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managerial accounting
Questions and Answers of
Managerial Accounting
Simba Company’s standard materials cost per unit of output is $10 (2 pounds × $5). During July, the company purchases and uses 3,200 pounds of materials costing $16,192 in making 1,500 units of
Lowell Company’s manufacturing overhead budget for the first quarter of 2014 contained the following data. Actual variable
Waterways Corporation is preparing its budget for the coming year, 2014. The first step is to plan for the first quarter of that coming year. The company has gathered information from its managers in
Waterways Corporation competes in a market economy in which its products must be sold at market prices. Its emphasis is therefore on manufacturing its products at a cost that allows the company to
Dewitt Corporation needs to set a target price for its newly designed product M14– M16. The following data relate to this new product.
This problem asks you to perform break-even analysis based on Waterways’ sales mix and to make sales mix decisions related to Waterways’ use of its productive facilities.An optional extension of
Many of you will someday own your own business. One rapidly growing opportunity is no-frills workout centers. Such centers attract customers who want to take advantage of state-of-the- art fitness
Determine the missing amounts
Your roommate asks for your help on the following questions about CVP analysis formulas. (a) How can the mathematical equation for break-even sales show both sales units and sales
Waterways looked into ABC as a method of costing because of the variety of items it produces and the many different activities in which it is involved. This problem asks you to help Waterways use an
Luxury Furniture designs and builds factory-made, premium, wood armoires for homes. All are of white oak. Its budgeted manufacturing overhead costs for the year 2014 are as follows.
Schultz Electronics manufactures two large-screen television models: the Royale which sells for $1,600, and a new model, the Majestic, which sells for $1,300. The production cost computed per unit
Having itemized its costs for the first quarter of next year’s budget, Santana Corporation desires to install an activity-based costing system. First, it identified the activity cost pools in which
Perdon Corporation manufactures safes—large mobile safes, and large walk-in stationary bank safes. As part of its annual budgeting process, Perdon is analyzing the profitability of its two
Rich Novelty Company identified the following activities in its production and support operations. Classify each of these activities as either value-added or non–value-added. (a) Machine
Hollins, Inc., a manufacturer of computer chips, employs activity-based costing. The budgeted data for each of the activity cost pools is provided below for the year 2014.
Classify each of the following activities within a tax-preparation business as value-added (VA) or non–value-added (NVA). (a) Advertising. (b) Completing tax returns. (c) Billing
Indicate whether the following statements are true or false. (a) The reasoning behind ABC cost allocation is that products consume activities and activities consume resources. (b)
What are the benefits of activity-based costing?
Florida Beach Company manufactures suntan lotion, called Surtan, in 11-ounce plastic bottles. Surtan is sold in a competitive market. As a result, management is very cost-conscious. Surtan is
Venuchi Cleaner Company uses a weighted-average process cost system and manufactures a single product—an all-purpose liquid cleaner. The manufacturing activity for the month of March has just been
Luxman Company has several processing departments. Costs charged to the Assembly Department for October 2014 totaled $1,298,400 as follows.Work in process, October 1 Materials
Borman Corporation manufactures in separate processes refrigerators and freezers for homes. In each process, materials are entered at the beginning and conversion costs are incurred uniformly.
Steiner Corporation manufactures water skis through two processes: Molding and Packaging. In the Molding Department, fiberglass is heated and shaped into the form of a ski. In the Packaging
Hamilton Processing Company uses a weighted-average process cost system and manufactures a single product—a premium rug shampoo and cleaner. The manufacturing activity for the month of October has
Morse Company manufactures basketballs. Materials are added at the beginning of the production process and conversion costs are incurred uniformly. Production and cost data for the month of July 2014
Rivera Company has several processing departments. Costs charged to the Assembly Department for November 2014 totaled $2,280,000 as follows.Work in process, November 1 Materials
Seagren Industries Inc. manufactures in separate processes furniture for homes. In each process, materials are entered at the beginning, and conversion costs are incurred uniformly. Production and
Rosenthal Company manufactures bowling balls through two processes: Molding and Packaging. In the Molding Department, the urethane, rubber, plastics, and other materials are molded into bowling
Royale Mortgage Company uses a process cost system to accumulate costs in its loan application department. When an application is completed, it is forwarded to the loan department for final
The assembly department has the following production data for the current month. Materials are entered at the
The Smelting Department of Mathews Company has the following production and cost data for November.Production: Beginning work in process 2,000 units that are 100% complete as to materials and 20%
Data for Cascio Company are given in BE3-7. Production records indicate that 18,000 units were transferred out, and 2,000 units in ending work in process were 50% complete as to conversion cost and
Refer to P1–5A and add the following requirement. Prepare a letter to the president of the company, Shelly Phillips, describing the changes you made. Explain clearly why net income is
Elliott Company, a manufacturer of tennis rackets, started production in November 2013. For the preceding 5 years, Elliott had been a retailer of sports equipment. After a thorough survey of tennis
Pedriani Company uses a job order cost system and applies overhead to production on the basis of direct labor hours. On January 1, 2014, Job No. 25 was the only job in process. The costs incurred
Pure Decorating uses a job order cost system to collect the costs of its interior decorating business. Each client’s consultation is treated as a separate job. Overhead is applied to each job based
(a) Distinguish between the two types of cost accounting systems.(b) Can a company use both types of cost accounting systems?
