window glass and sends it to either the wood
What are the three methods for determining transfer prices?
Assume the same facts as in Problem 21-27, except that the plant is located in Austin, Texas. Pro Chips has no special waiver on income taxes. It pays a 30% tax rate on all income. Proceeds from
Pro Chips is a manufacturer of prototype chips based in Dublin, Ireland. Next year, in 2012, Pro Chips expects to deliver 552 prototype chips at an average price of $80,000. Pro Chips’ marketing
Anna’s Bakery plans to purchase a new oven for its store. The oven has an estimated useful life of four years. The estimated pretax cash flows for the oven are as shown in the table that follows,
Century Lab plans to purchase a new centrifuge machine for its New Hampshire facility. The machine costs $137,500 and is expected to have a useful life of eight years, with a terminal disposal value
Andrews Construction is analyzing its capital expenditure proposals for the purchase of equipment in the coming year. The capital budget is limited to $6,000,000 for the year. Lori Bart, staff
Southern Cola is considering the purchase of a special-purpose bottling machine for $23,000. It is expected to have a useful life of four years with no terminal disposal value. The plant manager
To be sure that you understand how to use the tables in Appendix A at the end of this book, solve the following exercises. Ignore income tax considerations. The correct answers, rounded to the
Flexible Security Devices (FSD) has introduced a just-in-time production process and is considering the adoption of lean accounting principles to support its new production philosophy. The company
Assume the same facts as in Problem 20-32 except now there are only two trigger points: Completion of good finished units of product and Sale of finished goods.Required1. Prepare summary journal
Assume that the second trigger point for Rippel Corporation is the sale—rather than the completion—of finished goods. Also, the inventory account is confined solely to direct materials, whether
The Margro Corporation is an automotive supplier that uses automatic turning machines to manufacture precision parts from steel bars. Margro’s inventory of raw steel averages $600,000. John Oates,
Assume the same facts as in Exercise 20-23, except now Road Warrior uses only two trigger points, Completion of good finished units of product and Sale of finished goods. Any under- or overallocated
Road Warrior Corporation assembles handheld computers that have scaled-down capabilities of laptop computers. Each handheld computer takes six hours to assemble. Road Warrior uses a JIT production
Lakeland Company produces lawn mowers and purchases 18,000 units of a rotor blade part each year at a cost of $60 per unit. Lakeland requires a 15% annual rate of return on investment. In addition,
Athletic Textiles (AT) manufactures the Galaxy jerseys that Fan Base (FB) sells to its customers. AT has recently installed computer software that enables its customers to conduct “one-stop”
Fan Base (FB) operates a megastore featuring sports merchandise. It uses an EOQ decision model to make inventory decisions. It is now considering inventory decisions for its Los Angeles Galaxy soccer
Give examples of costs included in annual carrying costs of inventory when using the EOQ decision model.
