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Accounting concepts and applications 11th Edition Albrecht Stice, Stice Swain - Solutions
How much will profits increase for every unit sold over the break-even point?
What is the major advantage of using C-V-P graphs?
When other factors are constant, what is the effect on profits of an increase in fixed costs? Of a decrease in variable costs?
Which one of the following is not an activity base used by a company?a. Number of defects per hour in an assembly plantb. Number of units sold for a merchandising firmc. Number of units produced for a manufacturing firmd. Number of client hours billed for an accounting firme. Number of hours a
Which one of the following would not be a variable cost for a construction company?a. Cost of trusses used to construct a roof for a houseb. Cost of windows to be installed in a housec. Salary paid to overall project supervisord. Cost of drywall to be installed in housee. Cost of exterior house
Saratoga Company has assembled the following data about its variable costs:Level of Activity Total Variable Cost2,000 units..........$ 46,0003,000 units.............72,0004,000 units.............96,0005,000 units........... 120,0006,000 units........... 150,000The company is currently producing
If the level of activity increases during the month, does the fixed cost per unit increase, decrease, or remain constant?
B&B Company reports the following items:Direct materials per unit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.25Direct labor per unit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
McIntyre Company pays $3,000 per month to each of its four production supervisors. Each supervisor can handle the workload associated with up to 2,400 units of production per month; the current level of production is 9,000 units. If the company increases its level of production to 12,800 units per
Cambridge Company’s president receives a $150,000 base salary and a bonus of 0.5% of sales for the year. How much will the president earn at a sales level of $3,000,000 for the year?
Which one of the following statements is incorrect?a. The scattergraph method can be somewhat subjective depending on where one visually places the regression line.b. The scattergraph method is the most accurate method of analyzing mixed costs.c. When graphing mixed costs, the dollars go on the
Ryazan Company reports the following utility costs for different levels of activity during the first half of the year:Using the high-low method, estimate the variable costrate.
Refer to the data in PE 21-9. Using the high-low method, estimate the fixed costs per month based on the variable cost rate (computed in PE 21-9).Data from PE 21-9.
Loeffel Company sells desks for $550 each. The variable cost per desk is $375. The company’s monthly fixed costs are $75,000. Prepare a contribution margin income statement for a month in which the company sells 550 desks.
Refer to the data in PE 21-11. Compute the contribution margin ratio and the variable cost ratio.Data from PE 21-11Loeffel Company sells desks for $550 each. Th e variable cost per desk is $375. The company’s monthly fixed costs are $75,000. Prepare a contribution margin income statement for a
Lathrup Company sells riding lawnmowers for $2,395 each. The variable cost per lawnmower is $1,645. The company’s monthly fixed costs are $141,000. Using the C-V-P equation, compute the amount of profit the company will have for a month in which the company sells 275 lawnmowers.
Chrissy Company sells shovels for $30.25 each. The variable cost per shovel is $14.25. The company’s monthly fixed costs are $2,400. Compute the number of shovels the company must sell to break even.
Refer to the data in PE 21-14. How many shovels must the company sell to achieve a profit of $10,000?Data from PE 21-14Chrissy Company sells shovels for $30.25 each. The variable cost per shovel is $14.25. Th e company’s monthly fixed costs are $2,400. Compute the number of shovels the company
Jameson Company sells pianos for $7,000 each. The variable cost per piano is $5,500. The company has fixed costs per month of $45,000. Compute the number of units the company must sell in a month to achieve a 15% return on sales.
Runyan Company has a variable cost ratio of 55% and monthly fixed costs of $144,000. What is the company’s break-even point in terms of sales dollars?
Cobb Douglas Company currently sells 40,000 feet of cable each month for $3.50 per foot. The variable cost of the cable is $0.95 per foot, and monthly fixed costs are $75,000. The company is considering whether to raise the sales price for the cable to $4.00 per foot. The marketing team has
Refer to the data in PE 21-18. Cobb Douglas Company is considering whether to change its production process to reduce the variable cost per foot to $0.75 by raising fixed costs $5,000 per month to $80,000. This change will have no impact on selling price ($3.50) or sales volume (40,000 feet). In
Look at the given C-V-P graph. Which one of the following sets of labels correctly labels items A, B, and C in the C-V-P graph?a. A: Total cost line; B: Fixed costs; C: Break-even pointb. A: Revenue line; B: Variable costs; C: Fixed costsc. A: Fixed cost line; B: Break-even point; C: Fixed costsd.
