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business
managerial accounting

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

Mayhem Manufacturing provides the following standard cost data for one of its products:Direct materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 feet at $3.15 per footDirect labor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Materials and Labor VariancesActual materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000 tonsActual hours used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500 hoursStandard materials for
Sports Manufacturing, Inc., produces and sells footballs. The standard cost for materials and labor for one regulation-size football is as follows:Direct materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 feet of leather at $5.50 per footDirect labor. . . . . . . .
The following information was taken from the records of Liberty Tool Manufacturing Company for its production of jackhammers in the month of July:Required:1. Calculate the materials price and quantity variances, assuming that the materials price variance is recognized at the time of purchase.2.
Cooke Manufacturing Company produces high-quality men's pajamas for several large retail stores.The standard costs for each dozen pairs of pajamas is as follows:Direct materials, 30 yards at $0.80 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $24Direct labor, 4
Mankiw Company uses a standard cost system in its accounting for the manufacturing costs of its only product. The standard cost information for materials and labor is as follows:Direct materials: 5 pounds at $8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Della Brown is the manager of one of the stores in the nationwide EatRite supermarket chain. The following information has been gathered about the performance of Della's store in the most recent quarter:Required:Prepare a segment margin statement for corporate headquarters' use in evaluating the
Derrald Pearl Company has two divisions, Computer Consulting and Construction. During the most recent year, the two divisions had the following operating data:Required:1. Prepare a segment margin statement for Derrald Pearl Company. Include three columns' one for the company total and one for each
Menendez Company is a merchandiser that sells three products: Salsa, Tortillas, and Queso. The following are the actual and expected (standard) data for the three products:Required:1. Compute the sales price variance and the sales volume variance for Salsa.2. Compute the sales price variance and
Family Friendly Photography has just finished its first year of business. It specializes in group portraits, though the company also handles individual portraits. Revenue is determined per photo shooting. Family Friendly Photography has divided prices into three different groups: groups of 15 or
Macro Data Corporation's three divisions had the following operating data during the year:Required:1. Compute the contribution margin for each division.2. Compute the segment margin for each division (assume that all fixed costs are direct to each division).3. Compute the ROI for each division.4.
Frank's Fixtures has two divisions: the Plumbing Division and the Electrical Division. Following are their operating data for the year:Required:1. Calculate the ROI for each division (use total assets).2. Interpretive Question: On the basis of this return, which division appears to have the better
The following information applies to the two sales divisions of Ward Enterprises:Required:1. Calculate each division's revenue.2. Calculate each division's asset turnover ratio assuming that controllable assets include inventory only.3. Interpretive Question: Which division had the better
Pacific Corporation has a number of autonomous divisions. Its Real Estate Division has recently reviewed a number of investment proposals.a. A new office building would cost $450,000 and would generate yearly operating profit of $80,000.b. A computer system would cost $350,000 and would reduce
Albertson Furniture Company is a retailer of home furnishings. It currently has stores in three cities' San Francisco, Los Angeles, and Phoenix. Operating data for the three stores in 2012 were as follows:Required:1. Compute the segment margin for each store.2. Compute the profit margin ratio for
ROI and Residual IncomeRequired:Compute the missingamounts.