The Brandt Corporation makes wire harnesses for the aircraft industry only upon receiving firm orders form its customers. Brandt has recently purchased a new machine to make two types of wire
Costen, Inc., produces cell phone equipment. Jessica Tolmy, Costen’s president, decided to devote more resources to the improvement of product quality after learning that her company had been
White Goods assembles washing machines at its Auburn plant. In February 2012, 60 tumbler units that cost $44 each (from a new supplier who subsequently went bankrupt) were defective and had to be
Chipcity is a fast-growing manufacturer of computer chips. Direct materials are added at the start of the production process. Conversion costs are added evenly during the process. Some units of this
Appleton Company makes wooden toys in its forming department, and it uses the weighted-average method of process costing. All direct materials are added at the beginning of the process, and
For the data in Exercise 18-17, summarize total costs to account for; calculate the cost per equivalent unit for direct materials and conversion costs; and assign total costs to units completed and
Consider the following data for November 2012 from Gray Manufacturing Company, which makes silk pennants and uses a process costing system. All direct materials are added at the beginning of the
Consider the following data for November 2012 from Gray Manufacturing Company, which makes silk pennants and uses a process costing system. All direct materials are added at the beginning of the
Consider the following data for November 2012 from Gray Manufacturing Company, which makes silk pennants and uses a process costing system. All direct materials are added at the beginning of the
Ozumo’s Gardening makes several different kinds of mulch. Its busy period is in the summer months. In August, the controller suddenly quit due to a stress-related disorder. He took with him the
Larsen Company, as you know, is a manufacturer of car seats. Each car seat passes through the assembly department and testing department. This problem focuses on the testing department. Direct
Larsen Company manufactures car seats in its San Antonio plant. Each car seat passes through the assembly department and the testing department. This problem focuses on the assembly department. The
Asaya Clothing, Inc., is a manufacturer of winter clothes. It has a knitting department and a finishing department. This exercise focuses on the finishing department. Direct materials are added at
For the data in Exercise 17-19, summarize total costs to account for, calculate cost per equivalent unit for direct materials and conversion costs, and assign total costs to units completed (and
Roary Chemicals has a mixing department and a refining department. Its process-costing system in the mixing department has two direct materials cost categories (chemical P and chemical Q) and one
Roary Chemicals has a mixing department and a refining department. Its process-costing system in the mixing department has two direct materials cost categories (chemical P and chemical Q) and one
Refer to requirement 2 of Exercise 17-16.RequiredPrepare summary journal entries for the use of direct materials and incurrence of conversion costs. Also prepare a journal entry to transfer out the
Nihon, Inc., is a manufacturer of digital cameras. It has two departments: assembly and testing. In January 2012, the company incurred $750,000 on direct materials and $798,000 on conversion costs,
Sonimad Sawmill, Inc., (SSI) purchases logs from independent timber contractors and processes the logs into three types of lumber products:Studs for residential buildings (walls, ceilings)Decorative
The Chocolate Factory manufactures and distributes chocolate products. It purchases cocoa beans and processes them into two intermediate products: chocolate-powder liquor base and milk chocolate
Iowa Soy Products (ISP) buys soy-beans and processes them into other soy products. Each ton of soy beans that ISP purchases for $300 can be converted for an additional $200 into 500 pounds of soy
Instant Foods produces two types of microwavable products—beef-flavored ramen and shrimp-flavored ramen. The two products share common inputs such as noodle and spices. The production of ramen
Sinclair Oil & Gas, a large energy conglomerate, jointly processes purchased hydrocarbons to generate three nonsaleable intermediate products: ICR8, ING4, and XGE3. These intermediate products
The Wood Spirits Company produces two products—turpentine and methanol (wood alcohol)—by a joint process. Joint costs amount to $120,000 per batch of output. Each batch totals 10,000 gallons: 25%
Convad Company is one of the world’s leading corn refiners. It produces two joint products—corn syrup and corn starch—using a common production process. In July 2012, Convad reported the
Quality Chicken is computing the ending inventory values for its July 31, 2012, balance sheet. Ending inventory amounts on July 31 are 15 pounds of breasts, 4 pounds of wings, 6 pounds of thighs, 5
Quality Chicken grows and processes chickens. Each chicken is disassembled into five main parts. Information pertaining to production in July 2012 is as follows:
Why might managers seeking a monthly bonus based on attaining a target operating income prefer the sales method of accounting for byproducts rather than the production method?
The Central Valley Company has prepared department overhead budgets for budgeted-volume levels before allocations as follows:
Consider E-books again. The controller of E-books reads a widely used textbook that states that “the reciprocal method is conceptually the most defensible.” He seeks your assistance.Required1.
