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Management Accounting In A Dynamic Environment 1st Edition Cheryl S McWatters, Jerold L Zimmerman - Solutions
An ice cream producer manufactures 10,000 liters of strawberry ice cream in a month.The standard number of hours of direct labor per 1,000 liters is 40 hours at a standard labor rate of \($10\) per hour. The standard quantities and prices of ingredients per 1,000 liters of ice cream are 1,200
To manufacture its main product, a firm requires a standard of 10 direct labor hours per unit. The standard labor rate is \($20\) per hour. The product requires a standard of 25 kilograms of material. The standard price of materials is \($5\) per kilogram. The actual production of 100 units uses
At the beginning of the year, a university sets standards for processing 1,000 admissions applications with 10,000 direct labor hours. The application rate for overhead is £40 per standard direct labor hour. During the year, the university actually processes 1,200 applications.How much overhead is
A company uses machine hours to apply both variable and fixed overhead. Budgeted variable overhead is \($100,000.\) Budgeted fixed overhead is \($200,000.\) The budgeted machine hours are 1,000. During the period, 1,200 machine hours are used but only 1,100 standard hours occurred. The actual
The Scantron Company makes bar-code scanners for major supermarkets. The sales staff estimates that the company will sell 500 units next year for £10,000 each. The production manager estimates that fixed costs of making the scanners are £2 million, and the variable cost per unit is £4,000.
An insurance company has the following profitability analysis of its services: The fixed costs are distributed equally among the services and are not avoidable if one of the services is dropped. What is the profitability of the remaining services if all services with losses are dropped? Revenues
The Medford Mug Company is an old-line maker of ceramic coffee mugs. It imprints company logos and other sayings on mugs for both commercial and wholesale markets. The firm has the capacity to produce 50 million mugs per year, but a downturn has cut production and sales in the current year to 15
Smidt & Sons produces a single product and has the following operating data: The firm uses FIFO inventory costing, and there was no beginning inventory in 2013.a. Calculate net profit in each year using absorption costing.b. Calculate net profit in each year using variable
The manager of the manufacturing unit of a company is responsible for the costs of the manufacturing unit. The president is in the process of deciding whether to evaluate the manufacturing manager based on the average cost per unit or the variable cost per unit.Quality and timely delivery would be
The president of Celestial Printing has decided to use the practical capacity of the firm’s printers to determine the application rates per machine hour for overhead. She believes that the cost of unused capacity would be valuable information. As the controller begins to calculate application
The Green Packing Company has discovered an increasing demand for frozen boneless chicken breasts. The frozen chicken breasts can be thawed and cooked quickly. This product is becoming very popular with people who do not want to deal with the bones and other parts of the chicken that have less
National Mixing is a division of National Chemicals, a large diversified chemical company. National Mixing (NM) provides mixing services for both outside customers and other National divisions. NM buys or receives liquid chemicals and combines and packages them according to the customer’s
A firm makes a product with variable manufacturing costs equal to \($3\) per unit and fixed manufacturing costs of \($10,000.\) The product cost is based on an average cost per unit. The company plans to sell 1,000 units for \($15\) apiece.What is the profit for the company if 1,000, 1,200, and
A production department is allocated costs from the maintenance department based on the number of maintenance hours used. The maintenance costs are allocated at a rate of€20 per hour, which includes both variable and fixed costs. The variable cost per hour is€12. The maintenance department has
Central administration allocates its costs of £1 million to the two operating divisions (A and B) of the company. These costs are not avoidable if one division is dropped. With an equal allocation of these costs to both divisions, Division A has a profit of £300,000 and Division B has a loss of
Computer Shack makes two types of laptop computers: slim-line and palm-size. Excess capacity exists for which no alternative use exists. Fixed overhead costs are allocated based on direct material cost. The product profitability of each product is:The palm-size model does not seem profitable and
A company uses machine hours to allocate overhead. The company has the practical capacity to use 100,000 machine hours. The fixed overhead is expected to be $1 million and the expected usage of machine hours is 70,000.What is the application rate for fixed overhead if the company uses practical
A company makes a product that has a variable manufacturing cost of \($4\) per unit and fixed manufacturing costs of \($50,000.\) The product sells for \($10\) per unit.Using variable and absorption costing, what is the profit from the product if 10,000 units are made, but only 8,000 units are sold?
