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financial and managerial accounting
Questions and Answers of
Financial And Managerial Accounting
The manager of Watson Cosmetics's Perfume Division is evaluated on her division's return on investment and residual income. The company requires that all divisions generate a minimum return on
Radon Industries produces large earth-moving equipment. The company expanded vertically several years ago by acquiring Boris Steel Company, one of its suppliers. Radon decided to maintain Boris's
Describe the main components of return on investment (ROI).
What is the objective of calculating residual income?
How does the calculation of EVA differ from ROI?
Briefly explain the main components of management compensation.
Identify two reasons why the capital turnover ratio might decrease from one year to the next.
On February 1, 2007, Willmar Corporation borrowed \(\$ 100,000\) from its bank by signing a 12 percent, 15 -year note payable. The note calls for 180 monthly payments of \(\$ 1,200\). Each payment
Four Flags is a retail department store. The following cost-volume relationships were used in developing a flexible budget for the company for the current year:Management expected to attain a sales
Explain the cause of an unfavorable and a favorable overhead volume variance.
How do responsibility centers, budgets, and standard cost systems interact to create an effective system for maintaining cost control?
The labor rate variance is determined by multiplying the difference between the actual labor rate and the standard labor rate by:a. The standard labor hours allowed for a given level of output.b. The
Which of the following is not a possible cause of an unfavorable direct labor efficiency variance?a. Lack of motivation.b. Low-quality materials.c. Poor supervision.d. All of the above could be
An unfavorable overhead volume variance indicates that:a. Total fixed overhead has exceeded the standard amount budgeted.b. Variable overhead per unit has exceeded the standard amount budgeted.c.
A favorable overhead spending variance means that:a. Overhead has been overapplied.b. Overhead has been underapplied.c. Actual production was less than the normal volume of output.d. None of the
Modern Art, Inc., produces handpainted foam mouse pads. The following budgeted and actual results are for a recent month in which actual production was equal to budgeted production.Which of the
Japan's Financial Services Agency (FSA) recently decided to terminate Citigroup's private banking operations in Japan, a shocking setback for the biggest and oldest foreign-owned bank in Japan. FSA
Which of the following is not a potential benefit of using budgets?a. Enhanced coordination of firm activities.b. More motivated managers.c. More accurate external financial statements.d. Improved
F. Scott designs and manufactures fashionable women's clothing. For the coming year, the company has scheduled production of 50,000 silk skirts. Budgeted costs for this product are as follows:The
Green Leaf produces three joint products from mint leaves. At the split-off point, three basic products emerge: Mint Tea, Mint Paste, and Mint Powder. Each of these products can be either sold at the
Marshall's grocery store has a small bakery that sells a variety of baked goods. The manager of the bakery responsibility center has decided to sell a cup of coffee and doughnut combo at the low
Bula, Inc., produces two products: bottled water and coconut juice. Cost and revenue data for each product line for the current month are as follows:In addition, fixed costs that are common to both
Westfall Corporation has two divisions: the Motor Division and the Pump Division. The Motor Division supplies the motors used by the Pump Division. The Pump Division produces approximately 10,000
Discuss what makes information "relevant."
Gillette Corporation sells blade razors near or below their manufacturing cost. It also sells razor blades that have a relatively high contribution margin. Explain why Gillette does not eliminate its
In deciding whether to accept this special order from Computer Marketing Corp., Phoenix should be least concerned with:a. What Computer Marketing Corp. intends to do with the WizardCards.b. The \(\$
Assume that Phoenix decides to accept the special order at a unit sales price that will add \(\$ 400,000\) per month to its operating income. The unit price of the special order will be:a. \(\$
When faced with a limited availability of machine-hours, management should consider producing those products that:a. Have the highest contribution margin per unit.b. Have the highest contribution
Consultant Frank Alvarez recently commented that the most common error made by his clients is ignoring opportunity costs associated with business decisions. The costs Alvarez was referring to are:a.
Which of the following questions would not be relevant to a make or buy decision?a. Will the supplier make a product that is equal in quality to our own?b. Will the supplier meet our specified
Crafty Tools manufactures an electric motor that it uses in several of its products. Management isMake or Buy Decision1. The company needs 10,000 motors per year. The motors can be purchased from an
Optical Instruments produces two models of binoculars. Information for each model is as follows:Total manufacturing overhead amounts to \(\$ 180,000\) per month, one-third of which is fixed. The
Consider the following transactions for Sleek’s Furniture:a. Incurred and paid Web site expenses, \($2,100\)b. Incurred and paid manufacturing wages, \($17,000\)c. Purchased materials on account,
During the current year, the net sales of Ridgeway, Inc., were 10 percent below last year's level. You should expect Ridgeway's semivariable costs to:a. Decrease in total, but increase as a
Marston Company sells a single product at a sales price of \(\$ 50\) per unit. Fixed costs total \(\$ 15,000\) per month, and variable costs amount to \(\$ 20\) per unit. If management reduces the
Olsen Auto Supply typically earns a contribution margin ratio of 40 percent. The store manager estimates that by spending an additional \(\$ 5,000\) per month for radio advertising the store will be
Shown below are the monthly high and low levels of direct labor hours and total manufacturing overhead for Apex Mfg. Co.In a month in which 5,000 direct labor hours are used, the fixed element of
Driver Company manufactures two products. Data concerning these products are shown below:If fixed costs are equal to \(\$ 320,000\), what amount of total sales revenue is needed to break even?a. \(\$
In a January 18, 2006, BusinessWeek online article appearing in its Standard & Poor's MarketScope, shares of Puma common stock rose on speculation that the company was a takeover target of rival
In a January 5, 2006, BusinessWeek article titled "Pursuing New Power for Hybrids," author Bradley Berman notes that Toyota and other automobile manufacturers will continue to accelerate the
Describe the main components of a typical value chain.
