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

The service division of Raney Industries reported the following results for 2012.Sales ............$500,000Variable costs ......... 300,000Controllable fixed costs ...... 75,000Average operating assets ..... 450,000Management is considering the following independent courses of action in 2013 in
Mike Trusler has prepared the following list of statements about budgetary control.1. Budget reports compare actual results with planned objectives.2. All budget reports are prepared on a weekly basis.3. Management uses budget reports to analyze differences between actual and planned results and
Crede Company budgeted selling expenses of $30,000 in January, $35,000 in February, and $40,000 in March. Actual selling expenses were $31,000 in January, $34,500 in February, and $47,000 in March.Instructions(a) Prepare a selling expense report that compares budgeted and actual amounts by month
Thome Company uses a flexible budget for manufacturing overhead based on direct labor hours. Variable manufacturing overhead costs per direct labor hour are as follows.Indirect labor ........ $1.00Indirect materials ........ 0.50Utilities ........... 0.40Fixed overhead costs per month are:
Using the information in E21-3, assume that in July 2012, Thome Company incurs the following manufacturing overhead costs.Instructions(a) Prepare a flexible budget performance report, assuming that the company worked 9,000 direct labor hours during the month.(b) Prepare a flexible budget
DeWitt Company uses flexible budgets to control its selling expenses. Monthly sales are expected to range from $170,000 to $200,000. Variable costs and their percentage relationship to sales are: Sales Commissions 5%, Advertising 4%, Traveling 3%, and Delivery 2%. Fixed selling expenses will
The actual selling expenses incurred in March 2012 by DeWitt Company are as follows.Instructions(a) Prepare a flexible budget performance report for March using the budget data in E21-5, assuming that March sales were $170,000. Expected and actual sales are the same.(b) Prepare a flexible budget
Kitchen Help Inc. (KHI) is a manufacturer of toaster ovens. To improve control over operations, the president of KHI wants to begin using a flexible budgeting system, rather than use only the current master budget. The following data are available for KHI’s expected costs at production levels of
Rensing Groomers is in the dog-grooming business. Its operating costs are described by the following formulas:Grooming supplies (variable) ........ y = $0 + $4xDirect labor (variable) ........... y = $0 + $12xOverhead (mixed) ............ y = $8,000 + $1xMilo, the owner, has determined that direct
Lowell Company€™s manufacturing overhead budget for the first quarter of 2012 contained the following data.Actual variable costs were: indirect materials $13,800, indirect labor $9,600, utilities $8,700 and maintenance $4,900. Actual fixed costs equaled budgeted costs except for property
As sales manager, Joe Batista was given the following static budget report for selling expenses in the Clothing Department of Soria Company for the month of October.As a result of this budget report, Joe was called into the president€™s office and congratulated on his fine sales
Kirkland Plumbing Company is a newly formed company specializing in plumbing services for home and business. The owner, Lenny Kirkland, had divided the company into two segments: Home Plumbing Services and Business Plumbing Services. Each segment is run by its own supervisor, while basic selling
Venetian Company has two production departments, Fabricating and Assembling. At a department managers’ meeting, the controller uses flexible budget graphs to explain total budgeted costs. Separate graphs based on direct labor hours are used for each department. The graphs show the following.1. At
Fultz Company’s organization chart includes the president; the vice president of production; three assembly plants—Dallas, Atlanta, and Tucson; and two departments within each plant—Machining and Finishing. Budget and actual manufacturing cost data for July 2012 are as follows. Finishing
The Mixing Department manager of Malone Company is able to control all overhead costs except rent, property taxes, and salaries. Budgeted monthly overhead costs for the Mixing Department, in alphabetical order, are:Actual costs incurred for January 2012 are indirect labor $12,200; indirect
Deitz Manufacturing Inc. has three divisions which are operated as profit centers. Actual operating data for the divisions listed alphabetically are as follows.Instructions(a) Compute the missing amounts. Show computations.(b) Prepare a responsibility report for the Women€™s Shoes
The Sports Equipment Division of Harrington Company is operated as a profit center. Sales for the division were budgeted for 2012 at $900,000. The only variable costs budgeted for the division were cost of goods sold ($440,000) and selling and administrative ($60,000). Fixed costs were budgeted at
The West Division of Nieto Company reported the following data for the current year.Sales ............... $3,000,000Variable costs .......... 1,950,000Controllable fixed costs ....... 600,000Average operating assets ...... 5,000,000Top management is unhappy with the investment center’s
The Dinkle and Frizell Dental Clinic provides both preventive and orthodontic dental services. The two owners, Reese Dinkle and Anita Frizell, operate the clinic as two separate investment centers: Preventive Services and Orthodontic Services. Each of them is in charge of one of the centers: Reese
The Pletcher Transportation Company uses a responsibility reporting system to measure the performance of its three investment centers: Planes, Taxis, and Limos.Segment performance is measured using a system of responsibility reports and return on investment calculations. The allocation of resources
Presented below is selected information for three regional divisions of Medina Company.Instructions(a) Compute the return on investment for each division.(b) Compute the residual income for each division.(c) Assume that each division has an investment opportunity that would provide a rate of return
Presented below is selected financial information for two divisions of Yono Brewing.InstructionsSupply the missing information for the lettereditems.
