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managerial accounting

Cornerstones of Managerial Accounting 3rd Edition Mowen, Hansen, Heitger - Solutions

Susan Lewis, owner of a florist shop, is interested in predicting the cost of delivering floral arrangements. She collected monthly data on the number of deliveries and the total monthly delivery cost (depreciation on the van, wages of the driver, and fuel) for the past year.Required:1. Using a
Consider each of the following independent situations:a. A computer service agreement in which a company pays $150 per month and $15 per hour of technical time.b. Fuel cost of the company’s fleet of motor vehicles.c. The cost of beer for a bar.d. The cost of computer of computer printers and
Consider each of the following independent situations:a. Shaniqua Boyer just started her new job as controller for St. Matthias General Hospital. She wants to get a feel for the cost behavior of various departments of the hospital. Shaniqua first looks at the radiology department. She has annual
Identifying variable costs, committed fixed costs, and discretionary fixed costsRequired:Classify each of the following costs for a jeans manufacturing company as a variable cost, committed fixed cost, or discretionary fixed cost.a. The cost of buttons.b. The cost to lease warehouse space for
Farnsworth Company has gathered data on its overhead activities and associated costs for the past 10 months. Tracy Heppler, a member of the controller's department, has convinced management that overhead costs can be better estimated and controlled if the fixed and variable components of each
Refer to the Farnsworth Company information in Problem 3-41. However, now assume that Tracy has used the method of least squares on the receiving data and has gotten the following results:Intercept ......3,212Slope ........15.15Required:1. Using the results from the method of least squares, prepare
Fonseca, Ruiz, and Dunn is a large, local accounting firm located in a southwestern city. Carlos Ruiz, one of the firm's founders, appreciates the success his firm has enjoyed and wants to give something back to his community. He believes that an inexpensive accounting services clinic could provide
Jana Morgan is about to sign up for cellular telephone service. She is primarily interested in the safety aspect of the phone; that is, she wants to have one available for emergencies. She does not want to use it as her primary phone. Jana has narrowed her options down to two plans:Both plans are
Li Ming Yuan and Tiffany Shaden are the department heads for the accounting department and human resources department, respectively, at a large textile firm in the southern United States. They have just returned from an executive meeting at which the necessity of cutting costs and gaining
About eight years ago, Kicker faced the problem of rapidly increasing costs associated with workplace accidents. The costs included the following:State unemployment insurance premiums ........$100,000Average cost per injury ................$1,500Number of injuries per year ................15Number
Refer to the Farnsworth Company information in Problem 3-41 for the first 10 months of data on receiving orders and receiving cost. Now suppose that Tracy has gathered two more months of data:For the following requirements, round the intercept terms to the nearest dollar and round the variable
The management of Wheeler Company has decided to develop cost formulas for its major overhead activities. Wheeler uses a highly automated manufacturing process, and power costs are a significant manufacturing cost. Cost analysts have decided that power costs are mixed; thus, they must be broken
Louise McDermott, controller for the Galvin plant of Veromar Inc., wanted to determine the cost behavior of moving materials throughout the plant. She accumulated the following data on the number of moves (from 100 to 800 in increments of 100) and the total cost of moving materials at those levels
For the past five years, Garner Company has had a policy of producing to meet customer demand. As a result, finished goods inventory is minimal, and for the most part, units produced equal units sold.Recently, Garner’s industry entered a recession, and the company is producing well below capacity
Bill Lewis, manager of the Thomas Electronics Division, called a meeting with his controller, Brindon Peterson, and his marketing manager, Patty Fritz. The following is a transcript of the conversation that took place during the meeting:Bill: Brindon, the variable costing system that you developed
Explain how CVP analysis can be used for managerial planning.
Describe the difference between the units sold approach to CVP analysis and the sales revenue approach.
Define the term break-even point.
Explain why contribution margin per unit becomes profit per unit above the break-even point.
What is the variable cost ratio? The contribution margin ratio? How are the two ratios related?
