Questions and Answers of Horngrens Cost Accounting A Managerial Emphasis

Describe two benefits of improving quality.
1. Using the m { 2s rule, what variance investigation decisions would be made?2. Present control charts for each of the three bread sauces for March. What inferences can you draw from the charts?3.
Give two examples of appraisal costs.
IVplast is still debating whether it should introduce Y28. The following table provides information on selling prices, variable costs, and inventory carrying costs for Z39 and Y28:RequiredUsing the
Distinguish between customer-response time and manufacturing cycle time.
What are the advantages of nonfinancial measures of quality?
Jenna’s Bakery plans to purchase a new oven for its store. The oven has an estimated useful life of 4 years. The estimated pretax cash flows for the oven are as shown in the table that follows,
MakeWatch (MW) manufactures the TagMe wristwatches that RightTime (RT) sells to its customers. MW has recently installed a computer software that enables its customers to conduct “one-stop”
Paulina Jones, a manager for the Carpenter Manufacturing Company, has the opportunity to upgrade the equipment in the Midwest division by replacing and upgrading some of its machinery. The cost of
AquaPro produces water purifiers for the household. Business is good but Derek, the manager, has noticed that customers complain because they find leakages in the plastic nozzles used. AquaPro
The registration advisors at the Brunendorf University (BU) in Berlin help 4,200 students develop their class schedules and register for classes each semester. Each advisor works for 10 hours a day
Refer to the information presented in Exercise 20-24. The head of the registration advisors at BU has decided that the advisors must finish their advising in 2 weeks (10 working days) and therefore
Chunky Meatbots produces a wide variety of unorthodox bread sauces. The company’s three best-selling variants are The BLT Apprentice, The Submachine Bun, and Game of Scones. Each bottle containing
The Brady Corporation sells 375,000 V262 valves to the automobile and truck industry. Brady has a capacity of 210,000 machine-hours and can produce two valves per machine-hour. V262’s contribution
The Brightlight Corporation uses multicolored molding to make plastic lamps. The molding operation has a capacity of 150,000 units per year. The demand for lamps is very strong. Brightlight will be
The IVplast Corporation uses an injection molding machine to make a plastic product, Z39, after receiving firm orders from its customers. IVplast estimates that it will receive 40 orders for Z39
Outmark Corporation manufactures computer processors for leading computer makers. Joe Agent is the management accountant for one of Outmark’s largest manufacturing plants. His bonus is based on the
American Electronics manufactures 200,000 55-inch 4K TVs each year. The variable and fixed costs of rework and repair for the TVs are as follows:American Electronics’ 55-inch 4K TVs have a quality
Why might goal-congruence issues arise when managers use an EOQ model to guide decisions on how much to order?
KidsTravel produces car seats for children from newborn to two years old. KidsTravel’s only problem with its car seats was stitching in the straps. The problem can usually be detected and repaired
Jack’s Tracks sells 24,000 custom-designed GoKarts per year. These GoKarts are sold evenly throughout the year. The manufacturer charges Jack a $50 processing cost per order, and Jack incurs a
Jill’s Custom Bags manufacturers and sells 12,000 customer designer bags per year, each requiring three yards of a specially manufactured fabric. These bags are sold evenly throughout the year. The
Lyle Co. has only one product line. For that line, the reorder point is 500 units, the lead time for production is 3 weeks, and the sales volume is estimated at 50 units per week. Lyle has
RightTime (RT) Corporation operates a retail store featuring wristwatches. It maintains an EOQ decision model to make inventory decisions. Currently, it is considering inventory decisions for its
Gadgets Galore Corp. produces J-Pods, music players that can download thousands of songs. Gadgets Galore forecasts that demand in 2020 will be 22,800 J-Pods. The variable production cost of each
Eastern Cola is considering the purchase of a special-purpose bottling machine for $70,000. It is expected to have a useful life of 4 years with no terminal disposal value. The plant manager
New Med Corporation is a rapidly growing biotech company that has a required rate of return of 12%. It plans to build a new facility in Santa Clara County. The building will take 2 years to complete.
Lulus Construction is analyzing its capital expenditure proposals for the purchase of equipment in the coming year. The capital budget is limited to $12,000,000 for the year. Lyssa Bickerson, staff
Green Lab plans to purchase a new centrifuge machine for its Florida facility. The machine costs $437,000 and is expected to have a useful life of 8 years, with a terminal disposal value of $42,000.
