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managerial accounting

Managerial Accounting Tools for business decision making 6th Edition Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso - Solutions

Express Delivery is a rapidly growing delivery service. Last year, 80% of its revenue came from the delivery of mailing “pouches” and small, standardized delivery boxes (which provides a 20% contribution margin). The other 20% of its revenue came from delivering non-standardized boxes (which
Palmer Golf Accessories sells golf shoes, gloves, and a laser-guided range-finder that measures distance. Shown below are unit cost and sales data.Fixed costs are $630,000.Instructions(a) Compute the break-even point in units for the company.(b) Determine the number of units to be sold at the
Personal Electronix sells iPads and iPods. The business is divided into two divisions along product lines. CVP income statements for a recent quarter's activity are presented below.Instructions(a) Determine sales mix percentage and contribution margin ratio for each division.(b) Calculate the
Spencer Company manufactures and sells three products. Relevant per unit data concerning each product are given below.Instructions(a) Compute the contribution margin per unit of the limited resource (machine hours) for each product.(b) Assuming 1,500 additional machine hours are available, which
Dalton Inc. produces and sells three products. Unit data concerning each product is shown below.The company has 2,000 hours of labor available to build inventory in anticipation of the company's peak season. Management is trying to decide which product should be produced. The direct labor hourly
Billings Company manufactures and sells two products. Relevant per unit data concerning each product follow.Instructions(a) Compute the contribution margin per machine hour for each product.(b) If 1,000 additional machine hours are available, which product should Billings manufacture?(c) Prepare an
The CVP income statements shown below are available for Armstrong Company and Contador Company.Instructions(a) Compute the degree of operating leverage for each company and interpret your results.(b) Assuming that sales revenue increases by 10%, prepare a variable costing income statement for each
Arquitectos Interiores of Juarez, Mexico, is contemplating a major change in its cost structure. Currently, all of its drafting work is performed by skilled draftsmen. Alfonso Jiminez, Arquitectos€™ owner, is considering replacing the draftsmen with a computerized drafting system.
An investment banker is analyzing two companies that specialize in the production and sale of candied yams. Traditional Yams uses a labor-intensive approach, and Auto-Yams uses a mechanized system. CVP income statements for the two companies are shown below.The investment banker is interested in
Felde Company builds custom fishing lures for sporting goods stores. In its first year of operations, 2014, the company incurred the following costs.Variable Costs per UnitDirect materials ........... $7.50Direct labor ............... $2.45Variable manufacturing overhead .... $5.80Variable selling
Langdon Company produced 9,000 units during the past year, but only 8,200 of the units were sold. The following additional information is also available.Direct materials used .......... $79,000Direct labor incurred ........... $30,000Variable manufacturing overhead ..... $21,500Fixed manufacturing
Creative Crates Co. produces wooden crates used for shipping products by ocean liner. In 2014, Creative incurred the following costs.Wood used in crate production .......... $54,000Nails (considered insignificant and a variable expense) . $ 350Direct labor .................. $38,000Utilities for
Fredonia Inc. had a bad year in 2013. For the first time in its history, it operated at a loss. The company€™s income statement showed the following results from selling 80,000 units of product: net sales $2,000,000; total costs and expenses $1,740,000; and net loss $135,000. Costs and
Lorge Corporation has collected the following information after its first year of sales. Sales were $1,500,000 on 100,000 units; selling expenses $250,000 (40% variable and 60% fixed); direct materials $511,000; direct labor $290,000; administrative expenses $270,000 (20% variable and 80% fixed);
Tanek Industries manufactures and sells three different models of wet-dry shop vacuum cleaners. Although the shop vacs vary in terms of quality and features, all are good sellers. Tanek is currently operating at full capacity with limited machine time. Sales and production information relevant to
The Hillside Inn is a restaurant in Flagstaff, Arizona. It specializes in southwestern style meals in a moderate price range. Phil Weld, the manager of Hillside, has determined that during the last 2 years the sales mix and contribution margin ratio of its offerings are as follows.Phil is
The following CVP income statements are available for Viejo Company and Nuevo Company.Instructions(a) Compute the break-even point in dollars and the margin of safety ratio for each company.(b) Compute the degree of operating leverage for each company and interpret your results.(c) Assuming that
Bonita Beauty Corporation manufactures cosmetic products that are sold through a network of sales agents. The agents are paid a commission of 18% of sales. The income statement for the year ending December 31, 2014, is as follows.The company is considering hiring its own sales staff to replace the
