Questions and Answers of Financial Managerial Accounting

Kelly Kitchens operates both franchised and company-operated restaurants under the brand name Kelly Kitchens. Operating income, sales, and invested assets for both segments are provided as follows:a.
Laredo Corporation is considering new equipment. The equipment can be purchased from an overseas supplier for $120,000. The freight and installation costs for the equipment are $1,500. If purchased,
Burlington Construction Company is considering selling excess machinery with a book value of $115,000 (original cost of $275,000 less accumulated depreciation of $160,000) for $90,000, less a 6%
A company manufactures various-sized plastic bottles for its medicinal product. The manufacturing cost for small bottles is $55 per unit (100 bottles), including fixed costs of $12 per unit. A
Product Tango has revenue of $1,150,000, variable cost of goods sold of $850,000, variable selling expenses of $275,000, and fixed costs of $125,000, creating an operating loss of $(100,000). Prepare
Plymouth Company owns equipment with a cost of $600,000 and accumulated depreciation of $375,000 that can be sold for $300,000, less a 4% sales commission. Alternatively, Plymouth Company can lease
How does the target cost method differ from cost-plus approaches?
Explain the meaning of (a) Differential revenue, (b) Differential cost, and (c) Differential profit (loss).
Morrison’s Plastics Division, a profit center, sells its products to external customers as well as to other internal profit centers. Which one of the following circumstances would justify the
Manhattan Corporation has several divisions that operate as decentralized profit centers. At the present time, the Fabrication Division has excess capacity of 5,000 units with respect to the UT-371
Most firms allocate corporate and other support costs to divisions and departments for all of the following reasons except to:a. Remind profit center managers that earnings must be adequate to cover
Sara Bellows, manager of the telecommunication sales team, has the following department budget:Billings – long distance.................................................$350,000Billings – phone
Compare Panera Bread (PNRA) and Papa John’s (PZZA) using your computations from MAD 24-2 and MAD 24-3.Data from MAD24-3:Papa John’s International, Inc. (PZZA), operates over 5,000 restaurants in
GHT Tech Inc. sells electronics over the Internet. The Consumer Products Division is organized as a cost center. The budget for the Consumer Products Division for the month ended January 31 is as
The condensed income statement for the Consumer Products Division of Tri-State Industries Inc. is as follows (assuming no support department
The operating income and the amount of invested assets in each division of Conley Industries are as follows:a. Compute the return on investment for each division.b. Which division is the most
Championship Sports Inc. operates two divisions—the Winter Sports Division and the Summer Sports Division. The following income and expense accounts were provided from the trial balance as of
Rocky Mountain Airlines Inc. has two divisions organized as profit centers, the Passenger Division and the Cargo Division. The following divisional income statements were prepared:The support
Horton Technology has two divisions, Consumer and Commercial, and two corporate support departments, Tech Services and Purchasing. The corporate expenses for the year ended December 31, 20Y7, are as
Varney Corporation, a manufacturer of electronics and communications systems, allocates Computing and Communications Services Department (CCS) costs to profit centers. The following table lists the
For each of the following support departments, select the cost driver listed that is most appropriate for allocating support department costs to responsible units: Cost Driver 1. Number of conference
For each of the following support departments, identify a cost driver that could be used for allocating the support department costs to the profit center:a. Legalb. Duplication servicesc. Electronic
The following data were summarized from the accounting records for Ruiz Industries Inc. for the year ended November 30, 20Y8:Prepare divisional income statements for Ruiz Industries Inc. Support
Partially completed budget performance reports for Delmar Company, a manufacturer of light duty motors, follow:a. Complete the budget performance reports by determining the correct amounts for the
(a) Explain how return on investment might lead a divisional manager to reject new investments that could be profitable for the company as a whole. (b) How can this disadvantage be overcome?