A manufacturer of ergonomically designed computer keyboards has actual and estimated fixed costs of €1 million. Variable costs per unit are €18. The allocation base is the number of units produced. The sales price of the keyboard is €50 per unit. There is no beginning inventory. During the
The cost of rental space is the major fixed cost at Mattress Mart, a discount mattress store in a warehouse mall. The annual rental cost (actual and expected) is $360,000. The store occupies 60,000 square meters of space; the warehouse department occupies 30,000 meters, and the retail department
Refina divides petroleum into three types of fuel (A, B, and C) and tar. Tar is considered a by-product. The joint cost of processing 1,000 barrels is \($35,000.\) The joint products have the following characteristics:Is the joint process profitable? Joint product Number of barrels ARC 100 B 300
The Talbott Company has received an order (324) for 100 electronic widgets. On January 20, the shop foreman requisitioned 100 units of part 503 at a cost of \($5\) per unit and 500 units of part 456 at a per-unit cost of \($3\) to begin work on the 100 widgets. On the same day, 20 hours of direct
Mevellec Company uses a job-order cost system to track its production costs. The following activities have been performed for Job number 515:• Requisition of three units of part 34 at €40 per unit, and two hours of direct labor at €10 per hour on May 16.• Requisition of 5 kg. of raw
The job-order cost sheet for 1,000 units of toy trucks is:Job number: 555 Date started: 04/13 Date completed: 06/18All of the materials for the job were purchased on April 10. The batch of 1,000 toy trucks is sold on July 10.What are the costs of this job order in the Raw Materials,
The Tip Tap Company receives an order for 10,000 units of taps (a tool used to make threads in a block of steel). The taps require considerable machining on a blank (Part 14) to make. Blanks are sometimes ruined in the machining process, but the cost of the ruined blanks is treated as a part of the
A computer manufacturer has the following account balances at the end of the year.These accounts contain €800,000 of allocated overhead. Actual overhead, however, is €1,000,000.a. What are the account balances after prorating the under-absorbed overhead?b. If the manufacturing manager’s
A custom furniture manufacturer uses direct labor to allocate overhead. At the end of the year, the company had the following account balances with and without allocated overhead.Actual overhead during the year was $80,000. Estimated and actual direct labor hours are equal.a. What are the ending
A house-building contractor has the following three overhead cost pools:Costs from each of these cost pools then are allocated to housing contracts using the following allocation bases:How much overhead is allocated to a house that uses \($20,000\) of direct labor and has a total cost of
The Old Masters Puzzle Company makes jigsaw puzzles primarily sold in museum gift shops. The manufacturing process includes using the departments related to gluing, cutting, and boxing. Each type of jigsaw puzzle must go through these departments.The overhead costs in each of these departments are
Bella Cucina is considering outsourcing the production of a steel chassis that is used in a kitchen appliance. Two thousand chassis are produced per month. An outside vendor will supply an identical chassis for €9.90. The chassis is manufactured in two steps: a stamping press punches out the part
Avion Industries makes an assortment of aircraft parts. The company allocates overhead based on direct labor costs in euros (DL€). At the beginning of the year, the company estimated that overhead costs would be €400,000 and direct labor costs would be €250,000. The application rate was
The Rosen Company has two manufacturing departments, production and assembly.Each department has separate application rates. The Rosen Company made the following estimates for its production and assembly departments for the calendar year 2016.The company uses a budgeted application rate for the
The following figures were taken from the records of Wellington Co. for the year 2016.At the end of the year, two jobs were still in process. Details about the two jobs are given as follows:Wellington Co. applies overhead at a budgeted rate, calculated at the beginning of the year. The budgeted
Beaver Company has the following account balances after allocating overhead based on the pre-determined application rate of €10 per machine hour:The work-in-process used 1,000 machine hours. The balance in finished goods was calculated using 1,500 machine hours. Cost of Goods Sold was calculated