Suppose a firm with a contribution margin ratio of 0.3 increased its advertising expenses by $10,000 and found that sales increased by $30,000. Was it a good decision to increase advertising expenses? Suppose that the contribution margin ratio is now 0.4.Would it be a good decision to increase
Define the term sales mix, and give an example to support your definition.
Explain how CVP analysis developed for single products can be used in a multiple product setting.
Since break-even analysis focuses on making zero profit, it is of no value in determining the units a firm must sell to earn a targeted profit. Do you agree or disagree with this statement? Why?
How does targeted profit enter into the break-even units equation?
Explain how a change in sales mix can change a company’s break-even point.
Define the term margin of safety. Explain how it can be used as a crude measure of operating risk.
Explain what is meant by the term operating leverage. What impact does increased leverage have on risk?
How can sensitivity analysis be used in conjunction with CVP analysis?
Why is a declining margin of safety over a period of time an issue of concern to managers?
1. If the variable cost per unit goes up, Contribution margin Break-even pointa. Increases increases.b. Increases decreases.c. Decreases decreases.d. Decreases increases.e. Decreases remains unchanged.2. The amount of revenue required to earn a targeted profit is equal toa. Fixed cost divided by
Head-First Company plans to sell 5,000 bicycle helmets at $70 each in the coming year. Product costs include:Direct materials per helmet .......$ 30Direct labor per helmet .........5Variable overhead per helmet ......12Total fixed factory overhead ......14,000Variable selling expense is a
Head-First Company plans to sell 5,000 bicycle helmets at $70 each in the coming year. Unit variable cost is $49 (includes direct materials, direct labor, variable overhead, and variable selling expense). Total fixed cost equals $29,400 (includes fixed factory overhead and fixed selling and
Head-First Company plans to sell 5,000 bicycle helmets at $70 each in the coming year. Unit variable cost is $49 (includes direct materials, direct labor, variable overhead, and variable selling expense). Fixed factory overhead is $14,000 and fixed selling and administrative expense is
Head-First Company plans to sell 5,000 bicycle helmets at $70 each in the coming year. Variable cost is 70 percent of the sales price; contribution margin is 30 percent of sales price. Total fixed cost equals $29,400 (includes fixed factory overhead and fixed selling and administrative
Head-First Company plans to sell 5,000 bicycle helmets at $70 each in the coming year. Unit variable cost is $49 (includes direct materials, direct labor, variable overhead, and variable selling expense). Total fixed cost equals $29,400 (includes fixed factory overhead and fixed selling and
Head-First Company plans to sell 5,000 bicycle helmets at $70 each in the coming year. Variable cost is 70 percent of the sales price; contribution margin is 30 percent of sales price. Total fixed cost equals $29,400 (includes fixed factory overhead and fixed selling and administrative
Suppose that Head-First Company now sells both bicycle helmets and motorcycle helmets. The bicycle helmets are priced at $70 and have variable costs of $49 each. The motorcycle helmets are priced at $220 and have variable costs of $143 each. Total fixed costs for Head-First as a whole equals
Head-First Company now sells both bicycle helmets and motorcycle helmets. Next year, Head-First expects to produce total revenue of $570,000 and total variable costs of $388,000. Total fixed costs are expected to be $54,600.Required:1. Calculate the break-even point in sales dollars for Head-First.
