Questions and Answers of Cost Management A Strategic Emphasis

Refer to the data in Brief Exercise 15-16. Provide the correct summary journal entries for actual and applied factory overhead costs (both variable and fixed) for the year. Assume that the company
Ready Products Inc. operates two divisions, each with its own manufacturing facility. The accounting system reports the following data for 2022:Ready estimates the useful life of each manufacturing
Carrie Lee, the president of Lee Enterprises, was concerned about the results of her company’s new quality control efforts. “Maybe the emphasis we’ve placed on upgrading our quality control
Assume that in October 2022 the Schmidt Machinery Company (Exhibit 14.1) manufactured and sold 950 units for $835 each. During this month, the company incurred $475,000 total variable costs and
Refer to the information for Brooks Plumbing Products Inc. (BPP) in Problem 20-51. Required 1. What is the valuation of BPP (for 2022) using the market value method? 2. What is the valuation of BPP
Intangibles such as customer relationships can account for a massive amount of the total assets of firms in the United States, though such assets are not recorded on firms’ balance sheets under
Explain the difference between the engineered-cost and discretionary-cost approaches to evaluating support departments.
Obtain a copy of the following article: John H. Fleming, Curt Coffman, and James K. Harter, “Manage Your Human Sigma,” Harvard Business Review, July–August 2005, pp. 107–114 (available at
You are given the following environmental quality-related costs:Employee training ........................................................................ $100,000Product design
Consolidated Industries is a diversified manufacturer with business units organized as divisions, including the Reigis Steel Division. Consolidated monitors its divisions on the basis of both unit
Blackwood Industries manufactures die machinery. To meet its expansion needs, it recently (2020) acquired one of its suppliers, Delta Steel. To maintain Delta’s separate identity, Blackwood reports
Sticky Fingers Inc. produces packing and masking tape. Last year’s annual report has been compiled, and you are in charge of business analysis for the year. The company had a goal for inventory
Tinsley Inc. is an industry-leading cardboard manufacturer. You have been asked to determine a market value for the firm’s equity. The firm has 100,000 shares outstanding, earnings per share of
Williams Company is a manufacturer of auto parts having the following financial statements for 2021–2022.RequiredCalculate and interpret the financial ratios for Williams for both years. Because
Refer to the information in Exercise 20-34.Required:1. Calculate free cash flow at Williams Company for each of the two years.2. Develop a business valuation for Williams Company for 2022 using the
Consider the following balance sheet and income statement for Yum! Brands Inc. (the company that operates Kentucky Fried Chicken and Pizza Hut), in condensed form, including some information from the
Using the information in Exercise 20-38 for Yum! Brands, determine the estimated valuation of the company at the end of 2019 using each of the following three methods (round answers to the nearest
McCoy Brands Inc. (MBI) is a retailer of consumer products. The company made two acquisitions in previous years to diversify its product lines. In 2020, MBI acquired a consumer electronics firm
Brooks Plumbing Products Inc. (BPP) manufactures plumbing fixtures and other home improvement products that are sold in Home Depot and Walmart as well as hardware stores. BPP has a solid reputation
The authors of an article published in Harvard Business Review (Laurie Bassei and Daniel McMurrer, “Maximizing Your Return on People,” Harvard Business Review (March 2007), p. 115-123) discuss
Liz Raiborn Inc. has the following financial results for the years 2022 through 2024 for its three regional divisions:RequiredCalculate return on sales (ROS), asset turnover (AT), and return on
Alex Chunn Inc. has the following financial data for 2022 for its three regional divisions:RequiredPrepare an Excel spreadsheet that will calculate return on sales (ROS) for each division for 2022.
What is meant by the term investment center? How is the financial performance of investment centers measured?
