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managerial accounting

Managerial Accounting 12th Edition Ray H. Garrison, Eric W. Noreen, Peter C. Brewer - Solutions

Several weeks ago you called Jiffy Plumbing Company to have some routine repair work done on the plumbing system in your home. The plumber came about two weeks later, at four o’clock in the afternoon, and spent two hours completing your repair work. When you received your bill from the company,
Below are listed a number of activities that are part of a company’s quality control system:a. Repairs of goods still under warranty.b. Customer returns due to defects. c. Statistical process control. d. Disposal of spoiled goods. e. Maintaining testing equipment. f. Inspecting finished goods. g.
Ryser Company was organized on May 1. On that date the company purchased 35,000 plastic emblems, each with a peel-off adhesive backing. The front of the emblems contained the company’s name, accompanied by an attractive logo. Each emblem cost Ryser Company $2. During May, 31,000 emblems were
The following cost and inventory data for the just completed year are taken from the accounting records of Eccles Company:Costs incurred:Advertising expense . . . . . . . . . . . . . . . . . . . . $100,000Direct labor cost . . . . . . . . . . . . . . . . . . . . . . . $90,000Purchases of raw
Below are listed various costs that are found in organizations.1. The costs of turn signal switches used at a General Motors plant. These are one of the parts installed in the steering columns assembled at the plant.2. Interest expense on CBS€™s long-term debt.3. Salespersons€™
Fred Austin is employed by White Company where he assembles a component part for one of the company’s products. Fred is paid $12 per hour for regular time, and he is paid time and a half (i.e., $18 per hour) for all work in excess of 40 hours per week.Required:1. Assume that during a given week
Listed below are costs found in various organizations.1. Depreciation, executive jet.2. Costs of shipping finished goods to customers.3. Wood used in manufacturing furniture.4. Sales manager€™s salary.5. Electricity used in manufacturing furniture.6. Secretary to the company president.7.
Lynn Bjorland is employed by Southern Laboratories and is directly involved in preparing the company’s leading antibiotic drug. Lynn’s basic wage rate is $24 per hour. The company pays its employees time and a half (i.e., $36 per hour) for any work in excess of 40 hours per week. Required:1.
Several years ago Medex Company purchased a small building adjacent to its manufacturing plant in order to have room for expansion when needed. Since the company had no immediate need for the extra space, the building was rented out to another company for a rental revenue of $40,000 per year. The
Various costs associated with manufacturing operations are given below:1. Plastic washers used to assemble autos.2. Production superintendent’s salary.3. Wages of workers who assemble a product.4. Electricity to run production equipment.5. Janitorial salaries.6. Clay used to make bricks.7. Rent
Yedder Enterprises was a pioneer in designing and producing precision surgical lasers. Yedder€™s product was brilliantly designed, but the manufacturing process was neglected by management with a consequence that quality problems have been chronic. When customers complained about
Various cost and sales data for Medco, Inc., are given below for the just completed year:Required:1. Prepare a schedule of cost of goods manufactured.2. Prepare an income statement.3. Assume that the company produced the equivalent of 10,000 units of product during the year. What was the average
You have just been hired by EduRom Company, which was organized on January 2 of the current year. The company manufactures and sells a variety of educational DVDs for personal computers. It is your responsibility to supervise the employees who take orders from customers over the phone and to
Frieda Bronkowski has invented a new type of flyswatter. After giving the matter much thought, Frieda has decided to quit her $4,000 per month job with a consulting firm and produce and sell the flyswatters full time. Frieda will rent a garage that will be used as a production plant. The rent will
Bergen, Inc., produces telephone equipment at its Georgia plant. In recent years, the company€™s market share has been eroded by stiff competition from Asian and European competitors. Price and product quality are the two key areas in which companies compete in this market. Two years ago,
Heritage Company manufactures a beautiful bookcase that enjoys widespread popularity. The company has a backlog of orders that is large enough to keep production going indefinitely at the plant€™s full capacity of 4,000 bookcases per year. Annual cost data at full capacity follow:Direct
The Central Area Well-Baby Clinic provides a variety of health services to newborn babies and their parents. The clinic is organized into a number of departments, one of which is the Immunization Center. A number of costs of the clinic and the Immunization Center are listed below.Example: The cost
Skyler Company was organized on November 1 of the previous year. After seven months of start-up losses, management had expected to earn a profit during June, the most recent month. Management was disappointed, however, when the income statement for June also showed a loss. June€™s income
The top management of General Electronics, Inc., is well known for “managing by the numbers.” With an eye on the company’s desired growth in overall net profit, the company’s CEO (chief executive officer) sets target profits at the beginning of the year for each of the company’s
The following selected account balances for the year ended December 31 are provided for Valenko Company:Advertising expense . . . . . . . . . . . . . . . . . . $215,000Insurance, factory equipment. . . . . . . . . . . . $8,000Depreciation, sales equipment. . . . . . . . . . . $40,000Rent,
Supply the missing data in the four cases below. Each case is independent of theothers.