Weyerhaeuser Co. (WY) developed a system that allocates support department costs to user divisions on the basis of actual services consumed by the division. Here are a number of Weyerhaeuser’s
JoyT Company manufactures Maxi Dolls for sale in toy stores. In planning for this year, JoyT estimated variable factory overhead of $600,000 and fixed factory overhead of $400,000. JoyT uses a
Frisco Company recently purchased 108,000 units of raw material for $583,200. Three units of raw materials are budgeted for use in each finished good manufactured, with the raw material standard set
Marten Company has a cost-benefit policy to investigate any variance that is greater than $1,000 or 10% of budget, whichever is larger. Actual results for the previous month indicate the
MinnOil performs oil changes and other minor maintenance services on cars and trucks. The company advertises that all services are performed within 15 minutes each. On a recent Saturday, 160 cars
Some cost problems have been identified in the Assembly Department of Schumann Electronics Co., a consumer electronics company. The department’s budget performance report for the last quarter
Advent Software uses standards to manage the cost of the programming staff. There are two programmer levels, Level 1 and Level 2. Level 1 programmers normally work on the easier projects. Level 1 and
Shasta Fixture Company manufactures faucets in a small manufacturing facility. The faucets are made from brass. Manufacturing has 70 employees. Each employee presently provides 38 hours of labor per
Lowell Manufacturing Inc. has a normal selling price of $20 per unit and has been selling 125,000 units per month. In November, Lowell Manufacturing decided to lower its price to $19 per unit
Rosenberry Company computed the following revenue variances for January:Revenue price variance.......................................$(350,000) FavorableRevenue volume
Dickinsen Company gathered the following data for December:a. Compute the revenue price variance.b. Compute the revenue volume variance.c. Compute the total revenue variance. Planned Actual Sales
Rockport Industries Inc. gathered the following data for March:a. Compute the revenue price variance.b. Compute the revenue volume variance.c. Compute the total revenue variance. Actual Planned Sales
Mexicali On the Go Inc. owns and operates food trucks (mobile kitchens) throughout the west coast. The company’s employees have varying wage levels depending on their experience and length of time
Ada Clothes Company produced 40,000 units during April. The Cutting Department used 12,800 direct labor hours at an actual rate of $16.50 per hour. The Sewing Department used 19,600 direct labor
Glacier Bicycle Company manufactures commuter bicycles from recycled materials. The following data for October are available:Quantity of direct labor
The following data relate to labor cost for production of 20,000 cellular telephones:Actual: 8,450 hrs. at $22.50Standard: 8,400 hrs. at $23.00a. Determine the direct
H.J. Heinz Company uses standards to control its materials costs. Assume that a batch of ketchup (7,650 pounds) has the following standards:The actual materials in a batch may vary from the standard
De Soto Inc. produces tablet computers. The company uses Thin Film Crystal (TFC) LCD displays for its products. Each tablet uses one display. The company produced 770 tablets during July. However,
The following data relate to the direct materials cost for the production of 50,000 automobile tires:Actual: 725,000 lbs. at $3.00 per lb.Standard: 730,000 lbs.
Salisbury Bottle Company manufactures plastic two-liter bottles for the beverage industry. The cost standards per 100 two-liter bottles are as follows:At the beginning of March, Salisbury’s
Atlas Furniture Company manufactures designer home furniture. Atlas uses a standard cost system. The direct labor, direct materials, and factory overhead standards for an unfinished dining room table
Crazy Delicious Inc. produces chocolate bars. The primary materials used in producing chocolate bars are cocoa, sugar, and milk. The standard costs for a batch of chocolate (5,000 bars) are as
Bellingham Company produced 15,000 units of product that required 4 standard direct labor hours per unit. The standard fixed overhead cost per unit is $1.15 per direct labor hour at 58,000 hours,
At the end of the period, the factory overhead account has a credit balance of $10,000. (a) Is the total factory cost variance favorable or unfavorable? (b) Are the controllable and volume
a. What are the two variances between the actual cost and the standard cost for direct labor?b. Who generally has control over the direct labor cost variances?
Krouse Company produces two products, forged putter heads and laminated putter heads, which are sold through specialty golf shops. The company is in the process of developing its operating budget for
Ming Company has budgeted sales at 6,300 units for July, and desires to have 590 good units on hand on July 31. Inventory is 470 units on July 1. Ming has found from past experience that 10% of all
Hannon Retailing Company prices its products by adding 30% to its cost. Hannon anticipates sales of $715,000 in July, $728,000 in August, and $624,000 in September. Hannon’s policy is to have on
When compared to static budgets, flexible budgets:a. Offer managers a more realistic comparison of budgeted and actual fixed cost items under their control.b. Provide a better understanding of the
In teams, find the website of a state that interests you. The web address may be of the form www.statename.gov or similar. For example, the website for the state of Ohio can be found at www.Ohio.gov.
Johnson Stores is planning its staffing for the upcoming holiday season. From past history, the store determines that it needs one additional sales clerk for each $12,000 in daily sales. The average
Newport Inc. gathered the following data for use in developing the budgets for the first quarter (June, July, August) of its fiscal year:a. Estimated sales at $36 per unit:June. . . . . . . . . . . .
Bellaire Inc. gathered the following data for use in developing the budgets for the first quarter (January, February, March) of its fiscal year:a. Estimated sales at $125 per unit:January . . . . . .
Pet Supplies Inc., a pet wholesale supplier, was organized on January 1. Projected sales for each of the first three months of operations are as
Tobin’s Frozen Pizza Inc. has determined from its production budget the following estimated production volumes for 12" and 16" frozen pizzas for November:There are three direct materials used in
Healthy Measures Inc. produces a Bath and Gym version of its popular electronic scale. The anticipated unit sales for the scales by sales region are as follows:The finished goods inventory estimated
Steelcase Inc. (SCS) is one of the largest manufacturers of office furniture in the United States. In Grand Rapids, Michigan, it assembles filing cabinets in an Assembly Department. Assume the
The production supervisor of the Machining Department for Hagerstown Company agreed to the following monthly static budget for the upcoming year:The actual amount spent and the actual units produced
Digital Solutions Inc. uses flexible budgets that are based on the following data:Sales commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8% of
At the beginning of the school year, Craig Kovar decided to prepare a cash budget for the months of September, October, November, and December. The budget must plan for enough cash on December 31 to
Pasadena Candle Inc. budgeted production of 785,000 candles for January. Each candle requires molding. Assume that six minutes are required to mold each candle. If molding labor costs $18 per hour,
Pasadena Candle Inc. budgeted production of 785,000 candles for January. Wax is required to produce a candle. Assume 10 ounces of wax is required for each candle. The estimated January 1 wax
Pasadena Candle Inc. projected sales of 800,000 candles for January. The estimated January 1 inventory is 35,000 units, and the desired January 31 inventory is 20,000 units. What is the budgeted
At the beginning of the period, the Fabricating Department budgeted direct labor of $72,000 and equipment depreciation of $18,500 for 2,400 hours of production. The department actually completed
How does software aid firms in the budgeting process?