Mark Hancock Inc. manufactures a specialized surgical instrument called the HAN-20. The firm has grown rapidly in recent years because of the product’s low price and high quality. However, sales
Security Technology Inc. (STI) is a manufacturer of an electronic control system used in the manufacture of certain special-duty auto transmissions used primarily for police and military
Start Me Up, Inc., manufactures a caffeinated energy drink that sells for $4 each. The results for its first year of operations appear in the table below:Number of drinks produced
Woodland Hotels Inc. operates four resorts in the heavily wooded areas of northern California. The resorts are named after the predominant trees at the resort: Pine Valley, Oak Glen, Mimosa, and
Use the data in Problem 17-70 to respond to the requirements that follow.Required 1. If you haven’t done so already (in conjunction with Problem 17-70), prepare in Excel a COQ report for 2022
PIM Industries Inc. manufactures electronics components. Each unit costs $30 before the final test. The final test rejects, on average, 5% of the 50,000 units manufactured per year. The average
This chapter includes an overview of a COQ reporting system. Such a system has, in fact, been applied in practice by a number of companies. This exercise pertains to the application of a COQ
A customer’s order is delivered (received by the customer) on December 1, 2022. This order was placed with the company on September 1, 2022, and received by the manufacturing department on
Genova Company classifies its costs of quality into four categories. The costs of quality (COQ) as a percentage of cost of goods sold for the last three years are as follows:Required1. Use a
Sigma process that many organizations are using today to improve the quality of their services and products. One could get the impression from the discussion that this topic is more properly a
In 2023, a manufacturing company instituted a total quality management (TQM) program producing the comparative report shown below:On the basis of this report, which one of the following statements is
Refer to the information in Brief Exercise 17-13. What is the expected average loss (cost) per unit, E(L(x)), based on a Taguchi quality loss function (QLF), if the manufacturing process is centered
Refer to the information in Brief Exercise 17-13. Calculate the estimated total quality loss (cost) when the measured quality characteristic, x (e.g., circumference, measured in inches), is 78. Round
Use the data for Ashley Technology Inc. in Problem 16-41 to complete the following requirements. Also assume that fixed manufacturing costs are $50 million in both 2021 and 2022.Required1. Compute
Solidtronic Inc., an original equipment manufacturer (OEM), has a product specification of 75 ± 5 (i.e., T [the target value] = 75). The cost for warranty services (when the quality characteristic,
Ashley Technology Inc. manufactures a scrambling device for cellular telephones. The device’s main component is a delicate part, CT140. CT140 is easily damaged and requires careful handling. Once
Use the data for Ashley Technology Inc. in Problem 16-41 to complete the following requirements:Required1. Compute the partial financial productivity ratios for direct materials and direct labor for
Software Solution (SOS) helps subscribers solve software problems. All transactions are made over the telephone. For the year 2021, 10 engineers, most of whom are recent graduates, handled 100,000
Hathaway Products Inc. produces an innovative lighting system used in restaurants and high-end retail stores to provide a pleasing, warm atmosphere. Hathaway produces two versions of the product,
Each summer, the Harbour Report (www.oliverwyman. com/index.html) rates the productivity of the major automakers, including the “Detroit Big Three,” Toyota, Honda, and many other brands. The
Inc. provided the following information:Budgeted production .............................. 10,000 unitsActual production ....................................... 9,500 unitsBudgeted input
Which of the following statements is true?a. The lower the partial productivity ratio, the greater the productivity.b. Productivity improves when partial productivity increases.c. Prices of inputs
What is productivity? What does it measure?
This assignment involves the use of a traditional (i.e., non-time-driven) ABC system to address the problem of measuring and managing the cost of capacity. As controller for Zen Company, you’ve
Obtain and read the following article: Robert S. Kaplan and David P. Norton, “Mastering the ManagementSystem,” Harvard Business Review, January 2008, pp. 63–77 (available at ftp://public.
New Millennium Technologies uses a standard cost system. It budgeted 50,000 machine hours to manufacture 100,000 units in 2022. The budgeted total fixed factory overhead was $9,000,000. The company
See the following: K. P. Coyne, S. T. Coyne, and E. J. Coyne Jr., “When You’ve Got to Cut Costs Now: A Practical Guide to Reducing Overhead by 10%, 20%, or (wince) 30%,” Harvard Business
Refer to the information for Johnny Lee Inc. in Exercise 15-24. Assume that in a given month (December) the standard allowed machine hours for output produced was 5,500. Also, assume that the
Walkenhorst Company’s machining department prepared its 2022 budget based on the following data:Practical capacity ........................................................... 40,000 unitsStandard
Clark Company’s master budget includes $360,000 for equipment depreciation. The master budget was prepared for an annual volume of 120,000 chargeable hours. This volume is expected to occur
Refer to the information in Brief Exercise 15-16. Calculate and label the following factory overhead variances for the year: (a) Total overhead cost variance, (b) Total flexible budget
Refer to your answers to Brief Exercises 15-16 and 15-17 and the journal entries made in conjunction with Brief Exercise 15-18. Given this information, provide the appropriate journal
Refer to the data in Brief Exercise 15-16. Given this information, what was (a) The variable overhead spending variance for the year (b) The variable overhead efficiency variance for the
Steadman Company is considering an investment in a new machine for an independent five-year project. The machine’s cost is $500,000 with no salvage value at the end of five years. Net cash inflows
a. It is said that the Indian who sold Manhattan for $24 was a sharp salesman. If he had put his $24 away at 6% compounded semiannually, it would now be worth more than $9 billion, and he could buy
Work-in-Process Inventory, November 1 ................................. 45,000 unitsWork-in-Process Inventory, November 30 ................................ 23,000 unitsUnits started during November
Work-in-Process Inventory, September 1 .................................... 5,500 tonsWork-in-Process Inventory, September 30 ................................ 3,400 tonsUnits started during September
Fill in the missing amount for this of the Exercise.Work-in-Process Inventory, June 1 .................................... ?Work-in-Process Inventory, June 30 ........................... 55,000
Work-in-Process Inventory, February 1 ............................ 80,000 unitsWork-in-Process Inventory, February 28 .................................... ?Units started during February
Explain activity-based process costing.
