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intermediate accounting

Accounting 9th edition Lew Edwards, John Medlin, Keryn Chalmers, Andreas Hellmann, Claire Beattie, Jodie Maxfield, John Hoggett - Solutions

Siciliano Ltd, from exercise 14.9, requires a minimum return on investment of 16%.RequiredCalculate the residual profit for the Phone Screen and the Computer Screen divisions of Siciliano Ltd using the data from Exercise 14.9Data from Exercise 14.9Phone Screens and Computer Screens are two
Phone Screens and Computer Screens are two divisions operated as investment centres of Siciliano Ltd. Management wants to know which of the two earned the highest return on investment for the year ended 30 June 2017. The details for each division for the year ended 30 June 2017 were as
Violante Ltd operates four departments, and data relevant to each are:DepartmentSalesCost of salesOther expensesAssetsBeginningEndElectrical
Tscharke Ltd manufactures and sells four products — A, B, C and D. The selling prices, variable costs, and number of machine hours required to produce each product are as follows:ProductSelling priceVariable costsMachine hours per unitABCD$60808570$344258424325.5Each of the four products is
Gazzola Ltd produces four joint products — A, B, C and D — at a total cost of $325000. The company can sell the products immediately at the split-off point for $100000, $40000, $90000 and $85000 respectively. Alternatively, the products also can be processed further and sold as shown
Fo University Ltd is a private provider of diplomas in human resource management and is trying to decide whether to employ a new full-time staff member or whether to use casual staff paid by the hour to cover the increased demand for its courses. The costs of employing a new staff member to teach
Blagojevic Ltd manufactures hard disk recorders for television and makes all parts for the machines, including the outside casing. The cost per unit of the casings at a production level of 150000 units is as follows:Direct labourDirect materialsVariable factory overheadFixed factory
McKenzie Music Ltd manufactures hand held game players at a per-unit cost of:Direct labourDirect materialsVariable factory overheadFixed factory overhead$ 6183630Total unit cost$90The company sells each player for $240 and is presently operating at 80% of its capacity of 200000 units per
David Booth operates Booth Bootcamp Pty Ltd. David is a graduate of a sports and arecreation course, offers customised adventures for business groups wanting to develop their staff. Two clients have approached Booth Bootcamp Pty Ltd to run an adventure in the first week of April but David can run
Mixon Marketing is considering employing another marketing consultant to help with managing its clients. The human resources manager of the firm is weighing up whether to employ a marketing graduate or a marketing manager with at least 5 years’ experience.RequiredUsing the decision-making process
Comment on the following statement: ‘Cost of capital is the cost of the capital raised to pay for a particular project. If the money is borrowed from the bank, then the interest rate charged on the loan by the bank is the cost of capital.’
The method of depreciation used has no effect on the capital budgeting decision. Discuss.
Calculation of present value and determining discounted cash flows are two techniques which are the same. Do you agree Explain your stance.
An accounting student said, ‘In making capital budgeting decisions it is necessary to determine the relevant cash flows from the proposal rather than the revenues and expenses based on normal accrual accounting’. Do you agree? Explain.
On presenting your manager with the differential analysis of two possible uses for a piece of land that cost the company $2 million your manager believes you have made a major error as you omitted the cost of the land. Explain the term ‘sunk costs‘ and why you have not made an error.
You are responsible for managing a large department store. Explain how the section on ‘product mix decisions’ in this chapter could be relevant to deciding what departments you would include in the department store and where you might position such departments within the store.
How can the ideas of `evaluation of a make-or-buy decision’ be used in deciding whether to use existing staff expertise and existing resources in a new marketing campaign for a clothing brand name or whether to use an external professional marketing firms expertise? Other than costs, what factors
A business manager was heard to remark: ‘Quantitative analysis may be all right for some businesses but I’d rather make decisions based on my intuition and years of experience’. Do you agree? Explain.
This book indicates that one of the roles of managers is to make decisions about organising resources. How can a human resource manager use differential analysis in deciding the appropriate number and levels of staff in a large professional office such as a marketing, law or accounting firm?
