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managerial accounting

Fundamental Managerial Accounting Concepts 6th Edition Edmonds, Tsay, olds - Solutions

Hewitt Rug Company makes two types of rugs, seasonal and all-purpose. Both types of rugs are hand-made, but the seasonal rugs require significantly more labor because of their decorative designs. The annual number of rugs made and the labor hours required to make each type of rug
This problem is an extension of Problem 5-14A, which must be completed first. Hewitt’s accounting staff has disaggregated the $90,000 of overhead costs into the following items. .:.Requireda. Each of Hewitt’s rug lines operates as a department. The all-purpose department occupies 6,000
Soloman Academy, is a profit-oriented education business. Soloman provides remedial training for high school students who have fallen behind in their classroom studies. It charges its students $500 per course. During the previous year, Soloman provided instruction for 1,000 students. The income
Friar Paint Company makes paint in many different colors; it charges the same price for all of its paint regardless of the color. Recently, Friar’s chief competitor cut the price of its white paint, which normally outsells any other color by a margin of 4 to1. Friar’s marketing manager
Morello Sporting Goods Corporation makes two types of racquets, tennis and badminton. The company uses the same facility to make both products even though the processes are quite different. The company has recently converted its cost accounting system to activity-based costing. The following are
Heisler Cameras, Inc., manufactures two models of cameras. Model ZM has a zoom lens; Model DS has a fixed lens. Heisler uses an activity-based costing system. The following are the relevant cost data for the previous month. Heisler’s facility has the capacity to operate 4,500 machine hours
Fazel Chairs, Inc., makes two types of chairs. Model Diamond is a high-end product designed for professional offices. Model Gold is an economical product designed for family use. Irene Fazel, the president, is worried about cut-throat price competition in the chairs market. Her company suffered a
The following quality cost report came from the records of Nelson Company.Requireda. Explain the strategy that Nelson Company initiated to control its quality costs.b. Indicate whether the strategy was successful or unsuccessful in reducing quality costs.c. Explain how the strategy likely affected
Tucker Manufacturing is developing an activity-based costing system to improve overhead cost allocation. One of the first steps in developing the system is to classify the costs of performing production activities into activity cost pools.RequiredUsing the four-tier cost hierarchy described in the
Provide at least one example of an appropriate cost driver (allocation base) for each of the following activities.a. Workers count completed goods before moving them to a warehouse.b. A logistics manager runs a computer program to determine the materials release schedule.c. Janitors clean the
Astro Corporation, a furniture manufacturer, uses an activity-based costing system. It has identified the following selected activities:1. Incurring property taxes on factory buildings.2. Incurring paint cost for furniture produced.3. Setting up machines for a particular batch of production.4.
Understanding the context-sensitive nature of classifying activities RequiredDescribe a set of circumstances in which labor cost could be classified as a unit-level, a batch level, a product-level, or a facility-level cost.
Understanding the context-sensitive nature of classifying activities Mauldin Company makes two types of cell phones. Handy is a thin, pocket-size cell phone that is easy to carry around. Action is a palm-size phone convenient to hold while the user is talking.During its most recent accounting
Computing overhead rates based on different costing drivers Chase Industries produces two surge protectors: VC620 with six outlets and PH630 with eight outlets and two telephone line connections. Because of these product differences, the company plans to use activity-based costing to allocate
Comparing an ABC system with a traditional cost system Use the information in Exercise 5-6B to complete the following requirements. Assume that before shifting to activity-based costing, Chase Industries allocated all overhead costs based on direct labor hours. Direct labor data pertaining to the
Allocating costs with different cost drivers Rigsby Sporting Goods, Inc., produces indoor treadmills. The company allocates its overhead costs using activity-based costing. The costs and cost drivers associated with the four overhead activity cost pools follow.Producing 5,000 units of PFT200, one
Allocating costs with different cost drivers Talton Shoes Corporation produces three brands of shoes, Brisk, Pro, and Runner. Relevant information about Talton overhead activities, their respective costs, and their cost drivers follows.Requireda. Talton currently allocates all overhead costs based
Computing product cost with given activity allocation rates Using automated production processes, Stegall Videos produces two kinds of digital camcorders: N100 for the novice and D200 for the hobbyist. The company has found activity-based costing useful in assigning overhead costs to its products.