A specialty ice cream company has identified the following overhead activities and calculated the following application rates:a. What level of overhead is each of these overhead activities?b. How much overhead would a new flavor receive if it were made in five batches, required 20 purchases, and
Frames, Inc. manufactures two types of metal frames, large and small. Steel angle iron is first cut to the appropriate sizes and the pieces are then welded together to form the frames. The process involves a high degree of automation. Considerable indirect labor by skilled technicians and engineers
MumsDay Corporation manufactures a complete line of fiberglass attaché cases and suitcases. MumsDay has three manufacturing departments (Molding, Component, and Assembly) and two service departments (Power and Maintenance).The sides of the cases are manufactured in the Molding Department; the
Marion Company had the following bi-monthly output:The beginning inventory had 100 units at a cost of $18 per unit or a total cost of $1,800.The ending inventory had 300 units.a. What is the cost of the ending inventory under FIFO, LIFO, and weighted-average cost methods?b. What is the cost of
The Williams Company manufactures automatic garage-door openers. At the beginning of November, the company had the following inventory accounts:During the month of November, the company made purchases of raw material equal to \($100,000.\) The company also incurred direct labor costs of
The McIvor Company has the following inventory balances at the beginning of 2016:At the end of 2016, the controller calculates the Cost of Goods Sold to be \($700,000\) and the Cost of Goods Manufactured as \($750,000.\) Ending Work-in-Process for 2016 was estimated to be \($95,000.\) During 2016,
Marlborough Accounting is performing an audit for the Chandra Company.Marlborough Accounting uses a cost sheet to record the cost of each audit. Only professional services (by associates, managers, and partners) and overhead are recorded on the cost sheet. The cost sheets are then compared with the
The Philbrick Company makes recreational equipment. Overhead is allocated to the different products based on machine hours. At the beginning of the year, the company estimates that overhead will be \($4\) million and machine hours will be 200,000. During the year, the company actually has \($4.3\)
The Dunrobin law firm allocates overhead to different clients based on hours of work performed by Mr. Dunrobin. At the start of the year, Mr. Dunrobin estimates that the total overhead of the coming year will be \($100,000.\) He also estimates that he will perform 2,000 hours of work for clients.
The Alphonse Company allocates fixed overhead costs by machine hours and variable overhead costs by direct labor hours. At the beginning of the year, the company expects fixed overhead costs to be €600,000 and variable costs to be €800,000. The expected machine hours are 6,000 and the expected
The White Flour Company mills wheat into flour. The equivalent units are measured in terms of tons of flour produced. At the beginning of the year, the mill contained 20 tons of flour that was 30 percent milled. During the year, another 500 tons of flour were completely milled. At the end of the
An appliance manufacturer has an assembly line for making refrigerators. At the beginning of the year, the company had 300 refrigerators on the assembly line that were 40 percent complete on average. The appliance manufacturer started and completed another 5,000 refrigerators. At the end of the
A company allocates overhead using direct labor hours. The expected number of direct labor hours is 4,000 for the coming year and the expected overhead is \($80,000.\) During the year, the company uses 3,600 direct labor hours and the actual overhead was\($82,000\).What is the over- or
Anacom Company has expected overhead fixed costs of \($100,000.\) The estimated variable overhead costs are \($400,000,\) assuming the allocation base is 50,000 machine hours. Anacom has one overhead application rate that includes both variable and fixed costs. The actual machine hours are 60,000
Multifirm has three different types of production departments: A, B, and C. Each department allocates overhead costs to products based on direct labor cost. The production departments had the following expected overhead costs and direct labor cost:A product requires €2,000 of direct labor in
A company has no beginning work-in-process. During the year, the company starts and completes 1,000 units and has 100 units in ending inventory that are 60 percent complete. The costs related to this product during the period are £10,000.How many equivalent units were produced during the period?