The Gaming Division of Nevada Corporation had income of $750,000 and total assets of $3 million in the past year. The figures are expected to be similar next year. The manager of the Gaming Division has an opportunity to purchase some new gambling machines for $300,000. He concludes that the new
The manager of the Manufacturing Division of Wynne Company is evaluated on a residual income basis. He is in the process of evaluating three investment proposals.a. Pay $550,000 for a new machine that will increase production substantially. This will result in an increased income of $85,000
Janis Walker, president of Western Mills, Inc., a leading textile manufacturing firm, was out jogging after a strenuous day at the office. While jogging, she focused her thinking on the firm’s Commercial Carpeting Division. The major customers of the division are companies that are building new
You have recently been promoted to be the manager of the Camera Division of a large corporation. Your most profitable product is a thin, pocket-sized digital camera. Historically, the pictures taken by the camera were of a poor quality, but due to large investments in research and new breakthroughs
Which is more conducive to a successful organization: a centralized or decentralized company? With the improvements in technology and communication, many companies are able to decentralize their operations and still work effectively. Many segment managers have been given the responsibility to make
Can a company make a conscious decision and set the prices of its products, or does the supply and demand of the market automatically dictate the price? You were talking to your good friend in the economics department about companies and their pricing strategies. You mentioned a number of models
In the 2009 Annual Report for Wal-Mart (see Appendix A), you will find Segment Information in Note 11 in the Notes to the Financial Statements.1. As you can see, Wal-Mart has three different segments: Walmart U.S.; International; and SAM€™S CLUB (the Other segment contains unallocated
Petersen Pottery started out as a two-man operation for ceramic bathroom fixtures (sinks, toilets, and bathtubs). Eventually it grew to 20 master potters, and the fixtures had become known for their distinctive customer features, high quality, and long life. Clive Petersen, the owner, felt that he
From early on, the Japanese recognized that the most efficient way to keep costs down was to design them out of their products, not to reduce them after the products entered production. This realization reflects a fundamental reality of cost management in Japan; the majority of a product’s costs
Jack Lear, an internal auditor for Cool Air, Inc., met with Paul Marsh, the manager of the cost accounting department, to discuss a concern about a possible “glitch” in the standard cost system. Jack had been reviewing the employee time cards in the company division where air-conditioning units
What are the two steps in developing a management system for use in controlling variable manufacturing overhead?
What is a variable manufacturing overhead spending variance, and what does it indicate about variable manufacturing overhead costs?
What is a variable manufacturing overhead efficiency variance, and how does it relate to the labor efficiency variance?
What does the fixed manufacturing overhead budget variance measure?
What does the volume variance measure, and how is this variance different from the other cost variances studied in this chapter?
Using the following data, compute the variable manufacturing overhead spending variance.Number of nightstands produced . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150Actual hours used to produce nightstands . . . . . . . . . . . . . . . . . . . . . . . . . .
Refer to the data in PE 19-71. Compute the variable manufacturing overhead efficiency variance.
Northside Company spent $80,000 on fixed manufacturing overhead during the year. At the beginning of the year, the company had budgeted to spend $76,000 on fixed manufacturing overhead and to work 2,000 direct labor hours (based on expected production of 500 units at four direct labor hours per
Kearl Company has the following manufacturing overhead variances:Variable manufacturing overhead spending variance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$500 FVariable manufacturing overhead efficiency variance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .350
Jay Company manufactures one product. The standard capacity is 20,000 units per month. Manufacturing overhead costs are budgeted and applied on the basis of two machine hours per unit. At standard capacity, the monthly variable overhead budget is $550,000 and the monthly fixed overhead budget is
Rollins Manufacturing Company estimates variable manufacturing overhead for the month of November to be $80,000. Fixed manufacturing overhead is estimated to be $195,000. All manufacturing overhead is estimated on the basis of 10,000 budgeted direct labor hours. At standard production output
Engraph Manufacturing Company uses standard direct labor hours as a basis for charging manufacturing overhead to Work-in-Process Inventory. The following data were taken from the records:Data for August:Actual variable manufacturing overhead. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Grover Glove Company attempts to control manufacturing overhead costs through the use of a flexible budget. Standards are set by studying historical overhead cost data, which are shown here.Actual total overhead costs for each month of the second quarter are also shown.Standard variable overhead:
Standard and actual cost data for Willey Corporation for the first three quarters of the year are shown below.Standards:Machine hours per unit produced . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.0Units produced per quarter . . . . . . . . . . . . . . . . . .
The following production information is available for Porter Corporation:Budgeted production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,000 unitsActual production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145,000 unitsActual
What similarities are there in the inventories of a manufacturing and a merchandising organization? What are the differences?
What similarities are there in the inventories of a manufacturing and a service organization? What are the differences?
How does the work-in-process inventory in a manufacturing organization differ from that in a service organization?
What is represented by total cost of goods manufactured?
Why is the total cost of goods sold number of limited usefulness for detailed internal decision making?
What cost number is compared to the level of raw materials inventory in computing a useful measure of raw materials inventory turnover? Of work-in-process inventory turnover? Of finished goods inventory turnover?
Name three problems associated with carrying too much inventory.
