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Survey of Accounting 5th Edition Carl S Warren - Solutions
Night Watch Company recently began production of a new product, the halogen light, which required the investment of $500,000 in assets. The costs of producing and selling 12,000 halogen lights are estimated as follows: Night Watch Company is currently considering establishing a selling price for
Delaware Bay Chemical Company produces three products: ethylene, butane, and ester. Each of these products has high demand in the market, and Delaware Bay Chemical is able to sell as much as it can produce of all three. The reaction operation is a bottleneck in the process and is running at 100% of
Lucinda Lopez is a cost accountant for Northern Apparel Inc. Marcus Murry, vice president of marketing, has asked Lucinda to meet with representatives of Northern Apparel’s major competitor to discuss product cost data. Marcus indicates that the sharing of these data will enable Northern to
A manager of Fairways and Greens Sporting Goods Company is considering accepting an order from an overseas customer. This customer has requested an order for 20,000 dozen golf balls at a price of $24 per dozen. The variable cost to manufacture a dozen golf balls is $18 per dozen. The full cost is
If you are not familiar with Priceline.com Inc., go to its Web site. Assume that an individual “names a price” of $70 on Priceline.com for a room in Dallas, Texas, on August 24. Assume that August 24 is a Saturday, with low expected room demand in Dallas at a Marriott International, Inc.,
The following conversation took place between Cam Hudson, vice president of marketing, and Alan Attawry, controller of Digi-Comp Computer Company:Cam: I am really excited about our new computer coming out. I think it will be a real market success.Alan: I’m really glad you think so. I know that
Many businesses are offering their products and services over the Internet. Some of these companies and their Internet addresses are listed below. (a) In groups of three, assign each person in your group to one of the Internet sites listed above. For each site, determine the following:1. A
Differentiate between a profit center and an investment center. Discuss.
In what major respect would budget performance reports prepared for the use of plant managers of a manufacturing business with cost centers differ from those prepared for the use of the various department supervisors who report to the plant managers? Discuss.
What is the major shortcoming of using income from operations as a performance measure for investment centers? Discuss.
Why should the factors under the control of the investment center manager (revenues, expenses, and invested assets) be considered in computing the rate of return on investment?
In a decentralized company in which the divisions are organized as investment centers, how could a division be considered the least profitable, even though it earned the largest amount of income from operations?
The rates of return on investment for Fosina Co.’s three divisions, East, Central, and West, are 26%, 20%, and 15%, respectively. In expanding operations, which of Fosina Co.’s divisions should be given priority? Explain.
Why would a firm use a balanced scorecard in evaluating divisional performance?
What is the objective of transfer pricing? Discuss.
Partially completed budget performance reports for Iliad Company, a manufacturer of air conditioners, are provided below. (a) Complete the budget performance reports by determining the correct amounts for the lettered spaces.(b) Compose a memo to Dana Johnson, vice president of production for
The following data were summarized from the accounting records for DeSalvo Construction Company for the year ended June 30, 2010: Prepare divisional income statements for DeSalvo Construction Company.
For each of the following service departments, identify an activity base that could be used for charging the expense to the profit center.(a) Central Purchasing(b) Legal(c) Accounts Receivable(d) Duplication Services(e) Electronic Data Processing(f) Telecommunications
For each of the following service departments, select the activity base listed that is most appropriate for charging service expenses to responsible units.Service Department Activity Base
In divisional income statements prepared for Mills Construction Company, the Payroll Department costs are charged back to user divisions on the basis of the number of payroll checks, and the Purchasing Department costs are charged back on the basis of the number of purchase requisitions. The
Harris Corporation, a manufacturer of electronics and communications systems, uses a service department charge system to charge profit centers with Computing and Communications Services (CCS) service department costs. The following table identifies an abbreviated list of service categories and
Encounter Sporting Goods Company has two divisions, Wholesale and Retail, and two corporate service departments, Tech Support and Accounts Payable. The corporate expenses for the year ended December 31, 2010, are as follows: Tech Support Department .......................... $ 705,000 Accounts
Trans-Continental Airlines, Inc., has two divisions organized as profit centers, the Passenger Division and the Cargo Division. The following divisional income statements were prepared:The service department charge rate for the service department costs was based on revenues. Since the revenues of
X-Out Sporting Goods Co. operates two divisions—the Action Sports Division and the Team Sports Division. The following income and expense accounts were provided as of June 30, 2010, the end of the current fiscal year, after all adjustments, including those for inventories, were
The income from operations and the amount of invested assets in each division of Devon Industries are as follows: (a) Compute the rate of return on investment for each division.(b) Which division is the most profitable per dollarinvested?