Cook Company estimates that 360,000 direct labor hours will be worked during the coming year, 2012, in the Packaging Department. On this basis, the budgeted manufacturing overhead cost data, shown on the next page, are computed for the year.It is estimated that direct labor hours worked each month
Zelmer Company manufactures tablecloths. Sales have grown rapidly over the past 2 years. As a result, the president has installed a budgetary control system for 2012. The following data were used in developing the master manufacturing overhead budget for the Ironing Department, which is based on an
Hill Company uses budgets in controlling costs. The August 2012 budget report for the company€™s Assembling Department is as follows.The monthly budget amounts in the report were based on an expected production of 60,000 units per month or 720,000 units per year. The Assembling Department
Clarke Manufacturing Inc. operates the Patio Furniture Division as a profit center. Operating data for this division for the year ended December 31, 2012, are as shown below.In addition, Clarke Manufacturing incurs $180,000 of indirect fixed costs that were budgeted at $175,000. Twenty percent
Suppan Manufacturing Company manufactures a variety of tools and industrial equipment. The company operates through three divisions. Each division is an investment center. Operating data for the Home Division for the year ended December 31, 2012, and relevant budget data are as follows.Average
Durham Company uses a responsibility reporting system. It has divisions in Denver, Seattle, and San Diego. Each division has three production departments: Cutting, Shaping, and Finishing. The responsibility for each department rests with a manager who reports to the division production manager.
Delby Industries has manufactured prefabricated houses for over 20 years. The houses are constructed in sections to be assembled on customers’ lots. Delby expanded into the precut housing market when it acquired Jensen Company, one of its suppliers. In this market, various types of lumber are
Speier Company estimates that 240,000 direct labor hours will be worked during 2012 in the Assembly Department. On this basis, the following budgeted manufacturing overhead data are computed.It is estimated that direct labor hours worked each month will range from 18,000 to 24,000 hours. During
Gonzalez Manufacturing Company produces one product, Olpe. Because of wide fluctuations in demand for Olpe, the Assembly Department experiences significant variations in monthly production levels. The annual master manufacturing overhead budget is based on 300,000 direct labor hours. In July,
Hardesty Company uses budgets in controlling costs. The May 2012 budget report for the company's Packaging Department is as follows.The monthly budget amounts in the report were based on an expected production of 50,000 units per month or 600,000 units per year. The company president was displeased
Guzman Manufacturing Inc. operates the Home Appliance Division as a profit center. Operating data for this division for the year ended December 31, 2012, are shown below.In addition, Guzman Manufacturing incurs $150,000 of indirect fixed costs that were budgeted at $155,000. Twenty percent (20%) of
Strauss Manufacturing Company manufactures a variety of garden and lawn equipment. The company operates through three divisions. Each division is an investment center. Operating data for the Lawnmower Division for the year ended December 31, 2012, and relevant budget data are as follows.Average
Gore Company uses a responsibility reporting system. It has divisions in San Francisco, Phoenix, and Tulsa. Each division has three production departments: Cutting, Shaping, and Finishing. The responsibility for each department rests with a manager who reports to the division production manager.
Walton Industries has manufactured prefabricated garages for over 20 years. The garages are constructed in sections to be assembled on customers’ lots. Walton expanded into the precut housing market when it acquired Washington Enterprises, one of its suppliers. In this market, various types of
Green Pastures is a 400-acre farm on the outskirts of the Kentucky Bluegrass, specializing in the boarding of broodmares and their foals. A recent economic downturn in the thoroughbred industry has led to a decline in breeding activities, and it has made the boarding business extremely competitive.
