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Principles of Accounting 11th Edition Needles, Powers, crosson - Solutions

Since Rood Enterprises inaugurated participative budgeting 10 years ago, everyone in the organization-from maintenance personnel to the president's staff-has has a voice in the budgeting process. Until recently, participative budgeting has worked in the best interests of the company as a whole.
Refer to our development of Framecraft Company’s master budget in this chapter. Suppose that because of a new customer in Canada, the company or management has decided to increase budgeted sales in the first quarter by 5,000 units. The expenses for this sale will include direct materials, direct
In this segment of our continuing case, you have decided to open a store where you will sell your company’s cookies, as well as coffee, tea, and other beverages. You believe that the store will be able to provide excellent service and undersell the local competition. To fund operations, you are
Dapper Hat Makers is in the business of designing and producing specialty hats. The material used for derbies costs $4.50 per unit, and Dapper pays each of its two full-time employees $360 per week. If Employee A makes 15 derbies in one week, what is the variable cost per derby, and what is this
Identify the following as (a) fixed costs, (b) variable costs, or (c) mixed costs:1. Direct materials2. Electricity3. Operating supplies4. Personnel manager’s salary5. Factory building rent
Using the high-low method and the following information, compute the monthly variable cost per telephone hour and total fixed costs for Sadiko Corporation.
Prepare a contribution margin income statement if DeLuca, Inc., wants to make a profit of $20,000. It has variable costs of $8 per unit and fixed costs of $12,000. How much must it charge per unit if 4,000 units are sold?
How many units must Braxton Company sell to break even if the selling price per unit is $8.50, variable costs are $4.30 per unit, and fixed costs are $3,780? What is the breakeven point in total dollars of sales?
Using the contribution margin approach, find the breakeven point in units for Norcia Consumer Products if the selling price per unit is $11, the variable cost per unit is $6, and the fixed costs are $5,500.
Compute the contribution margin ratio and the breakeven point in total sales dollars for Wailley Products if the selling price per unit is $16, the variable cost per unit is $6, and the fixed costs are $6,250.
Using the contribution margin approach, find the breakeven point in units for Sardinia Company’s two products. Product A’s selling price per unit is $10, and its variable cost per unit is $4. Product B’s selling price per unit is $8, and its variable cost per unit is $5. Fixed costs are
If Oui watches sells 300 watches at $48 per watch and has variable costs of $18 per watch and fixed costs of $4,000, what is the projected profit?
Guy Spy, a private investigation firm, investigated 91 cases in December and had the following costs: direct labor, $190 per case; and service overhead of $20,840. Service overhead for October was $21,150; for November, it was $21,350. The number of cases investigated during October and November
Indicate whether each of the following costs of productive output is usually (a) variable or (b) fixed:1. Packing materials for stereo components2. Real estate taxes3. Gasoline for a delivery truck4. Property insurance5. Depreciation expense of buildings (calculated with the straight-line method)6.
Zero Time Oil Change has been in business for six months. The company pays $0.50 per quart for the oil it uses in servicing cars. Each job requires an average of 4 quarts of oil. The company estimates that in the next three months, it will service 240,288, and 360 cars.1. Compute the cost of oil
Whitehouse Company manufactures major appliances. Because of growing interest in its products, it has just had its most successful year. In preparing the budget for next year, its controller compiled these data:Using the high-low method, determine the variable electricity cost per machine hour and
When Jerome Company’s monthly costs were $75,000, sales were $80,000; when its monthly costs were $60,000, sales were $50,000. Use the high-low method to develop a monthly cost formula for Jerome’s coming year.
Senora Company manufactures a single product that sells for $110 per unit. The company projects sales of 500 units per month. Projected costs are as follows:1. Prepare a contribution margin income statement for the month.2. What is the contribution margin ratio?3. What volume, in terms of units,
Using the data in the contribution margin income statement for Sedona, Inc., that appears at the top of the next page, calculate(1) Selling price per unit,(2) Variable costs per unit, and(3) Breakeven point in units and in sales dollars.
