Questions and Answers of Managerial Accounting Tools For Business Decision Making

Data for the Bidwell Company are as follows:Required:a. Based on the preceding data, calculate break-even sales in units.b. If Bidwell Company is subject to an effective income tax rate of 40
What are avoidable and unavoidable costs? How are they related to opportunity costs?
Define mixed cost and give an example.
Define step cost and give an example.
Define fixed cost.
Sunnybrook Farms is a local grocery store that is currently open only Monday through Saturday.Sunnybrook is considering opening on Sundays. The annual incremental costs of Sunday openings are
Define variable cost. Is it the same as marginal cost? Explain.
What are the underlying assumptions in a cost–volume–profit analysis?
What are the benefits and limitations of cost–volume–profit analysis?
Describe the four major steps in the management decision process. How are agency problems reduced in this process?
It is often argued that private country clubs tend to have low-quality food operations because the members do not join or frequent their clubs for the food but rather for the golf and fellowship.(A
What role does the firm’s internal accounting system play in resolving organizational problems?
Describe three different types of responsibility centers.Include any shortcomings the centers might have.
What is the controllability principle and what are its limitations?
Discretionary costs are defined as “costs that (1) arise from periodic (usually yearly) appropriation decisions regarding the maximum amounts to be incurred and (2) have no well-specified function
What two points must be kept in mind when examining performance-based measurement systems?
What are the two main reasons for transfer pricing within firms?
Name four alternative methods for determining transfer prices.
Is the choice of transfer pricing methods a zero-sum game?
U.S. Pump is a multidivisional firm that manufactures and installs chemical piping and pump systems.The valve division makes a single standardized valve. The valve division and the installation
A large corporation has a manufacturing division with 40 parts departments and 20 assembly departments.The parts departments manufacture most of the parts for the products, and the assembly
Hochstedt is a German firm with a wholly owned U.S. subsidiary. The parent firm manufactures and exports products from Germany to its U.S. subsidiary for sale in the United States. Hochstedt also has
Savannah Products, a small integrated wood and lumber products company with substantial timber holdings, has two divisions: Forest and Lumber. Forest Division manages the timber holdings, maintains
How are budgets developed?
How are key planning assumptions derived?
Define budget variance.
Are budgets part of the performance measurement system or the performance reward system?
What are some of the synergies that budgets provide within a large corporation?
How do budgets partition decision rights within a firm?
What purposes are served by the budgeting process in a large firm?
Why would managers bias their forecasts when preparing a budget?
What is a bottom-up budgeting system?
What is the ratchet effect?
Describe participative budgeting.
What are short-run and long-run budgets?
What are the advantages and disadvantages of line-item budgets?
Why do some organizations practice budget lapsing? What are the disadvantages?
Define static and flexible budgets. Discuss their advantages and weaknesses.
Define incremental and zero-based budgeting. Discuss their advantages and weaknesses.
Why are opportunity costs costly to estimate?
Define direct costs.
Define overhead costs. How are they allocated?
What are period costs?
What are motion and time studies? What are their objectives?
Fast Photo operates four film developing labs in upstate New York. The four labs are identical: They employ the same production technology, process the same mix of films, and buy raw materials from
How do fixed costs enter the pricing decision?
William Company owns and operates a nationwide chain of movie theaters. The 500 properties in the William chain vary from low-volume, small-town, single-screen theaters to high-volume, big-city,
You work for a venture capitalist and have been asked to analyze a proposal from a group of investors interested in building a new ski area in Colorado, the Gold Mountain Ski Resort. The demand for
Why is a dollar today not worth the same as a dollar in the future?
How could there be an economic profit but not an accounting profit?
Define the present value of a future amount.
Define the future value of a present amount.
Define compound interest.
How do perpetuities differ from annuities?
Define net present value.
Explain why the interest rate on a one-year bank account paying interest monthly is not just one-twelfth the interest rate on a one-year bank account paying interest annually.
What does it mean to say depreciation is a tax shield when evaluating capital projects?
What are the components of the real interest rate?
What are the components of the nominal interest rate?
What are three problems with basing investment decisions on internal rate of return?
An investment opportunity that will involve an investment of $1,000 will generate $300 per year for five years and then earn $140 per year forever.What is the net present value of this investment,
Why is a dollar of initial investment in a building more valuable than a dollar of initial investment in land or working capital?
Demand for DVD Players The demand for DVD players is expanding rapidly, but the industry is highly competitive. A plant to make DVD players costs $40 million, has an annual capacity of 100,000 units,
Why are cash flows but not accounting earnings discounted in capital budgeting analyses?