Lanier Company manufactures expensive watch cases sold as souvenirs. Three of its sales departments are: Retail Sales, Wholesale Sales, and Outlet Sales. The Retail Sales Department is a profit center. The Wholesale Sales Department is a cost center. Its managers merely take orders from customers
The manufacturing overhead budget for Fleming Company contains the following items.The budget was based on an estimated 2,000 units being produced. During the past month, 1,500 units were produced, and the following costs incurred.Instructions(a) Determine which items would be controllable by Fred
American Products Corporation participates in a highly competitive industry. In order to meet this competition and achieve profit goals, the company has chosen the decentralized form of organization. Each manager of a decentralized investment center is measured on the basis of profit contribution,
(a) Alice Kent asks your help in understanding the term “activity index.” Explain the meaning and importance of this term for Alice.(b) State the two ways that variable costs may be defined.
B. K. Fernandez claims that the relevant range concept is important only for variable costs.(a) Explain the relevant range concept.(b) Do you agree with B. K.’s claim? Explain.
Todd Ricketts is confused. He does not understand why rent on his apartment is a fixed cost and rent on a Hertz rental truck is a mixed cost. Explain the difference to Todd.
Sara Lang defines contribution margin as the amount of profit available to cover operating expenses. Is there any truth in this definition? Discuss.
Agler Company’s Speedo calculator sells for $40. Variable costs per unit are estimated to be $28. What are the contribution margin per unit and the contribution margin ratio?
Total fixed costs are $25,000 for Oaks Inc. It has a contribution margin per unit of $15, and a contribution margin ratio of 25%. Compute the break-even sales in dollars.
Susie Tobias asks your help in constructing a CVP graph. Explain to Susie (a) How the break-even point is plotted, and (b) How the level of activity and dollar sales at the break-even point are determined.
Define the term “margin of safety.” If Stine Company expects to sell 1,250 units of its product at $12 per unit, and break-even sales for the product are $12,000, what is the margin of safety ratio?
Molena Company’s break-even sales are $600,000. Assuming fixed costs are $180,000, what sales volume is needed to achieve a target net income of $60,000?
The traditional income statement for Renfro Company shows sales $900,000, cost of goods sold $500,000, and operating expenses $200,000. Assuming all costs and expenses are 70% variable and 30% fixed, prepare a CVP income statement through contribution margin.
Monthly production costs in Loder Company for two levels of production are as follows.Indicate which costs are variable, fixed, and mixed, and give the reason for eachanswer.
For Bruno Company, the relevant range of production is 40–80% of capacity. At 40% of capacity, a variable cost is $4,000 and a fixed cost is $6,000. Diagram the behavior of each cost within the relevant range assuming the behavior is linear.
For Larissa Company, a mixed cost is $20,000 plus $16 per direct labor hour. Diagram the behavior of the cost using increments of 500 hours up to 2,500 hours on the horizontal axis and increments of $20,000 up to $80,000 on the vertical axis.
Pesaveno Company accumulates the following data concerning a mixed cost, using miles as the activity level.Compute the variable and fixed cost elements using the high-lowmethod.
Presto Corp. has collected the following data concerning its maintenance costs for the past 6 months.Compute the variable and fixed cost elements using the high-lowmethod.
Determine the missingamounts.
Radial Manufacturing Inc. had sales of $2,200,000 for the first quarter of 2012. In making the sales, the company incurred the following costs and expenses.Prepare a CVP income statement for the quarter ended March 31,2012.
Meriden Company has a unit selling price of $520, variable costs per unit of $286, and fixed costs of $187,200. Compute the break-even point in units using (a) The mathematical equation and (b) Contribution margin per unit.
Dugan Corp. had total variable costs of $180,000, total fixed costs of $160,000, and total revenues of $300,000. Compute the required sales in dollars to break even.
For Turgo Company, variable costs are 60% of sales, and fixed costs are $195,000. Management’s net income goal is $75,000. Compute the required sales in dollars needed to achieve management’s target net income of $75,000. (Use the contribution margin approach.)
For Kozy Company, actual sales are $1,200,000 and break-even sales are $840,000. Compute(a) The margin of safety in dollars and(b) The margin of safety ratio.
Dye Corporation has fixed costs of $480,000. It has a unit selling price of $6, unit variable cost of $4.50, and a target net income of $1,500,000. Compute the required sales in units to achieve its target net income.