Look at the given profit graph. Which one of the following sets of labels correctly labels items A, B, and C in the profit graph?a. A: Area of loss; B: Break-even point; C: Area of profitb. A: Area of loss; B: Area of profit; C: Break-even pointc. A: Break-even point; B: Area of loss; C: Area of
Which one of the following is not an assumption of C-V-P analysis?a. Fixed costs are always greater than variable costs.b. All costs can be divided into fixed and variable categories.c. C-V-P analysis is valid only for a relevant range.d. The mix of a company’s products does not change over the
Cook Corporation manufactures plastic garbage cans. In a typical year, the firm produces between 40,000 and 50,000 cans. At this level of production, fixed costs are $10,000 and variable costs are $2 per can.1. Graph the cost of producing cans, with cost as the vertical axis and production output
Sabrina Company manufactures large leisure boats. The following schedule shows total fixed costs at various levels of boat production:Units Produced Total Fixed Costs0–100.........$150,000101–400.......250,000401–900.......400,0001. What is the fixed cost per unit when 75 boats
Wyoming Company makes windmills. The company has the following total costs at the given levels of windmill production:Units Produced Total Costs20..........$16,00030.........22,00040............20,00050.........28,0001. Use the scattergraph method to estimate the fixed and variable elements of
Given the following mixed costs at various levels of production, complete the requirements.1. Plot the data on a scattergraph, and visually fit a straight line through the points.2. Based on your graph, estimate the monthly fixed cost and the variable cost per unit produced.3. Compute the total
Sailmaster makes boats and has the following costs and production levels for the last eight quarters:1. Plot the data on a scattergraph, and visually fit a straight line through the points.2. Based on your graph, estimate the quarterly fixed cost and the variable cost per unit produced.3. Use the
The Stamford Times has determined that the annual printing of 900,000 newspapers costs 14 cents per copy. If production were to be increased to 1,500,000 copies per year, the per-unit cost would drop to 9 cents per copy.1. Using the high-low method, determine the total fixed and variable costs of
Jerry Stone owns and operates a small beach shop in a mall on Sanibel Island, Florida. For the last six months, Jerry has had a display of sunglasses in the front window. Largely because of the display, Jerry has sold 100 pairs of sunglasses per month at an average cost of $26 and selling price of
The following data apply to Gordon Company for 2012:Sales revenue (120 units at $35 each) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,200Variable selling expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fill in the missing amounts for the following three cases. Note: There is no manufacturing overhead in thisexercise.
Dr. Hughes and Dr. Hawkins, owners of the Spanish Fork Care Clinic, have $350,000 of fixed costs per year. They receive 30,000 patient visits in a year, charging each patient an average of $25 per visit; variable costs average $3 per visit (needles, medicines, and so on).1. What is the contribution
Compute the missing amounts for the following independent cases. (Assume zero beginning and endinginventories.)
Detienne Company manufactures and sells one product for $10 per unit. The unit contribution margin is 40% of the sales price, and fixed costs total $105,000.1. Using the equation approach, compute:a. The break-even point in sales dollars and unitsb. The sales volume (in units) needed to generate a
Steven Newman, Inc., estimates 2012 costs to be as follows:Direct materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6 per unitDirect labor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Using the graph below, answer the following questions:1. Copy the graph and identify (label) fixed costs, variable costs, total revenues, the total cost line, and the break-even point.2. Determine the break-even point in both sales dollars and volume.3. Suppose that as a manager you forecast sales
Using the graph below, answer the following questions:1. What is the break-even point in sales volume (in units)?2. Approximately what volume of sales (in units) must this company have to generate an income of $300?3. How much are the fixedcosts?
Montana Company manufactures chocolate candy. Its manufacturing costs are as follows:Annual fixed costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $15,000Variable costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Last Outpost is a tourist stop in a western resort community. Kerry Yost, the owner of the shop, sells hand-woven blankets for an average price of $30 per blanket. Kerry buys the blankets from weavers at an average cost of $21. In addition, he has selling expenses of $3 per blanket. Kerry rents
Tracy, Inc., estimates that next year’s results will be:Sales revenue (75,000 units) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 900,000Less variable costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Modern Fun Corporation sells electronic games. Its five salespersons are currently being paid fixed salaries of $30,000 each; however, the sales manager has suggested that it might be more profitable to pay the salespersons on a straight commission basis. He has suggested a commission of 15% of
Cloward and Hawkins, CPAs, took in $350,000 of gross revenues this year. Besides themselves, they have two professional staff (one manager and one senior accountant) and a full-time secretary. Fixed operating expenses for the office were $50,000 last year. This year, the volume of activity is up
Woodfield Company makes bed linens. During the first six months of 2012, Woodfield had the following production costs:Required:1. Use the high-low method to compute the monthly fixed cost and the variable cost rate.2. Plot the costs on a scattergraph.3. Interpretive Question: Based on your
Early in 2013, Lily Company (a retailing firm) sent the following income statement to its stockholders:Required:1. Prepare a contribution margin income statement. (Assume that the fixed components of the selling expenses and administrative expenses are $20,000 and $20,000, respectively.)2.