Captain Inc. is considering the purchase of new equipment that will automate production and thus reduce labor costs. Captain made the following estimates related to the new machinery:RequiredAssume
Ortel Telecom sells telecommunication products and services to a variety of small businesses. Two of Ortel’s key clients are Square and Cloudburst, both fast-growing technology startups located in
The Platinum Company is a national mattress manufacturer. Its Marion plant will become idle on December 31, 2020. Nina Simon, the corporate controller, has been asked to look at three options
Jeong Natural Snacks is contemplating an expansion. The finance manager is looking at buying a second machine that would cost $62,000 and last for 10 years, with no disposal value at the end of that
TriMart is considering replacing 20 of their checkout registers with new self-checkout equipment. The equipment currently being used is fully depreciated and has no disposal value. The new equipment
Shalie Manufacturing makes several thousand different metal products, including building materials, tools, and furniture parts. The manager of the furniture parts division has proposed that his
What is a management control system?
People Able Computer, Inc., with headquarters in San Francisco, manufactures and sells a desktop computer. People Able has three divisions, each of which is located in a different country:a. China
Chocfix produces hot cocoa mix. The company has two divisions, each operating as a profit center. The transportation division purchases raw cocoa in the Ivory Coast and transports it to the mixing
Jose Martinez is the CEO of ShakeIt, a producer of premium ice cream. ShakeIt has two divisions, the supplying division and the processing division. The supplying division supplies milk, the main
Vancouver Lumber has a raw lumber division and a finished lumber division. The variable costs are as follows:■ Raw lumber division: $120 per 100 board-feet of raw lumber■ Finished lumber
What properties should transfer-pricing systems have?
Watson Motors, Inc., operates as a decentralized multidivision company. The Vadner division of Watson Motors purchases most of its airbags from the airbag division. The airbag division’s
The Jill-Farley Corporation, manufacturer of tractors and other heavy farm equipment, is organized along decentralized product lines, with each manufacturing division operating as a separate profit
The Aqua Company manufactures and sells television sets. Its assembly division (AD) buys television screens from the screen division (SD) and assembles the TV sets. The SD, which is operating at
Chicago, Inc., has two divisions, A and B, that manufacture expensive bicycles. Division A produces the bicycle frame, and division B assembles the rest of the bicycle onto the frame. There is a
Cranfuel Products is a cranberry cooperative that operates two divisions, a harvesting division and a processing division. Currently, all of harvesting’s output is converted into cranberry juice by
Refer to Problem 23-28. Assume that Pat Borges, CEO of Cranfuel, had mandated a transfer price equal to 175% of full cost. Now he decides to decentralize some management decisions and sends around a
Jeremiah Industries manufactures high-grade aluminum luggage made from recycled metal. The company operates two divisions: metal recycling and luggage fabrication. Each division operates as a
Rapid Grow Inc., based in Des Moines, Iowa, sells high-end fertilizers. Rapid Grow has two divisions:■ North Italy mining division, which mines potash in northern Italy■ U.S. processing division,
Endrino Bot Company’s annual demand for its only product, R2-T2, is 10,000 units. Endrino is currently analyzing possible combinations of relevant carrying cost per unit per year and relevant
The TyeNeck Company manufactures men’s neckwear at its A1 plant. TyeNeck is considering implementing a JIT production system. The following are the estimated costs and benefits of JIT production:a.
FootLove Shoe Co. produces and sells excellent quality walking shoes. After production, these shoes are distributed to 30 warehouses around the country. Each warehouse services approximately 120
CompTech Solution purchases one model of computer at a wholesale cost of $400 per unit and resells it to end consumers. The annual demand for the company’s product is 500,000 units. Ordering costs
The KateSteel Corporation is an automotive supplier that uses automatic turning machines to manufacture precision parts from steel bars. KateSteel’s inventory of raw steel averages $400,000. Keith
Steadfast Security Devices (SSD) has introduced a just-in-time production process and is considering the adoption of lean accounting principles to support its new production philosophy. The company
ClearPic Television Co. outsources the production of picture-tubes for the televisions it manufactures. It is currently deciding whether to use supplier X or supplier Y. Due to differences in the
Smart Jeans Ltd. orders high-quality denim fabric from two different suppliers: Shine Fabrics and Soft Cotton. Smart would like to use only one of the suppliers in the future. Due to variations in
Perez Containers Corporation is considering implementing a JIT production system. The new system would reduce current average inventory levels of $4,000,000 by 75%, but it would require a much
To be sure that you understand how to use the tables in Appendix A at the end of this text, solve the following exercises. Ignore income tax considerations. The correct answers, rounded to the
Heavenly Candy Company is considering purchasing a second chocolate dipping machine in order to expand its business. The information Heavenly has accumulated regarding the new machine isCost of the
City Hospital, a nonprofit organization, estimates that it can save $28,000 a year in cash operating costs for the next 10 years if it buys a special-purpose eyetesting machine at a cost of $110,000.