Watson’s Bay Co. is considering a contract to manufacture didgeridoos. Producing didgeridoos will require an investment in equipment of $100,000 and operating costs of $15 per didgeridoo
A proposed cost-saving device has an installed cost of $59,400. It will be depreciated for tax purposes on a straight-line basis over three years (zero salvage), although its actual life will be five
The Linda Lion Co. has an investment opportunity that involves a current outlay of $1,000 for equipment.The investment will yield net cash inflows for four years. The net cash inflow at the end of
Black Feather Indian Nation is a 900 square-mile territory in North Dakota that has the legal right to sell gasoline without having to collect or pay state and federal taxes on it. Gasoline in North
a. Scottie Corporation has been offered a contract to produce 100 castings a year for five years at a price of $200 per casting. Producing the castings will require an investment in the plant of
A punch press currently in use has a book value of $1,800 and needs design modifications totaling$16,200, which would be capitalized at the present time and depreciated. The press can be sold
Eastern Educational Services is considering the following proposal to sell its teaching machine and purchase a new, improved machine. The following data are presented by the department
Two types of machine tools are available for performing a particular job in Apex Corporation. Tool A has an initial investment of $52,000, with operating costs of $26,000 per year, an economic
What generates agency costs?
How are agency costs reduced, and what limits them?
Define goal incongruence.
How does one achieve goal congruence?
Why are knowledge and decision making linked within a firm?
Name three things markets do automatically that must be replaced with elaborate administrative systems in the firm.
What are influence costs?
Mail delivery during the Christmas holidays of 1990 to U.S. troops stationed in Saudi Arabia for Operation Desert Storm was haphazard. So many letters and packages were mailed during the holidays,
Why do firms exist?
Define decision management and decision control and give an example of each.
Describe the three systems all organizations must construct to control agency problems.
Some economists (e.g., Hayek) argue that decentralization of economic decisions in the economy leads to efficient resource allocation. What differences exist within the firm that make the link
Ideal Manufacturing Company has supported a research and development (R&D) department that has for many years been the sole contributor to the company’s new farm machinery products. The R&D
Building a kayak using the composite method is a very labor-intensive process. In the Fabrication Department, the kayaks go through several steps as employees carefully place layers of Kevlar® in a
The financial statements of Apple Inc. are available online.InstructionsAnswer the following questions.a. Wfvfvfv activities for the year ended September 28,2019? For the year ended September 29,
Information for NoFly Corporation is given in BE6.7. If the company has fixed costs of $269,500, how maDixie Candle Supply makes candles. The sales mix (as a percentage of total dollar sales) of its
Dilithium Batteries is a division of Enterprise Corporation. The division manufactures and sells a long-life battery used in a wide variety of applications. During the coming year, it expects to sell
Personal Electronix sells computer tablets and MP3 players. The business is divided into two divisions along product lines. CVP income statements for a recent quarter’s activity are presented
What is operating leverage? How does a company increase its operating leverage?
Tiger Golf Accessories sells golf shoes, gloves, and a laser-guided range-finder that measures distance. Shown below are unit cost and sales data. Unit sales price Unit variable costs Unit
Casas Modernas of Juarez, Mexico, is contemplating a major change in its cost structure. Currently, all of its drafting work is performed by skilled draftsmen. Rafael Jiminez, Casas’ owner, is
Langdon Company produced 9,000 units during the past year, but only 8,200 of the units were sold. The following additional information is also available. Direct materials used
Nathan T Corporation is comparing two different options. Nathan T currently uses Option 1, with revenues of $65,000 per year, maintenance expenses of $5,000 per year, and operating expenses of
Harris Company’s fixed overhead costs are $4 per unit, and its variable overhead costs are $8 per unit. In the first month of operations, 50,000 units are produced, and 46,000 units are sold. Write
At the beginning of last year (2021), Richter Condos installed a mechanized elevator for its tenants. The owner of the company, Ron Richter, recently returned from an industry equipment exhibition
The management of Shatner Manufacturing Company is trying to decide whether to continue manufacturing a part or to buy it from an outside supplier. The part, called CISCO, is a component of the
Maize Company incurs a cost of $35 per unit, of which $20 is variable, to make a product that normally sells for $58. A foreign wholesaler offers to buy 6,000 units at $30 each. Maize will incur
Hank Jewell is a production manager at a metal fabricating factory. Last night, he read an article about a new piece of equipment that would dramatically reduce his division’s costs. Hank was very

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