Allocating facility-level costs and a product elimination decision Adgar Corporation produces two types of juice that it packages in cases of 24 cans per case. Selected per case data for the two products for the last month follow.Adgar allocates production overhead using activity-based costing but
Lucas Weldon, the president of Easeley Industries, Inc., was beaming when he was reviewing the company’s quality cost report. After he had implemented a quality-control program for three years, the company’s defect rate had declined from 20 percent to 3 percent. Mr. Weldon patted Kenyata Terry,
Since its inception, Ray Laboratory, has produced a single product, Product S109. With the advent of automation, the company added the technological capability to begin producing a second product, Product N227. Because of the success of Product N227, manufacturing has been shifting toward its
Kelvin’s Commemoratives makes and sells two types of decorative plates. One plate displays a hand-painted image of Princess Diana; the other plate displays a machine-pressed image of Marilyn Monroe. The Diana plates require 25,000 hours of direct labor to make; the Monroe plates require only
Assume the same data as in Problem 5-14B with the following additional information. The hours of machine time for processing plates are 1,000 for Diana plates and 2,500 for Monroe plates.Requireda. Establish two activity centers, one for machine-related activities and the second for labor- related
Wattson CPA and Associates is a local accounting firm specializing in bookkeeping and tax services. The firm has four certified public accountants who supervise 20 clerks. The clerks handle basic bookkeeping jobs and prepare tax return drafts. The CPAs review and approve the bookkeeping jobs and
Yoder Boot and Shoe Company makes hand-sewn boots and shoes. Yoder uses a companywide overhead rate based on direct labor hours to allocate indirect manufacturing costs to its products. Making a pair of boots normally requires 2.4 hours of direct labor, and making a pair of shoes requires 1.8
Pricing decisions made with ABC system cost data Pittman Furniture Corporation makes two types of dining tables, Elegance for formal dining and Comfort for casual dining, at its single factory. With the economy beginning to experience a recession, Justin Pittman, the president, is concerned about
Target pricing and target costing with ABC Ricardo Corporation manufactures two models of watches. Model Wonder displays cartoon characters and has simple features designed for kids. Model Marvel has sophisticated features such as dual time zones and an attached calculator. Ricardo's product design
Cost management with an ABC system Hayne Corporation manufactures two different coffee makers, Professional for commercial use and Home for family use. Dwight Hayne, the president, recently received complaints from some members of the board of directors about the company's failure to reach the
Carl Wallace, the president of Ritch Plastic Company, is a famous cost cutter in the plastics industry. Two years ago, he accepted an offer from Ritch€™s board of directors to help the company cut costs quickly. In fact, Mr. Wallace€™s compensation package included a year-end
Drilling Innovations, Inc., produces specialized cutting heads used by companies that drill for oil and natural gas. The company has recently implemented an ABC system for three of its products and is interested in evaluating its effectiveness before converting to an ABC system for all products. To
A dialysis clinic provides two types of treatment for its patients. Hemodialysis (HD), an in house treatment, requires that patients visit the clinic three times each week for dialysis treatments. Peritoneal dialysis (PD) permits patients to self-administer their treatments at home on a daily
Evaluating external failure costs with real world data The federal government maintains a website devoted to providing information about product recalls. To complete this assignment you will need to obtain information from this site as follows: Go to recalls.gov Click on the Consumer Products tab
Assessing a strategy to control quality cost Lucy Sawyer, who owns and operates Sawyer Toy Company, is a perfectionist. She believes literally in the €œzero-defects€ approach to quality control. Her favorite saying is, €œYou can€™t spend too much on
Conflicts between controlling cost and providing social responsibility to patients This case examines potential ethical issues faced by the dialysis clinic described in ATC 5-2. It is, however, an independent case that students may study in conjunction with or separately from ATC 5-2. The dialysis
Tameron Corporation produces video games in three market categories: commercial, home line, and miniature handheld. Tameron has traditionally allocated overhead costs to the three product categories using the companywide base of direct labor hours. The company recently switched to an ABC system
Beasley Company makes three types of exercise machines. Data have been accumulated for four possible overhead drivers. Data for these four possible drivers are shown in rows 3 to 7 of the following spreadsheet.RequiredConstruct a spreadsheet that will allocate overhead and calculate unit cost for
To this point we have assumed the Magnificent Modems produced only one type of modem. Suppose instead we assume the company produces several different kinds of modems. The production process differs for each type of product. Some require more setup time than others, they are produced in different
Identify the primary qualities of revenues and costs that are relevant for decision making.