Accountants may provide much of the quantitative information in the decision-making process outlined in this chapter. What quantitative and non-quantitative information could people working in marketing, human resource management, tourism and hospitality, and sports and recreation contribute to the
Refer to the latest financial report of JB Hi-Fi Limited on its website, www.jbhifi.com.au, and answer the following questions:1. Is JB Hi-Fi Limited segmented?2. Could JB Hi-Fi Limited be described as a diversified economic entity? Explain why.3. Describe how segmental information is presented in
Bill Robbie works for a human resource management firm, People 4 U (P4U), that searches for middle and senior managers for large businesses. The firm receives a fee equivalent to 80% of the salary package of the people the firm successfully finds for clients. Each job is allocated direct expenses,
Read the extract of ‘Let’s stick together’ and discuss the questions that follow.In many organisations the functional silo is alive and well. A common view is finance does not provide information required by sales and is trying to prevent sales from selling by vetoing deals or attempting to
Elena works for a medium-sized family-owned firm and was employed on a low retainer with the majority of her income based on bonuses. Elena is in charge of one of four responsibility centres and the bonuses were based on the final profit for each centre. Elena was not satisfied with this
A. Should Penny close her resort in the fourth quarter and take her family on holiday? Explain why.B. Should Penny close her resort in the fourth quarter and seek employment as a tour guide? Explain your conclusion.Penny Farthing, proprietor of the Healthy Holiday Resort,
Steph Gates, sales manager of Pluto Computers Ltd, was given the following budget performance report for selling expenses in the marketing software department for the month of April 2017.The recently appointed managing director of the company was pleased that Steph had been able to increase her
Wagons and Wheels Ltd is a farm machinery dealership. In recent years, the company has experienced unsatisfactory profit results because of declining sales in the area. At the suggestion of the company’s public accountant, responsibility accounting was implemented at the beginning of 2018. The
Universal Solar Ltd operates three departments — a lighting department, a water heating department, and an equipment department. The store’s accountant has prepared an income statement by department for the year ended 30 June 2018 and, for the third year in a row, the equipment department has
Coola Vents Ltd has prepared a fixed budget performance report for the year ended 30June 2017 as follows:BudgetActualVarianceUnits of production: 72 000 75 200 3 200FFactory overhead:Variable costs:Indirect labourFactory suppliesRepairs and
The fixed budget performance report for the year ended 30 June 2018 for Motueka Mint is as follows:BudgetActualVarianceUnits of production:84 000 94 00010 000 FFactory overhead:Variable costs:Indirect labourFactory suppliesRepairs and maintenance$193 200134 400 67 200$216 200178
Perjaya Plastics Ltd has prepared the following fixed budget performance report for the production department’s financial results during the year ended 30 June 2017:PERJAYA PLASTICS LTDFixed Budget Performance Reportfor the year ended 30 June 2017BudgetActualVarianceUnits of production: 144
Barrington Ltd has prepared the following fixed budget performance report:BARRINGTON LTDFixed Budget Performance Reportfor the year ended 30 June 2017BudgetActualVarianceUnits produced 50 000 55 000 5 000 FVariable costs:Direct
Daisy Supermarket operates four departments. Management is concerned about the financial results of the dried goods department, which has shown a loss for the past 3 years according to the company’s income statement. Competition in dried goods is exceptionally strong in the area in which the
Fabric Wholesalers Ltd operates three departments. The accessories department has not been performing very well and has shown a loss for the past 3 years according to the company’s income statement. Competition in the accessories line is strong and the margins are low. The departmental income
Versatile Vacuums sells two products — domestic and commercial. The store’s income statement for the year ending 30 June 2017 has been prepared from the accounting records.VERSATILE VACUUMSIncome Statementfor the year ended 30 June 2017INCOMESalesCost of sales:Beginning inventoryPurchases$142
Cranford Cars Ltd operates a car sales business with two locations — new cars and second-hand cars. The company’s accountant has prepared an income statement for the year ending 30 June 2017.Cranford cars ltdIncome Statementfor the year ended 30 June 2017INCOMESalesCost of sales:Beginning
Sam’s Storage Solutions operates four departments — kitchen, bathroom, office and laundry. When preparing a departmental income statement, the store’s accountant allocates indirect expenses using the following allocation bases:Indirect expenseAllocation baseTotal
Rugged Rooms Ltd is a rug and drapery retailer. Rugged Rooms specialises in selling floor rugs and window dressings. The following information was derived from the shop’s accounting records for the year ended 30 June 2018:Floor rugsWindow dressingsNet salesPurchasesPurchase returnsDirect
Pretty in Pink Ltd specialises in bridal wear. The store operates two departments — gowns and shoes. The following information was obtained from the store’s accounting records for the year ended 30 June 2017:GownsShoesNet salesPurchasesPurchases returnsFreight inwardsDirect expensesInventory, 1
