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managerial accounting

Accounting Tools for business decision making 4th Edition Kimmel, weygandt, kieso - Solutions

Having itemized its costs for the first quarter of next year’s budget, Santana Corporation desires to install an activity-based costing system. First, it identified the activity cost pools in which to accumulate factory overhead; second, it identified the relevant cost drivers. (This was done in
William Mendel & Sons, Inc. is a small manufacturing company in La Jolla that uses activity-based costing. Mendel & Sons accumulates overhead in the following activity cost pools.1. Hiring personnel.2. Managing parts inventory.3. Purchasing.4. Testing prototypes.5. Designing products.6. Setting up
FireOut, Inc. manufactures steel cylinders and nozzles for two models of fire extinguishers: (1) a home fire extinguisher and (2) a commercial fire extinguisher. The home model is a high-volume (54,000 units), half-gallon cylinder that holds 2 1/2 pounds of multipurpose dry chemical at 480 PSI. The
Schultz Electronics manufactures two large-screen television models: the Royale which sells for $1,600, and a new model, the Majestic, which sells for $1,300. The production cost computed per unit under traditional costing for each model in 2012 was as follows.In 2012, Schultz manufactured 25,000
Thakin Stairs Co. of Moore designs and builds factory-made premium wooden stairways for homes. The manufactured stairway components (spindles, risers, hangers, hand rails) permit installation of stairways of varying lengths and widths. All are of white oak wood. Budgeted manufacturing overhead
Benton Corporation produces two grades of wine from grapes that it buys from California growers. It produces and sells roughly 3,000,000 liters per year of a low-cost, high-volume product called CoolDay. It sells this in 600,000 5-liter jugs. Benton also produces and sells roughly 300,000 liters
Polk and Stoneman is a public accounting firm that offers two primary services, auditing and tax return preparation. A controversy has developed between the partners of the two service lines as to who is contributing the greater amount to the bottom line. The area of contention is the assignment of
VideoPlus, Inc. manufactures two types of DVD players, a deluxe model and a standard model. The deluxe model is a multi-format progressive-scan DVD player with networking capability, Dolby digital, and DTS decoder. The standard model's primary feature is progressive-scan. Annual production is
Kinnard Electronics manufactures two home theater systems: the Elite which sells for $1,400, and a new model, the Preferred, which sells for $1,100. The production cost computed per unit under traditional costing for each model in 2012 was as follows.In 2012, Kinnard manufactured 20,000 units of
Luxury Furniture designs and builds factory-made, premium, wood armoires for homes. All are of white oak. Its budgeted manufacturing overhead costs for the year 2012 are as follows.Overhead Cost Pools AmountPurchasing ...................... $ 45,000Handling materials
Merando Corporation produces two grades of wine from grapes that it buys from California growers. It produces and sells roughly 600,000 gallon jugs per year of a low-cost, high-volume product called Valley Fresh. Merando also produces and sells roughly 200,000 gallons per year of a low-volume,
Smith and Jones is a law firm that serves both individuals and corporations. A controversy has developed between the partners of the two service lines as to who is contributing the greater amount to the bottom line. The area of contention is the assignment of overhead. The individual partners argue
East Valley Hospital is a primary medical care facility and trauma center that serves 11 small, rural midwestern communities within a 40-mile radius. The hospital offers all the medical/surgical services of a typical small hospital. It has a staff of 18 full-time doctors and 20 part-time visiting
Ideal Manufacturing Company of Sycamore, Illinois, has supported a research and development (R&D) department that has for many years been the sole contributor to the company€™s new farm machinery products. The R&D activity is an overhead cost center that provides services only to in-house
Hewlett-Packard (HP) is considered one of the best-managed and most innovative companies in the world. It continually has shown an ability to adapt to global competitive challenges through technical innovation and continual reassessment of its management and control mechanisms. Most applications of
Activity-based costing methods are constantly being improved upon, and many websites discuss suggestions for improvement. The article in this activity outlines an alternative perspective on activity-based costing.Address: hbswk.hbs.edu/item/4587.html, or go to
In our Feature Story about Super Bakery, Inc., we described a virtual corporation as one that consists of a core unit that is supported by a network of outsourced activities. A virtual corporation minimizes investment in human resources, fixed assets, and working capital. The application of ABC to
Curtis Rich, the cost accountant for Hi-Power Mower Company, recently installed activity-based costing at Hi-Power’s St. Louis lawn tractor (riding mower) plant where three models—the 8-horsepower Bladerunner, the 12-horsepower Quickcut, and the 18-horsepower Supercut—are manufactured.