Gardner Company produces plastic that is used for injection-molding applications such as gears for small motors. In 2013, the first year of operations, Gardner produced 4,000 tons of plastic and sold 2,500 tons. In 2014, the production and sales results were exactly reversed. In each year, the
Dilithium Batteries is a division of Enterprise Corporation. The division manufactures and sells a long-life battery used in a wide variety of applications. During the coming year, it expects to sell 60,000 units for $30 per unit. Nyota Uthura is the division manager. She is considering producing
McCure Corporation had a bad year in 2013, operating at a loss for the first time in its history. The company€™s income statement showed the following results from selling 200,000 units of product: net sales $2,400,000; total costs and expenses $2,472,000; and net loss $72,000. Costs and
Huber Corporation has collected the following information after its first year of sales. Sales were $1,000,000 on 40,000 units; selling expenses $200,000 (30% variable and 70% fixed); direct materials $327,000; direct labor $190,000; administrative expenses $250,000 (30% variable and 70% fixed);
Keppel Corporation manufactures and sells three different models of exterior doors. Although the doors vary in terms of quality and features, all are good sellers. Keppel is currently operating at full capacity with limited machine time.Sales and production information relevant to each model is
The Eatery is a restaurant in DeKalb, Illinois. It specializes in deluxe sandwiches in a moderate price range. Michael Raye, the manager of The Eatery, has determined that during the last 2 years the sales mix and contribution margin ratio of its offerings are as follows.Michael is considering a
The following variable costing income statements are available for Lyte Company and Darke Company.Instructions(a) Compute the break-even point in dollars and the margin of safety ratio for each company.(b) Compute the degree of operating leverage for each company and interpret your results.(c)
Peaches and Cream Corporation manufactures cosmetic products that are sold through a network of sales agents. The agents are paid a commission of 16.25% of sales. The income statement for the year ending December 31, 2014, is shown on the next page.The company is considering hiring its own sales
FAB produces fabrics that are used for clothing and other applications. In 2013, the first year of operations, FAB produced 500,000 yards of fabric and sold 400,000 yards. In 2014, the production and sales results were exactly reversed. In each year, selling price per yard was $2.50, variable
Electricoil is a division of Meier Products Corporation. The division manufactures and sells an electric coil used in a wide variety of applications. During the coming year, it expects to sell 200,000 units for $9 per unit. Mark Barnes is the division manager. He is considering producing either
Current Designs manufactures two different types of kayaks, rotomolded kayaks and composite kayaks. The following information is available for each product line.The company's fixed costs are $820,000. An analysis of the sales mix identifies that rotomolded kayaks make up 80% of the total units
E-Z Seats manufactures swivel seats for customized vans. It currently manufactures 10,000 seats per year, which it sells for $500 per seat. It incurs variable costs of $200 per seat and fixed costs of $2,000,000. It is considering automating the upholstery process, which is now largely manual. It
For nearly 20 years, Specialized Coatings has provided painting and galvanizing services for manufacturers in its region. Manufacturers of various metal products have relied on the quality and quick turnaround time provided by Specialized Coatings and its 20 skilled employees. During the last year,
The June 8, 2009, edition of the Wall Street Journal has an article by JoAnn Lublin entitled “Smart Balance Keeps Tight Focus on Creativity.”InstructionsRead the article and answer the following questions.(a) Describe Smart Balance’s approach to employment and cost structure.(b) What function
Easton Corporation makes two different boat anchors—a traditional fishing anchor and a high-end yacht anchor—using the same production machinery. The contribution margin of the yacht anchor is three times as high as that of the other product. The company is currently operating at full capacity
Brett Stern was hired during January 2014 to manage the home products division of Hi-Tech Products. As part of his employment contract, he was told that he would get $5,000 of additional bonus for every 1% increase that the division€™s profits exceeded those of the previous year.Soon
Many of you will someday own your own business. One rapidly growing opportunity is no-frills workout centers. Such centers attract customers who want to take advantage of state-of the- art fitness equipment but do not need the other amenities of full-service health clubs. One way to own your own
Many politicians, scientists, economists, and businesspeople have become concerned about the potential implications of global warming. The largest source of the emissions thought to contribute to global warming is from coal-fired power plants. The cost of alternative energy has declined, but it is
Your roommate, Anna Polis, contends that accounting contributes to most of the steps in management’s decision-making process. Is your roommate correct? Explain.
