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Accounting Tools For Business Decision Making 3rd Edition Paul D. Kimmel - Solutions
Each gallon of Old Guard, a popular aftershave lotion, requires 6 ounces of ocean scent. Budgeted production of Old Guard for the first three quarters of 2010 is:Quarter I .....10,000 gallonsQuarter II ...18,000 gallonsQuarter III .....11,000 gallonsManagement’s policy is to have on hand at the
Osage Inc. has actual sales for June and July and forecast sales for August, September, October, and November as follows:Actual:June . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,150 unitsJuly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Kiel Center’s sales are all made on account. The firm’s collection experience has been that 35% of a month’s sales are collected in the month the sale is made, 55% are collected in the month following the sale, and 8% are collected in the second month following the sale. The sales forecast
Flagstaff Co. has actual sales for July and August and forecast sales for September, October, November, and December as follows:Actual:July . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $73,500August . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Brass Creations Co. makes decorative candle pedestals. An industrial engineer consultant developed ideal time standards for one unit of the Cambridge model pedestal. The standards follow, along with the cost accountant’s determination of current labor pay rates:Worktype 1 . . . . . . . . . . . .
Ozark Manufacturing Co. manufactures and sells household cleaning products. The company’s research department has developed a new cleaner for which a standard cost must be determined. The new cleaner is made by mixing 18 quarts of triphate solution and 8 pounds of sobase granules and boiling the
DMA, Inc., processes corn into corn starch and corn syrup. The company’s productivity and cost standards follow: From every bushel of corn processed, 12 pounds of starch and 6 pounds of syrup should be produced.Standard direct labor and variable overhead total $0.86 per bushel of corn
A cost analyst for Stamper Manufacturing Co. has assembled the following data about the Model 24 stamp pad:The piece of sheet metal from which five pad cases can be made costs $0.24. This amount is based on the number of sheets in a 4,200-pound bundle of sheet metal, which is the usual purchase
Brooklyn Furniture, a retail store, has an average gross profit ratio of 42%. The sales forecast for the next four months follows:May. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $100,000June . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gemstone, Ltd., is a retail jeweler. Most of the firm€™s business is in jewelry and watches. The firm€™s average gross profit ratio for jewelry and watches is 80% and 40%, respectively. The sales forecast for the next two months for each product category is as follows:The
PrimeTime Sportswear is a custom imprinter that began operations six months ago. Sales have exceeded management's most optimistic projections. Sales are made on account and collected as follows: 60% in the month after the sale is made and 35% in the second month after sale. Merchandise purchases
Refer to the PrimeTime Sportswear data presented in Problem 14.13.Required:a. Prepare a cash budget for August and September. What are the prospects for this company if its sales growth continues at a similar rate?b. Assume now that PrimeTime Sportswear is a mature firm, and that the July–
The monthly cash budgets for the second quarter of 2010 follow ($000 omitted) for Morrison Mfg. Co. A minimum cash balance of $30,000 is required to start each month, and a $100,000 line of credit has been arranged with a local bank at a 8% interest rate.Required:Calculate the missingamounts.
Following are the budgeted income statements for the second quarter of 2010 for Marine Tech, Inc.:The company expects about 40% of sales to be cash transactions. Of sales on account, 65% are expected to be collected in the first month after the sale is made, and 35% are expected to be collected in
Soprano Co. is in the process of preparing the second quarter budget for 2010, and the following data have been assembled:• The company sells a single product at a selling price of $40 per unit. The estimated sales volume for the next six months is as follows:• All sales are on account.
Rolen, Inc., is in the process of preparing the fourth quarter budget for 2010, and the following data have been assembled:• The company sells a single product at a price of $25 per unit. The estimated sales volume for the next six months is as follows:September . . . . . . . . . . . . . . . . .
Canada Printing Group, Inc. (CPGI), has recently begun the process of acquiring small to medium-size local and regional printing firms across the country to facilitate its corporate strategy of becoming the low-cost provider of graphic arts and printing services in Canada. To emphasize the
The Office of Management and Budget provides access to the budget of the United States government at its Web site: www.gpoaccess.gov/usbudget/citizensguide.html. “A Citizen’s Guide to the Federal Budget” provides information about the budget and the budget process for the general public.