There are many resources available on the Web to assist people in time management. Some of these resources are designed specifically for college students.InstructionsGo to www.dartmouth.edu/~acskills/videos/video_tm.html (or do an Internet search of Dartmouth’s time-management video). Watch the
Kate Cey and Joe Coulter are discussing the benefits of budgeting. They ask you to identify the primary advantages of budgeting. Comply with their request.
Jane Gilligan asks your help in understanding the essentials of effective budgeting. Identify the essentials for Jane.
Lori Wilkins maintains that the only difference between budgeting and long-range planning is time. Do you agree? Why or why not?
Alou Company has 15,000 beginning finished goods units. Budgeted sales units are 160,000. If management desires 20,000 ending finished goods units, what are the required units of production?
In preparing the direct materials budget for Quan Company, management concludes that required purchases are 64,000 units. If 52,000 direct materials units are required in production and there are 7,000 units of beginning direct materials, what is the desired units of ending direct materials?
The production budget of Justus Company calls for 80,000 units to be produced. If it takes 30 minutes to make one unit and the direct labor rate is $16 per hour, what is the total budgeted direct labor cost?
Ortiz Company’s manufacturing overhead budget shows total variable costs of $198,000 and total fixed costs of $162,000. Total production in units is expected to be 160,000. It takes 15 minutes to make one unit, and the direct labor rate is $15 per hour. Express the manufacturing overhead rate
Everly Company’s variable selling and administrative expenses are 10% of net sales. Fixed expenses are $50,000 per quarter. The sales budget shows expected sales of $200,000 and $250,000 in the first and second quarters, respectively. What are the total budgeted selling and administrative
For Goody Company, the budgeted cost for one unit of product is direct materials $10, direct labor $20, and manufacturing overhead 90% of direct labor cost. If 25,000 units are expected to be sold at $69 each, what is the budgeted gross profit?
Noterman Company has credit sales of $500,000 in January. Past experience suggests that 45% is collected in the month of sale, 50% in the month following the sale, and 5% in the second month following the sale. Compute the cash collections from January sales in January, February, and March.
Chicksaw Manufacturing Company uses the following budgets: Balance Sheet, Capital Expenditure, Cash, Direct Labor, Direct Materials, Income Statement, Manufacturing Overhead, Production, Sales, and Selling and Administrative. Prepare a diagram of the interrelationships of the budgets in the master
Palermo Company estimates that unit sales will be 10,000 in quarter 1; 12,000 in quarter 2; 14,000 in quarter 3; and 18,000 in quarter 4. Using a sales price of $80 per unit, prepare the sales budget by quarters for the year ending December 31, 2012.
Sales budget data for Palermo Company are given in BE20-2. Management desires to have an ending finished goods inventory equal to 20% of the next quarter’s expected unit sales. Prepare a production budget by quarters for the first 6 months of 2012.
Perine Company has 1,600 pounds of raw materials in its December 31, 2012, ending inventory. Required production for January and February of 2013 are 4,000 and 5,500 units, respectively. Two pounds of raw materials are needed for each unit, and the estimated cost per pound is $6. Management desires
For Mize Company, units to be produced are 5,000 in quarter 1 and 6,000 in quarter 2. It takes 1.5 hours to make a finished unit, and the expected hourly wage rate is $14 per hour. Prepare a direct labor budget by quarters for the 6 months ending June 30, 2012.