Are variable costs always relevant? Explain.
Identify the four hierarchical levels used to classify costs. When can each of these levels of costs be avoided?
Describe the relationship between relevance and accuracy.
It all comes down to the bottom line. The numbers never lie. Do you agree with this conclusion? Explain your position.
Carmon Company invested $300,000 in the equity securities of Mann Corporation. The current market value of Carmon’s investment in Mann is $250,000. Carmon currently needs funds for operating purposes. Although interest rates are high, Carmon’s president has decided to borrow the needed funds
What is an opportunity cost? How does it differ from a sunk cost?
A local bank advertises that it offers a free noninterest-bearing checking account if the depositor maintains a $500 minimum balance in the account. Is the checking account truly free?
A manager is faced with deciding whether to replace machine A or machine B. The original cost of machine A was $20,000 and that of machine B was $30,000. Because the two cost figures differ, they are relevant to the manager’s decision. Do you agree? Explain your position.
Are all fixed costs unavoidable?
Identify two qualitative considerations that could be associated with special order decisions.
Which of the following would not be relevant to a make-or-buy decision?(a) Allocated portion of depreciation expense on existing facilities.(b) Variable cost of labor used to produce products currently purchased from suppliers.(c) Warehousing costs for inventory of completed products (inventory
What two factors should be considered in deciding how to allocate shelf space in a retail establishment?
What level(s) of costs is (are) relevant in special order decisions?
Why would a company consider outsourcing products or services?
Chris Sutter, the production manager of Satellite Computers, insists that the floppy drives used in the company’s upper-end computers be outsourced since they can be purchased from a supplier at a lower cost per unit than the company is presently incurring to produce the drives. Jane Meyers, his
Identify some qualitative factors that should be considered in addition to quantitative costs in deciding whether to outsource.
The managers of Wilcox, Inc., are suggesting that the company president eliminate one of the company’s segments that is operating at a loss. Why may this be a hasty decision?
Why would a supervisor choose to continue using a more costly old machine instead of replacing it with a less costly new machine?
Identify some of the constraints that limit a business’s ability to satisfy the demand for its products or services.
Leah Friend is trying to decide which of two different kinds of candy to sell in her retail candy store. One type is a name brand candy that will practically sell itself. The other candy is cheaper to purchase but does not carry an identifiable brand name. Ms. Friend believes that she will have to
Distinction between relevance and cost behavior Stanley Company makes and sells a single product. Stanley incurred the following costs in its most recent fiscal year.Stanley could purchase the products that it currently makes. If it purchased the items, the company would continue to sell them using
Distinction between avoidable costs and cost behavior Medallion Company makes fine jewelry that it sells to department stores throughout the United States. Medallion is trying to decide which of two bracelets to manufacture. Cost data pertaining to the two choices follow.Requireda. Identify the
Costs can be classified into one of four categories including unit-level, batch-level, product-level, or facility-level costs.RequiredClassify each of the items listed below into one of the four categories listed above. The first item has been categorized as an example.
Norman Concrete Company pours concrete slabs for single-family dwellings. Wayne Construction Company, which operates outside Norman’s normal sales territory, asks Norman to pour 40 slabs for Wayne’s new development of homes. Norman has the capacity to build 300 slabs and is presently working on
Issa Company manufactures a personal computer designed for use in schools and markets it under its own label. Issa has the capacity to produce 25,000 units a year but is currently producing and selling only 15,000 units a year. The computer’s normal selling price is $1,600 per unit with no volume
Identifying qualitative factors for a special order decision RequiredDescribe the qualitative factors that Issa should consider before accepting the special order described in Exercise 6-6A.