Dousman Company reports the following total costs at two levels of production.Classify each cost as variable, fixed, ormixed.
Colter Company accumulates the following data concerning a mixed cost, using units produced as the activity level.(a) Compute the variable and fixed cost elements using the high-low method.(b) Estimate the total cost if the company produces 8,500units.
Lance Company has a unit selling price of $250, variable cost per unit of $160, and fixed costs of $135,000. Compute the break-even point in units using (a) The mathematical equation and (b) Contribution margin per unit.
Sandoval Company makes radios that sell for $30 each. For the coming year, management expects fixed costs to total $200,000 and variable costs to be $20 per unit.(a) Compute the break-even point in dollars using the contribution margin (CM) ratio.(b) Compute the margin of safety ratio assuming
King Company manufactures a single product. Annual production costs incurred in the manufacturing process are shown below for two levels of production.Instructions(a) Define the terms variable costs, fixed costs, and mixed costs.(b) Classify each cost above as either variable, fixed, ormixed.
Glacial Enterprises is considering manufacturing a new product. It projects the cost of direct materials and rent for a range of output as shown below.Instructions(a) Diagram the behavior of each cost for output ranging from 1,000 to 12,000 units.(b) Determine the relevant range of activity for
The controller of Capital Industries has collected the following monthly expense data for use in analyzing the cost behavior of maintenance costs.Instructions(a) Determine the fixed and variable cost components using the high-low method.(b) Prepare a graph showing the behavior of maintenance costs,
Cottonwood Furniture Corporation incurred the following costs.1. Wood used in the production of furniture.2. Fuel used in delivery trucks.3. Straight-line depreciation on factory building.4. Screws used in the production of furniture.5. Sales staff salaries.6. Sales commissions.7. Property taxes.8.
The controller of Sedgwick Industries has collected the following monthly expense data for use in analyzing the cost behavior of maintenance costs.Instructions(a) Determine the fixed and variable cost components using the high-low method.(b) Prepare a graph showing the behavior of maintenance
Hadicke Corporation manufactures a single product. Monthly production costs incurred in the manufacturing process are shown below for the production of 3,000 units. The utilities and maintenance costs are mixed costs. The fixed portions of these costs are $300 and $200, respectively.Production in
Kenny Deines wants Deines Company to use CVP analysis to study the effects of changes in costs and volume on the company. Deines has heard that certain assumptions must be valid in order for CVP analysis to be useful.InstructionsPrepare a memo to Kenny Deines concerning the assumptions that
Green Forever provides environmentally friendly lawn services for homeowners. Its operating costs are as follows.Depreciation .............$1,500 per monthAdvertising ............ $200 per monthInsurance .............$2,000 per monthWeed and feed materials ....... $13 per lawnDirect labor
The San Marcos Inn is trying to determine its break-even point. The inn has 50 rooms that it rents at $60 a night. Operating costs are as follows.Salaries ........$7,200 per monthUtilities ........$1,500 per monthDepreciation ......$1,200 per monthMaintenance ...... $300 per monthMaid service
In the month of March, Trendy Spa services 570 clients at an average price of $120. During the month, fixed costs were $21,000 and variable costs were 65% of sales.Instructions(a) Determine the contribution margin in dollars, per unit, and as a ratio.(b) Using the contribution margin technique,
In 2012, Grissom Company had a break-even point of $350,000 based on a selling price of $7 per unit and fixed costs of $105,000. In 2013, the selling price and the variable cost per unit did not change, but the break-even point increased to $420,000.Instructions(a) Compute the variable cost per
Naylor Company has the following information available for September 2012.Unit selling price of video game consoles ........ $ 400Unit variable costs .................. $ 270Total fixed costs ..................$52,000Units sold ................... 620Instructions(a) Prepare a CVP income statement
Moran Company had $150,000 of net income in 2012 when the selling price per unit was $150, the variable costs per unit were $90, and the fixed costs were $570,000. Management expects per unit data and total fixed costs to remain the same in 2013. The president of Moran Company is under pressure
Ogilvie Company reports the following operating results for the month of August: Sales $350,000 (units 5,000); variable costs $210,000; and fixed costs $90,000. Management is considering the following independent courses of action to increase net income.1. Increase selling price by 10% with no