Bawarchi Company is known for making fire screens that fit over the back of cooking grills in restaurants. Current production is 20,000 units. This is also the maximum number of screens that Bawarchi
Case Construction Company, a three-year-old business, provides contracting and construction services to a variety of clients. Given that each construction job is different from the others, Susan
Ortiz Company is a manufacturer of toys. Its controller resigned in August 2014. An inexperienced assistant accountant has prepared the following income statement for the month of August 2014.
The following data were taken from the records of Moxie Company for the year ended December 31, 2014.Instructions (a) Prepare a cost of goods manufactured schedule. (Assume all raw materials
Elliott Company, a manufacturer of tennis rackets, started production in November 2013. For the preceding 5 years, Elliott had been a retailer of sports equipment. After a thorough survey of tennis
Phillips Company is a manufacturer of computers. Its controller resigned in October 2014. An inexperienced assistant accountant has prepared the following income statement for the month of October
The following data were taken from the records of Clarkson Company for the fiscal year ended June 30, 2014.Instructions (a) Prepare a cost of goods manufactured schedule. (Assume all raw
Bell Company, a manufacturer of audio systems, started its production in October 2014. For the preceding 3 years, Bell had been a retailer of audio systems. After a thorough survey of audio system
Buhler Motor Company manufactures automobiles. During September 2014, the company purchased 5,000 headlamps at a cost of $10 per lamp. Buhler withdrew 4,650 lamps from the warehouse during the month.
Chambers Company produces blankets. From its accounting records, it prepares the following schedule and financial statements on a yearly basis. (a) Cost of goods manufactured schedule.
The following information is available for Aikman Company.Instructions (a) Compute cost of goods manufactured. (b) Prepare an income statement through gross profit. (c) Show the
Kwik Delivery Service reports the following costs and expenses in June 2014.InstructionsDetermine the total amount of (a) delivery service (product) costs and (b) period costs.
The following information is available for Fishel Company.Prepare the cost of goods manufactured schedule for the month of April.
What is activity-based costing, and what are its potential benefits?
In Statement of Financial Accounting Standards No. 95, the Financial Accounting Standards Board (FASB) recommended but did not require that companies use the direct method. In Appendix B, Paragraphs
On October 31, 2012, Henderson Company’s total current assets were $65,000 and its total current liabilities were $20,000. On November 1, 2012, Henderson purchased marketable securities for $10,000
Smiley Medical Equipment Company makes a blood pressure measuring kit. Elbert Jackson is the production manager. The production department’s static budget and actual results for 2012
Using the internet, locate the most recent financial statements for two companies from the same industry. Find (or calculate) the ratios listed below, and compare the two companies. (If you cannot
The after-tax cost of interest expense is used in calculating which of the following? a. Times-interest-earned b. Return on total assets c. Debt ratio d.
A small pizza restaurant, founded and owned by the Martinelli sisters, would be expected to have which of the following? a. High price-earnings ratio b. High inventory
Fred and Torrie Jones are a retired couple looking for income. They are currently rebalancing their portfolio of stocks to include more with high dividends. Fred and Torrie will be most interested in
Profitability ratios are used by which of the following groups? a. Company managers b. Creditors c. Lenders d. Investors e. All of the above
Company B shows that 46 percent of its assets are financed by creditors. Which of the following shows this result? a. Current ratio b. Times-interest-earned c.
A company’s inventory turnover in days is 80 days. Which of the following actions could help to improve that ratio? a. Increase in sales price b. Increase in manufacturing
The measures of the ability of a company to meet its long- and short term obligations are called a. ratios. b. liquidity ratios. c. leverage ratios. d.
Fractions or percentages computed by dividing one account or line-item amount by another are called a. ratios. b. industry averages. c. common-size
An advantage of common-size analysis is that a. the size of dollar amounts impact the analysis. b. larger companies will have higher common-size percentages. c.