For Roche Inc., variable manufacturing overhead costs are expected to be $20,000 in the first quarter of 2012, with $4,000 increments in each of the remaining three quarters. Fixed overhead costs are estimated to be $35,000 in each quarter. Prepare the manufacturing overhead budget by quarters and
Noble Company classifies its selling and administrative expense budget into variable and fixed components. Variable expenses are expected to be $25,000 in the first quarter, and $5,000 increments are expected in the remaining quarters of 2012. Fixed expenses are expected to be $40,000 in each
North Company has completed all of its operating budgets. The sales budget for the year shows 50,000 units and total sales of $2,000,000. The total unit cost of making one unit of sales is $22. Selling and administrative expenses are expected to be $300,000. Income taxes are estimated to be
Bruno Industries expects credit sales for January, February, and March to be $200,000, $260,000, and $310,000, respectively. It is expected that 70% of the sales will be collected in the month of sale, and 30% will be collected in the following month. Compute cash collections from customers for
Moore Wholesalers is preparing its merchandise purchases budget. Budgeted sales are $400,000 for April and $475,000 for May. Cost of goods sold is expected to be 60% of sales. The company’s desired ending inventory is 20% of the following month’s cost of goods sold. Compute the required
Zeller Company estimates that 2012 unit sales will be 18,000 in quarter 1, 24,000 in quarter 2, and 30,000 in quarter 3, at a unit selling price of $20. Management desires to have ending finished goods inventory equal to 10% of the next quarter’s expected unit sales. Prepare a production budget
Ash Creek Company is preparing its master budget for 2012. Relevant data pertaining to its sales, production, and direct materials budgets are as follows. Sales: Sales for the year are expected to total 1,000,000 units. Quarterly sales are 20%, 25%, 25%, and 30%, respectively. The sales price is
Ash Creek Company is preparing its budgeted income statement for 2012. Relevant data pertaining to its sales, production, and direct materials budgets can be found in Do it! 20-3. In addition, Ash Creek budgets 0.3 hours of direct labor per unit, labor costs at $14 per hour, and manufacturing
Batista Company management wants to maintain a minimum monthly cash balance of $20,000. At the beginning of April, the cash balance is $22,000, expected cash receipts for April are $245,000, and cash disbursements are expected to be $256,000. How much cash, if any, must be borrowed to maintain the
Adler Company has always done some planning for the future, but the company has never prepared a formal budget. Now that the company is growing larger, it is considering preparing a budget.InstructionsWrite a memo to Jim Dixon, the president of Adler Company, in which you define budgeting, identify
Edington Electronics Inc. produces and sells two models of pocket calculators, XQ-103 and XQ-104. The calculators sell for $12 and $25, respectively. Because of the intense competition Edington faces, management budgets sales semiannually. Its projections for the first 2 quarters of 2012 are as
Garza and Neely, CPAs, are preparing their service revenue (sales) budget for the coming year (2012). The practice is divided into three departments: auditing, tax, and consulting. Billable hours for each department, by quarter, are provided below.Average hourly billing rates are: auditing $80, tax
Dallas Industries has adopted the following production budget for the first 4 months of 2013.Each unit requires 3 pounds of raw materials costing $2 per pound. On December 31, 2012, the ending raw materials inventory was 9,000 pounds. Management wants to have a raw materials inventory at the end of
On January 1, 2013, the Hardin Company budget committee has reached agreement on the following data for the 6 months ending June 30, 2013.Sales units: quarter 5,000; second quarter 6,000; thirdquarter 7,000Ending raw materials inventory: 50% of the next quarter’s production requirementsEnding
Chandler Ltd. estimates sales for the second quarter of 2012 will be as follows.Month UnitsApril ...... 2,550May ..... 2,475June ..... 2,390The target ending inventory of finished products is as follows.March 31 ..... 2,000April 30 ..... 2,230May 31 ...... 2,190June 30
Rodriguez, Inc., is preparing its direct labor budget for 2012 from the following production budget based on a calendar year.Each unit requires 1.6 hours of direct labor.InstructionsPrepare a direct labor budget for 2012. Wage rates are expected to be $15 for the first 2 quarters and $16 for