Based on the data in Exercise 14-10, assume that management has established a 10% minimum acceptable rate of return for invested assets.(a) Determine the residual income for each division.(b) Which division has the most residual income?
One item is omitted from each of the following computations of the rate of return on investment: Determine the missing items, identifying each by the appropriateletter.
The condensed income statement for the International Division of King Industries Inc. is as follows (assuming no service department charges):Sales .............. $1,200,000Cost of goods sold ........ 600,000Gross profit .......... $ 600,000Administrative expenses ....... 300,000Income from
The Walt Disney Company has four major sectors, described as follows: ? Media Networks: The ABC television and radio network, Disney channel, ESPN, A&E, E!, and Disney.com. ? Parks and Resorts: Walt Disney World Resort, Disneyland, Disney Cruise Line, and other resort properties. ? Studio
Data for Schmidt Company is presented in the following table of rates of return on investment and residual incomes: Determine the missing items, identifying each item by the appropriateletter.
Data for the North, South, East, and West divisions of McGonigel Company are as follows: (a) Determine the missing items, identifying each by the letters (a) through (l). Round whole percents to one decimal place and investment turnover to two decimal places.(b) Determine the residual income for
Hilton Hotels Corporation provides lodging services around the world. The company is separated into three major divisions. ?? Hotel Ownership: Hotels owned and operated by Hilton. ?? Managing and Franchising: Hotels franchised to others or managed for others. ?? Timeshare: Resort properties
American Express Company is a major financial services company, noted for its American Express card. Below are some of the performance measures used by the company in its balanced scorecard.Average cardmember spending ...... Number of merchant signingsCards in force ............... Number of card
Several years ago, United Parcel Service (UPS) believed that the Internet was going to change the parcel delivery market and would require UPS to become a more nimble and customer-focused organization. As a result, UPS replaced its old measurement system, which was 90% oriented toward financial
Electronic components used by the Engine Division of Armstrong Manufacturing are currently purchased from outside suppliers at a cost of $200 per unit. However, the same materials are available from the Components Division. The Components Division has unused capacity and can produce the materials
Based on Armstrong Manufacturing’s data in Exercise 14-20, assume that a transfer price of $190 has been established and that 35,000 units of materials are transferred, with no reduction in the Components Division’s current sales. a. How much would Armstrong Manufacturing’s total income from
Amoruso Parts Company sells vehicle parts to automotive companies. The Truck Division is organized as a cost center. The budget for the Truck Division for the month ended October 31, 2010, is as follows (in thousands):Customer service salaries ........ $ 260,450Insurance and property taxes .......