Using the contribution margin approach for a special order decision Shenyang Company, which produces and sells a small digital clock, bases its pricing strategy on a 35 percent markup on total cost. Based on annual production costs for 10,000 units of product, computations for the sales price per
Roaming Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-quality racing bikes with limited sales. Roaming produces and sells only 6,000 bikes each year. Due to the low volume of activity, Roaming is unable to obtain the economies of
Establishing price for an outsourcing decision Lunn Company makes and sells lawn mowers for which it currently makes the engines. It has an opportunity to purchase the engines from a reliable manufacturer. The annual costs of making the engines are shown here.Requireda. Determine the maximum price
Outsourcing decision with qualitative factors Nadir Corporation which makes and sells 79,400 radios annually, currently purchases the radio speakers it uses for $12 each. Each radio uses one speaker. The company has idle capacity and is considering the possibility of making the speakers that it
Outsourcing decision affected by opportunity costs Pace Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,000 containers follows.Ace Container Company has offered to sell comparable containers to Pace for
Lynch Freight Company owns a truck that cost $30,000. Currently, the truck’s book value is $18,000, and its expected remaining useful life is four years. Lynch has the opportunity to purchase for $26,000 a replacement truck that is extremely fuel efficient. Fuel cost for the old truck is expected
Steve Denmark owns his own taxi, for which he bought an $18,000 permit to operate two years ago. Mr. Denmark earns $36,000 a year operating as an independent but has the opportunity to sell the taxi and permit for $73,000 and take a position as dispatcher for Sartino TaxiCo. The dispatcher position
Chamberline Company operates three segments. Income statements for the segments imply that profitability could be improved if Segment A were eliminated.Requireda. Explain the effect on profitability if Segment A is eliminated.b. Prepare comparative income statements for the company as a whole under
Baich Transport Company divides its operations into four divisions. A recent income statement for Koslov Division follows.Requireda. Should Koslov Division be eliminated? Support your answer by explaining how the division's elimination would affect the net income of the company as a whole. By how
Safar Corporation is considering the elimination of one of its segments. The segment incurs the following fixed costs. If the segment is eliminated, the building it uses will be sold.Required Based on this information, determine the amount of avoidable cost associated with the segment.
A machine purchased three years ago for $300,000 has a current book value using straight-line depreciation of $175,000; its operating expenses are $30,000 per year. A replacement machine would cost $240,000, have a useful life of nine years, and would require $13,000 per year in operating expenses.
Rainger Company is considering replacement of some of its manufacturing equipment. Information regarding the existing equipment and the potential replacement equipment follows.RequiredBased on this information, recommend whether to replace the equipment. Support your recommendation with appropriate
Hardin Company paid $90,000 to purchase a machine on January 1, 2009. During 2011, a technological breakthrough resulted in the development of a new machine that costs $120,000. The old machine costs $45,000 per year to operate, but the new machine could be operated for only $15,000 per year. The
Annual versus cumulative data for replacement decision Because of rapidly advancing technology, Andersen Publications Corporation is considering replacing its existing typesetting machine with leased equipment. The old machine, purchased two years ago, has an expected useful life of six years and
Joyful Novelties has the capacity to produce either 30,000 corncob pipes or 14,000 cornhusk dolls per year. The pipes cost $4 each to produce and sell for $7 each. The dolls sell for $11 each and cost $5 to produce.RequiredAssuming that Joyful Novelties can sell all it produces of either product,
Context-sensitive relevance RequiredRespond to each requirement independently.a. Describe two decision-making contexts, one in which unit-level materials costs are avoidable, and the other in which they are unavoidable.b. Describe two decision-making contexts, one in which batch-level setup costs
Chapman Construction Company is a building contractor specializing in small commercial buildings. The company has the opportunity to accept one of two jobs; it cannot accept both because they must be performed at the same time and Chapman does not have the necessary labor force for both jobs.