Name three problems associated with carrying too little inventory.
What is inventory shrinkage? Name three things that can cause inventory shrinkage.
What can a company do to evaluate the management of its inventory investment?
What causes holding costs to exist? How is it that holding costs exist in service companies, which typically do not have inventories?
What are the advantages of purchasing inventory in large quantities? What are the advantages of purchasing it in small quantities?
What are carrying costs in the denominator of the economic order quantity (EOQ) formula? How do large carrying costs affect the economic order quantity?
Explain the reasoning behind the reorder point formula: Reorder point × Lead time × Average daily sales. How does safety stock fit into the reorder point concept?
What concerns might investors have when they observe changing levels of inventory on the balance sheet?
How does operating income between variable and absorption costing differ if the number of units in inventory increases during the year and the company’s total fixed costs were the same this year as last year?
Why do you think GAAP requires absorption costing instead of variable costing?
Using the following annual information, calculate inventory turnover for(1) Raw materials inventory,(2) Work-in-process inventory, and(3) Finished goodsinventory.
Refer to the data in PE 20-1. Compute the number of days in inventory for(1) Raw materials inventory,(2) Work-in-process inventory, and(3) Finished goods inventory. (Assume 365 days in the year.)Data from PE 20-1
Which company performed better during the period based on gross marginalone?
Refer to the data in PE 20-3. Based on DuPont’s return on investment (ROI) formula, which company performed better during the period?Data from PE 20-3
Which one of the following statements is false?a. Economic profit is less than or equal to net operating profit.b. A company that has a high quantity of one type of inventory may incur opportunity costs related to other inventory items in lower quantity.c. Both service and manufacturing firms often
Pratt Company had an average of $160,000 worth of a certain product in inventory from September 1 to December 31. If Pratt’s cost of capital is 16%, what is the financial holding cost of this inventory?
Using the following data, compute Lancaster Company’s economic order quantity.Total units demanded annually . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,000Cost to place one order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wilson Company sells 130 units daily. Each time Wilson orders more units, the supplier takes four days to deliver the inventory. What is Wilson’s reorder point (in number of units)?
Refer to the data in PE 20-8. The supplier may take five days to deliver the inventory if any unexpected event occurs, and the daily demand for inventory may also spike to 160 units.Compute the amount of safety stock the company should keep on hand in case both of these events should happen.
Which of the following would be considered product costs under absorption costing?1. Variable manufacturing overhead2. Fixed manufacturing overhead3. Selling and administrative expensesa. 1, 2, and 3b. 1 and 2 onlyc. 1 and 3 onlyd. 1 onlye. None of the above
Johnson Company manufactures and sells kites to toy stores. Given the following information for 2011, create an income statement using both the absorption method (based on the actual full cost per unit) and the variable costingapproach.
The following information is the end-of-year data for Pecos Yo Company:Compute the following:1. Inventory turnover for raw materials inventory2. Days in raw materials inventory (Assume 360 days in a year.)3. Inventory turnover for work-in-process inventory4. Days in work-in-process inventory
Both Dave and Kelly own auto parts stores. The following information is available for 2011 and 2012:1. Calculate each company€™s turnover for inventory for 2012.2. Calculate each company€™s days in inventory for 2012 (assume 365 days in a year).3. Which owner manages inventory
You have just finished preparing the management accounting report below for your division. You are very pleased with the performance of your division and show the report to your division president, Karen. Karen does not understand what some of the costs are and why they are in the report. Respond
Plaids & Stripes and Audrey's Apparel are clothes retailers. August and September are busy months for these two stores because many people are buying children new clothes for the start of school. The following information has been given for both stores' children's departments during the months of
On January 1, 2011, Owen Corporation has $350,000 in inventory. On May 1, 2011, Owen’s inventory is at $400,000. Owen’s cost of capital is 13%. What were Owen’s financial holding costs for January through April?
Brady Company sells imported goods made in India. One product it sells is a wooden music box.The music boxes cost Brady $65, and Brady charges its customers $250. Brady’s cost of capital is 12%. On average, an entire year elapses between the time Brady pays for a music box and the time Brady
For the past three years, Hawkeye Army Surplus Store has had excessive inventory holding costs. Management believes the excessive costs are due to the large inventory purchase orders the company places. The company hires a consultant, Brad Miles, to analyze the problem and suggest a solution.