A manufacturer has 500 units in beginning inventory that are 30 percent complete.During the year, the firm starts 5,000 units. It completes the 500 units in the beginning inventory and 4,200 of the 5,000 units started. The ending inventory is 80 percent complete.How many uncompleted units are in
Beach Chair Corporation makes two types of beach chairs, reclining and straight-back.The direct costs per unit of the two chairs are as follows:The company has no beginning inventory. During the year, the company plans and makes 10,000 reclining chairs and 20,000 straight-back chairs. The company
The Pure Water Company operates as the municipal water supplier for North Country Town. The town allows the Pure Water Company to charge consumers of the town water the costs to provide the water plus 10 percent. The Pure Water Company also sells bottled water to grocery stores. These sales are not
A building contractor started and finished a 20-unit condominium complex during the past year. The direct costs per unit were \($100,000,\) and the indirect costs per unit were\($50,000.\) The indirect costs are manufacturing overhead, and are considered product costs. By the end of the year, the
A lawyer allocates overhead costs based on her hours working with different clients.The lawyer expects to have \($200,000\) in overhead during the year and expects to work on clients’ cases 2,000 hours during the year. In addition, she wants to pay herself \($50\) per hour for working with
The Human Resources department’s costs are allocated to the other departments based on the number of direct labor hours. The department’s expected fixed costs are £400,000 and its variable costs are £0.25 per direct labor hour. The Human Resources department has sufficient capacity such that
The town of Seaside has decided to construct a new sea aquarium to attract tourists.The cost of the measure is to be paid by a special tax. Although most of the townspeople believe that the sea aquarium is a good idea, disagreement exists about how the tax should be levied.Suggest three different
Eastern University, located in central Canada, prides itself on providing faculty and staff with a competitive compensation package. One aspect of this package is a tuition benefit of \($4,000\) per child per year, for up to four years, to offset the cost of college education. The faculty or staff
Professors at Norton University are given a budget of \($12,000\) per year for travel and research purposes. Presently, the university allows the professors to carry over unused balances from one year to the next. The university is considering a new policy of having the \($12,000\) lapse from year
The Sticky Company makes special glue that is used to make the layers of wood veneer adhere to make plywood. The glue-making process has been used for many years and the customers are satisfied with the product. The Sticky Company has had very low turnover of personnel and the president and all of
The sales manager of the T Corporation is complaining about the budget process. He notes, “Each year the central administration asks for expected sales in each of the next three years. The first year’s budget is used to determine production amounts and establish benchmarks for measuring
You currently work as a financial analyst with a large investment bank, RP Investments. Last year, there was a major scandal at one of your major competitors, CC Bank, involving manipulation of some auctions for government bonds. A number of senior partners at CC Bank were charged with price fixing
A Fortune magazine article with the title ‘Why budgets are bad for business’ included the following statements:Budgets, say experts, control the wrong things, like head count, and miss the right ones, such as quality, customer service – and even profits. Worse, they erect walls between the
A company makes 200 units of A and 500 units of B. All the units of B are sold and one-half of the units of A are sold. There was no beginning inventory, but 100 units of A are in ending inventory. Product A sells for \($5\) per unit and product B sells for \($10\) per unit. The variable cost of
A company has an agreement to sell product A for 20 percent above cost. The company also sells product B for \($10\) per unit. The variable cost of product A is \($4\) per unit and the variable cost of product B is \($6\) per unit. The company makes and sells 1,000 units of product A and 2,000
The Maintenance department of a firm has fixed costs of €40,000 and variable costs of €15 per maintenance hour supplied to other divisions. The Maintenance department expects to supply 1,000 hours of maintenance during the coming year.What is the application rate per maintenance hour supplied?