Assume that you have decided to drive your car to Florida for the spring break. A classmate learns about your plans and asks about riding along with you. Explain how you would apply each of the following cost concepts to the task of determining how much, if any, cost you would take into
Attending college involves incurring many costs. Give an example of a college cost that could be assigned to each of the following classifications. Explain your reason for assigning each cost to the classification.a. Sunk cost.b. Discretionary cost.c. Committed cost.d. Opportunity cost.e.
National Chemical Company manufactures a chemical compound that is sold for $58 per gallon. A new variant of the chemical has been discovered, and if the basic compound were processed into the new variant, the selling price would be $72 per gallon. National expects the market for the new compound
Mizzou Mining Company mines an iron ore called Alpha. During the month of December, 400,000 tons of Alpha were mined and processed at a cost of $742,500. As the Alpha ore is mined, it is processed into Delta and Pi, where 60% of the Alpha output becomes Delta and 40% becomes Pi. Each product can be
Circuit Masters, Inc. (CMI), is presently operating at 80% of capacity and manufacturing 120,000 units of a patented electronic component. The cost structure of the component is as follows: Raw materials . . . . . . . . . . . . . . . . . . . . . . . . $ 6.00 per unitDirect labor . . . . . . . .
AAA Lock Manufacturing Co. makes and sells several models of locks. The cost records for the ZForce lock show that manufacturing costs total $29.00 per lock. An analysis of this amount indicates that $16.75 of the total cost has a variable cost behavior pattern, and the remainder is an allocation
Canton Company, a manufacturer of digital cameras, is considering entry into the digital binocular market. Canton Company currently does not produce binoculars of any style, so this venture would require a careful analysis of relevant manufacturing costs to correctly assess its ability to compete.
Rainbow Cruises operates a week-long cruise tour through the Hawaiian Islands. Passengers currently pay $1,800 for a two-person cabin, which is an all-inclusive price that includes food, beverages, and entertainment. The current cost to Rainbow per two-person cabin is $1,440 for the week-long
Eldon Engine, Inc., produces engines for the watercraft industry. An outside manufacturer has offered to supply several component parts used in the engine assemblies, which are currently being produced by Eldon. The supplier will charge Eldon $620 per engine for the set of parts. Eldon’s current
Sycamore Company uses a certain part in its manufacturing process that it buys from an outside supplier for $29 per part plus another $4 for shipping and other purchasing-related costs. The company will need 14,400 of these parts in the next year and is considering making the part internally. After
Product S has a contribution margin of $150 per unit and requires three hours of machine time. Product T requires four hours of machine time and provides $200 of contribution margin per unit.Required:If the capacity of machine time is limited to 600 hours and only one product can be produced, what
ABC Company produces Product X, Product Y, and Product Z. All three products require processing on specialized finishing machines. The capacity of these machines is 3,600 hours per month. ABC Company wishes to determine the product mix that should be achieved to meet the high demand for each
An investor has asked for your help with the following time value of money applications. Use the appropriate factors from Table 6-4 or Table 6-5 to answer the following questions.Required:a. What is the present value of $50,000 to be received in five years using a discount rate of 8%?b. How much
Use the appropriate factors from Table 6-4 or Table 6-5 to answer the following questions.Required:a. Staley Co.’s common stock is expected to have a dividend of $6 per share for each of the next 12 years, and it is estimated that the market value per share will be $136 at the end of 12 years. If
Capital budgeting analysis involves the use of many estimates.Required:For each of the following estimation errors, state whether the net present value of the project will be too high or too low:a. The investment is too high.b. The cost of capital is too low.c. The cash flows from the project
National Leasing is evaluating the cost of capital to use in its capital budgeting process. Over the recent past, the company has averaged a return on equity of 12% and a return on investment of 9%. The company can currently borrow short-term money for 6%.Required:a. Which of the preceding rates
South Bay Manufacturing Ltd. is considering the investment of $230,000 in a new machine. The machine will generate cash flow of $40,000 per year for each year of its eight-year life and will have a salvage value of $26,000 at the end of its life. The company’s cost of capital is 10%.Required:a.