Avery Grocery Store is the only grocery store in Rayville, a small town populated mostly by college students. Students have been complaining lately because Avery always runs out of macaroni and cheese, the students' favorite food. Avery management decides it needs to calculate a more suitable
Assume that Johnny Johnson (manager of Johnson Company from PE 20-11) will only receive his managerial bonus if operating income is the same or higher in 2012 than in 2011 (according to the absorption method). Unfortunately, 2012 sales for his company have fallen drastically for the year while
Last year, Welk Company had 16,000 units in its beginning inventory (FIFO inventory method). During the year, Welk’s variable production costs were $6 per unit and its fixed manufacturing overhead costs were $4 per unit. Welk’s operating income for the year was $24,000 higher under absorption
Last year, Blake Company’s income under absorption costing was $3,600 lower than its income under variable costing. Blake sold 10,000 units during the year, and its variable costs were $9 per unit, of which $1 was variable selling expense. If total production cost was $11 per unit under
The following information is for Bun MaScare Company:Required:Assuming 365 days in a year, compute the following. (Note: Preparing a cost of goods manufactured schedule and a costs of goods sold schedule may be helpful in solving the problem.)1. Inventory turnover for raw materials2. Days in ending
Ride EZ and Happy Trails are mountain bike retailers. This season a new bike, the Coaster, was introduced in the market. It was believed that the Coaster would be the most popular mountain bike sold during the season. Both companies sold the bike at the suggested retail price. At the end of each
Larson Company has two divisions. The following is information about these divisions over the past six months:Required:1. Use the above information to calculate the economic profit for the two divisions.2. Interpretive Question: The division manager for Division M asks you why it is appropriate to
Watersports, Inc., sells high-performance water skis. Because its sales are seasonal, Watersports calculates and uses different reorder points for summer and winter months. The following information is available:The water skis cost $150 each, and Watersports sells them to its customers for $300.
Widgits-R-Us specializes in building gears that go into large windmills and clocks. The company has had the following sales and production costs for the last four years.Required:1. Compute operating incomes using variable and absorption costing and FIFO periodic inventory flows.2. Compute operating
Reann Baird owns a small retail shop. Historically, her annual sales have been about $250,000, with 60% of that coming in the November and December holiday season. This year, on a buying trip to southern China, Reann discovered an item that she is certain will be in huge demand. It’s a mechanical
You work in the accounting department of Cox Company and are having a debate with one of your co-workers about holding costs. Your co-worker insists that holding costs should not be considered in making decisions because they do not involve any cash flows. He believes that cash flows are all that
Can inventory management tools, such as turnover and days in inventory, be used in a service company that doesn’t have significant levels of tangible inventory? Why is it important to manage costs in a service organization?You have just been hired as an accountant for a large law firm. Your first
Use the following data from Wal-Mart to answer the questions below.1. Calculate the inventory turnover and the days in inventory for Wal-Mart€™s fiscal years2006 through 2009 (assume 365 days per year).2. Based on your answer in part (1), what trends to do you see in Wal-Mart€™s
Deloitte & Touche Tohmatsu (DTT) is one of the largest professional services firms in the world. In 2008, the company reported revenues of $27.4 billion generated from its various business units—accounting, assurance and advisory, tax, legal, and management, financial and human capital
You are a store manager for a large, regional department store chain. Company headquarters has asked you to submit an evaluation of your assistant managers€™ performance. The company is considering promoting one of them to be the manager of another store in the chain. One of the assistant
Explain how understanding cost behavior patterns can assist management.
Discuss how level of activity is measured in manufacturing, merchandising, and service firms.
What is meant by the relevant range?
How should stepped costs be treated in the planning process?
Why must all mixed costs be segregated into their fixed and variable components?
What is the major weakness of the scattergraph, or visual-fit, method of analyzing mixed costs?
What is the major limitation of the high-low method of analyzing mixed costs?
What is the basic C-V-P equation? What is a more detailed version of this equation?
What is the contribution margin, and why is it important for managers to know the contribution margins of their products?

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