Assume the same facts as in Exercise 22-23 except that City Hospital is a taxpaying entity. The income tax rate is 30% for all transactions that affect income taxes.Data From Exercise 22-23City
Assume the same information for Keebler-Olson as in Problem 11-31. James Silva and the data scientist on his team work together to develop the following decision tree:Data From Problem 11-31James
What is cost-plus pricing?
Describe three alternative cost-plus pricing methods.
What factors should be considered by managers when allocating resources among customers?
“A customer-profitability profile highlights those customers a company should drop to improve profitability.” Do you agree? Explain.
What information does the whale curve provide?
The “fairness or equity” criterion is most applicable to the government rather than the private sector. Explain.
How should a company decide on the number of cost pools it should use to allocate costs to divisions, channels, and customers?
Explain why a favorable sales-quantity variance occurs.
How can the sales-quantity variance be decomposed further?
Juliet Brazier is a Scottish firm which manufactures carpentry tools. The company uses standard absorption costing system. The following information was recorded by the company for January 2019:What
Juliet Brazier is a Scottish firm which manufactures carpentry tools. The company uses standard absorption costing system. The following information was recorded by the company for January 2019:What
Dave Meltzer vacationed at Lake Tahoe last winter. Unfortunately, he broke his ankle while skiing and spent 2 days at the Sierra University Hospital. Meltzer’s insurance company received a $4,800
Enviro-Tech has only two retail and two wholesale customers. Information relating to each customer for 2020 follows (in thousands):Enviro-Tech’s annual distribution-channel costs are $33 million
HQ Drugs is a distributor of pharmaceutical products. Its ABC system has five activities:Rick Flair, the controller of HQ Drugs, wants to use this ABC system to examine individual customer
Lapworth County Council has been awarded the office window cleaning contract against competition from private firms. The contract price is $6.20 per office window and budget and actual results for
Blueback Manufacturing has four divisions named after its locations: China, Cambodia, Bangladesh, and India. Corporate headquarters is in Minnesota. Blueback corporate headquarters incurs $8,400,000
Martini Hotel & Casino is situated on beautiful Lake Tahoe in Nevada. The complex includes a 300-room hotel, a casino, and a restaurant. As Martini’s new controller, your manager asks you to
Holbrook Corporation has three divisions: pulp, paper, and fibers. Holbrook’s new controller, Paul Weber, is reviewing the allocation of fixed corporate-overhead costs to the three divisions. He is
Lofty Bread Ltd is a baking company that operates in Thailand. The company produces two types of bread—a full loaf and a mini loaf. A full loaf is 8 inches long and a mini loaf is 3 inches long.
Soda-King manufactures and sells two soft drinks: Kola and Limor. Budgeted and actual results for 2020 are as follows:Required1. Compute the total sales-volume variance, the total sales-mix variance,
Soda-King prepared the budget for 2020 assuming a 12.5% market share based on total sales in the western region of the Australia. The total soft drinks market was estimated to reach sales of 10
Bracelet Delights is a new company that manufactures custom jewelry.Bracelet Delights currently has six customers referenced by customer number: 01, 02, 03, 04, 05, and 06.Besides the costs of making
Save Trees Delivery has decided to analyze the profitability of five new customers. It buys recycled paper at £20 per case and sells to retail customers at a list price of £26 per case. Data
Denise Nelson owns Interiors by Denise, an interior design consulting and window treatment fabrication business. Her business is made up of two different distribution channels, a consulting business
Dusty Rhodes, controller of Richfield Oil Company, is preparing a presentation to senior executives about the performance of its four divisions. Summary data (dollar amounts in millions) related to
Francisco Bakery makes baked goods for grocery stores and has three divisions: bread, cake, and doughnuts. Each division is run and evaluated separately, but the main headquarters incurs costs that
Rod Manufacturing Company produces metal rods for their customers. Its wholesale division is the focus of our analysis. Management of the company wishes to analyze the profitability of the three key
Space Infonautics, Inc., produces handheld Windows CE™-compatible organizers. Space Infonautics markets three different handheld models: MobilePro is a souped-up version for the executive on the
Space Infonautics’ senior vice president of marketing prepared his budget at the beginning of the third quarter assuming a 25% market share based on total sales. Star Research estimated that the
The Robin’s Basket’s senior vice president of marketing prepared her budget at the beginning of the third quarter assuming a 10% market share based on a budgeted market size of 1,000,000 pints in
Distinguish between the single-rate and the dual-rate methods.
State an advantage of the single-rate and dual-rate methods of allocating support department costs.
Distinguish among the three methods of allocating the costs of multiple support departments to operating departments.
What is conceptually the most defensible method for allocating multiple support-department costs? Why?
What are the challenges of using the incremental cost allocation method when allocating common costs and how might they be overcome?
What are some common clauses that are often included in contracts based on cost accounting information?
Distinguish between revenue allocation and bundled product or service.

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