A task force of capital budgeting analysts at Seger Ltd. collected the following data concerning the drilling and production of known petroleum reserves at an offshore location: Investment in rigging equipment and related personnel costsrequired to pump the oil . . . . . . . . . . . . . . . . . .
The Goodwrench Garage is considering an investment in a new tune-up computer. The cost of the computer is $48,000. A cost analyst has calculated the discounted present value of the expected cash flows from the computer to be $52,650, based on the firm’s cost of capital of 12%.Required:a. What
Lake Regional Hospital is considering the acquisition of a new diagnostic scanning machine. The investment required to get the machine operational will be $2,082,560. The machine will be capable of performing 6,000 scanning procedures per year, but based on the experience of other hospitals,
The Delmar Beverage Co. produces a premium root beer that is sold throughout its chain of restaurants in the Midwest. The company is currently producing 4,000 gallons of root beer per day, which represents 80% of its manufacturing capacity. The root beer is available to restaurant customers by the
Hull Motors, Inc. (HMI), produces small gasoline-powered motors for use in lawn mowers. The company has been growing steadily over the past five years and is operating at full capacity. HMI recently completed the addition of new plant and equipment at a cost of $7,800,000, thereby increasing its
MMV Inc. opened a chain of businesses several years ago that provide quick oil changes and other minor services in conjunction with a convenience operation consisting of a soup, sandwich, and snack bar. The strategy was that as customers brought autos in for oil changes, they would likely use the
The segmented income statement for XYZ Company for the year ended December 31, 2010, follows:The company is concerned about the performance of product A, and you have been asked to analyze the situation and recommend to the president whether to continue or discontinue the product. During your
Duncan Company is considering the investment of $140,000 in a new machine. It is estimated that the new machine will generate additional cash flow of $21,000 per year for each year of its 12-year life and will have a salvage value of $15,000 at the end of its life. Duncan’s financial managers
TopCap Co. is evaluating the purchase of another sewing machine that will be used to manufacture sport caps. The invoice price of the machine is $208,000. In addition, delivery and installation costs will total $10,000. The machine has the capacity to produce 18,000 dozen caps per year. Sales are
Information about four investment proposals is summarized here:Required:Calculate the present value ratio of each proposal and indicate which proposal is the most desirableinvestment.
The following capital expenditure projects have been proposed for management's consideration at Heard, Inc., for the upcoming budget year:Required:a. Calculate the net present value of projects B, C, and D, using 14% as the cost of capital for Heard, Inc.b. Calculate the present value ratio for
Crichton Publications uses the accounting rate of return method to evaluate proposed capital investments. The company’s desired rate of return (its cost of capital) is 18%. The project being evaluated involves a new product that will have a three-year life. The investment required is $300,000,
Busy Beaver Corp. is interested in reviewing its method of evaluating capital expenditure proposals using the accounting rate of return method. A recent proposal involved a $50,000 investment in a machine that had an estimated useful life of five years and an estimated salvage value of $10,000. The
Jinny Buffett recently retired as a flight attendant and is interested in opening a fitness center and health spa exclusively for women in Grand Cayman, where she resides. After careful study, she is somewhat puzzled as to how to proceed. In her words, “I see my business going in one of two
The following data have been collected by capital budgeting analysts at Sunrise Beach, Inc., concerning an investment in an expansion of the company’s product line. Analysts estimate that an investment of $400,000 will be required to initiate the project at the beginning of 2010. The estimated
Annual reports provide significant information about an organization’s capital budget and capital budgeting process. Intel Corporation provides financial reports for several years at www.intel.com (About Intel → Investor Relations → Financials and Filings → Annual Report). This exercise
Look forward to the day when you will have accumulated $5,000, and assume that you have decided to invest that hard-earned money in the common stock of a publicly owned corporation. What data about that company will you be most interested in, and how will you arrange those data so they are most
