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managerial accounting

Accounting concepts and applications 11th Edition Albrecht Stice, Stice Swain - Solutions

Using the traditional overhead allocation technique, Lily Ice Cream Company's Vanilla flavor has a gross profit of negative $155,000 (see Exhibit 17.6). Using the ABC system, Vanilla has a gross profit of positive $139,500 (see Exhibit 17.7). Why is there so much difference in the gross profits
What are the two characteristics of a good management accounting measure?
Which one of the following statements is true with respect to Lily Ice Cream Company?a. The original traditional overhead allocation system ignored the impact of spoiled goods on the calculation of gross profit.b. The original materials warehouse requisition system did not include adequate controls
Which one of the following statements is false with respect to a traditional overhead allocation system?a. A traditional overhead allocation system is a good method of cost allocation in the right context.b. A traditional overhead allocation system is widely used by many companies.c. A traditional
Cassi Company expects to use 400,000 direct labor hours in the production of its only product. Using a traditional overhead allocation system based on direct labor hours and the following manufacturing overhead costs for the year, compute the manufacturing overhead allocation rate.Electricity . . .
Which one of the following statements is false?a. Facility support costs should not be allocated over each division.b. Facility support costs include direct labor and direct materials.c. Traditional overhead allocation systems can result in application of manufacturing overhead costs that do not
Which one of the following statements best summarizes the difference between a traditional overhead allocation system and an ABC system?a. With a traditional system, overhead costs are first allocated to products; with ABC, overhead costs are first allocated to activities.b. With a traditional
Which one of the following is not one of the four general categories of ABC activities?a. Facility support activitiesb. Batch-level activitiesc. Unit-level activitiesd. Product-line activitiese. Manufacturing application activities
Which one of the following would not be an example of a batch activity for a manufacturing firm?a. Purchase ordersb. Special product warehouse manager’s salaryc. Number of setupsd. Number of inspections
Which one of the following is not an example of a product-line activity?a. Property taxes on the production facilityb. Costs related to specialized materials warehousesc. Production process design activitiesd. Training activities for specific types of consulting services
Which one of the following is not an example of a facility support activity?a. Manufacturing vice president’s salaryb. Product engineer’s salaryc. Property taxesd. Plant securitye. Accounting
Motor City Inc. manufactures a variety of models of automobile transmissions. Which one of the following is the best cost driver to use with the activity “designing the parts for a new transmission”?a. Number of machine hoursb. Number of production batches used to manufacture transmissionsc.
Olthof Unlimited Company has determined that $2,500,100 of its total manufacturing overhead costs related to unit-level activities like electricity costs for running the manufacturing equipment and equipment maintenance costs. Olthof Unlimited allocates these costs over the individual units of
Sinjin Company has determined that its total manufacturing overhead cost of $1,200,000 is a mixture of unit-level, batch-level, product-line, and facility support costs. The company has assembled the following information concerning the manufacturing overhead costs, the annual number of units
Which one of the following statements is false?a. In a manufacturing setting with several different types of products, a traditional overhead allocation system can cause a manager to evaluate products incorrectly.b. In a manufacturing setting with several different types of products, the cost
David's Robotics Company manufactures three products. Profit computations for these products for the most recent year are as follows:David's Robotics traditionally allocates manufacturing overhead based on the level of direct labor cost'$2 of manufacturing overhead are allocated for each $1 of
Mad Dog Enterprises manufactures computer game control devices like joysticks and steering wheels. Following is a list of the costs incurred by Mad Dog in 2012:Wages paid to assembly workers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $250,000Cost of plastic
The percentages of product costs comprised by direct materials, direct labor, and manufacturing overhead for three companies are as follows:Based on this information, which of these three companies would probably improve its product costing accuracy most by converting to activity-based costing
For the following list of costs, indicate by the appropriate letter which category of activities each cost applies to: unit level (U), batch level (B), product line (P), or facility support (F):a. Machine fine-tuning adjustment cost (required after the production of each unit)b. Salary of vice
Cottrell Company manufactures three products. Gross margin computations for these three products for 2012 are given below.Cottrell has reexamined the factors that cause its manufacturing overhead costs and has discovered that the annual amount of manufacturing overhead is more closely related to
Halsey, Inc., manufactures two types of baby car seats: standard and deluxe. Information for the year 2012 has been given as follows:Manufacturing overhead for the year totals $650,000. Halsey allocates manufacturing overhead by direct labor hour.1. Prepare gross margin calculations for each
Giles Company has two divisions for Standard and Custom Products. Gross margin computations for these two divisions for 2012 are as follows:Giles has determined that its total manufacturing overhead cost of $1,000,000 is a mixture of batch-level costs and product-line costs. Giles has assembled the