Browning Transportation Co. has three regional divisions organized as profit centers. The chief executive officer (CEO) evaluates divisional performance, using income from operations as a percent of revenues. The following quarterly income and expense accounts were provided from the trial balance
Sunshine Baking Company is a diversified food products company with three operating divisions organized as investment centers. Condensed data taken from the records of the three divisions for the year ended June 30, 2010, are as follows: The management of Sunshine Baking Company is evaluating each
A condensed income statement for the Snowboard Division of New Wave Rides Inc. for the year ended December 31, 2010, is as follows:Sales ......... $1,200,000Cost of goods sold .... 826,000Gross profit ...... $ 374,000Operating expenses ...... 230,000Income from operations ... $ 144,000Invested
The vice president of operations of Rucker-Putnam Bike Company is evaluating the performance of two divisions organized as investment centers. Invested assets and condensed income statement data for the past year for each division are as follows: Instructions1. Prepare condensed divisional income
Bay Area Scientific, Inc. manufactures electronic products, with two operating divisions, the Performance Materials and Communication Technologies divisions. Condensed divisional income statements, which involve no intracompany transfers and which include a breakdown of expenses into variable and
Evigi Company has two divisions, the Semiconductor Division and the PC Division. The PC Division may purchase semiconductors from the Semiconductor Division or from outside suppliers. The Semiconductor Division sells semiconductor products both internally and externally. The market price for
The Customer Service Department of Schweitzer Industries asked the Publications Department to prepare a brochure for its training program. The Publications Department delivered the brochures and charged the Customer Service Department a rate that was 25% higher than could be obtained from an
The three divisions of Monstore Foods are Snack Goods, Cereal, and Frozen Foods. The divisions are structured as investment centers. The following responsibility reports were prepared for the three divisions for the prior year: 1. Which division is making the best use of invested assets and thus
The Truck Division of Estatoe Motors Inc. has been experiencing revenue and profit growth during the years 2008?2010. The divisional income statements are provided below. Assume that there are no charges from service departments. The vice president of the division, Eddie Wadsley, is proud of his
Casual Living Inc. is a privately held diversified company with five separate divisions organized as investment centers. A condensed income statement for the Apparel Division for the past year, assuming no service department charges, is as follows:Casual Living Inc.—Apparel DivisionIncome
Divide responsibilities between two groups, with one group going to the home page of The Palladium Group at www.thepalladiumgroup.com, and the second group going to the home page of Stern Stewart & Co. at www.eva .com. The Palladium Group is a consulting firm that helped develop the balanced
What are the three major objectives of budgeting? Discuss.
Briefly describe the type of human behavior problems that might arise if budget goals are set too tightly. Discuss.
What behavioral problems are associated with setting a budget too loosely? Discuss.
Under what circumstances would a static budget be appropriate? Discuss.
How do computerized budgeting systems aid firms in the budgeting process? Discuss.
Why should the production requirements set forth in the production budget be carefully coordinated with the sales budget? Discuss.
(a) Discuss the purpose of the cash budget.(b) If the cash for the first quarter of the fiscal year indicates excess cash at the end of each of the first two months, how might the excess cash be used?
How does a schedule of collections from sales assist in preparing the cash budget? Discuss.
How often should standards be revised? Discuss.
How are standards used in budgetary performance evaluation?
(a) What are the two variances between the actual cost and the standard cost for direct materials?(b) Discuss some possible causes of these variances.
The materials cost variance report for Nickols Inc. indicates a large favorable materials price variance and a significant unfavorable materials quantity variance. What might have caused these offsetting variances? Discuss.
(a) What are the two variances between the actual cost and the standard cost for direct labor?(b) Who generally has control over the direct labor cost?
A new assistant controller recently was heard to remark: “All the assembly workers in this plant are covered by union contracts, so there should be no labor variances.” Was the controller’s remark correct? Discuss. Discuss.
Would the use of standards be appropriate in a nonmanufacturing setting, such as a fast food restaurant?
Briefly explain why firms might use nonfinancial performance measures.
Agent Blaze uses flexible budgets that are based on the following data:Sales commissions ...................... 8% of salesAdvertising expense ................... 21% of salesMiscellaneous selling expense .......... $2,250 plus 3% of salesOffice salaries expense ............... $15,000 per
The production supervisor of the Machining Department for Nell Company agreed to the following monthly static budget for the upcoming year: Nell Company Machining Department Monthly Production Budget Wages ...... $540,000 Utilities ...... 36,000 Depreciation .... 60,000 Total ...... $636,000 The
Steelcase Inc. is one of the largest manufacturers of office furniture in the United States. In Grand Rapids, Michigan, it produces filing cabinets in two departments: Fabrication and Trim Assembly. Assume the following information for the Fabrication Department:Steel per filing cabinet ....... 45
Harmony Audio Company manufactures two models of speakers, DL and XL. Based on the following production and sales data for September 2009, prepare (a) a sales budget and (b) a productionbudget.