Hickey Corporation is a manufacturer that produces a single product. The following information has been taken from the company€™s production, sales, and cost records for the just completed year:Production in units . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000Sales in
€œI know I€™m a pretty good scientist, but I guess I still have some things to learn about running a business,€ said Staci Morales, founder and president of Medical Technology, Inc. €œDemand has been so strong for our heart monitor that I was sure
While snoozing at the controls of his Pepper Six airplane, Dunse P. Sluggard leaned heavily against the door; suddenly, the door flew open and a startled Dunse tumbled out. As he parachuted to the ground, Dunse watched helplessly as the empty plane smashed into Operex Products’ plant and
To answer the questions in this exercise, you will need to download Dell, Inc.’s 2005 Form 10-K at www.dell.com/downloads/global/corporate/sec/10k-fy05.pdf. You can view this document on your computer screen; you do not need to print this document to answer the questions.Required:1. What is
Managers often assume a strictly linear relationship between cost and volume. How can this practice be defended in light of the fact that many costs are curvilinear?
What is the contribution margin?
Koffee Express operates a number of espresso coffee stands in busy suburban malls. The fixed weekly expense of a coffee stand is $1,100 and the variable cost per cup of coffee served is $0.26.Required:1. Fill in the following table with your estimates of total costs and cost per cup of coffee at
The data below have been taken from the cost records of the Atlanta Processing Company. The data relate to the cost of operating one of the company€™s processing facilities at various levels of activity:Required:1. Prepare a scattergraph using the above data. Plot cost on the vertical
The Edelweiss Hotel in Vail, Colorado, has accumulated records of the total electrical costs of the hotel and the number of occupancy-days over the last year. An occupancy-day represents a room rented out for one day. The hotel€™s business is highly seasonal, with peaks occurring during
Haaki Shop, Inc., is a large retailer of water sports equipment. An income statement for the company€™s surfboard department for a recent quarter is presented below:The surfboards sell, on the average, for $400 each. The department€™s variable selling expenses are $50 per
EZ Rental Car offers rental cars in an off-airport location near a major tourist destination in Florida. Management would like to better understand the behavior of the company's costs. One of those costs is the cost of washing cars. The company operates its own car wash facility in which each
Parker Company manufactures and sells a single product. A partially completed schedule of the company€™s total and per unit costs over a relevant range of 60,000 to 100,000 units produced and sold each year is given below:Required:1. Complete the schedule of the company€™s total
Refer to the data for Zerbel Company in Exercise 5-7.Required:1. Using the least-squares regression method, estimate the cost formula for shipping expense.2. If you also completed Exercise 5-7, prepare a simple table comparing the variable and fixed cost elements of shipping expense as computed
Speedy Parcel Service operates a fleet of delivery trucks in a large metropolitan area. A careful study by the company’s cost analyst has determined that if a truck is driven 120,000 miles during a year, the average operating cost is 11.6 cents per mile. If a truck is driven only 80,000 miles
The number of X-rays taken and X-ray costs over the last nine months in Beverly Hospital are given below:Required:1. Using the high-low method, estimate the cost formula for X-ray costs.2. Using the cost formula you derived above, what X-ray costs would you expect to be incurred during a month in
Resort Inns, Inc., has a total of 2,000 rooms in its nationwide chain of motels. On average, 70% of the rooms are occupied each day. The company’s operating costs are $21 per occupied room per day at this occupancy level, assuming a 30-day month. This $21 figure contains both variable and fixed
One of Varic Company€™s products goes through a glazing process. The company has observed glazing costs as follows over the last six weeks:For planning purposes, the company€™s management must know the amount of variable glazing cost per unit and the total fixed glazing cost per
Amanda King has just been appointed director of recreation programs for Highland Park, a rapidly growing community in Connecticut. In the past, the city has sponsored a number of softball leagues in the summer months. From the city€™s cost records, Amanda has found the following total
House of Organs, Inc., purchases organs from a well-known manufacturer and sells them at the retail level. The organs sell, on the average, for $2,500 each. The average cost of an organ from the manufacturer is $1,500. House of Organs, Inc., has always kept careful records of its costs. The costs
Frankel Ltd., a British merchandising company, is the exclusive distributor of a product that is gaining rapid market acceptance. The company€™s revenues and expenses (in British pounds) for the last three months are given below:Required:1. Identify each of the company€™s
Refer to the data for Sebolt Wire Company in Problem 5-18.Required:1. Using the least-squares regression method, estimate a cost formula for power cost. (Round the variable cost to the nearest cent and the fixed cost to the nearest dollar.)2. Prepare a table showing the total fixed cost per month
Alden Company has decided to use a contribution approach income statement for internal planning purposes. The company has analyzed its expenses and has developed the following cost formulas:Cost Cost FormulaCost of goods sold . . . . . . . . . . . $20 per unit soldAdvertising expense . . . . .