Sundance Skis Company is preparing its end-of-year gross margin computations. Sundance Skis manufactures three types of products: skis, snowboards, and snow skates. The following information, as of the end of the year, is available for these products:Total manufacturing overhead is $1,125,000, with
Blaine Avenue Company manufactures three products. Gross margin computations for these three products for 2012 are as follows:Blaine Avenue has reexamined the activities that relate to its manufacturing overhead costs and has discovered that $500,000 of the annual amount of manufacturing overhead
Wilken's Sandwich Shop maintains three separate menus for breakfast, lunch, and dinner. Gross margin computations for the three menu lines for 2012 are as follows:
For each overhead cost activity below, determine whether it is a unit-level, batch-level, product-line, or facility support activity.1. Employee training. Employees need special training to work with each of the company’s different products.2. Product inspection. No inspection is performed on
MaScare Company produces clothing and has identified five overhead cost activities. These activities are shown as the columns in the table below, along with the percentage of time spent in each activity by various factory employees.The total overhead cost associated with each of the categories of
Amber Company produces electronic fish finders. It makes two different fish finders: the standard model, which is produced in bulk and sells for $200, and the deluxe model, which comes in various configurations and sells for $400. Amber’s engineering and design overhead cost for 2012 is $70,000.
Rockwell Company has three operating divisions. Gross margin computations for these three divisions for 2012 are given below.Rockwell has determined that its total manufacturing overhead cost of $350,000 is a mixture of batch-level costs and product-line costs. Rockwell has assembled the following
Solar Salt Company has two divisions. Gross margin computations for these two divisions for 2012 are as follows:Solar Salt has determined that its total manufacturing overhead cost of $700,000 is a mixture of unit-level costs, batch-level costs, and product-line costs. Solar Salt has assembled the
The following information is given for Greenbaum Tool Manufacturing Company:Required:1. Determine the ABC allocation rate for each activity (i.e., each manufacturing overhead cost pool).2. Determine the manufacturing overhead cost for each product.3. If drills, sanders, saws, and routers sell for
Rick's Crane Company manufactures three different crane engines with 50 horsepower (hp), 60 horsepower, and 70 horsepower engines, respectively. Relevant information for each engine is provided as follows:Total manufacturing overhead cost pools:Engineering . . . . . . . . . . . . . . . . . . . . .
Schmidt Electronics produces two products: CD105 and HD210. Relevant costing information for each product is as follows:Manufacturing overhead costs and associated ABC allocation bases are as follows:Required:1. If manufacturing overhead is allocated on the basis of direct labor hours, compute the
Stafford Manufacturing, Inc., produces two different products. Product 1 sells for $950 each, and Product 2 sells for $700 each. Estimated annual production and sales for Product 1 and Product 2 are 2,100 units and 2,900 units, respectively. Direct materials are $350 for Product 1 and $200 for
Geddy, Inc., is a manufacturing firm that manufactures two types of boat engines. The Type A engine is designed for a specific type of cruise ship. Because of a long-term commitment with a cruise company, Type A engines need no modifications. Type B engines are designed for slightly smaller cruise
Wade Sprinkling Company produces two types of pipe:(1) Lawn sprinkler pipe and(2) Building sprinkler pipe. Relevant information for the production of the two types of pipe for 2012 is as follows:These preliminary manufacturing overhead cost assignments do not yet reflect the proper application of
Yosef Company makes two products'guns and butter. Production cost data are as follows:Both the guns and the butter are manufactured in the same facility and, surprisingly, using the same equipment. The company manufactures seven different gun models and three different types of butter. Total
Ashlyn Company manufactures three products. Gross margin computations for these three products for 2012 are as follows:
Stott Knife Company produces three models of kitchen knives: Dicer, Slicer, and CutsAll. Sales and costing information for the three models are as follows:In the past, manufacturing overhead has been allocated based on number of units produced. Manufacturing overhead for the period is $810,000, and
Does cost information provide help in running a business, or is it only useful within the bounds of an accounting system?Your friends in the MBA program at your university think that cost information is helpful, but rarely used in the decision-making process within a company. One friend said,
Does activity-based costing (ABC) help a company revamp and improve its business operations, or is it too much of an administrative burden that takes away from the company’s primary goals?At your current place of employment, your boss has heard about ABC and tries to meet at least every six weeks
Deluxe Corporation (Deluxe) is the world’s largest printer of checks as well as a provider of electronic products and services to financial institutions and retail companies. The company serves nearly 1.8 million small businesses annually and provides 2 million products—each with personalized
You are the controller for Minuteman Enterprises, a manufacturer of rocket booster engines and various aerospace products. Though there are many commercial customers for most of the company’s products, the federal government is the only buyer of your rocket booster engines. Because you are the
Imagine that one of your parents has traveled across the country to visit you at college. As the two of you have dinner together at one of your favorite restaurants, the discussion turns to your accounting class. You begin describing some of the new ideas and techniques you have been learning
Why is it practically impossible for a large firm to be completely centralized, that is, to have top management making all operating decisions?
