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management accounting

Management Accounting 5th Edition Anthony A Atkinson, Robert S Kaplan - Solutions

For a university, identify a cost that you think is controllable in the short term and explain why. Identify a cost that you think is controllable in the intermediate term and explain why. Identify a cost that you think is controllable in the long term and explain why. What does this cost structure
Many managers consider the pro forma financial statements to be the most important product of the master budgeting process. Why do you think they believe this?
Budgeting allows an organization to identify broad resource requirements so that it can develop plans to put needed resources in place. Use an example to illustrate why this might be valuable in a consulting company that provides advice to clients.
Budgeting allows an organization to identify potential problems so that plans can be developed to avoid these problems or to deal with them systematically. Give an example of how budgeting might serve this role in a company that buys vegetables and cans them.
Monthly cash budgets of inflows and outflows are an important part of the budgeting process in most organizations. In the course of preparing a cash budget, the organization must estimate its cash inflows from credit sales. Suppose that in response to projected cash shortfalls, the organization
Jeren Company is considering replacing its existing cutting machine with a new machine that will help reduce its defect rate. Relevant information for the two machines includes the following:Requireda. Determine the sales level, in number of units, at which the costs are the same for both
Sensitivity analysis is an important component of any budgeting exercise. Which estimates do you think will be most crucial in developing a master budget? Why?
A university faced with a deficit reacts by cutting resource allocations to all faculties and departments by \(8 \%\). Do you think this is a good approach to budgeting? Why?
The following information is available for Mandalay Company:Requireda. Determine the material price variance and material quantity variance.b. Determine the direct labor rate variance and direct labor efficiency variance. Actual Materials: Direct labor: Units produced: Standard Materials: Direct
Pharout Company uses a standard cost system. Job 822 is for the manufacturing of 500 units of the product P521. The company's standards for one unit of product P521 are as follows:The job required 2,800 ounces of raw material costing \(\$ 5,880\). An unfavorable labor rate variance of \(\$ 250\)
Each unit of job Y703 has standard requirements of 5 pounds of raw material at a price of \(\$ 100\) per pound and 0.5 hour of direct labor at \(\$ 12\) per hour. To produce 9,000 units of this product, job Y703 actually required 40,000 pounds of the raw material costing \(\$ 97\) per pound. The
Borders Manufacturing is developing a sales and production plan as part of its master budgeting process. Following are the projected monthly sales, which occur uniformly during each month, for the upcoming year:Production for each month equals one-half of the current month's sales plus one-half of
Mira Vista Planters provides reforestation services to large paper products companies. It must hire one planter for every 10,000 trees that it has contracted to plant each month. New employees are hired in the month needed, on the first day of the month. An employee must receive 1 week of
Pasadena Chemical Company manufactures a wide range of chemical compounds. One of the most difficult compounds is a cleaning solvent made from an expensive and volatile raw material, tetrax, that is often in short supply. The company uses 1 liter of tetrax for every 100 liters of cleaning solvent
Strathfield Motel is planning its operations for the upcoming tourist season. The motel has 60 units. The following table presents the average number of daily rentals expected for each of the 12 weeks of the tourist season.The motel hires housekeeping staff on a weekly basis. Each person can clean
Worthington Company makes cash ( \(20 \%\) of total sales), credit card ( \(50 \%\) of total sales), and account ( \(30 \%\) of total sales) sales. Credit card sales are collected in the month following the sale, net a \(3 \%\) credit card fee. This means that if the sale is \(\$ 100\), the credit
Masefield Dairy is preparing a third-quarter budget (July, August, and September) for its ice cream products. It produces five brands of ice cream, and each uses a different mix of ingredients. Its suppliers deliver ingredients just in time, provided that they are given 2 months' notice. The
Nathaniel's Motor Shop does major repair work on automobile engines. The major cost in the shop is the wages of the mechanics. The shop employs nine mechanics who are paid \(\$ 750\) for working a 40 -hour week. The work week consists of 5 days of 8 hours. Employees actually work 7 hours each day
Country Club Road Nurseries grows and sells garden plants. The nursery is active between January and October each year. During January, the potting tables and equipment are prepared. The potting and seeding are done in February. In March and April, the plants are cultivated, watered, and
Adams Company, a merchandising firm that sells one product, estimates it will sell 12,000 units of its product at \(\$ 60\) per unit in December. The company has prepared other information to prepare a budget for December, as shown here:• The company estimates that \(60 \%\) of each month's