Head-First Company plans to sell 5,000 bicycle helmets at $70 each in the coming year. Unit variable cost is $49 (includes direct materials, direct labor, variable overhead, and variable selling expense). Total fixed cost equals $29,400 (includes fixed factory overhead and fixed selling and
Head-First Company plans to sell 5,000 bicycle helmets at $70 each in the coming year. Unit variable cost is $49 (includes direct materials, direct labor, variable overhead, and variable selling expense). Total fixed cost equals $29,400 (includes fixed factory overhead and fixed selling and
Head-First Company had planned to sell 5,000 bicycle helmets at $70 each in the coming year. Unit variable cost is $49 (includes direct materials, direct labor, variable overhead, and variable selling expense). Total fixed cost equals $29,400 (includes fixed factory overhead and fixed selling and
Suppose that Adams Company sells a product for $16. Unit costs are as follows:Direct materials ..................$3.90Direct labor ....................1.40Variable overhead ...................2.10Variable selling and administrative expense ......1.60Total fixed overhead is $52,000 per year, and
Next year, Jefferson Company expects to sell 140,000 units at $7.60 each. Variable costs are 60 percent of sales price. Fixed costs total $349,600.Required:1. Calculate the contribution margin per unit.2. Calculate the break-even point in units.3. Calculate the break-even sales revenue.4. Prepare
The controller of Sandoval Company prepared the following projected income statement:Sales ...............$90,000Less: Variable costs ........72,000Contribution margin ........ $18,000Less: Fixed costs ...........6,900Operating income .........$11,100Required:1. Calculate the Contribution margin
Goslin Company sold 27,000 units last year at $14 each. Variable cost was $9.50, and fixed costs were $126,000.Required:1. Prepare an income statement for Goslin Company for last year.2. Calculate the break-even point in units.3. Calculate the units that Goslin must sell to earn operating income of
Prachi Company produces and sells disposable foil baking pans to retailers for $2.45 per pan. The variable costs per pan are as follows:Direct materials ........$0.27Direct labor ..........0.58Variable overhead ......0.63Variable selling .......0.17Fixed manufacturing costs total $131,650 per year.
Chase Company produces and sells strings of colorful indoor/outdoor lights for holiday display to retailers for $6.28 per string. The variable costs per string are as follows:Direct materials ........$1.27Direct labor ..........1.58Variable overhead ......0.63Variable selling .......0.17Fixed
Information on four independent companies follows. Calculate the correct amount for each question mark. (Round your answers to two significantdigits.)
Rezler Company’s controller prepared the following budgeted income statement for the coming year:Sales ...............$315,000Less: Variable expenses ........141,750Contribution margin .........$173,250Less: Fixed expenses ...........63,000Operating income .........$110,250Required:1. What is
Switzer Company produces and sells yoga-training products: how-to DVDs and a basic equipment set (blocks, strap, and small pillows). Last year, Switzer sold 10,000 DVDs and 5,000 equipment sets. Information on the two products is as follows:Total fixed costs are $70,000.Required:1. What is the
Refer to the data in Exercise 4-32. Suppose that in the coming year, Switzer plans to produce an extra-thick yoga mat for sale to health clubs. The company estimates that 20,000 mats can be sold at a price of $18 and a variable cost per unit of $13. Fixed costs must be increased by $48,350 (making
Sonora Company produces and sells pottery chimineas (small clay outdoor fireplaces). The chimineas come in three models: small basic, large basic, and carved (ornately shaped and carved). In the coming year, Sonora sold 30,000 small basic models, 50,000 large basic models, and 10,000 carved models.