Why is a system of responsibility accounting necessary in most businesses?
What are some important behavioral factors that must be considered when responsibilities are assigned to managers?
Why are most performance reports called exception reports?
What is the difference between a cost center and a profit center? Between a profit center and an investment center?
What is a standard cost?
What is the purpose of a standard cost system?
Who is responsible for the development of the standards to be used in a standard cost system?
What is a variance from standard?
What is the relationship of a standard cost system to the principle of management by exception?
What are the steps in establishing and operating a standard cost system?
Why are two variances, rather than one, used to measure and control materials and labor costs?
Who is usually responsible for each of the following variances?a. Direct materials price varianceb. Direct materials quantity variancec. Direct labor rate varianced. Direct labor efficiency variance
If a profit center has a net loss, does that always mean it is not making a contribution to the company as a whole?
What are the two variances used to analyze revenues in profit and investment centers?
What is the major disadvantage of using ROI to evaluate the performance of investment centers?
What is the major advantage of using residual income to evaluate the performance of investment centers?
Which one of the following statements is not an advantage of decentralization?a. Segment managers usually have more information regarding matters within their segments than do managers at higher levels.b. Segment managers’ decisions are always consistent with the overall objectives of the firm.c.
Krohn Company is producing an exception report. One division had $47,500 in budgeted costs, but it actually spent $45,000. How would this variance appear on the exception report?
Which one of the following is not an example of a responsibility center in an organization?a. Profit centerb. Asset centerc. Cost centerd. Investment center
Using the following standard quantities and standard rates, calculate the standard costs of direct materials, direct labor, and variable and fixed manufacturing overhead, and determine the total standard cost perunit.
Olthof Company purchased 15,000 pounds of raw materials at $3.00 per pound. The company’s standard cost per pound is $2.50. Calculate the materials price variance for this purchase.
Refer to the data in PE 19-5. Make the necessary journal entry to record the cash purchase of the raw materials inventory at standard cost.
Over-the-Rhine Company used 5,500 board feet of raw materials with a standard cost of $6.00 per board foot to make 400 tables. The company’s standard is 14 board feet per table. Calculate the company’s materials quantity variance.
Refer to the data in PE 19-7. Make the necessary journal entry to record the transfer of these raw materials into work-in-process inventory.
Using the following information, compute the labor rate variance.Number of nightstands produced . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200Actual hours used to produce nightstands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Refer to the data in PE 19-9. Compute the labor efficiency variance.Data from PE 19-9Number of nightstands produced . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200Actual hours used to produce nightstands . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Refer to the data in PE 19-9 and 19-10. Make the necessary journal entry to record direct labor at the standard rates.Data from PE 19-9 and 19-10Number of nightstands produced . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200Actual hours used to produce
Southgate Company reports the following costs and revenues for one of its segments:Net sales revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $728,000Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Refer to the data in PE 19-12. Compute the segment-margin ratio.Data from PE 19-12Net sales revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $728,000Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Which of the following are not examples of revenue variances (you may select more than one)?a. Sales price varianceb. Spending variancec. Materials price varianced. Sales volume variancee. Labor rate variance
The company sells one product, which is called Product A. Actual and expected sales data for the most recent year are as follows:Using these data, compute the following:1. Sales price variance2. Sales volumevariance
Oakley Company’s profit margin is 15%, and its asset turnover is 3.5. Compute the company’s return on investment (ROI).
Viella Now Company had $400,000 in total assets and $105,000 in operating profit this year, and the company requires at least a 11% return on assets. Compute Viella Now’s residual income.