E-books, an online book retailer, has two operating departments—corporate sales and consumer sales—and two support departments—human resources and information systems. Each sales department
Phoenix Partners provides management consulting services to government and corporate clients. Phoenix has two support departments—administrative services (AS) and information systems (IS)—and two
Chocolat Inc. is a producer of premium chocolate based in Palo Alto. The company has a separate division for each of its two products: dark chocolate and milk chocolate. Chocolat purchases
Spring Distribution has decided to analyze the profitability of five new customers (see pp. 510–517). It buys bottled water at $12 per case and sells to retail customers at a list price of $14.40
The Detroit Penguins play in the American Ice Hockey League. The Penguins play in the Downtown Arena (owned and managed by the City of Detroit), which has a capacity of 15,000 seats (5,000 lower-tier
Figure Four is a distributor of pharmaceutical products. Its ABC system has five activities: Rick
Instant Service (IS) repairs printers and photocopiers for five multisite companies in a tristate area. IS’s costs consist of the cost of technicians and equipment that are directly traceable to
. Lenzig Corporation has three divisions: pulp, paper, and fibers. Lenzig’s new controller, Ari Bardem, is reviewing the allocation of fixed corporate-overhead costs to the three divisions. He is
Rembrandt Hotel & Casino is situated on beautiful Lake Tahoe in Nevada. The complex includes a 300-room hotel, a casino, and a restaurant. As Rembrandt’s new controller, you are asked to
Greenbold Manufacturing has four divisions named after its locations: Arizona, Colorado, Delaware, and Florida. Corporate headquarters is in Minnesota. Greenbold corporate headquarters incurs
What criteria might be used to guide cost-allocation decisions? Which are the dominant criteria?
Halsey Company sells women’s clothing. Halsey’s strategy is to offer a wide selection of clothes and excellent customer service and to charge a premium price. Halsey presents the following data
Lee Corporation manufactures various types of color laser printers in a highly automated facility with high fixed costs. The market for laser printers is competitive. The various color laser printers
Caltex, Inc., refines gasoline and sells it through its own Caltex Gas Stations. On the basis of market research, Caltex determines that 60% of the overall gasoline market consists of
Refer to Exercise 13-26.Required1. Calculate the operating income of Westlake Corporation in 2010 and 2011.2. Calculate the growth, price-recovery, and productivity components that explain the change
Refer to Exercise 13-22.Required 1. Calculate the amount and cost of (a) unused manufacturing capacity and (b) unused selling and customer-service capacity at the beginning of 2011 based on actual
Refer to Exercise 13-22.Required 1. Calculate the amount and cost of (a) unused manufacturing capacity and (b) unused selling and customer-service capacity at the beginning of 2011 based on actual
Suppose that during 2011, the market for Stanmore’s special-purpose machines grew by 3%. All increases in market share (that is, sales increases greater than 3%) are the result of Stanmore’s
Refer to Exercise 13-22.Required1. Calculate the operating income of Stanmore Corporation in 2010 and 2011.2. Calculate the growth, price-recovery, and productivity components that explain the change
Refer to Exercise 13-19. Suppose that the market for silk-screened T-shirts grew by 10% during 2011. All increases in sales greater than 10% are the result of Roberto’s strategic
What is a partial-productivity measure?
Define strategy.
Vend-o-licious makes candy bars for vending machines and sells them to vendors in cases of 30 bars. Although Vend-o-licious makes a variety of candy, the cost differences are insignificant, and the
Cutler Electronics makes an MP3 player, CE100, which has 80 components. Cutler sells 7,000 units each month for $70 each. The costs of manufacturing CE100 are $45 per unit, or $315,000 per month.
Medical Instruments uses a manufacturing costing system with one direct-cost category (direct materials) and three indirect-cost categories:a. Setup, production order, and materials-handling costs
Snappy Tiles is a small distributor of marble tiles. Snappy identifies its three major activities and cost pools as ordering, receiving and storage, and shipping, and it reports the following details
The San Carlos Company is an electronics business with eight product lines. Income data for one of the products (XT-107) for June 2011 are as follows:
The following financial data apply to the DVD production plant of the Dill Company for October 2011:
What is life-cycle budgeting?
What is cost-plus pricing?
Give two examples of pricing decisions with a short-run focus.
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