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managerial accounting
Questions and Answers of
Managerial Accounting
“The revenue budget is the cornerstone for budgeting.” Why?
Activity-based costing (ABC) systems are useful in helping companies make better decisions about pricing, product mix, and cost management related to product design and efficiency. In fact, General
Terminology.RequiredSelect the terms from the above list to complete the following sentences.One common ____________ to a traditional or ____________ costing system is called an ____________ . The
“ABC systems apply only to manufacturing companies.” Do you agree? Explain.
Describe four ways that help indicate when ABC systems are likely to provide the most benefits.
Jack Halpern is the owner and CEO of Aerospace Comfort, a firm specializing in the manufacture of seats for air transport. He has just received a copy of a letter written to the Auditor General of
In each of the following situations, determine whether job costing or process costing would be more appropriate.a. A public acccounting firmb. An oil refineryc. A custom furniture manufacturerd. A
Describe three alternative ways to dispose of underallocated or overallocated indirect costs.
Describe three different debit entries in the Work-in-Process Control general ledger T-account.
How does actual costing differ from normal costing?
What are the two major types of organizational elements that managers focus on in companies using job costing?
Why might an advertising agency use job costing for an advertising campaign by Pepsi, whereas a bank might use process costing to determine the cost of chequing account deposits?
The Rapid Meal has two restaurants that are open 24 hours a day. Fixed costs for the two restaurants together total $450,000 per year. Service varies from a cup of coffee to full meals. The average
Patel Manufacturing sold 200,000 units of its product for $30 per unit. Variable cost per unit is $25 and total fixed costs are $800,000.Required1. Calculate (a) contribution margin and (b) operating
Name three factors that affect the classification of a cost as direct or indirect.
As a new controller, reply to this comment by a plant manager: “As I see it, our accountants may be needed to keep records for shareholders and the Canada Revenue Agency—but I don’t want them
“Knowledge of technical issues such as computer technology is necessary but not sufficient to becoming a successful accountant.” Do you agree? Why?
Use the Hamilton’s Data Set to compute these profitability measures for 2020:Data use in Hamilton’s Data Seta. Rate of return on net sales b. Rate of return on total assets c. Rate of
Skyline Music is considering investing $600,000 in private lesson studios that will have no residual value. The studios are expected to result in annual net cash inflows of $100,000 for the next 10
Estimate the number of kilometres you drive each year. Also estimate the cost of a litre of fuel.
Describe the product being produced (and the company that makes it).
Dodds Aquatics manufactures swimming pool equipment. The company estimates total manufacturing costs next year to be $2,400,000. Dodds also estimates it will use 50,000 direct labour hours and incur
Hi-Tek is a small software firm that builds and installs custom business applications for clients and uses a job order costing system. The costs for each client are organized into two departments:
Ockham Kitchens produces granite countertops in two sequential production departments: Forming and Polishing. The Polishing Department calculated the following costs per equivalent unit (square
Warm Hearth Bakery mass-produces bread using three sequential processing departments: Mixing, Baking, and Packaging. The following transactions occurred during January: Requirements 1. Post each
Blackfish and Corr (B&C) is a small accounting firm that offers services to businesses in the area. The services include Assurance Services, which include reviews of controls to help companies
Cortana Products manufactures its products in two separate departments: Machining and Assembly. Total manufacturing overhead costs for the year are budgeted at $1.09 million. Of this amount, the
Harding College Bookstore, a campus bookstore, shows the following sales projections in units by quarter for the upcoming year:The average price of an item in each of the departments is as
The Harris Company is in the process of preparing its manufacturing overhead budget for the upcoming year. Sales are projected to be 40,000 units. Information about the various manufacturing overhead
Horns and More, Ltd., a manufacturer of saxophone, oboe, and clarinet reeds, has projected sales to be $890,000 in October, $950,000 in November, $1,025,000 in December, and $920,000 in January. The
BiGGym produces two types of exercise treadmills: Regular and Deluxe. The exercise craze is such that BiGGym could use all of its available machine hours producing either model. The two models are
Fibre Systems manufactures an optical switch that it uses in its final product. Fibre Systems incurred the following manufacturing costs when it produced 75,000 units last year:Fibre Systems does not
Bennett Builders builds townhomes in a new subdivision just outside of Calgary. Land and labour are cheap, and competition among developers is fierce. The homes in the subdivision are identical to
Suppose the Hockey Hall of Fame in Toronto has approached Sports-Cardz with a special order. The Hall of Fame wants to purchase 60,000 hockey card packs for a special promotional campaign and offers
Do sunk costs affect a sell or process-further decision? Why or why not?