Susan Young, a part-time inventor, met Henry Jones, a Christmas ornament manufacturer, while golfing. Henry manufactures an ornament everyone loves, but stores will not carry because they are very fragile and often break during shipping. Susan told Henry about a plastic box she had developed that
Bassically Jammin’, Inc. (BJI) is a retail outlet for customized bass guitars. The average cost of a bass guitar to the company is $1,000. BJI includes a markup of 50% of cost in the sales price. In 2012, BJI sold 380 bass guitars and finished the year with the same amount of inventory it had at
The following information is available for Dabney Company for 2012:Sales revenue (at $20 per unit). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $140,000Fixed manufacturing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Press Publishing Corporation has two major magazines: Star Life and Weekly News. During 2012, Star Life sold 3 million copies at $1.00 each, and Weekly News sold 2.1 million copies at $1.10 each. Press Publishing accumulated the following cost information:Required:1. Use the high-low method to
Clearview Company is a manufacturer of blown glass vases. The following information pertains to Clearview’s 2012 sales:Sales price per unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 65Variable costs per unit . . . . . . . . . . . . . .
Jane Tamlyn paid $225 to rent a carnival booth for four days. She has to decide whether to sell doughnuts or popcorn. Doughnuts cost $1.50 per dozen and can be sold for $3.00 per dozen. Popcorn will require a $115 rental fee for the popcorn maker and $0.15 per bag of popcorn for the popcorn,
Using the graph below, complete the requirements.Required:1. Determine the following:a. The break-even point in sales dollars and volumeb. The sales price per unitc. Total fixed costsd. Total variable costs at the break-even pointe. The variable cost per unitf. The unit contribution margin2. What
SMC, Inc., is a producer of handheld electronic games. Its 2012 income statement was as follows:In preparing its budget for 2013, SMC is evaluating the effects of changes in costs, prices, and volume on profit.Required:1. Evaluate the following independent cases, and determine SMC's 2013 budgeted
Zimmerman Company records the following costs associated with the production and sale of a steel slingshot:Selling expenses:Fixed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $20,000Variable. . . . . . . . . . . . . . . . . . . .
Wonder T Manufacturing Company produces lanterns. The firm has not been as profitable as expected in the past three years. As a result, it has excess capacity that could be used to produce an additional 20,000 lanterns per year. However, any production above that amount would require a capital
The federal government recently placed a ceiling on the selling price of sheet metal produced byMOB Company. In 2012, MOB was limited to charging a price that would earn a 20% return on gross sales. On the basis of this restriction, MOB had the following results for 2012:In 2013, MOB predicted that
The 2012 pro-forma income statement for Grover Company is as follows (ignore taxes):Required:1. Compute how many units must be sold to break even.2. Compute the increase (decrease) in profit under the following independent situations:a. Sales increase 25%.b. Fixed selling and administrative
The Colorado Outdoors Federation sponsors an annual banquet. This year, the guest speaker is a noted wildlife photographer and lecturer. In planning for the event, the group’s treasurer has determined the following costs:Rental of meeting facility . . . . . . . . . . . . . . . . . . . . . . . . .
Entertainment Enterprises, a firm that sells magazine subscriptions, is experiencing increased competition from a number of companies. The president, Betty Kincher, has asked you, the controller, to prepare an income statement that will highlight the fixed and variable costs; this will provide more
Should the management of a company consider fixed costs in the decision making process, or should they ignore fixed costs and base their decision on what makes the most business sense? Recently, the board of directors for a television manufacturing company was considering a change in products from
Should companies have large amounts of inventory on hand for customers, or should companies keep inventory at a minimum to free up cash for other parts of the business?Your uncle, Tim, started a very successful “home improvement” business 10 years ago. He wanted to create a place where people
Annual revenues, as well as sales and marketing expenses, for the years 1991–2002 are provided below for Microsoft Corporation:1. Operating output data, like the number of software products sold each year, are not provided in Microsoft's Form 10-K. However, while it is a little odd to use
While it is not uncommon for grocery stores to have video rental departments now, not much management attention is paid to this aspect of the business. However, successfully managing a rental business requires being aware of an unimaginably large number of video titles. Further, large-scale video
Joan Hildabrand is analyzing some cost data for her boss, Ross Cumings. The data relate to a special sales order that Pickmore International is considering from a large customer in Singapore. The following data are applicable to the product being ordered:Normal unit sales price . . . . . . . . . .