Donnegal Company makes and sells artistic frames for pictures. The controller is responsible for preparing the master budget and has accumulated the following information for 2012.Donnegal has a labor contract that calls for a wage increase to $9.00 per hour on April 1. New labor-saving machinery
Atlanta Company is preparing its manufacturing overhead budget for 2012. Relevant data consist of the following. Units to be produced (by quarters): 10,000, 12,000, 14,000, 16,000.Direct labor: Time is 1.5 hours per unit.Variable overhead costs per direct labor hour: Indirect materials $0.70;
Duncan Company combines its operating expenses for budget purposes in a selling and administrative expense budget. For the first 6 months of 2012, the following data are available.1. Sales: 20,000 units quarter 1; 22,000 units quarter 2.2. Variable costs per dollar of sales: Sales commissions 5%,
Fuqua Company’s sales budget projects unit sales of part 198Z of 10,000 units in January, 12,000 units in February, and 13,000 units in March. Each unit of part 198Z requires 2 pounds of materials, which cost $3 per pound. Fuqua Company desires its ending raw materials inventory to equal 40% of
Dalby Company has accumulated the following budget data for the year 2012.1. Sales: 30,000 units, unit selling price $80.2. Cost of one unit of finished goods: Direct materials 2 pounds at $5 per pound, direct labor 3 hours at $12 per hour, and manufacturing overhead $6 per direct labor hour.3.
Danner Company expects to have a cash balance of $46,000 on January 1, 2012. Relevant monthly budget data for the first 2 months of 2012 are as follows. Collections from customers: January $85,000, February $150,000. Payments for direct materials: January $50,000, February $70,000. Direct labor:
Aaron Corporation is projecting a cash balance of $31,000 in its December 31, 2011, balance sheet. Aaron’s schedule of expected collections from customers for the first quarter of 2012 shows total collections of $180,000. The schedule of expected payments for direct materials for the first
The controller of Trenshaw Company wants to improve the company’s control system by preparing a month-by-month cash budget. The following information is for the month ending July 31, 2012.June 30, 2012, cash balance ............... $45,000Dividends to be declared on July 15* ............
LRF Company's budgeted sales and direct materials purchases are as follows.LRF's sales are 40% cash and 60% credit. Credit sales are collected 10% in the month of sale, 50% in the month following sale, and 36% in the second month following sale; 4% are uncollectible. LRF's purchases are 50% cash
Green Landscaping Inc. is preparing its budget for the first quarter of 2012. The next step in the budgeting process is to prepare a cash receipts schedule and a cash payments schedule. To that end the following information has been collected. Clients usually pay 60% of their fee in the month that
Lager Dental Clinic is a medium-sized dental service specializing in family dental care. The clinic is currently preparing the master budget for the first 2 quarters of 2012. All that remains in this process is the cash budget. The following information has been collected from other portions of
In May 2012, the budget committee of Grand Stores assembles the following data in preparation of budgeted merchandise purchases for the month of June.1. Expected sales: June $500,000, July $600,000.2. Cost of goods sold is expected to be 70% of sales.3. Desired ending merchandise inventory is 40%
Glendo Farm Supply Company manufactures and sells a pesticide called Snare. The following data are available for preparing budgets for Snare for the first 2 quarters of 2013.1. Sales: Quarter 1, 28,000 bags; quarter 2, 42,000 bags. Selling price is $60 per bag.2. Direct materials: Each bag of Snare
Deleon Inc. is preparing its annual budgets for the year ending December 31, 2013. Accounting assistants furnish the data shown below.An accounting assistant has prepared the detailed manufacturing overhead budget and the selling and administrative expense budget. The latter shows selling expenses
Marsh Industries had sales in 2012 of $6,400,000 and gross profit of $1,100,000. Management is considering two alternative budget plans to increase its gross profit in 2013. Plan A would increase the selling price per unit from $8.00 to $8.40. Sales volume would decrease by 5% from its 2012 level.