Briefly explain the nature and goals of a JIT manufacturing system.
What is required for a firm to become "ISO 9000 certified"?
Identify the five characteristics of the target costing process.
Why do french fries from McDonald's taste different than those from Burger King? In his August 9, 2005, BusinessWeek article, "Giving Machines the Gift of Gab," Burt Helm explains that much of the
Road Ranger Corporation began operations early in the current year, building luxury motor homes. During the year, the company started and completed 50 motor homes at a cost of \(\$ 60,000\) per unit.
The following are data regarding last year's production of Baby Buddy, one of the major products of Toledo Toy Company:During the year, 60,000 units of this product were manufactured and 62,100 units
Pisna, Inc., manufactures dowhats. The manufacturing costs incurred during its first year of operations are as follows:During the year, 100 completed dowhats were manufactured, of which 90 were sold.
Early in the year, Bill Edmond founded Edmond Engineering Co. for the purpose of manufacturing a special plumbing device that he had designed. Shortly after year-end, the company's accountant was
In an August 8, 2005, BusinessWeek article, authors David Welch and Michael Arndt discuss how companies are using bankruptcy to alter their cost structures. The article, titled "Bankruptcy is
What documents serve as the basis for charging the costs of direct materials used in production to the Work in Process Inventory account?
Describe the stages in implementing activity-based costing.
Cramer Cookie Company is a relatively new company and so far has sold its products only in its home country, Denmark. In December, Cramer determined that it had excess capacity to produce more of its
Europa-West is a U.S. corporation that purchases automobiles from European manufacturers for distribution in the United States. A recent purchase involved the following events:Nov. 12 Purchased
Finding an auditor in Japan can be challenging. In an August 31, 2001, BusinessWeek article, "Bean-Counting American-Style," Chester Dawson states that demand for U.S.-trained CPAs has really taken
Indicate which of the following statements are more descriptive of management accounting than of financial accounting. (More than one answer may be appropriate.)a. Recognized standards are used for
In a manufacturing company, the costs debited to the Work in Process Inventory account represent:a. Direct materials used, direct labor, and manufacturing overhead.b. Cost of finished goods
The Work in Process Inventory account had a beginning balance of \(\$ 4,200\) on February 1 . During February, the cost of direct materials used was \(\$ 29,000\) and direct labor cost assigned to
Manufacturing overhead costs would include:a. Marketing costs related to selling the product.b. The salary of the production line supervisor.c. The chief executive officer's salary.d. Research and
The accounting records of Newport Mfg. Co. include the following information for the most recent year ended December 31:Indicate which of the following are correct. (More than one answer may be
During the current year, the cost of direct materials purchased by a manufacturing firm was \(\$ 340,000\), and the direct materials inventory increased by \(\$ 20,000\). What was the cost of direct
During the current year, Cherry Electronics incurred \(\$ 350,000\) of indirect labor costs, \(\$ 10,000\) of indirect materials costs, \(\$ 130,000\) of rent costs, and \(\$ 260,000\) of other
Stone Tools, Inc., had the following account balances as of January 1:During the month of January, all of the following occurred:1. Direct labur costs were \(\$ 42,000\) for 1,800 hours worked.2.
Mayville Company, a sole proprietorship, reports the following information pertaining to its operating activities:During the year, the company purchased \(\$ 30,000\) of direct materials and incurred
The Central Intelligence Agency (CIA) of the U.S. government maintains an Internet site containing information on various countries (www.odci.gov). The site includes a database known as the "World
The following information was developed from the financial statements of Darwin, Inc. At the beginning of 2007, the company's former supplier went bankrupt, and the company began buying merchandise
Safeway, Inc., is one of the world's largest supermarket chains. These selected items were adapted from a recent Safeway balance sheet. (Dollar amounts are in millions.)Instructionsa. Using the
Blockbuster Inc. operates under the name Blockbuster Video and is engaged primarily in the business of renting videotapes. The following selected data are from a recent annual report. (Dollar amounts
At the end of the year, the following information was obtained from the accounting records of Zachery, Inc.Instructionsa. From the information given, compute the following:1. Inventory turnover.2.
Bathrooms, Inc., manufactures bathroom equipment. Shown below for the current year are the income statements for the company and a common size summary for the industry in which the company operates.