The Monteiro Manufacturing Corporation manufactures and sells folding umbrellas. The corporation's condensed income statement for the year ended December 31, 2006 follows:Monteiro's budget committee has estimated the following changes for 2007:\(30 \%\) increase in number of units sold \(20 \%\)
The following budget information for the year ending December 31, 2006, pertains to Rust Manufacturing Company's operations:The following information is also provided:1. Rust has no beginning inventory. Production is planned so that it will equal the number of units sold.2. The cost of direct labor
The Herschel Candy Company produces a single product: a chocolate almond bar that sells for \(\$ 0.40\) per bar. The variable costs for each bar (sugar, chocolate, almonds, wrapper, and labor) total \(\$ 0.25\). The total monthly fixed costs are \(\$ 60,000\). Last month, bar sales reached 1
Tenneco, Inc., produces three models of tennis rackets: standard, deluxe, and pro. Following are the sales and cost information for 2006:Fixed manufacturing support costs are \(\$ 800,000\), and fixed selling and administrative costs are \(\$ 400,000\). In addition, the company pays its sales
The following information pertains to Torasic Company's budgeted income statement for the month of June 2006:Requireda. Determine the company's breakeven point in both units and dollars.b. The sales manager believes that a \(\$ 22,500\) increase in the monthly advertising expenses will result in a
Air Peanut Company manufactures and sells roasted peanut packets to commercial airlines. Following are the price and cost data per 100 packets of peanuts:Requireda. Determine Air Peanut's breakeven point in units.b. How many packets does Air Peanut have to sell to earn \(\$ 156,000\) ?c. Air Peanut
Trieste Toy Company manufactures only one product, Robot Ranger. The company uses a standard cost system and has established the following standards per unit of Robot Ranger:During November, the company recorded the following activity:1. The company produced 6,000 units.2. A total of 21,000 pounds
Mountain View Hospital has adopted a standard cost accounting system for evaluation and control of nursing labor. Diagnosis-related groups (DRGs), instituted by the U.S. government for health insurance reimbursement, are used as the output measure in the standard cost system. A DRG is a patient
Asahi USA, Inc., based in Denver, Colorado, is a subsidiary of a Japanese company manufacturing specialty tools. Asahi USA employs a standard cost system. Following are the standards per unit of one of its products, tool KJ79. This tool requires as direct materials a special chrome steel.During
Bakery Extraordinaire sells several types of muffins and scones and also sells carrot bread loaves. Planned prices and sales quantities for February are shown here:The owner would like to know how the price changes and volume changes each contributed to the \(\$ 2,735\) difference between planned
Megan Espanoza, manager of the Wells Division of Mars, Inc., a large credit card company, recently received a memorandum describing the company's new budgeting process for the coming year. The new process requires Megan and the other division managers to submit a budget proposal outlining their
Mike Shields was having dinner with one of his friends at a restaurant in Memphis. His friend, Woody Brooks, a local manager of an express mail service, told Mike that he consistently overstated the amount of resources needed in his budget requests for his division. He also told Mike that year
Compare and contrast the definitions of an organization's vision and mission.
What is this chapter's concept of strategy?
Describe the best-buy or lowest-total-cost value proposition and provide your own example of a company that has successfully implemented this value proposition.
Describe the product innovation and leadership value proposition and provide your own example of a company that has successfully implemented this value proposition.
Describe the complete-customer-solutions value proposition and provide your own example of a company that has successfully implemented this value proposition.
What are operating processes, and what three broad areas are included in the operating processes part of the Balanced Scorecard's process perspective?
What are the four sets of customer management processes that are part of the Balanced Scorecard's process perspective?
What four important subprocesses does managing innovation include?
Discuss the number of measures that might typically be included in each of the Balanced Scorecard's four perspectives.
Identify an organization with the best-buy or lowest-total-cost value proposition and suggest at least two possible measures within each of the four Balanced Scorecard perspectives.
Identify an organization with the product-innovation-and-leadership value proposition and suggest at least two possible measures within each of the four Balanced Scorecard perspectives.
Identify an organization with the complete-customer-solutions value proposition and suggest at least two possible measures within each of the four Balanced Scorecard perspectives.
Respond to the following statement: "It is impossible for an organization to focus on 25 to 30 different measures that result if each of the four Balanced Scorecard perspectives includes as few as four to seven measures."