Identify the letter of the point, line segment, or area of the breakeven graph shown below that correctly completes each of the following statements:1. The maximum possible operating loss isa. Ab. Dc. Bd. F2. The breakeven point in sales dollars isa. Cb. Dc. Ad. G3. At volume F, total contribution
Techno Designs produces head covers for golf clubs. The company expects to generate a profit next year. It anticipates fixed manufacturing costs of $126,500 and fixed general and administrative expenses of $82,030 for the year. Variable manufacturing and selling costs per set of head covers will be
McLennon Company has a plant capacity of 100,000 units per year, but its budget for this year indicates that only 60,000 units will be produced and sold. The entire budget for this year is as follows:1. Given the budgeted selling price and cost data, how many units would McLennon have to sell to
Saline Aquarium, Inc., manufactures and sells aquariums, water pumps, and air filters. The sales mix is 1:2:2 (i.e., for every one aquarium sold, two water pumps and two air filters are sold). Using the contribution margin approach, find the breakeven point in units for each product. The company's
Hamburgers and More, Inc., sells hamburgers, drinks, and fries. The sales mix is 1:3:2 (i.e., for every one hamburger sold, three drinks and two fries are sold). Using the contribution margin approach, find the breakeven point in units for each product. The company's fixed costs are $2,040. Other
Ella Mae Simpson is the owner of a hairdressing salon in Palm Coast, Florida. Her salon provides three basic service: shampoo and set, permanents, and cut and blow dry. The following are its operating results from the past quarter:Compute the breakeven point in units based on the weighted-average
Target Systems, Inc., makes heat-seeking missiles. It has recently been offered a government contract from which it may realize a profit. The contract purchase price is $130,000 per missile, but the number of units to be purchased has not yet been decided. The company’s fixed costs are budgeted
Short-term automobile rentals are the specialty of ASAP Auto Rentals, Inc. Average variable operating costs have been $12.50 per day per automobile. The company owns 60 automobiles. Fixed operating costs for the next year are expected to be $145,500. Average daily rental revenue per automobile is
Luke Ricci, CPA, is the owner of a firm that provides tax services. The firm charges $50 per return for the direct professional labor involved in preparing standard short-form tax returns. In January, the firm prepared 850 such returns; in February, 1,000; and in March, 700. Service overhead
Flossmoor Inspection Service specializes in inspecting cars that have been returned to automobile leasing companies at the end of their leases. Flossmoor’s charge for each inspection is $50; its average cost per inspection is $15. Tony Lomangeno, Flossmoor’s owner, wants to expand his business
Power Brite Painting Company specializes in refurbishing exterior painted surfaces that have been hard hit by humidity and insect debris. It uses a special technique, called pressure cleaning, before priming and painting the surface. The refurbishing process involves the following steps:1.
Luce & Morgan, a law firm in downtown Jefferson City, is considering opening a legal clinic for middle-and low-income clients. The clinic would bill at a rate of $18 per hour. It would employ law student as paraprofessional help and pay them $9 per hour. Other variable costs are anticipated to
Icon Industries is considering a new product for its Trophy Division. The product, which would feature an alligator, is expected to have global market appeal and to become the mascot for many high school and university athletic teams. Expected variable unit costs are as follows: direct materials,
Write Company has a maximum capacity of 200,000 units per year. Variable manufacturing costs are $12 per unit. Fixed overhead is $600,000 per year. Variable selling and administrative costs are $5 per unit, and fixed selling and administrative costs are $300,000 per year. The current sales price is
Lending Hand Financial Corporation is a subsidiary of Gracey Enterprises. Its main business is processing loan applications. Last year, Bettina Brent, the manager of the corporation’s loan department, established a policy of charging a $250 fee for every loan application processed. Next year’s
Officials of the Hidden Hills Golf and Tennis Club are in the process of preparing a budget for the year ending December 31. Because Ramon Saud, the club treasurer, has had difficulty with two expense items, the process has been delayed by more than four weeks. The two items are mixed
At the beginning of each year, the Accounting Department at Moon Glow Lighting, Ltd., must find the point at which projected sales revenue will equal total budgeted variable and fixed costs. The company produces custom-made, low-voltage outdoor lighting systems. Each system sells for an average of
Garden Marbles manufactures birdbaths, statues, and other decorative items, which it sells to florists and retail home and garden centers. Its design department has proposed a new product, a statue of a frog, that it believes will be popular with home gardeners. Expected variable unit costs are
Peerless Company has a maximum capacity of 500,000 units per year. Variable manufacturing costs are $25 per unit. Fixed overhead is $900,000 per year. Variable selling and administrative costs are $5 per unit, and fixed selling and administrative costs are $300,000 per year. The current sales price
Home Mortgage Inc.’s primary business is processing mortgage loan applications. Last year, Jenna Jason, the manager of the mortgage application department, established a policy of charging a $500 fee for every loan application processed. Next year’s variable costs have been projected as
Lesley Chomski is the supervisor of the New Product Division of MCO Corporation. Her annual bonus is based on the success of new products and is computed on the number of sales that exceed each new product’s projected breakeven point. In reviewing the computations supporting her most recent
Visit a local fast-food restaurant. Observe all aspects of the operation and take notes on the entire process. Describe the procedures used to take, process, and fill an order and deliver the order to the customer. Based on your observations, make a list of the costs incurred by the operation.