Lotts Company produces and sells one product. The selling price is $10, and the unit variable cost is $6. Total fixed costs are $10,000.Required:1. Prepare a CVP graph with ‘‘Units Sold’’ as the horizontal axis and ‘‘$ Profit’’ as the vertical axis. Label the break-even point on the
Berry Company produces a single product. The projected income statement for the coming year is as follows:Sales (18,000 units @ $60) ........$1,080,000Less: Variable costs ............594,000Contribution margin ...........$ 486,000Less: Fixed costs .............540,000Operating income
Agador Company produces a single product. The projected income statement for the coming year is as follows:Sales (50,000 units @ $45) ......$2,250,000Less: Variable costs ..........945,000Contribution margin ........$1,305,000Less: Fixed costs ............916,650Operating income ...........$
Parker Pottery produces a line of vases and a line of ceramic figurines. Each line uses the same equipment and labor; hence, there are no traceable fixed costs. Common fixed costs equal $30,000. Parker's accountant has begun to assess the profitability of the two lines and has gathered the
Rad-Brad, Inc.’s projected operating income (based on sales of 350,000 units) for the coming year is as follows:TotalSales ..............$8,400,000Less: Variable expenses .......6,720,000Contribution margin ........$1,680,000Less: Fixed expenses ........1,512,000Operating income ..........$
Bandaleria Company's projected profit for the coming year is as follows:Required:1. Compute the break-even point in units.2. How many units must be sold to earn a profit of $640,000?3. Compute the contribution margin ratio. Using that ratio, compute the additional profit that Bandaleria would earn
Dory Manufacturing Company produces T-shirts screen-printed with the logos of various sports teams. Each shirt is priced at $10 and has a unit variable cost of $5. Total fixed costs are $96,000.Required:1. Compute the break-even point in units.2. Suppose that Dory could reduce its fixed costs by
Sohrwide Company produces a variety of chemicals. One division makes reagents for laboratories. The division’s projected income statement for the coming year is:Sales (128,000 units @ $50) ........$6,400,000Less: Variable expenses ...........4,480,000Contribution margin
Gosnell Company produces two products: squares and circles. The projected income for the coming year, segmented by product line, follows:The selling prices are $30 for squares and $50 for circles.Required:1. Compute the number of units of each product that must be sold for Gosnell Company to break
Nutri-Tress Company produces combination shampoos and conditioners in individual use bottles for hotels. Each bottle sells for $0.36. The variable costs for each bottle (materials, labor, and overhead) total $0.27. The total fixed costs are $58,500. During the most recent year, 830,000 bottles were
Doerhing Company produces plastic mailboxes. The projected income statement for the coming year follows:Sales ...........$560,400Less: Variable costs .......257,784Contribution margin ....$302,616Less: Fixed costs ........150,000Operating income .....$152,616Required:1. Compute the Contribution
Carlyle Lighting Products produces two different types of lamps: a floor lamp and a desk lamp. Floor lamps sell for $30, and desk lamps sell for $20. The projected income statement for the coming year follows:Sales ..............$600,000Less: Variable costs .......400,000Contribution margin
Polaris Inc. manufactures two types of metal stampings for the automobile industry: door handles and trim kits. Fixed costs equal $146,000. Each door handle sells for $12 and has variable costs of $9; each trim kit sells for $8 and has variable costs of $5.Required:1. What are the contribution
Victoria Company produces a single product. Last year’s income statement is as follows:Sales (29,000 units) ........$1,218,000Less: Variable costs ..........812,000Contribution margin .......$ 406,000Less: Fixed costs ...........300,000Operating income ..........$ 106,000Required:1. Compute the
Isaac Company had revenues of $930,000 last year with total variable costs of $353,400 and fixed costs of $310,000.Required:1. What is the variable cost ratio for Isaac? What is the contribution margin ratio?2. What is the break-even point in sales revenue?3. What was the margin of safety for Isaac
Solve the following independent problems.Required:1. Sarah Company’s break-even point is 1,500 units. Variable cost per unit is $300; total fixed costs are $120,000 per year. What price does Sarah charge?2. Jesper Company charges a price of $3.50; total fixed costs are $160,000 per year, and the
Candyland Inc. produces a particularly rich praline fudge. Each 10-ounce box sells for $5.60. Variable unit costs are as follows:Pecans ..........$0.70Sugar ...........0.35Butter .........1.85Other ingredients ......0.34Box, packing material .....0.76Selling commission ......0.20Fixed overhead cost
Income statements for two different companies in the same industry are as follows:Required:1. Compute the degree of operating leverage for each company.2. Compute the break-even point for each company. Explain why the break-even point for Company B is higher.3. Suppose that both companies
Suppose that Kicker had the following sales and cost experience (in thousands of dollars) for May of the current year and for May of the prior year:In August of the prior year, Kicker started an intensive quality program designed to enable it to build original equipment manufacture (OEM) speaker
Artistic Woodcrafting Inc. began several years ago as a one-person cabinet-making operation. Employees were added as the business expanded. Last year, sales volume totaled $850,000. Volume for the first five months of the current year totaled $600,000, and sales were expected to be $1.6 million for
Danna Lumus, the marketing manager for a division that produces a variety of paper products, is considering the divisional manager’s request for a sales forecast for a new line of paper napkins. The divisional manager has been gathering data so that he can choose between two different production
Cost Behavior and Cost-Volume-Profit Analysis for Many Glacier HotelThe purpose of this integrated exercise is to demonstrate the interrelationship between cost estimation techniques and subsequent uses of cost information. In particular, this exercise illustrates how the variable and fixed cost
What are job-order costing and process costing? What types of firms use job-order costing? Process costing?