Suppose that in addition to the call center engagement outlined earlier, MMI also provides the following annual service to 10 other clients:Required1. What is the level of idle capacity at MMI, not
Second Republic Bank is a lending company that operates in the Southeastern United States. Current economic conditions have kept lending rates low, which limits the revenue potential for Second
Studemeir Paint & Floors (SPF) is a retail store specializing in home improvement. The store has experienced net operating losses in its Other Flooring Products line during the last few periods.
What is activity-based management?
What are facility-level activities? Give two examples of facility-level activities.
What are unit-level activities? Give two examples of unit-level activities.
The following information is for Punta Company for July: a. Factory overhead costs were applied to jobs at the predetermined rate of $42.50 per labor hour. Job S incurred 6,175 labor hours; Job
Work-in-Process Inventory for Carston Inc. at the beginning of the year was a single job, Job T114:The company’s budgeted costs for the year are as follows:Budgeted overheadVariableIndirect
What is the best way to choose an appropriate cost driver or cost drivers when applying factory overhead?
Provide an example of an indirect materials cost.
Billy Bob’s Manufacturing had the following data for the fiscal year ended December 31.Direct Materials Inventory, January 1 ............................ $ 30,000Direct materials purchases
Provide an example of an indirect labor cost.
The term global supply chain is often used to describe the complex set of interrelated activities and relationships that global companies use to source their needed material, labor, and equipment; to
This chapter introduced the Balanced Scorecard (BSC) and showed applications in organizations that were using the BSC for planning and for strategy implementation. Another important use for the BSC
As noted in the chapter, the demand for sustainability reporting has grown, and this growth has created a demand for sustainability assurance, the ability to add verification and credibility to the
What is sustainability, and what does it mean for a business?
What is a balanced scorecard? What is its primary objective?
What is SWOT analysis? For what is it used?
Comparative advantage is the concept in economics that states that two countries will benefit economically if the relative costs of producing two or more goods differs. The concept of comparative
Founded in the UK in 2007, Brew Dog produces a variety of craft beers and has a reputation for provocative marketing. Brew Dog has grown rapidly and in 2017 had 1,500 workers worldwide and a $12
After two Boeing 737 MAX 8 aircraft crashed in October 2018 and March 2019 causing 346 deaths, the plane was grounded worldwide in March 2019. The 737 Max was first entered into service in 2017,
Lexon Inc. is a large manufacturer of affordable DVD players. Management recently became aware of rising expenses resulting from returns of malfunctioning products. As a starting point for further
What is the difference among a master budget, pro forma budgets, and a flexible budget?
The Baldwin Company, in its master budget for 2022, predicted total sales of $160,000, variable costs of $48,000, and fixed costs of $52,000 ($24,000 manufacturing and $28,000 nonmanufacturing).
The Midwest Division of the Paibec Corporation manufactures subassemblies used in Paibec’s final products. Lynn Hardt of Midwest’s profit planning department has been assigned the task of
What are the limitations of the payback period method for making capital budgeting decisions (e.g., whether to accept or reject a proposed investment)? Does the present value payback period overcome
Calculate the net after-tax cash flow effect of the following information: sales, $260; expenses other than depreciation, $140; depreciation expense, $50; marginal income tax rate, 35%.
Refer to Exhibit 12.4 in the text. What is the depreciation expense deduction in each of 4 years for a $10,000 asset classified under MACRS as 3-year property?Exhibit 12.4 Year 3-year 5-year 7-year
Below is information regarding the capital structure of Micro Advantage Inc. On the basis of this information you are asked to respond to the following three questions:Required1. Micro Advantage
Assume a situation in which a company has an existing asset, A, that has a current net book value (original cost less accumulated depreciation to date) of $300,000. This asset has a useful life of 3
VacuTech manufactures sophisticated instruments for testing microcircuits. Each instrument sells for $3,500; variable manufacturing cost per unit (all cash) equals $2,450. An essential component of
Gunnell Inc. is considering two mutually exclusive 10-year investments. The initial cash outlays and expected net after-tax cash flows are shown below.Required1. Using Excel, calculate the NPV and
What is life-cycle costing? Why is it used?
What is the main difference between activity-based costing and the theory of constraints? When is it appropriate to use each one?
Vista Company manufactures electronic equipment. In 2021, it purchased from an outside supplier the special switches used in each of its products. The supplier charged Vista $2 per switch. As an
Triple-F Health Club (Family, Fitness, and Fun) is a not-for-profit, family-oriented health club. The club’s board of directors is developing plans to acquire more equipment and expand club
Spring Manufacturing Company makes two components identified as C12 and D57. Selected budgetary data for 2022 follow:The firm expects the average wage rate to be $25 per hour in 2022. Spring

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