The following information was developed from the financial statements of Slow Time, Inc. At the beginning of 2007, the company's former supplier went bankrupt, and the company began buying
Holiday Greeting Cards is a local company organized late in July of 2006. The company's net income for each of its first six calendar quarters of operations is summarized below. (Amounts are stated
In "Making Bad News Pay," BusinessWeek, September 3, 2001, Pallavi Gogoi described David W. Tice, a professional stock-market bear. Tice sells scathing research reports to institutional investors
Compute trend percentages for the following items taken from the financial statements of Lopez Plumbing over a five-year period. Treat 2003 as the base year. State whether the trends are favorable or
Prepare common size income statements for Pellum Company, a sole proprietorship, for the two years shown below by converting the dollar amounts into percentages. For each year, sales will appear as
Selected information from the financial statements of Rochet, Inc., includes the following:a. Compute the percentage change in 2007 for the amounts of (1) net sales and (2) total expenses.b. Using
The financial statements of large public companies are often accompanied by a multiple-year summary of key financial and other information that is helpful in understanding the company. Appendix A of
Selected items from successive annual reports of Carey, Inc., appear as follows:Dividends of \(\$ 16,000\) were declared and paid in 2007.Compute the following:a. Current ratio for 2007 and 2006.b.
Johnson & Johnson's 2005 financial statements include the following items (all dollars in millions):Compute the following ratios and comment on the trend you can observe from the limited two
David Henry, in a March 2003 BusinessWeek article entitled, "Ouch! Real Numbers," indicates that new accounting rules will deflate earnings hype and, perhaps, stocks. He describes tighter accounting
Tyler, Inc.'s cash balance at December 31, 2007, the end of its financial reporting year, was \(\$ 155,000\). During 2007 , cash provided by operations was \(\$ 145,000\), cash used in investing
The 2006 annual report of Software City, Inc., included the following comparative summary of earnings per share over the last three years:In 2007, Software City, Inc., declared and distributed a 100
Early in 2004, Robbinsville Press was organized with authorization to issue 100,000 shares of \(\$ 100\) par value preferred stock and 500,000 shares of \(\$ 1\) par value common stock. Ten thousand
Waller Publications was organized early in 2002 with authorization to issue 20,000 shares of \(\$ 100\) par value preferred stock and 1 million shares of \(\$ 1\) par value common stock. All of the
Maria Martinez organized Manhattan Transport Company in January 2004. The corporation immediately issued at \(\$ 8\) per share one-half of its 200,000 authorized shares of \(\$ 2\) par value common
Quanex Corporation is a publicly owned company. The following information is excerpted from a recent balance sheet. Dollar amounts (except for per share amounts) are stated in
Early in 2005 , Feller Corporation was formed with authorization to issue 50,000 shares of \(\$ 1\) par value common stock. All shares were issued at a price of \(\$ 8\) per share. The corporation
Early in 2003, Herndon Industries was formed with authorization to issue 200,000 shares of \(\$ 10\) par value common stock and 30,000 shares of \(\$ 100\) par value cumulative preferred stock.
Early in 2004 , Septa, Inc., was organized with authorization to issue 1,000 shares of \(\$ 100\) par value preferred stock and 200,000 shares of \(\$ 1\) par value common stock. Five hundred shares
Banner Publications was organized early in 2002 with authorization to issue 10,000 shares of \(\$ 100\) par value preferred stock and 1 million shares of \(\$ 1\) par value common stock. All of the
Joy Sun organized Ray Beam, Inc., in January 2004. The corporation immediately issued at \(\$ 15\) per share one-half of its 260,000 authorized shares of \(\$ 1\) par value common stock. On January
Toasty Corporation is a publicly owned company. The following information is taken from a recent balance sheet. Dollar amounts (except for per-share amounts) are stated in thousands.InstructionsFrom
Early in 2005 , Tin Corporation was formed with authorization to issue 50,000 shares of \(\$ 3\) par value common stock. All shares were issued at a price of \(\$ 10\) per share. The corporation
Early in 2003, Parker Industries was formed with authorization to issue 100,000 shares of \(\$ 20\) par value common stock and 10,000 shares of \(\$ 100\) par value cumulative preferred stock. During
In "GM May Have Landed a Dandy Daewoo Deal," in the October 8, 2001, BusinessWeek issue, Moon Ihlwan and David Welch explained details of the purchase agreement between General Motors Corp. and
What is the purpose of a stock dividend?
When a corporation has outstanding both common and preferred stock:a. Basic and diluted earnings per share are reported only if the preferred stock is cumulative.b. Earnings per share is reported for
In her April 21, 2003, BusinessWeek article, "The Risks of Rising Rates," Susan Scherreik writes:For the past three years, bond investors have profited mightily from the decline in interest rates.
A portion of the stockholders' equity section from the balance sheet of Walland Corporation appears as follows:Assume that all the stock was issued on January 1 and that no dividends were paid during
Which of the following situations require recording a liability in 2007? (More than one answer may be correct.)a. In 2007, a company manufactures and sells stereo equipment that carries a three-year
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