Stiever Company estimates that variable costs will be 60% of sales, and fixed costs will total $800,000. The selling price of the product is $4.Instructions(a) Prepare a CVP graph, assuming maximum sales of $3,200,000. (Note: Use $400,000 increments for sales and costs and 100,000 increments for
Hardwood Seating Co., a manufacturer of chairs, had the following data for 2012.Sales ............ 2,400 unitsSales price ......... $40 per unitVariable costs ....... $14 per unitFixed costs ........ $19,500Instructions(a) What is the contribution margin ratio?(b) What is the break-even
Stephen Thorne owns the Fredonia Barber Shop. He employs five barbers and pays each a base rate of $1,000 per month. One of the barbers serves as the manager and receives an extra $500 per month. In addition to the base rate, each barber also receives a commission of $5.50 per haircut.Other costs
Lyman Company bottles and distributes Livit, a diet soft drink. The beverage is sold for 50 cents per 16-ounce bottle to retailers, who charge customers 75 cents per bottle. For the year 2012, management estimates the following revenues and costs.Instructions(a) Prepare a CVP income statement for
Giere Manufacturing's sales slumped badly in 2012. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 600,000 units of product: Net sales $2,400,000; total costs and expenses $2,540,000; and net loss $140,000. Costs and
Julie Milroy is the advertising manager for Value Shoe Store. She is currently working on a major promotional campaign. Her ideas include the installation of a new lighting system and increased display space that will add $34,000 in fixed costs to the $270,000 currently spent. In addition, Julie is
Marotta Corporation has collected the following information after its first year of sales. Net sales were $1,600,000 on 100,000 units; selling expenses $240,000 (40% variable and 60% fixed); direct materials $511,000; direct labor $285,000; administrative expenses $280,000 (20% variable and 80%
Lankford Manufacturing carries no inventories. Its product is manufactured only when a customer’s order is received. It is then shipped immediately after it is made. For its fiscal year ended October 31, 2012, Lankford’s break-even point was $1.35 million. On sales of $1.2 million, its income
The Ottawa Barber Shop employs four barbers. One barber, who also serves as the manager, is paid a salary of $3,900 per month. The other barbers are paid $1,900 per month. In addition, each barber is paid a commission of $2 per haircut. Other monthly costs are: store rent $700 plus 60 cents per
Colaw Company bottles and distributes No-FIZZ, a fruit drink. The beverage is sold for 50 cents per 16-ounce bottle to retailers, who charge customers 70 cents per bottle. For the year 2012, management estimates the following revenues and costs.Instructions(a) Prepare a CVP income statement for
Denton Manufacturing had a bad year in 2011. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 60,000 units of product: Net sales $1,500,000; total costs and expenses $1,890,000; and net loss $390,000. Costs and
Beth Howard is the advertising manager for Payless Shoe Store. She is currently working on a major promotional campaign. Her ideas include the installation of a new lighting system and increased display space that will add $24,000 in fixed costs to the $210,000 currently spent. In addition, Beth is
Tomorrow Corporation has collected the following information after its first year of sales. Net sales were $2,000,000 on 100,000 units; selling expenses $400,000 (30% variable and 70% fixed); direct materials $600,000; direct labor $340,000; administrative expenses $500,000 (30% variable and 70%
Apple Manufacturing carries no inventories. Its product is manufactured only when a customer’s order is received. It is then shipped immediately after it is made. For its fiscal year ended October 31, 2012, Apple’s break-even point was $2.2 million. On sales of $1.9 million, its income
Martinez Company has decided to introduce a new product. The new product can be manufactured by either a capital-intensive method or a labor-intensive method. The manufacturing method will not affect the quality of the product. The estimated manufacturing costs by the two methods are as
The condensed income statement for the Sally and Terry partnership for 2012 is as follows.A cost behavior analysis indicates that 75% of the cost of goods sold are variable, 50% of the selling expenses are variable, and 25% of the administrative expenses are variable.Instructions(Round to nearest
Jimmy Hester is an accountant for Advanced Company. Early this year, Jimmy made a highly favorable projection of sales and profits over the next 3 years for Advanced Company’s hot-selling computer PLEX. As a result of the projections Jimmy presented to senior management, the company decided to
The purchase of a new car is one of your biggest personal expenditures. It is important that you carefully analyze your options. Suppose that you are considering the purchase of a hybrid vehicle. Let’s assume the following facts: The hybrid will initially cost an additional $3,000 above the cost
What is meant by CVP analysis?
Provide three examples of management decisions that benefit from CVP analysis.

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