Sydney Greene asks for your help concerning the relevance of variable and fixed costs in incremental analysis. Help Sydney with her problem.
Emil Corporation has an opportunity to buy parts at $9 each that currently cost $12 to make. What manufacturing costs are relevant to this make-or-buy decision?
What are joint products? What accounting issue results from the production process that creates joint products?
How are allocated joint costs treated when making a sell-or-process-further decision?
Your roommate, Gale Dunham, is confused about sunk costs. Explain to your roommate the meaning of sunk costs and their relevance to a decision to retain or replace equipment.
Huang Inc. has one product line that is unprofitable. What circumstances may cause overall company net income to be lower if the unprofitable product line is eliminated?
Bogart Company is considering two alternatives. Alternative A will have revenues of $160,000 and costs of $100,000. Alternative B will have revenues of $180,000 and costs of $125,000. Compare Alternative A to Alternative B showing incremental revenues, costs, and net income.
At Jaymes Company, it costs $30 per unit ($20 variable and $10 fixed) to make a product at full capacity that normally sells for $45. A foreign wholesaler offers to buy 3,000 units at $25 each. Jaymes will incur special shipping costs of $2 per unit. Assuming that Jaymes has excess operating
Manson Industries incurs unit costs of $8 ($5 variable and $3 fixed) in making a sub-assembly part for its finished product. A supplier offers to make 10,000 of the assembly part at $6 per unit. If the offer is accepted, Manson will save all variable costs but no fixed costs. Produce an analysis
Chudrick Inc. makes unfinished bookcases that it sells for $62. Production costs are $36 variable and $10 fixed. Because it has unused capacity, Chudrick is considering finishing the bookcases and selling them for $70. Variable finishing costs are expected to be $7 per unit with no increase in
Each day, Adama Corporation processes 1 ton of a secret raw material into two resulting products, AB1 and XY1. When it processes 1 ton of the raw material, the company incurs joint processing costs of $60,000. It allocates $25,000 of these costs to AB1 and $35,000 of these costs to XY1. The
Kobe Company has a factory machine with a book value of $90,000 and a remaining useful life of 5 years. It can be sold for $30,000. A new machine is available at a cost of $300,000. This machine will have a 5-year useful life with no salvage value. The new machine will lower annual variable
Lisah, Inc., manufactures golf clubs in three models. For the year, the Big Bart line has a net loss of $10,000 from sales $200,000, variable costs $180,000, and fixed costs $30,000. If the Big Bart line is eliminated, $20,000 of fixed costs will remain. Prepare an analysis showing whether the Big
Ortega has prepared the following list of statements about decision-making and incremental analysis.1. The first step in management’s decision-making process is, “Determine and evaluate possible courses of action.”2. The final step in management’s decision-making process is to actually make
Gruden Company produces golf discs which it normally sells to retailers for $7 each. The cost of manufacturing 20,000 golf discs is:Materials ...... $ 10,000Labor ........ 30,000Variable overhead .... 20,000Fixed overhead ..... 40,000Total ....... $100,000Gruden also incurs 5% sales commission
Leno Company manufactures toasters. For the first 8 months of 2014, the company reported the following operating results while operating at 75% of plant capacity:Sales (350,000 units) .... $4,375,000Cost of goods sold ...... 2,600,000Gross profit ........ 1,775,000Operating expenses ......
Klean Fiber Company is the creator of Y-Go, a technology that weaves silver into its fabrics to kill bacteria and odor on clothing while managing heat. Y-Go has become very popular as an undergarment for sports activities. Operating at capacity, the company can produce 1,000,000 undergarments of
Schopp Inc. has been manufacturing its own shades for its table lamps. The company is currently operating at 100% of capacity, and variable manufacturing overhead is charged to production at the rate of 70% of direct labor cost. The direct materials and direct labor cost per unit to make the lamp
Jobs, Inc. has recently started the manufacture of Tri-Robo, a three-wheeled robot that can scan a home for fires and gas leaks and then transmit this information to a mobile phone. The cost structure to manufacture 20,000 Tri-Robos is as follows.CostDirect materials ($50 per robot) .......