Give some examples of service firms that might use job-order costing, and explain why it is used in those firms.
What is normal costing? How does it differ from actual costing?
Why are actual overhead rates seldom used in practice?
Explain how overhead is assigned to production when a predetermined overhead rate is used.
What is underapplied overhead? When Cost of Goods Sold is adjusted for underapplied overhead, will the cost increase or decrease? Why?
What is overapplied overhead? When Cost of Goods Sold is adjusted for overapplied overhead, will the cost increase or decrease? Why?
Suppose that you and a friend decide to set up a lawn mowing service next summer. Describe the source documents that you would need to account for your activities.
Why might a company decide to use departmental overhead rates instead of a plantwide overhead rate?
What is the role of materials requisition forms in a job-order costing system? Time tickets? Predetermined overhead rates?
Carver Company uses a plantwide overhead rate based on direct labor cost. Suppose that during the year, Carver raises its wage rate for direct labor. How would that affect overhead applied? The total cost of jobs?
What is an overhead variance? How is it accounted for typically?
Is the cost of a job related to the price charged? Explain.
If a company decides to increase advertising expense by $25,000, how will that affect the predetermined overhead rate? Eventual cost of goods sold?
How can a departmental overhead system be converted to a plantwide overhead system?
Describe the difference between producing and support departments. (Appendix 5B)
Assume that a company has decided not to allocate any support department costs to producing departments. Describe the likely behavior of the managers of the producing departments. Would this be good or bad? Explain why allocation would correct this type of behavior. (Appendix 5B)
Why is it important to identify and use causal factors to allocate support department costs? (Appendix 5B)
Identify some possible causal factors for the following support departments: (Appendix 5B)a. Cafeteriab. Custodial servicesc. Laundryd. Receiving, shipping, and storagee. Maintenancef. Personnelg. Accounting
Explain the difference between the direct method and the sequential method. (Appendix 5B)
1. Which of the following statements is true?a. Job-order costing is used only in manufacturing firms.b. The job cost sheet is subsidiary to the work-in-process account.c. Job-order costing is simpler to use than process costing because the recordkeeping requirements are less.d. Process costing is
1. The costs of a job are accounted for on thea. Materials requisition sheet.b. Time ticket.c. Requisition for overhead application.d. Job-order cost sheet.e. Sales invoice.2. Wilson Company has a predetermined overhead rate of $5 per direct labor hour. The job-order cost sheet for Job 145 shows
At the beginning of the year, Kreskin Company estimated the following costs:Overhead .......$450,000Direct labor cost ....600,000Kreskin uses normal costing and applies overhead on the basis of direct labor cost. (Direct labor cost is equal to total direct labor hours worked multiplied by the wage
At the end of the year, Kreskin Company provided the following actual information:Overhead .....$456,500Direct labor cost .....607,200Kreskin uses normal costing and applies overhead at the rate of 75 percent of direct labor cost. At the end of the year, Cost of Goods Sold (before adjusting for any
At the beginning of the year, Badger Company estimated the following:Badger uses departmental overhead rates. In the cutting department, overhead is applied on the basis of machine hours. In the sewing department, overhead is applied on the basis of direct labor hours. Actual data for the month of

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