You are provided with the profit centre responsibility accounting reports for Owen’s Department Stores:Budget ($’000)Actual ($’000)Variance ($’000)General manager’s reportClothing departmentHomewares departmentElectrical departmentFurniture department$3 4005 2002 800
The balanced scorecard goes beyond financial measures to provide a broader range of performance measures. Refer to The Balanced Scorecard Institute at the following website:www.balancedscorecard.org.RequiredFor each of the following perspectives suggest non-financial measures that could be used in
MBK Bags uses an annual flexible budget based on standard direct machine hours for the following factory overhead items:Fixed costVariable cost per standarddirect machine hourSuppliesElectricityIndirect labour$16 00019 60024 400$0.300.201.10During the year, 18 000 direct machine
Fiscal Fixes Ltd is preparing flexible budget cost estimates for the following items within a range of 16 000 to 24 000 chargeable hours:Fixed costVariable cost per chargeable hourRentElectricityInsuranceTrainingTemporary secretarial supportNon-billable hoursSundry
Nathan’s Demolition Ltd wants to prepare flexible budget cost estimates for the following items within a range of 32 000 to 40 000 chargeable hours.Fixed costVariable cost per chargeable hourDepreciationElectricityInsuranceMaintenanceAdministrationEquipment
European Motors Ltd uses flexible budgets in order to control selling expenses.Monthly sales range from $200 000 to $300 000. Budgeted fixed monthly expenses for the Sales Department are $63 000 for salaries of sales staff, $5000 for depreciation of equipment, and $12 000 for
Dairy Delights operates with three departments. The owner–manager wants to close Department B because it continually shows a loss. During the past year ending 30 June 2017, the departmental performances were as follows:Department ADepartment BDepartment CSalesCost of
McKee’s Outdoor Store Ltd operates three departments, including a department that has consistently shown losses. For the year just ended, the fishing supplies department showed the following performance:SalesCost of sales$76 000 20 000Gross
Even Electronics Ltd operates three selling departments. Certain indirect expenses are allocated to the selling departments as follows:AmountBasis of allocationAdministrationPersonnel departmentMarketingUtilitiesInsurance on inventory$160 00084 00025 000172 000118 000SalesNumber
Shirley Cycles Ltd operates three selling departments — mountain bike, road bike and hybrid. Certain indirect expenses are allocated to the selling departments as follows.AmountBasis of allocationMarketingRepairs departmentBuilding occupancyInsurance on inventoryAdministration$
One of the Marshland Ltd’s four departments has reported a loss of $90 000 after deducting $204 000 of expenses. Assume that only $130 000 of the expenses can be eliminated if the department is discontinued.RequiredA. Should the business keep operating the department showing the loss when these
Fitness Fantastic operates four gymnasiums in suburban areas. The Richmond club has recently reported an operating loss of $35000. Total revenue for this club was recorded at $215000. If this club is closed down Fitness Fantastic estimate they will still incur costs of $86000.RequiredShould the
Petaling Products is a manufacturer of leather goods and for management and control purposes is divided into three departments. For the year ended 30 June the following information has been collected to determine the best way to allocate rent expense to each department.Hand
Perfect Health Pharmacy allocates indirect expenses to its three departments on the basis of sales. For the year ended 30 June 2016, the following allocations were made:Dispensary itemsCosmeticsHair careTotalSalesIndirect expenses$766 200426 000$383 100213 000$127 70071 000$1 277 000710 000Assume
Port Hills Gondola is a tourist operation on the outskirts of Dunedin. It provides cable car trips to the highest peak and also operates a café and gift shop on the mountain. Port Hills Gondola allocates indirect expenses to its three departments on the basis of gross profit percentage. The most
Daisy Discount Store operates two departments — stationery and kitchenware. During the year ended 30 June 2017, the store had the following financial results:StationeryKitchenwareSalesDirect expensesGross profit percentage of sales$247 56055 00020%$289 200136 12045%In addition, indirect expenses
Awesome Appliances operates two departments — whitegoods and electronics. During the year ended 30 June 2017, the store had the following financial results:WhitegoodsElectronicsSalesSales returnsDirect expensesGross profit percentage of sales$176 8003 50014 40020%$212 6001 38063
Following is a performance report for Oasis Villas.BudgetActualVarianceStaff wagesFood and suppliesRepairs and maintenanceRates and insuranceAdvertisingElectricity$234 000189 00080 00036 00018 00012 000$267 000145 000105 00038 50018 00015 000RequiredCalculate the variances,
Tania is the production manager for Manikato Winery. Tania has responsibility for all aspects of white wine production by Manikato. Red wines are produced at a different geographical locations and managed separately. For the current year, classify each of the following items as controllable income,
‘The principles of responsibility accounting are just as relevant for the balanced scorecard management system as for an accounting system.’ Discuss.