Effect of order quantity on special order decision Ellis Quilting Company makes blankets that it markets through a variety of department stores. It makes the blankets in batches of 1,000 units. Ellis made 20,000 blankets during the prior accounting period. The cost of producing the blankets is
Effects of the level of production on an outsourcing decision Seymour Chemical Company makes a variety of cosmetic products, one of which is a skin cream designed to reduce the signs of aging. Seymour produces a relatively small amount (15,000 units) of the cream and is considering the purchase of
Outsourcing decision affected by equipment replacement Jenkins Bike Company (JBC) makes the frames used to build its bicycles. During 2011, JBC made 20,000 frames; the costs incurred follow.JBC has an opportunity to purchase frames for $110 each.Additional Information1. The manufacturing equipment,
Brandt Boot Co. sells men's, women's, and children's boots. For each type of boot sold, it operates a separate department that has its own manager. The manager of the men's department has a sales staff of nine employees, the manager of the women's department has six employees, and the manager of
Effect of activity level and opportunity cost on segment elimination decision Levert Manufacturing Co. produces and sells specialized equipment used in the petroleum industry. The company is organized into three separate operating branches: Division A, which manufactures and sells heavy equipment;
Comprehensive problem including special order, outsourcing, and segment elimination decisions Huffman Corporation makes and sells state-of-the-art electronics products. One of its segments produces The Math Machine, an inexpensive calculator. The company's chief accountant recently prepared the
The following information applies to the products of Kaito Company.RequiredIdentify the product that should be produced or sold under each of the following constraints. Consider each constraint separately.a. One unit of Product A requires 2 hours of labor to produce, and one unit of Product B
Julio Sanchez manages the cutting department of Guzman Timber Company. He purchased a tree-cutting machine on January 1, 2011, for $400,000. The machine had an estimated useful life of five years and zero salvage value, and the cost to operate it is $90,000 per year. Technological developments
Distinction between relevance and cost behavior Joe Awad is planning to rent a small shop for a new business. He can sell either sandwiches or donuts. The following costs pertain to the two products.RequiredIdentify each cost as relevant or irrelevant to Mr. Awad's product decision and indicate
Distinction between relevance and cost behavior Gromyko Company makes and sells a toy plane. Gromyko incurred the following costs in its most recent fiscal year:Gromyko could purchase the toy planes from a supplier. If it did, the company would continue to sell them using its own logo, advertising
Distinction between avoidable costs and cost behavior Preston Phones, Inc., makes telephones that it sells to department stores throughout the United States. Preston is trying to decide which of two telephone models to manufacture. The company could produce either telephone with its existing
Costs can be classified into one of four categories including unit-level, batch-level, product-level, or facility-level costs.RequiredClassify each of the items listed below into one of the four categories listed above. The first item has been categorized as an example.
Ragan Textile Company manufactures high-quality bed sheets and sells them in sets to a well known retail company for $54 a set. Ragan has sufficient capacity to produce 150,000 sets of sheets annually; the retail company currently purchases 90,000 sets each year. Ragan’s unit-level cost is $30
Mansour Automotive Company manufactures an engine designed for motorcycles and markets the product using its own brand name. Although Mansour has the capacity to produce 40,000 engines annually, it currently produces and sells only 30,000 units per year. The engine normally sells for $500 per unit,
Identifying qualitative factors for a special order decision RequiredDescribe the qualitative factors that Mansour should consider before making the decision described in Exercise 6-6B.
Using the contribution margin approach for a special order decision Winchester Company produces and sells a food processor that it prices at a 25 percent markup on total cost. Based on data pertaining to producing and selling 50,000 food processors, Winchester computes the sales price per food
Making an outsourcing decision Upton Boats Company currently produces a battery used in manufacturing its boats. The company annually manufactures and sells 5,000 units of a particular model of fishing boat. Because of the low volume of activity, Upton is unable to obtain the economies of scale
Establishing a price for an outsourcing decision Romero Corporation makes and sells skateboards. Romero currently makes the 60,000 wheels used annually in its skateboards but has an opportunity to purchase the wheels from a reliable manufacturer. The costs of making the wheels follow.Requireda.
Making an outsourcing decision with qualitative factors considered Keating Computers currently purchases for $16 each keyboard it uses in the 50,000 computers it makes and sells annually. Each computer uses one keyboard. The company has idle capacity and is considering whether to make the keyboards

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