Golden Company€™s total overhead cost at various levels of activity are presented below:Assume that the overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 40,000 machine-hour level of activity is as follows:Utilities
NuWay, Inc., manufactures a single product. Selected data from the company€™s cost records for two recent months are given below:The company€™s manufacturing overhead cost consists of both variable and fixed cost elements. To have data available for planning, management wants to
Echeverria SA is an Argentinian manufacturing company whose total factory overhead costs fluctuate somewhat from year to year according to the number of machine-hours worked in its production facility. These costs (in Argentinian pesos) at high and low levels of activity over recent years are given
Mapleleaf Sweepers of Toronto manufactures replacement rotary sweeper brooms for the large sweeper trucks that clear leaves and snow from city streets. The business is seasonal, with the largest demand during and just preceding the fall and winter months. Since there are so many different kinds of
The Hard Rock Mining Company is developing cost formulas for management planning and decision-making purposes. The company€™s cost analyst has concluded that utilities cost is a mixed cost, and he is attempting to find a base with which the cost might be closely correlated. The controller
Ruedi BÃ¤rlach PLC, a company located in GÃ¼mligen, Switzerland, manufactures custom-designed high-precision industrial tools. The company has a traditional job-order costing system in which direct labor and direct materials costs are assigned directly to jobs, but
Jasmine Lee owns a catering company that serves food and beverages at exclusive parties and business functions. Lee€™s business is seasonal, with a heavy schedule during the summer months and holidays and a lighter schedule at other times. One of the major events that Lee€™s
The questions in this exercise are based on Blue Nile, Inc. To answer the questions, you will need to download Blue Nile€™s 2004 Form 10-K at investor.bluenile.com/phoenix.zhtml?c=177247&p=irol-reportsAnnual. You do not need to print this document to answer the questions. You will need
Zerbel Company, a wholesaler of large, custom-built air conditioning units for commercial buildings, has noticed considerable fluctuation in its shipping expense from month to month, as shown below:Required:1. Using the high-low method, estimate the cost formula for shipping expense.2. The
Refer to the data in Exercise 5-10 for Beverly Hospital.Required:1. Prepare a scattergraph using the data from Exercise 5-10. Plot cost on the vertical axis and activity on the horizontal axis. Using a ruler, fi t a line to your plotted points.2. Using the quick-and-dirty method, what is the
Sebolt Wire Company heats copper ingots to very high temperatures by placing the ingots in a large heat coil. The heated ingots are then run through a shaping machine that shapes the soft ingot into wire. Due to the long heat-up time, the coil is never turned off. When an ingot is placed in the
Often the most direct route to a business decision is an incremental analysis. What is meant by an incremental analysis?
Company A’s costs are mostly variable, whereas Company B’s costs are mostly fixed. When sales increase, which company will tend to realize the greatest increase in profits? Explain.
What is meant by the term break-even point?
Name three approaches to break-even analysis. Briefly explain how each approach works.
What is meant by the margin of safety?