Roberts and Chou, CPAs, offer three types of services to clients: auditing, tax, and small business accounting. Based on experience and projected growth, the following billable hours have been estimated for the year ending December 31, 2010: The average billing rate for staff is $130 per hour, and
Based on the data in Exercise 13-5 and assuming that the average compensation per hour for staff is $30 and for partners is $125, prepare a professional labor cost budget for Roberts and Chou, CPAs, for the year ending December 31, 2010. Use the following column headings:Staff Partners
Marino's Frozen Pizza Inc. has determined from its production budget the following estimated production volumes for 12'? and 16'? frozen pizzas for April 2010: There are three direct materials used in producing the two types of pizza. The quantities of directmaterials expected to be used for
Coca-Cola Enterprises is the largest bottler of Coca-Colaâ in North America. The company purchases Cokeâ and Spriteâ concentrate from The Coca-Cola Company, dilutes and mixes the concentrate with carbonated water, and then fills the blended beverage into cans or plastic two-liter bottles. Assume
Hammer Racket Company manufactures two types of tennis rackets, the Junior and Pro Striker models. The production budget for October for the two rackets is as follows: Both rackets are produced in two departments, Forming and Assembly. The direct labor hours required for each racket are estimated
Levi Strauss & Co. manufactures slacks and jeans under a variety of brand names, such as Dockers? and 501 Jeans?. Slacks and jeans are assembled by a variety of different sewing operations. Assume that the sales budget for Dockers and 501 Jeans shows estimated sales of 24,700 and 53,600 pairs,
Venus Candy Company budgeted the following costs for anticipated production for September 2010: Prepare a factory overhead cost budget, separating variable and fixed costs. Assume that factory insurance and depreciation are the only factory fixed costs.
The controller of Swiss Ceramics Inc. wishes to prepare a cost of goods sold budget for June. The controller assembled the following information for constructing the cost of goods sold budget: Use the preceding information to prepare a cost of goods sold budget for June2010.
Pet Joy Wholesale Inc., a pet wholesale supplier, was organized on May 1, 2010. Projected sales for each of the first three months of operations are as follows:May $360,000June
Office Mate Supplies Inc. has “cash and carry” customers and credit customers. Office Mate estimates that 25% of monthly sales are to cash customers, while the remaining sales are to credit customers. Of the credit customers, 20% pay their accounts in the month of sale, while the remaining 80%
Excel Learning Systems Inc. was organized on May 31, 2010. Projected selling and administrative expenses for each of the first three months of operations are as follows:June ... $117,400July .... 110,500August ... 100,400Depreciation, insurance, and property taxes represent $25,000 of the estimated
Rejuvenation Physical Therapy Inc. is planning its cash payments for operations for the third quarter (July?September), 2011. The Accrued Expenses Payable balance on July 1 is $24,000. The budgeted expenses for the next three months are as follows: Other operating expenses include $10,500 of
On January 1, 2010, the controller of Gardeneer Tools Inc. is planning capital expenditures for the years 2010–2013. The controller interviewed several Gardeneer executives to collect the necessary information for the capital expenditures budget. Excerpts of the interviews are shown
Hickory Furniture Company manufactures unfinished oak furniture. Hickory uses a standard cost system. The direct labor, direct materials, and factory overhead standards for an unfinished dining room table are as follows:. Determine the standard cost per dining room table.