If your library has a common stock investment advisory service such as Moody’s Handbook of Common Stocks or online access to an investment advisory service such as Value Line Research Center: Historical Reports, use one of those sources to locate a report about a company you have heard about or
Indicate the effect that each transaction/event listed here will have on the financial ratio listed opposite it, and provide an explanation for your answer. Use + for increase, for decrease, and (NE) for no effect. Assume that current assets exceed current liabilities in all cases, both before
Indicate the effect that each transaction/event listed here will have on the financial ratio listed opposite it, and provide an explanation for your answer. Use + for increase, – for decrease, and (NE) for no effect. Assume that current assets exceed current liabilities in all cases, both before
Refer to the consolidated balance sheets on page 688 of the Intel Corporation annual report in the appendix.Required:Prepare a common size balance sheet at December 29, 2007, using the following captions:Total current assetsProperty, plant, and equipment (net)Marketable equity securities and other
Solve the requirements of Problem 11.5 for the year ended December 27, 2008.Required:Prepare a common size balance sheet at December 29, 2007, using the following captions:Total current assetsProperty, plant, and equipment (net)Marketable equity securities and other long-term investmentsGoodwill
Assume that the current ratio for Arch Company is 2.0, its acid-test ratio is 1.5, and its working capital is $300,000. Answer each of the following questions independently , always referring to the original information.a. How much does the firm have in current liabilities?b. If the only current
Selected balance sheet accounts for Tibbetts Company on September 30, 2010, are as follows:Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 32,000Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . 58,000Accounts receivable, net . . . . . . .
Presented here are summarized data from the balance sheets and income statements of Wiper, Inc.:Required:a. Calculate return on investment, based on net income and average total assets, for 2011 and 2010. Show both margin and turnover in your calculation.b. Calculate return on equity for 2011 and
This problem is based on the 2008 annual report of Intel Corporation in the appendix.Required:a. Compute the following profitability measures for the year ended December 27, 2008:1. Return on investment, based on net income (perform a DuPont analysis).2. Return on equity, based on net income.3.
The annual reports of the Coca-Cola Co. and PepsiCo, Inc., indicate the following for the year ended December 31, 2008 (amounts in millions):Required:a. Calculate ROI and ROE for each company for 2008. b. Based on the results of your ROI and ROE analysis in part a, do you believe that either firm
Partially completed financial statements for Whittaker, Inc., follow:WHITTAKER, INC.Income StatementFor the Year Ended December 31, 2011Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ ?Cost of goods sold . . .
Calculate selected financial ratios and explain financial reporting issuesRequired:a. Case 4.26 presents the 2010 income statement and balance sheet for Gerrard Construction Co. What other financial statements are required? What information would these statements communicate that could not be
Thakin Stairs Co. 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 costs for the
As you learned in the previous chapters, Current Designs has two main product lines' composite kayaks, which are handmade and very labor-intensive, and rotomolded kayaks, which require less labor but employ more expensive equipment. Current Designs' controller, Diane Buswell, is now evaluating
An article in Cost Management, by Kocakulah, Bartlett, and Albin entitled “ABC for Calculating Mortgage Loan Servicing Expenses” (July/August 2009, p. 36), discusses a use of ABC in the financial services industry.InstructionsRead the article and answer the following questions.(a) What are some
As discussed in the chapter, the principles underlying activity-based costing have evolved into the broader approach known as activity-based management. One of the common practices of activity-based management is to identify all business activities, classify each activity as either a value-added or
Sealy Company has beginning raw materials inventory $12,000, ending raw materials inventory $15,000, and raw materials purchases $170,000. What is the cost of direct materials used?
Tate Inc. has beginning work in process $26,000, direct materials used $240,000, direct labor $220,000, total manufacturing overhead $180,000, and ending work in process $32,000. What are the total manufacturing costs?
Francum Company has the following data: direct labor $209,000, direct materials used $180,000, total manufacturing overhead $208,000, and beginning work in process $25,000. Compute (a) Total manufacturing costs and (b) Total cost of work in process.