Lorlily Company is an agricultural supply firm. The management of the company is decentralized, with division managers heading the two operating divisions: Machinery and Seed/Fertilizer. Within each division, the sales are split between the two states of Indiana and Illinois. The following data are
Hogan Manufacturing Company has just adopted a standard cost system. You have been asked to analyze the materials purchases and usage for the month of August to determine the materials price variance to be recorded at the end of the month. During August, 5,000 gallons of a chemical were purchased
Genesis Enterprises produces one product—MX4. The following information relating to raw materialsis available for the month of March:Beginning direct materials inventory . . . . . . . . . . . . . . . . . . . . 1,500 pounds at $3.10 per poundPurchases made during the month . . . . . . . . . . . .
Mary Clarke is concerned about her performance as a recently employed purchasing agent. TheAccounting Department has provided her with the following performance data for the month ofAugust:Units produced . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mr. Rogers, the production manager, has received a report showing a $10,800 unfavorable total materials variance (materials price variance plus materials quantity variance). He knows that production used 20,000 pounds less than the budgeted amount of direct materials allowed for actual output. Mr.
Daniel Smith, production manager, has just received a report stating that the total materials variance (materials price variance plus materials quantity variance) for last month was $4,670 unfavorable. However, he is not certain whether the production supervisors are overdrawing from inventory or
Starship Enterprises produces and sells calibrators. The company began the period with the following inventory of raw material:200 units at $5.50 per unit (the materials price variance is recorded at the time of purchase) A standard of four units of material for each calibrator produced has been
To produce one unit of Product C requires eight hours of labor at a standard cost per hour of $25.00. During the month of September, 5,500 units were produced. Actual hours and costs for the month are as follows:Actual direct labor hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Raymond Stone, a recent business school graduate, has taken a job with Farben Corporation as production manager. His job is to see that production is efficient. After his first month, he is given this memo.Performance ReportRaymond Stone:
During the year, Thompson Plastics was in negotiations with the local union over wages. A settlement was finally reached, and the average wage per hour was increased to $32. Production fell to 130,000 units, and 205,000 hours were incurred. Production had been budgeted at 150,000 units. 1.5 hours
Compute the missing amounts.Total labor variance (efficiency plus rate variances) . . . . . . . . . . . . . . . . . . . . . . . . $47,500 ULabor efficiency variance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $42,000 UActual labor hours incurred . . . .
Scranton, Inc., is a company that sponsors seminars for executives. It has two profit centers, or divisions: a time-management group and a money-management group. Financial information for the two divisions for the year just ended follows:Of these costs, printing and advertising are direct fixed
Sunshine Center's three profit centers had the following operating data during 2012:Sunshine's management is concerned because the company is losing money. They ask you to:1. Calculate each profit center's contribution and segment margins, and overall company profits.2. Determine, on the basis of
El Pico Company has two divisions: Maya and Aztec. During the year they had the following operating data:1. Compute each division's contribution and segment margins, and the contribution each makes to overall company profits.2. Interpretive Question: Based on only the financial information given,
Fabulous Fragrances makes two products: lotion and shampoo. Actual and expected revenue data for the two products are as follows:Using the above data, compute the sales price and sales volume variances for lotion and shampoo for FabulousFragrances.
Telling Time is a watch retailer. It sells two types of watches: digital and analog. The results for the third quarter for Telling Time are as follows:1. Calculate the sales price variance and the sales volume variance for digital watches.2. Calculate the sales price variance and the sales volume
Compute the missing data, items (a) through (i), in the followingtable:
During the year the Hopewell and Hamilton divisions of Granger Company reported the following:1. What was each division's asset turnover ratio?2. What profit margin ratio would each division need in order to generate an ROI of25%?
McCormick Corporation measures the performance of its divisions by using the residual income approach, with a minimum accepted rate of return of 16%. In 2012, the Printing Division, which has total assets of $300,000, generated an operating profit of $56,000, or 8% of sales. The operating results
An investment center of Southwick Corporation made three investment proposals. Details of the proposals follow.Southwick Corporation uses the residual income method to evaluate all investment proposals. Its minimum rate of return is 15%.1. As president of Southwick Corporation, which of the
Ryhan Company is a multinational computer services firm. The management of the company is decentralized, with division managers heading the following three divisions: Europe, Asia, and the Americas. Within each division, the three sources of revenue are software sales, service contracts, and
The standard cost data for Madison Machinery Company show the following costs for producing one of its machines:Direct materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400 pounds at $8 = $3,200Direct labor. . . . . . . . . . . . . . . . . . . . . . . . . .

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