Balanced Scorecard and key performance indicators Respond to the following statement: "Our organization has key performance indicators that measure financial and nonfinancial performance, including customer satisfaction, product and service quality, cost, revenues, and employee satisfaction. We
Discuss whether the Balanced Scorecard approach is a performance measurement system, a management system, or both.
Explain how organizations might use the Balanced Scorecard to link strategy to the budgeting process.
Develop a Balanced Scorecard that the dean or director of your school may use to evaluate the school's operations. Be specific and indicate the purpose of each Balanced Scorecard measure.
BC Company attempted to build a Balanced Scorecard by fitting the company's objectives and financial and nonfinancial performance measures into the four Balanced Scorecard perspectives. Explain why this approach may not lead to a well-developed Balanced Scorecard.
ED Company's chief executive officer (CEO) wanted his company to develop a Balanced Scorecard. He gave considerable thought to who should lead the development, and he selected the head of the information technology group because the Balanced Scorecard would obviously involve collecting information
Explain how an activity-based costing model can be linked to a Balanced Scorecard approach.
Suppose an organization has not implemented either activity-based costing or a Balanced Scorecard but believes both would be valuable for the organization. However, management is currently willing to undertake only one major change initiative. Advise management on the decision between implementing
What are the four requirements of ethical conduct by which certified management accountants have to abide?
What are the five steps involved in keeping an organization in control?
What are the three stages of the research development and engineering cycle?
What is the postsale service and disposal cycle?
Why is the evaluation of short-term pricing and product mix decisions different from the evaluation of long-term pricing and product mix decisions?
What distinguishes a commodity-type business from other businesses?
What two considerations complicate shortterm product mix decisions?
What firms are likely to behave as pricetaker firms?
What firms are likely to behave as price-setter firms?
Should a firm consider facility-sustaining costs in making a short-run pricing decision? Give two examples to illustrate your answer.
Describe three situations in which economics justifies using full costs for pricing decisions.
How do price markups over costs relate to the strength of demand, the elasticity of demand, and the intensity of competition?
Why do short-run prices fluctuate over time?
What strategic reasons may influence the level of markups?
What options should firms consider when long-run market prices are below full costs?
Why is full-cost information useful for longrun product mix decisions?
Patient mix, ethics Willow Way Nursing Home, attempting to improve its profit, adopted a policy of welcoming only residents who are covered by private insurance or by Medicare or who have sufficient funds of their own to pay the nursing home fees. These groups of residents are clearly the most
Export order Delta Screens Corporation is currently operating at \(60 \%\) of capacity in producing 6,000 screens annually. Delta recently received an offer from a company in Germany to purchase 2,000 screens at \(\$ 500\) per unit. Delta has not previously sold products in Germany. Budgeted
Pricing with elastic demand Sunny Valley Orchards is reevaluating the pricing of its fresh-squeezed orange juice in half-gallon containers. Variable costs per half-gallon container of fresh-squeezed orange juice are \(\$ 1.50\). Based on Sunny Valley's market study, the management has determined
Pricing and impact on demand Columbia Bicycle Company manufactures and sells 12 different models of bicycles. Columbia is contemplating a 5% price cut across the board for all 12 models. It expects the price cut to result in an 8% increase in the number of units sold of models M124, M126, M128,
Pricing using standard hours A major automaker collected detailed data on labor hours used by skilled technicians at its auto dealer service departments for different automobile repair jobs. The company then estimated repair times for each type of repair job and established these estimated times as
Dropping a product Sanders Company recently developed an activitybased costing system and discovered that one of its products, SM5, does not cover the costs traced to it by the new cost system. Although the current sales price covers the direct material and direct labor costs, it does not cover the
Dropping a segment George's Grill analyzes profitability of three segments: restaurant, bar, and billiards. Revenues and direct costs (variable plus fixed costs) for each segment are as follows:George, the owner, is considering converting the billiards area into an expanded bar area.Requireda.