Wheeler Corporation€™s most recent income statement follows:Required:Prepare a new contribution format income statement under each of the following conditions (consider each case independently):1. The sales volume increases by 50 units.2. The sales volume declines by 50 units.3. The sales
Katara Enterprises distributes a single product whose selling price is $36 and whose variable cost is $24 per unit. The company’s monthly fixed expense is $12,000.Required:1. Prepare a cost-volume-profit graph for the company up to a sales level of 2,000 units.2. Estimate the company’s
Last month when Harrison Creations, Inc., sold 40,000 units, total sales were $300,000, total variable expenses were $240,000, and total fixed expenses were $45,000.Required:1. What is the company’s contribution margin (CM) ratio?2. Estimate the change in the company’s net operating income if
Data for Herron Corporation are shown below:Fixed expenses are $75,000 per month and the company is selling 3,000 units per month.Required:1. The marketing manager argues that an $8,000 increase in the monthly advertising budget would increase monthly sales by $15,000. Should the advertising budget
Maxson Products distributes a single product, a woven basket whose selling price is $8 and whose variable cost is $6 per unit. The company’s monthly fixed expense is $5,500.Required:1. Solve for the company’s break-even point in unit sales using the equation method.2. Solve for the company’s
Liman Corporation has a single product whose selling price is $140 and whose variable cost is $60 per unit. The company’s monthly fixed expense is $40,000.Required:1. Using the equation method, solve for the unit sales that are required to earn a target profit of $6,000.2. Using the contribution
Mohan Corporation is a distributor of a sun umbrella used at resort hotels. Data concerning the next month’s budget appear below:Selling price . . . . . . . . . . . . . . $25 per unitVariable expense . . . . . . . . . . $15 per unitFixed expense . . . . . . . . . . . . $8,500 per monthUnit
Eneliko Company installs home theater systems. The company€™s most recent monthly contribution format income statement appears below:Required:1. Compute the company€™s degree of operating leverage.2. Using the degree of operating leverage, estimate the impact on net operating
Lucky Products markets two computer games: Predator and Runway. A contribution format income statement for a recent month for the two games appears below:Required:1. Compute the overall contribution margin (CM) ratio for the company.2. Compute the overall break-even point for the company in sales
Pringle Company distributes a single product. The company€™s sales and expenses for a recent month follow:Required:1. What is the monthly break-even point in units sold and in sales dollars?2. Without resorting to computations, what is the total contribution margin at the break-even
Chi Omega Sorority is planning its annual Riverboat Extravaganza. The Extravaganza committee has assembled the following expected costs for the event:Dinner (per person) . . . . . . . . . . . . . . . . . . . . . . . $7Favors and program (per person) . . . . . . . . . . . . $3Band . . . . . . . . .
Porter Company€™s most recent contribution format income statement is shown below:Required:Prepare a new contribution format income statement under each of the following conditions (consider each case independently):1. The number of units sold increases by 15%.2. The selling price
Fill in the missing amounts in each of the eight case situations below. Each case is independent of the others.a. Assume that only one product is being sold in each of the four following case situations:b. Assume that more than one product is being sold in each of the four following casesituations:
Super Sales Company is the exclusive distributor for a revolutionary bookbag. The product sells for $60 per unit and has a CM ratio of 40%. The company’s fixed expenses are $360,000 per year. Required:1. What are the variable expenses per unit?2. Using the equation method:a. What is the
Superior Door Company sells prehung doors to home builders. The doors are sold for $60 each. Variable costs are $42 per door, and fixed costs total $450,000 per year. The company is currently selling 30,000 doors per year.Required:1. Prepare a contribution format income statement for the company at
Reveen Products sells camping equipment. One of the company’s products, a camp lantern, sells for $90 per unit. Variable expenses are $63 per lantern, and fi xed expenses associated with the lantern total $135,000 per month.Required:1. Compute the company’s break-even point in number of
Okabee Enterprises is the distributor for two products, Model A100 and Model B900. Monthly sales and the contribution margin ratios for the two products follow:The company€™s fixed expenses total $598,500 per month.Required:1. Prepare a contribution format income statement for the company
Stratford Company distributes a lightweight lawn chair that sells for $15 per unit. Variable costs are $6 per unit, and fixed costs total $180,000 annually.Required:Answer the following independent questions:1. What is the product’s CM ratio?2. Use the CM ratio to determine the break-even point
Memofax, Inc., produces memory enhancement kits for fax machines. Sales have been very erratic, with some months showing a profit and some months showing a loss. The company’s contribution format income statement for the most recent month is given below:Sales (13,500 units at $20 per unit) . . .