Standard costs are predetermined measures of what it should cost to produce a product or perform an operation. How are standard costs derived and what factors should be taken into account when determining standard costs?
In performance evaluation, is a fixed budget or a flexible budget more likely to provide a better measure of how well a manager has performed? Explain your answer by using examples.
‘The only difference between fixed (static) and flexible budgets is the number of fixed budgets — with a fixed budget there is one, with a flexible budget there are many fixed budgets.’ Discuss.
Variable costs represent the “flex” in the flexible budget and fixed costs really are of no use in such a budget.’ Discuss.
What are two factors that need to be taken into account when determining whether a department should be maintained or closed down? Give examples to illustrate each factor.
When preparing departmental contribution income statements, all direct expenses are controllable by department managers. Discuss, giving examples.
The manager of a newly established department store asked the accountant to make recommendations regarding reports which should be produced for management use. The accountant was adamant that an income statement that disclosed departmental contributions was far superior to the fully
‘Although determining gross profit for departments in a department store has some merit, the idea of trying to determine departmental profit is questionable because of all the indirect costs usually involved. Allocation of these costs is so arbitrary that the allocation process makes the
Save More is a large retail warehouse store which sells a wide range of products at discounted prices to the public. For each of the following business segments identify what type of responsibility centre would be appropriate:(a) Staff cafeteria(b) Gardening — retail
It is much more time consuming to involve all managers accountable for responsibility centres in the planning process. Given the extra time and resources of this approach what are some of the benefits of participation of all managers. What are some possible downsides?
‘Distinguishing between direct cost, controllable cost and avoidable cost is difficult, since they all really mean the same except they are used in different contexts.’ Discuss.
Refer to the latest financial report of JB Hi-Fi Limited on its website, www.jbhifi.com.au, and answer the following questions:RequiredAfter examining the report, is it possible to conclude that there is a budgetary system in operation within JB Hi-Fi Ltd?What would be the key element driving a
William Bill is the production manager for Cheetah Motors Ltd and is responsible for preparing the production budget for the Cheetah car that the company manufactures. During the previous year, new robots were installed on the production line that significantly increased fixed factory overheads but
Read the following extract from a CIMA report into annuality in public budgeting.Public sector budgeting: The annuality phenomenonAnnuality is a widespread and pervasive phenomenon that affects public budgeting throughout the world. It is fundamentally a problem for financial accounting theory,
Read the following article and answer the questions that follow.Council’s green strategy no longer a key area of failureA South Australian council has overhauled its carbon reduction strategy and will install software from TechnologyOne to improve its reporting capability. Campbelltown City
You are newly employed by Surat Global Ltd to promote their environmental approach to mining for minerals. In their annual report and promotional material, Surat Global Ltd states that protecting the environment while mining is one of its most important goals. This is what attracted you to your new
Refer to the latest financial report of JB Hi-Fi Limited on its website, www.jbhifi.com.au, and answer the following questions:Required1. Would JB Hi-Fi Limited be able to make use of cost–volume–profit analysis within its business operations?2. Examine the note on ‘Segment information’.
Phuong Nguyen runs a commercial kitchen that produces a range of bottled Vietnamese cooking sauces that are sold in major retail food stores across the country. Past accounting records show that the business, Phuong’s Fantastic Foods Pty Ltd, has been profitable. The bottles of sauces come in a
Jill owns and operates a business that makes hand-crafted rocking chairs. The business is expanding but the increasing costs of raw materials and labour, and the GST, have badly affected profitability. Jill believes that if she buys some wood-turning equipment that is more modern she could reduce
A. Explain, in non-accounting terms, about the nature of manufacturing costs and costing products.B. Why can’t Jemma simply reduce her price by $15 and cover only the variable costs of production? What would you suggest Jemma should do to combat the new competition?Jemma Simpkins began her own
The manager of Fritz Fabricators Ltd has just reviewed the income statement for the previous quarter and is concerned by the profit earned. Her main concern is the significant difference between the planned contribution margin and the one actually achieved. The company sells only one product. A
Richards Ltd has prepared the following draft profit analysis for the current year:Sales (15 000 units)Variable expenses$600000345000Contribution marginFixed expenses255000108800Profit before taxTax (at 30%)146200 43860Profit after tax$102340RequiredAnswer each of the following four