Based in Italy, Datura, Ltd., is an international importer-exporter of pottery with distribution centers in the United States, Europe, and Australia. The company was very successful in its early years, but its profitability has since declined. As a member of a management team selected to gather
Refer to the information in C 3. In January 2011, Sophia Callas, the president of Datura, Ltd., conducted a strategic planning meeting. Duting the meeting, phillipe Mazzeo, vice president of distribution, noted that because of a new contract with an international shipping line, the company’s
As noted in C 3 4, Datura, Ltd., sold 15,000 sets of pottery in 2010. For the next year, 2011, Datura’s strategic planning team targeted sales of 15,000 sets of pottery, reduced the selling price to €890 per set, increased sales commissions to 12 percent of the selling price, and decreased
In this segment of our continuing "cookie company" case, you will classify the costs of the business as variable, fixed, or mixed; use the high-low method to evaluate utility costs; and prepare a contribution margin income statement.1. Review your cookie recipe and the overhead costs you identified
The owner of Milo’s, a Mexican restaurant, is deciding whether to take fish tacos off the menu. State whether each item of decision information that follows is qualitative or quantitative. If the information is quantitative, specify whether it is financial or nonfinancial.1. The time needed to
Pices Corporation has assembled the following information related to the purchase of a new automated postage machine:Using incremental analysis and only relevant information, compute the difference in favor of the Value machine.
Marc Company assembles products from a group of interconnecting parts. The company produces some of the parts and buys some from outside vendors. The vendor for Part X has just increased its price by 35 percent, to $10 per unit for the first 5,000 units and $9 per additional unit ordered each year.
Dental Associates, Inc., is currently operating at less than capacity. The company thinks it could cut costs by outsourcing dental cleaning to an independent dental hygienist for $50 per cleaning. Currently, a dental hygienist is employed for $30 an hour. A dental cleaning usually takes one hour to
Hedley Company has received a special order for Product R3P at a selling price of $20 per unit. This order is over and above normal production, and budgeted production and sales targets for the year have already been exceeded. Capacity exists to satisfy the special order. No selling costs will be
Smith Accounting Services is considering a special order that it received from one of its corporate clients. The special order calls for Smith to prepare the individual tax returns of the corporation’s four-largest shareholders. The company has idle capacity that could be used to complete the
Peruna Company is evaluating its two divisions, North Division and South Division. Data for North Division include sales of $530,000, variable costs of $290,000, and fixed costs of $260,000, 50 percent of which are traceable to the division. South Division’s efforts for the same period include
Snow, Inc., makes three kinds of snowboards, but it has a limited number of machine hours available to make them. Product line data are as follows:In what order should the snowboard product lines be produced?
Gomez Industries produces three products from a single operation. Product A sells for $4 per unit, Product B for $6 per unit, and Product C for $10 per unit. When B is processed further, there are additional unit costs of $3, and its new selling price is $10 per unit. Each product is allocated $2
In an attempt to provide superb customer service, Richard V. Meats is considering the expansion of its product offerings from whole hams and turkeys to complete ham and turkey dinners. Each dinner would include a carved ham or turkey, two side dishes, and six rolls or cornbread. The accountant for
Max Wayco, the business manager for Essey Industries, must select a new computer system for his assistant. Rental of Model A, which is similar to the model now being used, is $2,200 per year. Model B is a deluxe system that rents for $2,900 per year and will require a new desk for the assistant.