Company C is composed of Division A and B. Division A has sales of \($200,000\) to outside buyers and \($50,000\) to Division B. Division B has sales of \($300,000\) to outside buyers. The costs of Division A are \($120,000.\) The costs of Division B are \($200,000\) excluding the purchases from
Alpha Company has two service departments, A and B. The costs of these service departments are allocated to two production departments, C and D. The following table describes the usage of the allocation base of the service departments by the service and production departments:Service Department A
A consultant has an agreement with Worldwide Foods that all her costs while working on its project would be reimbursed in addition to her being paid £100 per hour. Other clients pay her a fee of £150 per hour with no cost reimbursement. During the year, she expects to have overhead costs of
The Harrison Corporation manufactures a variety of small toys popular with children and their parents. It allocates indirect costs to different products using the following allocation bases and application rates:Yue Lee is responsible for manufacturing toy trucks at the lowest possible cost. The
The annual Cost of Goods Sold for a company is expected to be £82,000. The beginning inventory balance is £25,000. The ending inventory balance is expected to be £21,000.All purchases are on credit. The beginning and ending balances for accounts payable are expected to be £11,000 and £8,000,
The Topper Restaurant uses a flexible budget to estimate profit in each month. The restaurant expects to charge \($15\) per meal on average. Some costs are assumed to vary with the number of meals served. The restaurant estimates a variable cost of \($5\) per meal served. The restaurant also has
The Fancy Umbrella Company makes recyclable beach umbrellas. The production process requires 3 square meters of plastic sheeting and a metal pole. The plastic sheeting costs \($0.50\) per square meter and each metal pole costs \($1.00.\) At the beginning of the month, the company has 5,000 square
Humdrum Company is worried about cash flows. The company has \($1,000\) in cash at the start of February. January’s total sales were \($20,000\) and total sales in February are expected to be \($30,000.\) Sales are 30 percent cash sales and 70 percent account sales collected in the following
The Birdie Company makes badminton racquets. Beginning inventory for the coming year is 1,000 racquets. During the year, the company expects to sell 10,000 racquets and wants to have 800 racquets in inventory at the end of the year.How many racquets must the company produce during the year to meet
The Gold Bay Hotel is developing a master budget and pro-forma financial statements for 2016. The beginning balance sheet for the fiscal year 2016 is estimated to be as follows:During the year, the hotel expects to rent 30,000 rooms. Rooms rent for an average of £90 per night. Additionally, the
The Jung Corporation’s budget calls for the following production:Each unit of product requires 3 kilograms of direct material. The company’s policy is to begin each quarter with an inventory of direct materials equal to 30 percent of that quarter’s direct material requirements.Compute
August Company’s budget for the current month called for producing and selling 5,000 units at \($8\) each. Actual units produced and sold were 5,200, yielding revenue of\($42,120.\) Variable costs per unit are budgeted at \($3\) and fixed costs are budgeted at \($2\) per unit. Actual variable
The Corner Hardware Store is developing a budget to estimate monthly cash balances in the near future. At the end of December, the cash balance is \($6,000\) and the accounts payable balance is \($30,000\) (reflecting December’s purchases of inventory). The Corner Hardware Store expects
The Quality Auto Parts Wholesaler maintains an inventory of car parts to supply local car-repair shops. The company is making cash-flow estimates for the coming year. The monthly inventory purchases are sufficient to cover sales for a two-month period, but the bills for those purchases are paid in
The Essex Eye Company (EEC) makes reading glasses. EEC’s expected beginning balance sheet on January 1, 2016 follows:During 2016, EEC expects to sell 100,000 units (reading glasses) for \($12\) apiece. The reading glasses are sold on account, and the accounts receivable is expected to be
Hadrian Power manufactures small power supplies for car stereo systems. The company uses flexible budgeting techniques in order to deal with the seasonal and cyclical nature of the business. The accounting department provided the following data on budgeted manufacturing costs for the month of
You work for a firm that specializes in mergers and takeovers, and your job is to analyze potential acquisitions. You are assigned the task to evaluate a possible merger between Europa and Italiana Airlines. These two carriers are competing in the European markets of Nice, Milan, Barcelona, and