Colter Company prepares monthly cash budgets. Relevant data from operating budgets for 2013 are:All sales are on account. Collections are expected to be 50% in the month of sale, 30% in the first month following the sale, and 20% in the second month following the sale. Sixty percent (60%) of direct
The budget committee of Litwin Company collects the following data for itsSan Miguel Store in preparing budgeted income statements for May and June 2013.1. Sales for May are expected to be $800,000. Sales in June and July are expected to be 10% higher than the preceding month.2. Cost of goods sold
Krause Industries€™ balance sheet at December 31, 2012, is presented below.Additional information accumulated for the budgeting process is as follows. Budgeted data for the year 2013 include the following.To meet sales requirements and to have 3,000 units of finished goods on hand at
Mercer Farm Supply Company manufactures and sells a fertilizer called Basic II. The following data are available for preparing budgets for Basic II for the first 2 quarters of 2012.1. Sales: Quarter 1, 40,000 bags; quarter 2, 50,000 bags. Selling price is $65 per bag.2. Direct materials: Each bag
Urbina Inc. is preparing its annual budgets for the year ending December 31, 2012. Accounting assistants furnish the following data.An accounting assistant has prepared the detailed manufacturing overhead budget and the selling and administrative expense budget. The latter shows selling expenses of
Ogleby Industries has sales in 2012 of $5,600,000 (800,000 units) and gross profit of $1,344,000. Management is considering two alternative budget plans to increase its gross profit in 2013.Plan A would increase the selling price per unit from $7.00 to $7.60. Sales volume would decrease by 10% from
Derby Company prepares monthly cash budgets. Relevant data from operating budgets for 2013 are:All sales are on account. Collections are expected to be 60% in the month of sale, 30% in the first month following the sale, and 10% in the second month following the sale. Thirty percent (30%) of direct
The budget committee of Widner Company collects the following data for its Westwood Store in preparing budgeted income statements for July and August 2012.1. Expected sales: July $400,000, August $450,000, September $500,000.2. Cost of goods sold is expected to be 60% of sales.3. Company policy is
Palmer Corporation operates on a calendar-year basis. It begins the annual budgeting process in late August when the president establishes targets for the total dollar sales and net income before taxes for the next year. The sales target is given first to the marketing department. The marketing
Elliot & Hesse Inc. manufactures ergonomic devices for computer users. Some of its more popular products include glare screens (for computer monitors), keyboard stands with wrist rests, and carousels that allow easy access to discs. Over the past 5 years, it experienced rapid growth, with sales of
Information regarding many approaches to budgeting can be found on the Web. The following activity investigates the merits of “zero-based” budgeting, as discussed by Michael LaFaive, Director of Financial Policy of the Mackinac Center for Public Policy.Address:
In order to better serve their rural patients, Drs. Joe and Rick Parcells (brothers) began giving safety seminars. Especially popular were their €œemergency-preparedness€ talks given to farmers. Many people asked whether the €œkit€ of materials the doctors
In order to get your personal finances under control, you need to prepare a personal budget. Assume that you have compiled the following information regarding your expected cash flows for a typical month.InstructionsUsing the information above, prepare a personal budget. In preparing this budget,
Fred Barone is describing budgetary control. What steps should be included in Fred’s description?
Ken Bay questions the usefulness of a master sales budget in evaluating sales performance. Is there justification for Ken’s concern? Explain.
Megan Pedigo is confused about how a flexible budget is prepared. Identify the steps for Megan.