Warwick Bottle Company (WBC) manufactures plastic two-liter bottles for the beverage industry. The cost standards per 100 two-liter bottles are as follows: Standard Cost per 100Cost Category Two-Liter BottlesDirect labor ………………...……… $1.32Direct materials
The following data relate to the direct materials cost for the production of 2,000 automobile tires:Actual: …....….. 54,600 lbs. at $1.80 ………….. $98,280Standard: ……. 53,400 lbs. at $1.85 ……..…… $98,790(a) Determine the price variance, quantity variance, and total direct
The following data relating to direct materials cost for March of the current year are taken from the records of Play Tyme Inc., a manufacturer of plastic toys:Quantity of direct materials used ........ 5,000 lbs.Actual unit price of direct materials ...... $2.40 per lbUnits of finished product
H.J. Heinz Company uses standards to control its materials costs. Assume that a batch of ketchup (1,500 pounds) has the following standards: The actual materials in a batch may vary from the standard due to tomato characteristics. Assume that the actual quantities of materials for batch K103 were
The following data relate to labor cost for production of 5,500 cellular telephones:Actual: .... 3,650 hrs. at $15.20 ..... $55,480Standard: .. 3,710 hrs. at $15.00 .... $55,650(a) Determine the rate variance, time variance, and total direct labor cost variance.(b) Discuss what might have caused
Alpine Bicycle Company manufactures mountain bikes. The following data for May of the current year are available:Quantity of direct labor used …………..… 600 hrs.Actual rate for direct labor ………....... $12.50 per hr.Bicycles completed in May …………………. 280Standard direct
At the beginning of October, Cornerstone Printers Company budgeted 16,000 books to be printed in October at standard direct materials and direct labor costs as follows:Direct materials …… $24,000Direct labor ………...….. 8,000Total ……………......…. $32,000The standard materials
St. Luke Hospital began using standards to evaluate its Admissions Department. The standards were broken into two types of admissions as follows: Standard Time to CompleteType of Admission Admission RecordUnscheduled admission …………….. 40 min.Scheduled admission
Tri-County College wishes to monitor the efficiency and quality of its course registration process.(a) Identify three input and three output measures for this process.(b) Why would Tri-County College use nonfinancial measures for monitoring this process?
Under Par, Inc., is an Internet retailer of golf equipment. Customers order golf equipment from the company, using an online catalog. The company processes these orders and delivers the requested product from its warehouse. The company wants to provide customers with an excellent purchase
The following data relate to factory overhead cost for the production of 5,000 computers:Actual: …………… Variable factory overhead …………. $125,000 Fixed
Perma Weave Textiles Corporation began January with a budget for 30,000 hours of production in the Weaving Department. The department has a full capacity of 40,000 hours under normal business conditions. The budgeted overhead at the planned volumes at the beginning of January was as
The data related to Acclaim Sporting Goods Company's factory overhead cost for the production of 50,000 units of product are as follows: Productive capacity at 100% of normal was 75,000 hours, and the factory overhead cost budgeted at the level of 76,000 standard hours was $456,000. Based on
Scientific Molded Products Inc. prepared the following factory overhead cost budget for the Trim Department for August 2010, during which it expected to use 10,000 hours for production: Scientific Molded Products has available 15,000 hours of monthly productive capacity in the Trim Department
The budget director of Regal Furniture Company requests estimates of sales, production, and other operating data from the various administrative units every month. Selected information concerning sales and production for August 2010 is summarized as follows:(a) Estimated sales of King and Prince
The budget director ofHeads Up Athletic Co., with the assistance of the controller, treasurer, production manager, and sales manager, has gathered the following data for use in developing the budgeted income statement for January 2010:(a) Estimated sales for January:Batting helmet . . . . . . .
The controller of Dash Shoes Inc. instructs you to prepare a monthly cash budget for the next three months. You are presented with the following budget information: The company expects to sell about 10% of its merchandise for cash. Of sales on account, 60% are expected to be collected in full
Best Bathware Company manufactures faucets in a small manufacturing facility. The faucets are made from zinc. Manufacturing has 50 employees. Each employee presently provides 36 hours of labor per week. Information about a production week is as follows:Standard wage per hr. .............
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