What effect is a change in the sales mix likely to have on a firm’s overall contribution margin ratio?
Dee Company has fixed costs of $43,000 and the following sales mix:Using this same sales mix, calculate the required sales (in dollars) to earn a target income of$50,000.
If you experience much higher sales than expected this year, which kind of operating leverage would you like to have in your company for profit maximization?a. High operating leverageb. Low operating leveragec. Medium operating leveraged. Operating leverage does not affect profitability.
Klein Brothers sells products X and Y. Because of the nature of the products, Klein sells two units of product X for each unit of product Y. Relevant information about the products is as follows:1. Assuming that Klein's fixed costs total $140,000, compute Klein's break-even point in sales
Mower Manufacturing’s income statement for January 2012 is given below.Sales (25,000 units × $25) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $625,000Less variable costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ludlam Company and Kassandra Company both make school desks. They have the same production capacity, but Ludlam is more automated than Kassandra. At an output of 2,500 desks per year, the two companies have the following costs:Assuming that both companies sell desks for $100 each and that there are
You have been hired as a consultant for Jones Inc. The company manufactures high-density compact disks and sells them to a wide variety of business clients. Management is eager to learn more about the company's cost behavior. You have been provided the following data. Assume all production falls
Mike's Ice Cream Company produces and sells ice cream in three sizes: quart, half-gallon, and gallon. Relevant information for each of the sizes is as follows:Mike anticipates sales of $500,000 and fixed costs of $120,000 in 2012.Required:1. Determine the break-even sales volume in units and
The following summary data are provided for Spencer Mercantile Corporation and James Service, Inc. During the year for which these data are reported, Spencer sold 50,000 units and James sold 100,000 units.Required:1. Determine the break-even point for Spencer and James in both sales dollars and
Livingston, Padden, & Company (LPC) makes specialized compact discs that are used for high-density data storage. LPC forecasts an increase of 300 units per month in sales for the first two quarters of the year. The following data are available for the company:Expected sales in units:January. .
What is invested capital, and how is it measured?
What is the total cost of capital for a company?
How can a company make a profit and yet not be profitable in the sense that it has negative value in the EVA® calculation?
What are three basic ways that a company can improve its EVA®?
How did the concept of just-in-time (JIT) change most companies’ view that maintaining a minimum level of inventory was desirable? Use the measures of cost, quality, and time as you prepare your answer.
“The purpose of just-in-time (JIT) is to reduce inventory.” Do you agree or disagree? Explain.
In what way do Edward Deming’s ideas of total quality management (TQM) change Andrew Carnegie’s slogan, “Watch the costs and the profits will take care of themselves”?
Briefly describe the four types of costs in costs of quality (COQ).
Why are external failure costs generally the highest of the costs of quality (COQ)?
Why is it unwise for a company to focus on only one performance measure while ignoring other performance measures?
Why do you think performance measures vary from company to company?
Why do you think there has been such a revolution in the way companies think about and measure their performance in recent years?
What is one way that traditional performance measurement systems, which have historically been tied to financial reporting, may be dysfunctional?
Describe the two classifications of customer performance measures.
What are the key ingredients of customer satisfaction?
Why doesn’t the purchase price of a product equal the product’s total cost to customers?
What are the two issues involved in managing a company’s market share of its products?
What are the three types of processes that should be in place to effectively support customer satisfaction?
How can companies plan, control, and evaluate their innovation processes?
Is it possible for a company to spend more money on the innovation process than on providing goods and services to current customers?
What are the three leading measures of learning and growth in an organization?
What are some of the factors of effective organizational structures discussed in this chapter?
How do companies go about directly managing their return on investment (ROI)?
Pressure to provide better information to support the competitive needs of today’s marketplace is resulting in fundamental changes in the accounting information that is being provided to managers, investors, and creditors. Identify the three primary areas of change.
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