A company provided income statements for the past five years. In looking at the percentage columns for each year, you notice that sales are 46 percent higher in year 5 than in year 1. The company has
In a completed worksheet, a. the debit column contains the cash outflows. b. the debit column contains the cash inflows. c. the credit column contains the cash
A worksheet approach to preparing the statement of cash flows a. is a useful aid. b. uses a spreadsheet format. c. offers an efficient and logical way of
Which method calculates operating cash flows by adjusting the income statement on a line-by-line basis? a. The working paper approach b. The indirect method c. The
Which of the following is a financing activity? a. Issuance of a mortgage b. Purchase of land c. Increase in accounts receivable d. Increase in
Which of the following is an investing activity? a. Issuance of a mortgage b. Purchase of land c. Increase in accounts receivable d. Increase in
The gain on sale of equipment is deducted from net income to arrive at operating cash flows because a. the sale of long-term assets is a non-operating activity. b. the gain
An increase in inventories is deducted from net income to arrive at operating cash flow because a. cash payments to customers were larger than the purchases made during the period.
A decrease in accounts receivable is added to net income to obtain operating cash flows because a. cash collections from customers were greater than the revenues reported. b.
Which of the following adjustments to net income is needed to obtain cash flows? a. Elimination of gains on sale of equipment b. Add to net income all noncash expenses (e.g.,
Which of the following adjustments helps to convert accrual income to operating cash flows? a. Add to net income an increase in inventories b. Deduct from net income a
The difference between the beginning and ending cash balances shown on the balance sheet a. is added to net income to obtain total cash inflows. b. is deducted from net income
Uses of cash include a. cash dividends. b. the purchase of long-term assets. c. the sale of old equipment. d. only a and b. e. none of the
Sources of cash include a. profitable operations. b. the issuance of long-term debt. c. the sale of long-term assets. d. the issuance of capital
Raising cash by issuing capital stock is an example of a. an operating activity. b. an investing activity. c. a financing activity. d. a noncash
Cash outflows from operating activities come from a. payment for raw materials. b. collection of sales revenues. c. acquisition of operating equipment.
Cash inflows from operating activities come from a. payment for raw materials. b. collection of sales revenues. c. gains on the sale of operating equipment.
Assume that there are two competing projects, A and B. Project A has a net present value of $1,000 and an internal rate of return of 15 percent; Project B has an NPV of $800 and an IRR of 20 percent.
For competing projects, net present value is preferred to internal rate of return because a. maximizing IRR may not maximize the wealth of the owners. b. in the final
Postaudits of capital projects are useful because a. they are not very costly. b. they help to ensure that resources are used wisely. c. the assumptions underlying
A postaudit a. is a follow-up analysis of a capital project, once implemented. b. compares the actual benefits with the estimated benefits. c. evaluates the
Using internal rate of return, a project is rejected if the IRR a. is less than the required rate of return. b. is equal to the required rate of return. c. is
Which of the following is not true regarding the internal rate of return? a. The IRR is the interest rate that sets the present value of a project’s cash inflows equal to the present
Assume that an investment of $1,000 produces a future cash flow of $1,000. The discount factor for this future cash flow is 0.89. The net present value is a. $0. b.
If the present value of future cash flows is $1,200 for an investmentthat requires an outlay of $1,000, the net present value a. is $200. b. is $1,000. c. is
Using net present value, a project is rejected if it is a. equal to zero. b. positive. c. negative. d. less than the hurdle rate. e.
Net present value is calculated by using a. accounting income. b. the required rate of return. c. the IRR. d. the future value of cash flows.
Net present value measures a. the profitability of an investment. b. the change in wealth. c. the change in firm value. d. the difference in present
If the net present value is positive, it signals a. that the initial investment has been recovered. b. that the required rate of return has been earned. c. that
An investment of $1,000 provides an average net income of $220 with zero salvage value. Depreciation is $20 per year. The accounting rate of return using the original investment is a. 44
The accounting rate of return has one specific advantage not possessed by the payback period in that it a. considers the time value of money. b. measures the value added by a
The payback period suffers from which of the following deficiencies? a. It is a rough measure of the uncertainty of future cash flows. b. It helps control the risk of
An investment of $1,000 produces a net cash inflow of $600 in the first year and $2,000 in the second year. What is the payback period? a. 1.67 years b. 0.50 year c.
An investment of $1,000 produces a net annual cash inflow of $500 for each of five years. What is the payback period? a. Two years b. One-half year c.
Mutually exclusive capital budgeting projects are those that a. if accepted or rejected do not affect the cash flows of other projects. b. if accepted will produce a negative
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