Evans Inc. manufactures only two products, Medium (42-inch) and Large (63-inch) plasma screen TVs. To generate adequate profit and cover its expenses throughout the value chain, Evans prices its TVs
Victor’s Sporting Goods is a retailer of sporting equipment. Last year, Victor’s Sporting Goods’ sales revenues totalled $8,000,000. Total expenses were $2,100,000. Of this amount,
Refer to Asokan’s Golden Brown Pancake Restaurant in E3- 33A.Data in E3- 33A.Asokan’s Golden Brown Pancake Restaurant features sourdough pancakes made from a strain of sourdough dating back to
Refer to Cliff’s Fresh Stacks Pancake Restaurant in E3-57B. Data in E3-57B.Cliff’s Fresh Stacks Pancake Restaurant features sourdough pancakes made from a strain of sourdough dating back to
Use the information from the Royal Hellenic Cruiseline data set. If Royal Hellenic Cruiseline sells 10,000 dinner cruises, compute the margin of safety a. In units (dinner cruise
Use the information from the Royal Hellenic Cruiseline data set.a. Compute the operating leverage factor when Royal Hellenic Cruiseline sells 12,000 dinner cruises. b. If volume increases by
Suppose Kay sells 1,000 posters. Use the data from S4-13 to compute her operating leverage factor. If sales volume increases 10%, by what percentage will her operating income change? Prove your
Little Piggie produces sports socks. The company has fixed expenses of $80,000 and variable expenses of $1.20 per package. Each package sells for $2.50. Requirements 1. Compute the
Vair’s Steel Parts produces parts for the automobile industry. The company has monthly fixed expenses of $500,000 and a contribution margin of 80% of revenues. Requirements 1. Compute
Pistone Industries is planning to purchase a new piece of equipment that will increase the quality of its production. It hopes the increased quality will generate more sales. The company’s
Kick-A’s Sporting Goods is a retailer of sporting equipment. Last year, Kick-A’s sales revenues totalled $5,000,000. Total expenses were $2,100,000. Of this amount, approximately $1,500,000 were
Mathieu Manufacturing had a 1.2 operating leverage factor when sales were $50,000. Mathieu Manufacturing’s contribution margin ratio was 20%. What were Mathieu Manufacturing’s fixed expenses?
Antigonish Steel Parts produces parts for the automobile industry. The company has monthly fixed expenses of $620,000 and a contribution margin of 75% of revenues. Requirements 1. Compute
Nate’s Repair Shop has a monthly target operating income of $13,500. Variable expenses are 80% of sales, and monthly fixed expenses are $10,000.Requirements1. Compute the monthly margin of safety
Hillsboro Recycling recycles newsprint, cardboard, and so on into recycled packaging materials. For the coming year, Hillsboro Recycling estimates total manufacturing overhead to be $360,000. The
Refer to the data in Exercise 5-26A . Freeman’s accountant found an error in the expense records from the year reported. Depreciation on manufacturing plant and equipment was actually $400,000, not
Jackson Company, which uses the high-low method to analyze cost behaviour, has determined that machine hours best predict the company’s total utilities cost. The company’s cost and machine hour
Refer to the Sportade example in Appendix 3A and the data and your answer to S3-16. Data in S3-16.Consider the Sportade example in Appendix 3A . Suppose that during April, the company produces
Categorize each of the following characteristics as being more representative of either traditional manufacturing or lean production.1. Quality tends to be “inspected-in” rather than
How did employees of Enron (and employees of the utilities company in Oregon) end up losing billions in retirement funds?
Wharfedale manufactures high-quality audio speakers. Suppose Wharfedale is considering spending the following amounts on a new quality program: Wharfedale expects this quality program to save
In light of the “mark-to-market” accounting that enabled Enron to basically record any profit it wished, can you understand why some of the cornerstones of financial accounting are
The reporter from Fortune magazine asked, “How does Enron make its money?” Why should every employee and manager (at every company) know the answer to this question?
You are a business student who will someday work for a company or own a business. How will watching this movie affect the way you intend to conduct yourself as an employee or owner?
Do you think people weigh the potential costs of acting unethically with the potential benefits?
What was your reaction to the psychology experiment shown in the movie? Studies have shown that, unlike the traders at Enron (who received large bonuses), most employees really have very little to
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.
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