Gibbs Company purchases sails and produces sailboats. It currently produces 1,200 sailboats per year, operating at normal capacity, which is about 80% of full capacity. Gibbs purchases sails at $250 each, but the company is considering using the excess capacity to manufacture the sails instead. The
Innova uses 1,000 units of the component IMC2 every month to manufacture one of its products. The unit costs incurred to manufacture the component are as follows.Direct materials .... $ 65.00Direct labor ....... 45.00Overhead ...... 126.50Total ........ $236.50Overhead costs include variable
Rachel Rey recently opened her own basketweaving studio. She sells finished baskets in addition to the raw materials needed by customers to weave baskets of their own. Rachel has put together a variety of raw material kits, each including materials at various stages of completion. Unfortunately,
Stahl Inc. produces three separate products from a common process costing $100,000. Each of the products can be sold at the split-off point or can be processed further and then sold for a higher price. Shown below are cost and selling price data for a recent period.Instructions(a) Determine total
Chen Minerals processes materials extracted from mines. The most common raw material that it processes results in three joint products: Larco, Marco, and Narco. Each of these products can be sold as is, or each can be processed further and sold for a higher price. The company incurs joint costs of
A company manufactures three products using the same production process. The costs incurred up to the split-off point are $200,000. These costs are allocated to the products on the basis of their sales value at the split-off point. The number of units produced, the selling prices per unit of the
On January 2, 2013, Benson Hospital purchased a $100,000 special radiology scanner from Picard Inc. The scanner had a useful life of 4 years and was estimated to have no disposal value at the end of its useful life. The straight-line method of depreciation is used on this scanner. Annual operating
Johnson Enterprises uses a computer to handle its sales invoices. Lately, business has been so good that it takes an extra 3 hours per night, plus every third Saturday, to keep up with the volume of sales invoices. Management is considering updating its computer with a faster model that would
Judy Jean, a recent graduate of Rolling€™s accounting program, evaluated the operating performance of Artie Company€™s six divisions. Judy made the following presentation to Artie€™s board of directors and suggested the Huron Division be eliminated. €œIf the
Cawley Company makes three models of tasers. Information on the three products is given below.Fixed expenses consist of $300,000 of common costs allocated to the three products based on relative sales, and additional fixed expenses of $30,000 (Tingler), $80,000 (Shocker), and $35,000 (Stunner). The
Twyla Company operates a small factory in which it manufactures two products: C and D. Production and sales results for last year were as follows.For purposes of simplicity, the firm averages total fixed costs over the total number of units of C and D produced and sold.The research department has
The costs listed below relate to a variety of different decision situations.InstructionsFor each cost listed above, indicate if it is relevant or not to the related decision. For those costs determined to be irrelevant, briefly explainwhy.
Maize Company incurs a cost of $35 per unit, of which $20 is variable; to make a product that normally sells for $58. A foreign wholesaler offers to buy 6,000 units at $30 each. Maize will incur additional costs of $3 per unit to imprint a logo and to pay for shipping. Compute the increase or
Rubble Company must decide whether to make or buy some of its components. The costs of producing 60,000 switches for its generators are as follows.Direct materials ....... $30,000Variable overhead ...... $45,000Direct labor ........ $42,000Fixed overhead ........ $60,000Instead of making the
Mesa Verde manufactures unpainted furniture for the do-it-yourself (DIY) market. It currently sells a table for $75. Production costs are $40 variable and $10 fixed. Mesa Verde is considering staining and sealing the table to sell it for $100. Variable costs to finish each table are expected to be
Gator Corporation manufactures several types of accessories. For the year, the gloves and mittens line had sales of $500,000, variable expenses of $370,000, and fixed expenses of $150,000. Therefore, the gloves and mittens line had a net loss of $20,000. If Gator eliminates the line, $38,000 of
ShurShot Sports Inc. manufactures basketballs for the National Basketball Association (NBA). For the first 6 months of 2014, the company reported the following operating results while operating at 80% of plant capacity and producing 120,000 units.AmountSales ............... $4,800,000Cost of goods
The management of Shatner Manufacturing Company is trying to decide whether to continue manufacturing a part or to buy it from an outside supplier. The part, called CISCO, is a component of the company€™s finished product.The following information was collected from the accounting records
Sutton Industrial Products Inc. (SIPI) is a diversified industrial-cleaner processing company. The company€™s Verde plant produces two products: a table cleaner and a floor cleaner from a common set of chemical inputs (CDG). Each week 900,000 ounces of chemical input are processed at a