The Shocker Company’s sales budget shows quarterly sales for the next year as follows:Company policy is to have a Finished Goods inventory at the end of each quarter equal to 20 percent of the next quarter’s sales.Compute budgeted production for the second quarter of the next year. (CMA
Candide Chocolate expects to sell 100,000 cases of chocolate bars during the next year.Budgeted costs per case are €150 for direct materials, €120 for direct labor, and €75 for manufacturing overhead (all variable). Candide Chocolate begins the year with 40,000 cases of finished goods on
A chair manufacturer has established the following flexible budget for the month.a. What is the sales price per chair?b. What is the expected profit if 1,600 chairs are made? Sales Variable costs Fixed costs Profit Units Produced and Sold 1,000 1,500 2,000 $10,000 $15,000. $20,000 (5,000) (7,500)
Tubbs Company has established the following flexible budget for the coming month.a. What is the variable cost per unit?b. What is the fixed cost? Units produced 10,000 11,000 12,000 Total costs $30,000 $32,000 $34,000
Wolski Company expects sales in July to be €100,000. Of total sales, 20 percent are cash and the remaining are to be collected in August. Accounts receivable at the beginning of July is €70,000, which will be collected in July.a. How much cash is expected to be collected in July from accounts
A company had the following budgeted and actual results during the year:Perform a variance analysis and identify variances that should be investigated Revenues Cost of Goods Sold General administration Selling expenses Profit Budgeted Actual 200,000 210,000 (100,000) (75,000) (20,000) (18,000)
A company makes multiple products. Direct labor hours are used to measure activity.Variable costs are expected to be \($40\) per direct labor hour. Revenues are expected to be\($60\) per direct labor hour. The fixed manufacturing costs are expected to be \($200,000\) and the selling and
A company plans to sell 5,000 units; it has beginning inventory equal to 500 units and expects to have 800 units in ending inventory.How many units must be produced?
A company makes a product that requires 3 kilograms of raw material A and 5 meters of wire per unit. The cost of raw material A is \($10\) per kilogram. The cost of the wire is\($1\) per meter. There are 100 kilograms of raw material A in beginning inventory. The company would like to have 200
A company plans to have sales of €20,000 in January, €30,000 in February, and €40,000 in March. Cash sales are expected to be 20 percent of the total and the remaining sales are sold on account and collected the month after the sales. Accounts receivable are €25,000 at the beginning of
A company has the following beginning and expected ending balances:What are the cash effects of these changes in the balances? Accounts receivable Inventory Accounts payable Wages payable Beginning Ending $40,000 $30,000 60,000 80,000 20,000 35,000 10,000 12,000
Oakwood Golf Course is a private club that is owned by its members. It has the following managers and organizational structure:Eric Olson: General manager responsible for all the operations of the golf course and other facilities (swimming pool, restaurant, golf shop).Jennifer Jones: Manager of the
The Bookmark Company uses cost-based transfer pricing to transfer books from the publication division to its bookstores. The transfer price is based on a budget established at the beginning of the year. At the end of the year, the publication division had a cost over-run and its manager wants to
An Italian wholesaler of Mexican crafts is considering the importing of rugs. The rugs are hand-woven in southern Mexico and use natural dyes. The rugs cost an average of€250 including transportation and handling. The wholesaler plans to sell them in Italy for €300. Therefore, the profit per
News Inc. owns five newspaper stands. Each stand has a manager who is responsible for ordering newspapers each day. News Inc. purchases the newspapers for each stand.Any newspapers not sold at the end of the day are thrown away.Describe how the newspaper stands might operate as cost centers, profit
Memories Company sells cosmetics door to door. The company has traditionally paid its salespeople a commission based on total sales. The company is considering making each sales representative a profit center.How would making each sales representative a profit center affect his or her behavior?
The president of a company is trying to improve his firm’s ROI. He asks a consultant for assistance. The consultant tells the president that he must increase either his profit margin (profit/sales) or asset turnover (sales/assets). The president complains that every time he tries to increase his
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