The managers of Lennox Company must decide which of two mill blade grinders-Y or Z-to buy. The grinders have the same purchase price but different revenue and cost characteristics. The company currently owns Grinder X, which it bought three years ago for $15,000 and which has accumulated
One component of a radio produced by Audio Systems, Inc., is currently being purchased for $225 per 100 parts. Management is studying the possibility of manufacturing that component. Annual production (usage) at Audio is 70,000 units; fixed costs (all of which remain unchanged whether the part is
Sunny Hazel, the manager of Cyber Web Services, must decide whether to hire a new employee or to outsource some of the web design work to Ky To, a freelance graphic designer. If she hires a new employee, she will pay $32 per design hour for the employee to work 600 hours and incur service overhead
Antiquities, Ltd., produces antique-looking books. Management has just received a request for a special order for 2,000 books and must decide whether to accept it. Venus Company, the purchaser, is offering to pay $25.00 per book, which includes $3.00 per book for shipping costs.The variable
Jens Sporting Goods, Inc., manufactures a complete line of sporting equipment. Leiden Enterprises operates a large chain of discount stores. Leiden has approached Jens with a special order for 30,000 deluxe baseballs. Instead of being packaged separately, the balls are to be packed in boxes
In September, a nonprofit organization, Toys for Homeless Children (THC), offers Virtually LLC $400 to prepare a custom web page to help the organization attract toy donations. The home page for the THC website will include special animated graphics of toys and stuffed animals. Virtually LLC
Guld's Glass, Inc., has three divisions: Commercial, Nonprofit, and Residential. The segmented income statement for last year revealed the following:1. How will Guld's Glass, Inc., be affected if the Nonprofit Division is dropped?2. Assume the elimination of the Nonprofit Division causes the sales
URL Services has two divisions: Basic Web Pages and Custom Web Pages. Ricky Vega, manager of Custom Web Pages, wants to find out why Custom Web Pages is not profitable. He has prepared the reports that appear on the shown below.1. How will URL Services be affected if the Custom Web Pages Division
EZ, Inc., manufactures two products that require both machine processing and labor operations. Although there is unlimited demand for both products, EZ could devote all its capacities to a single product. Unit prices, cost data, and processing requirements follow:Next year, the company will be
Grady Enterprises manufactures three computer games. They are called Rising Star, Ghost Master, and Road Warrior. The product line data are as follows:The current production capacity is 110,000 machine hours.1. Which computer game should be manufactured first? Which should be manufactured second?
Web Services, a small company owned by Simon Orozco, provides web page services to small businesses. His services include the preparation of basic pages and custom pages.The following summary of information will be used to make several short-run decisions for Web Services:Total annual fixed costs
H & L Beef Products, Inc., processes cattle. It can sell the meat as sides of beef or process it further into final cuts (steaks, roasts, and hamburger). As part of the company's strategic plan, management is looking for new markets for meat or meat by-products. The production process currently
Six Stat Pizza manufactures frozen pizzas and calzones and sells them for $4 each. It is currently considering a proposal to manufacture and sell fully prepared products. The following relevant information has been gathered by management:Use incremental analysis to determine which products Six Star
Stainless Refrigerator Company purchases ice makers and installs them in its products. The ice makers cost $138 per case, and each case contains 12 ice makers. The supplier recently gave advance notice that the price will rise by 50 percent immediately. Stainless Refrigerator Company has idle
On March 26, Sinker Industries received a special order request for 120 ten-foot aluminum fishing boats. Operating on a fiscal year ending May 31, the company already has orders that will allow it to produce at budget levels for the period. However, extra capacity exists to produce the 120
Sports, Inc., is a nationwide distributor of sporting equipment. The corporate president, Wesley Coldwell, is dissatisfied with corporate operating results, particularly those of the Spring Branch, and has asked the controller for more information. The controller prepared the following segmented
Management at Generic Chemical Company is evaluating its product mix in an attempt to maximize profits. For the past two years, Generic has produced four products, and all have large markets in which to expand market share. Heinz Bexer, Generic's controller, has gathered data from current
Bagels, Inc., produces and sells 20 types of bagels by the dozen. Bagels are priced at $6.00 per dozen (or $0.50 each) and cost $0.20 per unit to produce. The company is considering further processing the bagels into two products: bagels with cream cheese and bagel sandwiches. It would cost an
Three Brothers Restaurant purchases cheesecakes and offers them as dessert items on its menu. The cheesecakes cost $24 each, and a cake contains 8 pieces. The supplier recently gave advance notice that the price will rise by 20 percent immediately. Three Brothers Restaurant has idle equipment that
Keystone Resorts, Ltd., has approached Crystal Printers, Inc., with a special order to produce 300,000 two-page brochures. Most of Crystal’s work consists of recurring short-run orders. Keystone Resorts is offering a one-time order, and Crystal has the capacity to handle the order over a
Seven months ago, Naib Publishing Company published its first book (Book N). since then, Naib has added four more books to its product list (Books S, Q, X, and H). Management is considering proposals for three more new books, but editorial capacity limits the company to producing only seven books
Dr. Massy, who specializes in internal medicine, wants to analyze his sales mix to find out how the time of his physician assistant, Consuela Ortiz, can be used to generate the highest operating income.Ortiz sees patients in Dr. Massy's office, consults with patients over the telephone, and
Marketeers, Inc., developed a promotional program for a large shopping center in Sunset Living, Arizona, a few years ago. Having invested $360,000 in developing the original promotion campaign, the firm is ready to present its client with an add-on contract offer that includes the original
Two weeks ago, your cousin Edna mover from New York City to Houston. She needs a car to drive to work and to run errands, but she has no experience in selecting a car and has asked for your help. Using the management process presented in this chapter, write her a letter explaining how she can
Motorola, Inc., originated a $5 billion project, called Iridium, that launched 66 low-earth-orbit satellites for global communication using pagers and mobile phones. After its operations began, the Iridium Project had technical and marketing problems. Instead of the 600,000 subscribers it was
Bob’s Burgers is in the fast-food restaurant business. One component of its marketing strategy is to increase sales by expending in foreign markets. It uses both financial and nonfinancial quantitative and qualitative information when deciding whether to open restaurants abroad. Bob’s decided
Select two destinations for a one-week vacation, and gather information about them from brochures, magazines, travel agents, the Internet, and friends. Then list the relevant quantitative and qualitative information in order of its importance to your decision. Analyze the information, and select a
Tilly Issac is the assistant controller for Tagwell Corporation, a leading producer of home appliances. Her friend Zack Marsh is the supervisor of the firm’s Cookware Department. Marsh has the authority to decide whether parts are purchased from outside vendors or manufactured in his department.