Carver Company has a demand function given by this equation:where \(P=\) price and \(Q=\) quantity produced and sold. Carver Company's cost function is given by this equation:Determine the optimal price and the corresponding demand quantity and product unit cost. Q 400 (5 P)
Activity-based costing and markup pricing Based on last year's activity, the Moose Jaw Manufacturing Company estimates the following manufacturing support costs for this year for its plant in Moose Jaw, Saskatchewan:Moose Jaw's plant manufactures three products: A, B, and C. Data per unit are as
Capacity and product mix decision Barney Toy Company manufactures large and small stuffed animals. It has a long-term contract with a large chain of discount stores to sell 3,000 large and 6,000 small stuffed animals each month. The following cost information is available for large and small
Product mix and special order decisions Holmes Manufacturing Company produces three models of aquastatic controls: A17, B23, and XLT-all of which use the same basic component. The basic components are produced in department A. For model A17, the basic components are finished in department C. For
Special order decision Kirby Company manufactures leather briefcases sold to wholesalers for \(\$ 37.95\). The plant capacity for manufacturing this product is 750,000 units annually, but normal volume is 500,000 units. The unit and total costs at normal volume follow:Manufacturing support and
Special order pricing, product mix decisions (Adapted from CMA, May 1989) Purex Company produces and sells a single product called Kleen. Annual production capacity is 100,000 machine hours. It takes 1 machine hour to produce a unit of Kleen. Annual demand for Kleen is expected to remain at 80,000
Product mix and special order decisions Orion Outdoors Company produces a standard model and a high-quality deluxe model of lightweight tents. Orion's workforce is organized into production teams responsible for cutting, stitching, and inspection activities. Orion has determined that its labor and
Colway Company estimates the relation between the demand for its products and the price it sets, in terms of this equation where:\[\begin{aligned}& Q=\text { the quantity demanded } \\& P=\text { the price of the product } \\& Q=a-b P\end{aligned}\]The marketing manager, Trisha Colway,
Product mix decisions (Adapted from CMA, December 1991) Bakker Industries sells three products (products 611,613 , and 615 ) that it manufactures in a factory consisting of four departments (departments 1 through 4). Both labor and machine time are applied to the products in each of the four
Product mix decision (Adapted from CMA, June 1990) Sportway, Inc., is a wholesale distributor supplying a wide range of moderately priced sporting equipment to large chain stores. About \(60 \%\) of Sportway's products are purchased from other companies, while the remainder of the products are
Process or sell decision The Troy Company manufactures electronic subcomponents that can be sold at the end of process \(\mathrm{A}\) or can be processed further in process B and sold as special parts for a variety of electronic appliances. The entire output of process A can be sold at a market
Are sunk costs relevant? Explain.
Are direct materials and direct labor costs always relevant? Explain with examples.
When are product-sustaining support costs and facility-sustaining (business-sustaining) support costs relevant? Give examples of each case.
Why can't we directly compare cash flows at different points in time?
Give two examples of costs and decision contexts in which the costs are not relevant for a short-term context but are relevant for a long-term context.
Why are facility-sustaining (business sustaining) support costs often not relevant for make-or-buy decisions? Give an example when facility-sustaining support costs are relevant for a make-or-buy decision.
"Design an accounting system that routinely reports only relevant costs," advised a management consultant. Is this good advice? Explain.
Relevant and sunk costs Ideal Company's plant manager is considering buying a new grinding machine to replace an old grinding machine or overhauling the old one to ensure compliance with the plant's high-quality standards. The following data are available:Requireda. What costs should the decision
Make-or-buy, relevant costs The assembly division of Cassandra Resolution, Inc., is bidding on an order of 1,000 TV sets. The division is anxious to get this order because it has a substantial amount of unused plant capacity. The variable cost for each TV set is \(\$ 600\) in addition to the cost
JIT manufacturing and cost savings Bogden Company introduced JIT manufacturing last year and has prepared the following data to assess the benefits from the change:Inventory financing costs are \(15 \%\) per year. Estimate the total financial benefits that resulted from the switch to JIT
Relevant costs Carmen's Catering provides lunches and dinners for various groups or organizations. A new customer has approached Carmen's Catering to provide dinner for a special event featuring a well-known speaker, with estimated attendance of 100 people. Carmen suggested two different menus to
Relevant costs and revenues; marketing channels Diamond Bicycle Company manufactures and sells bicycles nationwide through marketing channels ranging from sporting goods stores to specialty bicycle shops. Diamond's average selling price to its distributors is \(\$ 185\) per bicycle. The bicycles
Facilities layout, identifying value-added activities Consider Exhibit 5-19, which summarizes the activities at the former Bethlehem Steel Corporation's Sparrows Point plant. The blast furnaces make the iron that is refined into steel. The basic oxygen furnaces and open-hearth furnaces refine the

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