Lawsistan Ltd has prepared the following draft profit analysis for the current year.Sales (150000 units)Variable expenses$1200000 690000Contribution marginFixed expenses510000 217600Profit$ 292400RequiredAnswer each of the following four independent situations:A. If the
Kids Sports Consulting Pty Ltd is a company set up by sports and recreation management students to gain experience in running their own business. It had the following contribution margin income statement data for the year ended 2016:Sporting event fees (96 events)Variable expenses$48 000
TMP Human Resource Consulting had the following contribution margin income statement for the year ended 2016:Employment services fees (1500 employed)Variable expenses$3600000014400000contribution marginFixed expenses2160000012240000Profit$ 9360000RequiredAnswer each of the following
Details of BJM Pty Ltd’s income statement for the past year are:Sales (22000 units)Cost of sales:Direct materialsDirect labourVariable factory overheadFixed factory overhead$44000039600088000 60000$1320000 984000GROSS PROFITVariable selling expensesFixed selling and
Long Weekend Ltd suffered a severe drop in sales and profit performance for the year ended 30 June 2015. The income statement revealed that net sales were $1500000 with a profit of $310000. Unit sales were 300000, and total costs were $1190000. A breakdown of costs and expenses is presented
A to Z Pty Ltd has provided the following planned per-unit cost and sales data for the year ended 30 June 2016: ABCSelling priceDirect labour costDirect materials costVariable factory overheadVariable selling expenses$901828104$1002424126$80161284Units sold in 2015Planned 2016 unit
Copeland Hotels Ltd provide three levels of rooms in their hotels. The following planning data are provided for the year ended 31 December 2016:Deluxe SuiteSuperior SuitePresidential SuiteRate per nightDirect room maintenance costsVariable hotel overheadVariable marketing expensesRoom nights in
XYZ Childcare Ltd plans to open a day care centre at the beginning of next year. A building has been leased and the company has estimated that the following annual costs will be required:Salaries — three qualified staffSalaries — two assistantsLease rental (building)ElectricitySundry expenses
The accountant of Pearl Coast Medical Centre is evaluating ways to increase revenues. The financial objective of the centre is to operate at or just above its break-even point. The centre currently refers approximately 8000 patients each year to a nearby laboratory for a standard blood test. The
AEK Ltd has prepared its income statement, summarised below, for the year ended 30 June 2016:Sales revenue (40000 units)Variable expenses$256000192000Contribution marginFixed expenses64000 40000Profit$ 24000The company is evaluating three independent situations and has asked for your
Move On Marketing (MOM) Pty Ltd produces television advertisements for local businesses. The contribution margin income statement for the company is as follows:Marketing fees (52 television advertisements)Variable expenses$624000249600contribution marginFixed expenses374400324000Profit$
Slip Shod Ltd has provided the following production and sales information for each pair of its dress shoes:Direct materialsDirect labourVariable factory overheadSelling priceSales commissions$12235151800%of the selling priceThe fixed costs for the period are $1125000.RequiredA. Calculate the
The factory overhead of TJD Ltd has fluctuated significantly from year to year in relation to the direct machine hours. The average costs at the average high and low levels of activity during the past 3 years are as follows:Level of activityHighLowFactory overheadDirect machine
Assume you are marketing manager for SJM Ltd in exercise 11.14, and the accountant explains that when the actual results were compared with budget results he found a favourable sales price variance, an unfavourable sales volume variance and an unfavourable variable expense variance.RequiredA. For
SJM Ltd has prepared the following income statement information showing the actual contribution margin earned from the sale of its only product, and the planned contribution margin.BudgetActualSales — unitsSales — dollarsVariable expenses$3200480000256000$3000468000255000contribution
Aussie Sporting Company Pty Ltd produces two types of sporting balls: basketballs and footballs. During the year ended 30 June 2015 it sold the balls in the proportion of three basketballs for every two footballs sold. The basketballs are high-quality balls and sell for $120 each and the variable
Flaherty Ltd sells two types of shoes, men’s shoes and women’s shoes. During the financial year ended 30 June 2016, fixed costs were $460 800 and sales were in the ratio of three units (pairs) of men’s shoes to one unit (pair) of women’s shoes. Men’s shoes sell for $180 per pair, and the
Cruz Manufacturing Ltd’s sales slumped badly in 2015. For the first time in its history, it operated at a loss. The company’s income statement showed the following results from selling 600 000 units of product: Net sales $2 400 000; total costs and expenses $2 610 000; and loss $210 000. Costs
Warner Ltd sells its only product at a price of $200 per unit. Variable costs are $160 per unit and total fixed costs are $208 000. Current annual sales are 6500 units.RequiredA. What is the company’s break-even point in sales units? What is the break-even point in sales dollars?B. What is the

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