Marlin Company, a wholesale distributor, has been operating for only a few months. The company sells three products€”sinks, mirrors, and vanities. Budgeted sales by product and in total for the coming month are shown below:As shown by these data, net operating income is budgeted at
Shirts Unlimited operates a chain of shirt stores around the country. The stores carry many styles of shirts that are all sold at the same price. To encourage sales personnel to be aggressive in their sales efforts, the company pays a substantial sales commission on each shirt sold. Sales personnel
Detmer Holdings AG of Zurich, Switzerland, has just introduced a new fashion watch for which the company is trying to find an optimal selling price. Marketing studies suggest that the company can increase sales by 5,000 units for each SFr2 per unit reduction in the selling price. (SFr2 denotes 2
Teri Hall has recently opened Sheer Elegance, Inc., a store specializing in fashionable stockings. Ms. Hall has just completed a course in managerial accounting, and she believes that she can apply certain aspects of the course to her business. She is particularly interested in adopting the cost-
The Marbury Stein Shop sells steins from all parts of the world. The owner of the shop, Clint Marbury, is thinking of expanding his operations by hiring local college students, on a commission basis, to sell steins at the local college. The steins will bear the school emblem. These steins must be
Puleva Milenario SA, a company located in Toledo, Spain, manufactures and sells two models of luxuriously finished cutlery€”Alvaro and Bazan. Present revenue, cost, and unit sales data for the two products appear below. All currency amounts are stated in terms of euros, which are
Topper Sports, Inc., produces high-quality sports equipment. The company€™s Racket Division manufactures three tennis rackets€”the Standard, the Deluxe, and the Pro€”that are widely used in amateur play. Selected information on the rackets is given below:AAll sales are
Tyrene Products manufactures recreational equipment. One of the company’s products, a skateboard, sells for $37.50. The skateboards are manufactured in an antiquated plant that relies heavily on direct labor workers. Thus, variable costs are high, totaling $22.50 per skateboard. Over the past
A CVP graph, as illustrated on the shown below, is a useful technique for showing relationships between an organization€™s costs, volume, and profits.Required:1. Identify the numbered components in the CVP graph.2. State the effect of each of the following actions on line 3, line 9, and
Novelties, Inc., produces and sells highly faddish products directed toward the preteen market. A new product has come onto the market that the company is anxious to produce and sell. Enough capacity exists in the company’s plant to produce 30,000 units each month. Variable costs to manufacture
Frieden Company’s contribution format income statement for the most recent month is given below:Sales (40,000 units) . . . . . . . . . . . $800,000Variable expenses . . . . . . . . . . . . 560,000Contribution margin . . . . . . . . . . . 240,000Fixed expenses . . . . . . . . . . . .
Jasmine Park encountered her boss, Rick Gompers, at the pop machine in the lobby. Rick is the vice president of marketing at Down South Lures Corporation. Jasmine was puzzled by some calculations she had been doing, so she asked him:Jasmine: "Rick, I'm not sure how to go about answering the
Marston Corporation manufactures disposable thermometers that are sold to hospitals through a network of independent sales agents located in the United States and Canada. These sales agents sell a variety of products to hospitals in addition to Marston€™s disposable thermometer. The sales
The Cardiac Care Department at St. Andrew€™s General Hospital has a capacity of 70 beds and operates 24 hours a day year-around. The measure of activity in the department is patient-days, where one patient-day represents one patient occupying a bed for one day. The average revenue per
What is a predetermined overhead rate, and how is it computed?
Explain why some production costs must be assigned to products through an allocation process.
What is underapplied overhead? Overapplied overhead? What disposition is made of these amounts at the end of the period?
Sigma Company applies overhead cost to jobs on the basis of direct labor cost. Job A, which was started and completed during the current period, shows charges of $5,000 for direct materials, $8,000 for direct labor, and $6,000 for overhead on its job cost sheet. Job B, which is still in process at
If the plant is operated at less than capacity and the predetermined overhead rate is based on the estimated total units in the allocation base at capacity, will overhead ordinarily be overapplied or underapplied?
Rather than netting underapplied overhead against Cost of Goods Sold or Cost of Goods Sold and ending inventories, some critics suggest an alternative way to disclose underapplied overhead. What is this alternative method?
Which would be more appropriate in each of the following situations—job-order costing or process costing?a. A custom yacht builder.b. A golf course designer.c. A potato chip manufacturer.d. A business consultant.e. A plywood manufacturer.f. A soft-drink bottler.g. A film studio.h. A firm that
Mountain Gearing Company has incurred the following costs on Job ES34, an order for 40 gearing wheels to be delivered at the end of next month.Direct materials:On March 5, requisition number 870 was issued for 40 titanium blanks to be used in the special order. The blanks cost $8.00 each.On March

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