Cali Company has prepared a graph of flexible budget data. At zero direct labor hours, the total budgeted cost line intersects the vertical axis at $25,000. At 10,000 direct labor hours, the line drawn from the total budgeted cost line intersects the vertical axis at $85,000. How may the fixed and
Eve Rooney is studying for an accounting examination. Describe for Eve what conditions are necessary for responsibility accounting to be used effectively.
Jane Nott is confused about controllable margin reported in an income statement for a profit center. How is this margin computed, and what is its primary purpose?
What is residual income, and what is one of its major weaknesses?
For the quarter ended March 31, 2012, Maris Company accumulates the following sales data for its product, Garden-Tools: $310,000 budget; $304,000 actual. Prepare a static budget report for the quarter.
Data for Maris Company are given in BE21-1. In the second quarter, budgeted sales were $380,000, and actual sales were $383,000. Prepare a static budget report for the second quarter and for the year to date.Data from BE12-1For the quarter ended March 31, 2012, Maris Company accumulates the
In Paige Company, direct labor is $20 per hour. The company expects to operate at 10,000 direct labor hours each month. In January 2012, direct labor totaling $203,000 is incurred in working 10,400 hours. Prepare (a) A static budget report and(b) A flexible budget report. Evaluate the usefulness of
Gundy Company expects to produce 1,200,000 units of Product XX in 2012. Monthly production is expected to range from 80,000 to 120,000 units. Budgeted variable manufacturing costs per unit are: direct materials $4, direct labor $6, and overhead $8. Budgeted fixed manufacturing costs per unit for
Data for Gundy Company are given in BE21-4. In March 2012, the company incurs the following costs in producing 100,000 units: direct materials $425,000, direct labor $590,000, and variable overhead $805,000. Actual fixed costs were equal to budgeted fixed costs. Prepare a flexible budget report for
In the Assembly Department of Hannon Company, budgeted and actual manufacturing overhead costs for the month of April 2012 were as follows.All costs are controllable by the department manager. Prepare a responsibility report for April for the costcenter.
Elbert Manufacturing Company accumulates the following summary data for the year ending December 31, 2012, for its Water Division which it operates as a profit center: sales—$2,000,000 budget, $2,080,000 actual; variable costs—$1,000,000 budget, $1,050,000 actual; and controllable fixed
For the year ending December 31, 2012, Cobb Company accumulates the following data for the Plastics Division which it operates as an investment center: contribution margin—$700,000 budget, $715,000 actual; controllable fixed costs—$300,000 budget, $309,000 actual. Average operating assets for
For its three investment centers, Kaspar Company accumulates the following data:Compute the return on investment (ROI) for eachcenter.
Data for the investment centers for Kaspar Company are given in BE21-9. The centers expect the following changes in the next year: (I) Increase sales 15%; (II) Decrease costs $200,000; (III) Decrease average operating assets $400,000. Compute the expected return on investment (ROI) for each
Voorhees, Inc. reports the following financial information.Average operating assets ....... $3,000,000Controllable margin ........ $ 600,000Minimum rate of return ...... 9%Compute the return on investment and the residual income.
Presented below is information related to the Southern Division of Lumber, Inc.Contribution margin ....... $1,200,000Controllable margin ....... $ 800,000Average operating assets ..... $3,200,000Minimum rate of return .... 16%Compute the Southern Division’s return on investment and
In Pargo Company’s flexible budget graph, the fixed cost line and the total budgeted cost line intersect the vertical axis at $90,000. The total budgeted cost line is $330,000 at an activity level of 60,000 direct labor hours. Compute total budgeted costs at 70,000 direct labor hours.
Mussatto Company expects to produce 50,000 units of product IOA during the current year. Budgeted variable manufacturing costs per unit are direct materials $7, direct labor $12, and overhead $18. Annual budgeted fixed manufacturing overhead costs are $96,000 for depreciation and $45,000 for
The Wellstone Division operates as a profit center. It reports the following for the year.Prepare a responsibility report for the Wellstone Division at December 31,2012.

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