In alphabetical order below are current asset items for Ruiz Company’s balance sheet at December 31, 2014. Prepare the current assets section (including a complete heading).Accounts receivable ......... $200,000Cash ................ 62,000Finished goods ........... 91,000Prepaid expenses
An analysis of the accounts of Roberts Company reveals the following manufacturing cost data for the month ended June 30, 2014.Costs incurred: raw materials purchases $54,000, direct labor $47,000, manufacturing overhead $19,900. The specific overhead costs were: indirect labor $5,500, factory
Mike Cichanowski founded Wenonah Canoe and later purchased Current Designs, a company that designs and manufactures kayaks. The kayak-manufacturing facility is located just a few minutes from the canoe company's headquarters in Winona, Minnesota. Current Designs makes kayaks using two different
Wendall Company specializes in producing fashion outfits. On July 31, 2014, a tornado touched down at its factory and general office. The inventories in the warehouse and the factory were completely destroyed as was the general office nearby. Next morning, through a careful search of the disaster
The primary purpose of managerial accounting is to provide information useful for management decisions. Many of the managerial accounting techniques that you learn in this course will be useful for decisions you make in your everyday life.InstructionsFor each of the following managerial accounting
As noted in this chapter, because of global competition, companies have become increasingly focused on reducing costs. To reduce costs and remain competitive, many companies are turning to outsourcing. Outsourcing means hiring an outside supplier to provide elements of a product or service rather
(a) Scott Winter asks your help in understanding the term “activity index.” Explain the meaning and importance of this term for Scott.(b) State the two ways that variable costs may be defined.
J. P. Alexander claims that the relevant range concept is important only for variable costs.(a) Explain the relevant range concept.(b) Do you agree with J. P.’s claim? Explain.
The relevant range is indispensable in cost behavior analysis.” Is this true? Why or why not?
Adam Antal 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 Adam.
Faye Dunn defines contribution margin as the amount of profit available to cover operating expenses. Is there any truth in this definition? Discuss.
Marshall Company’s GWhiz calculator sells for $40. Variable costs per unit are estimated to be $26. What are the contribution margin per unit and the contribution margin ratio?
Total fixed costs are $26,000 for Daz Inc. It has a contribution margin per unit of $15, and a contribution margin ratio of 25%. Compute the break-even sales in dollars.
Peggy Turnbull asks your help in constructing a CVP graph. Explain to Peggy (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.
Huang Company’s break-even sales are $500,000. Assuming fixed costs are $180,000, what sales volume is needed to achieve a target net income of $90,000?
The traditional income statement for Pace Company shows sales $900,000, cost of goods sold $600,000, and operating expenses $200,000. Assuming all costs and expenses are 70% variable and 30% fixed, prepare a CVP income statement through contribution margin.
For Lodes 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 Hunt Company, a mixed cost is $15,000 plus $18 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 $15,000 up to $60,000 on the vertical axis.
Bruno 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.
Stiever 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.
Radial Inc. had sales of $2,400,000 for the first quarter of 2014. In making the sales, the company incurred the costs and expenses shown belowPrepare a CVP income statement for the quarter ended March 31,2014.
Rice Company has a unit selling price of $520, variable costs per unit of $286, and fixed costs of $163,800. Compute the break-even point in units using (a) The mathematical equation and (b) Contribution margin per unit.
Acorn Corp. had total variable costs of $180,000, total fixed costs of $170,000, and total revenues of $300,000. Compute the required sales in dollars to break even.
For Flynn Company, variable costs are 70% 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 Stevens Company, actual sales are $1,000,000 and break-even sales are $840,000. Compute(a) The margin of safety in dollars and(b) The margin of safety ratio.
Deines Corporation has fixed costs of $480,000. It has a unit selling price of $6, unit variable costs of $4.40, and a target net income of $1,500,000. Compute the required sales in units to achieve its target net income.
Helena Company reports the following total costs at two levels of production.Classify each cost as variable, fixed, ormixed.
Westerville 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 9,200units.
Larissa Company has a unit selling price of $250, variable costs per unit of $170, and fixed costs of $140,000. Compute the break-even point in units using (a) The mathematical equation and (b) Contribution margin per unit.
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