Metallica Can Opener Company is a subsidiary of Maltz Appliances, Inc. The can opener that Metallica produces is in strong demand. Sales this year are expected to be 1,000,000 units. Full plant capacity is 1,150,000 units, but 1,000,000 units are considered normal capacity for the current year. The
Management at Transco Company is considering a proposal to install a third production department in its factory building. With the company's existing production setup, direct materials are processed through the Mixing Department to produce Materials A and B in equal proportions. The Shaping
As the CEO of your cookie company, you are interested in how public companies with a segment that includes cookies report their operating results. Because public companies are required to report on their segments, it is possible to evaluate the performance of comparable segments of different
Silly Putter Miniature Golf provides 36 holes of miniature golf. Dan, the owner of the golf course, must make several business decisions soon. Write yes or no to indicate whether knowing the cost to play one golf game (i.e., the product unit cost) can help Dan answer these questions:1. Is the fee
Write yes or no to indicate whether each of the following companies would typically use a job order costing system:1 Soft-drink producer2. Jeans manufacturer3. Submarine contractor4. Office building contractor5. Stuffed-toy maker
State whether a job order costing system or a process costing system would typically be used to account for the costs of the following:1. Manufacturing bottles of water2. Manufacturing custom-designed swimming pools3. Providing babysitting4. Manufacturing one-size-fits-all flip-flop shoes5.
For each of the following transactions, state which accounts (s) would be debited and credited in a job order costing system:1. Purchased materials on account, $12,8902. Charged direct labor to production, $3,7903. Requested direct materials for production, $6,8004. Applied overhead to jobs in
Enter the following transactions into T accounts:1. Incurred $34,000 of direct labor and $18,000 of indirect labor2. Applied overhead based on 12, 680 labor hours @ $6.50 per labor hour
Identify the accounts in which each of the following transactions for Acorn Furniture, a custom manufacturer of oak tables and chairs, would be debited and credited:1. Issued oak materials into production for job ABC2. Recorded direct labor time for the first week in February for job ABC3.
Write yes or no to indicate whether each of the following costs is included in a product unit cost. Then explain your answers.1. Direct materials costs2. Fixed overhead costs3. Variable selling costs4. Fixed administrative costs5. Direct labor costs6. Variable overhead costs
Complete the following job order cost card for six custom-built computersystems:
For each of the following transactions, state which account (s) would be debited and credited in a job order costing system for a desert landscaping business:1. Charged customer for landscape design2. Purchased cactus plants and gravel on credit for one job3. Paid three employees to prepare soil
Complete the following job order cost card for an individual taxreturn:
Bell Printing Company specializes in wedding in wedding invitations. Bell needs information to budget next year’s activities. Write yes or no to indicate whether each of the following costs is likely to be available in the company’s product costing system:1. Cost of paper and envelopes2.
Which of the following products would typically be accounted for using a job order costing system? Which would typically be accounted for using a process costing system?(a) Paint,(b) Jelly beans,(c) Jet aircraft,(d) Bricks,(e) Tailor-made suit,(f) Liquid detergent,(g) Helium gas canisters used to
Which of the following products would typically be accounted for using a job order costing system? Which would typically be accounted for using a process costing system?(a) Standard nails,(b) Television sets,(c) Printed wedding invitations,(d) A limited edition of lithographs,(e) Flea collars for

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