Bethany Company has just completed the first month of producing a new product but has not yet shipped any of this product. The product incurred variable manufacturing costs of $5,000,000, fixed
Mill Corporation had the following unit costs for the recent calendar year:Inventory for Mill’s sole product totaled 6,000 units on January 1 and 5,200 units on December 31. When compared to
Chassen Company, a cracker and cookie manufacturer, has the following unit costs for the month of June:Variable manufacturing
Data for the last fiscal year for Merlene Company are as follows: *Denominator level of activity is 750 units for the yearActual selling and administrative costs equaled the budgeted amount, and
Segment disclosure by Apple Inc. (AAPL) provides sales information for its major product lines for three recent years as follows (in millions):The Services segment includes sales from iTunes Store,
The Walt Disney Company (DIS) is a leading worldwide entertainment company. Disney operates four business segments. These segments and some of their larger businesses are:▪ Media Networks: ABC
Yum! Brands, Inc. (YUM) is a worldwide operator and franchisor of fast-food restaurants, under the familiar brands of KFC, Pizza Hut, and Taco Bell. Segment revenues, operating income, and
Comcast Corporation (CMCSA) is a global media and entertainment company with operations divided into five major segments:▪ Cable Communications (XFINITY)▪ Cable Networks (USA Network, Syfy, E!,
During the first month of operations ended May 31, Big Sky Creations Company produced 40,000 designer cowboy boots, of which 36,000 were sold. Operating data for the month are summarized as
The demand for solvent, one of numerous products manufactured by Logan Industries Inc., has dropped sharply because of recent competition from a similar product. The company’s chemists are
The operating revenues of the three largest business segments for Time Warner, Inc. (TWX), for a recent year follow. Each segment includes a number of businesses, examples of which are indicated in
Galaxy Sports Inc. manufactures and sells two styles of All Terrain Vehicles (ATVs), the Conquistador and Hurricane, from a single manufacturing facility. The manufacturing facility operates at 100%
The following data were adapted from a recent income statement of Caterpillar Inc. (CAT) for the year ended December 31:
Prior to the first month of operations ending October 31, Marshall Inc. estimated the following operating results:Sales (40,000 × $90) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The following data were adapted from a recent income statement of The Procter & Gamble Company (PG):
On October 31, the end of the first month of operations, Maryville Equipment Company prepared the following income statement, based on the variable costing concept:Prepare an income statement under
On April 30, the end of the first month of operations, Joplin Company prepared the following income statement, based on the absorption costing concept:If the fixed manufacturing costs were $450,000
On March 31, the end of the first month of operations, Barnard Inc. manufactured 15,000 units and sold 12,000 units. The following income statement was prepared, based on the variable costing
Fresno Industries Inc. manufactures and sells high-quality camping tents. The company began operations on January 1 and operated at 100% of capacity (150,000 units) during the first month, creating
Gallatin County Motors Inc. assembles and sells snowmobile engines. The company began operations on July 1 and operated at 100% of capacity during the first month. The following data summarize the
At the end of the first year of operations, 21,500 units remained in the finished goods inventory. The unit manufacturing costs during the year were as follows:Direct
Marley Company has the following information for March:Sales.................................................................................$912,000Variable cost of goods
The managers of a company are planning to manufacture more product than is needed for expected sales for the coming year. What effect will this have on operating income under (a) The absorption
Eagle Brand Inc. produces two products as follows:Eagle Brand has 1,000 lbs. of raw materials that can be used to produce Products X and Y. Which of the following alternatives should Eagle Brand
Bolger and Co. manufactures large gaskets for the turbine industry. Bolger’s per-unit sales price and variable costs for the current year are as follows:Sales price per
Kimber Company has the following unit costs for the current year:Raw materials................................................................$20.00Direct
Taylor Corporation is analyzing the cost behavior of three cost items, A, B, and C, to budget for the upcoming year. Past trends have indicated the following dollars were spent at three different
Sun Airlines is a commercial airline that targets business and nonbusiness travelers. In recent months, the airline has been unproﬁtable. The company has break-even sales volume of 75% of capacity,
Edward Seymour is a financial consultant to Cornish Inc., a real estate syndicate. Cornish finances and develops commercial real estate (office buildings) projects. The completed projects are then
Global Air is considering a new flight between Atlanta and Los Angeles. The average fare per seat for the flight is $760. The costs associated with the flight are as follows:Fixed costs for the

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