Last year (2013), Richter Condos installed a mechanized elevator for its tenants. The owner of the company, Ron Richter, recently returned from an industry equipment exhibition where he watched a computerized elevator demonstrated. He was impressed with the elevator€™s speed, comfort of
Gutierrez Company has four operating divisions. During the first quarter of 2014, the company reported aggregate income from operations of $213,000 and the following divisional results.Analysis reveals the following percentages of variable costs in each division.Discontinuance of any division would
Morello Inc. manufactures basketballs for the National Basketball Association (NBA). For the first 6 months of 2014, the company reported the following operating results while operating at 90% of plant capacity and producing 90,000 units.Fixed costs for the period were cost of goods sold $900,000,
The management of Gill Corporation is trying to decide whether to continue manufacturing a part or to buy it from an outside supplier. The part, called FIZBE, is a component of the company€™s finished product.The following information was collected from the accounting records and
Ohio Household Products Co. (OHPC) is a diversified household-cleaner processing company. The company€™s Mishawaka plant produces two products: an appliance cleaner and a general-purpose cleaner from a common set of chemical inputs (NPR).Each week 1,000,000 ounces of chemical input are
Last year (2013), Simmons Company installed new factory equipment. The owner of the company, Gene Simmons, recently returned from an industry equipment exhibition where he watched computerized equipment demonstrated. He was impressed with the equipment€™s speed and cost efficiency. Upon
Panda Corporation has four operating divisions. During the first quarter of 2014, the company reported aggregate income from operations of $129,000 and the divisional results shown below.Analysis reveals the following percentages of variable costs in each division.Discontinuance of any division
Current Designs faces a number of important decisions that require incremental analysis. Consider each of the following situations independently.Situation 1Recently, Mike Cichanowski, owner and CEO of Current Designs, received a phone call from the president of a brewing company. He was calling to
Aurora Company is considering the purchase of a new machine. The invoice price of the machine is $140,000, freight charges are estimated to be $4,000, and installation costs are expected to be $6,000. Salvage value of the new equipment is expected to be zero after a useful life of 5 years. Existing
MiniTek manufactures private-label small electronic products, such as alarm clocks, calculators, kitchen timers, stopwatches, and automatic pencil sharpeners. Some of the products are sold as sets, and others are sold individually. Products are studied as to their sales potential, and then cost
Outsourcing by both manufacturers and service companies is becoming increasingly common. There are now many firms that specialize in outsourcing consulting.Address: www.alsbridge.com, or go to www.wiley.com/college/weygandtInstructionsGo to the Web page of Alsbridge, Inc. at the address shown
Hank Jewell is a production manager at a metal fabricating plant. Last night, he read an article about a new piece of equipment that would dramatically reduce his division’s costs. Hank was very excited about the prospect, and the first thing he did this morning was to bring the article to his
Blake Romney became Chief Executive Officer of Peters Inc. two years ago. At the time, the company was reporting lagging profits, and Blake was brought in to “stir things up.” The company has three divisions, electronics, fiber optics, and plumbing supplies. Blake has no interest in plumbing
School costs money. Is this an expenditure that you should have avoided? A year of tuition at a public four-year college costs about $8,655, and a year of tuition at a public two-year college costs about $1,359. If you did not go to college, you might avoid mountains of school-related debt. In
What are the two types of pricing environments for sales to external parties?
In what situation does a company place the greatest focus on its target cost? How is the target cost determined?
What is the basic formula to determine the target selling price in cost-plus pricing?
Benz Corporation produces a filter that has a per unit cost of $18. The company would like a 30% markup. Using cost-plus pricing, determine the per unit selling price.
What is the basic formula for the markup percentage?
What are some of the factors that affect a company’s desired ROI?
Stanley Corporation manufactures an electronic switch for dishwashers. The cost base per unit, excluding selling and administrative expenses, is $60. The per unit cost of selling and administrative expenses is $15. The company’s desired ROI per unit is $6. Calculate its markup percentage on total
Sheen Co. manufactures a standard cabinet for a DVD player. The variable cost per unit is $16. The fixed cost per unit is $9. The desired ROI per unit is $6. Compute the markup percentage on total unit cost and the target selling price for the cabinet.
In what circumstances is time-and-material pricing most often used?
What is the material loading charge? How is it expressed?
What is a transfer price? Why is determining a fair transfer price important to division managers?

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