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management accounting
Management Accounting In A Dynamic Environment 1st Edition Cheryl S McWatters, Jerold L Zimmerman - Solutions
A popular book claims that manufacturing managers should always work to improve throughput (the time from starting the manufacturing process to the time of sale).How is this philosophy related to ROI?
Peaceful Valley Company owns both hotels and manufacturing companies. One hotel has a convention center, which is leased to various groups. The manufacturing companies want to use the convention center for a training session.What conditions should affect the choice of the transfer price?
Northern Blue Company has manufacturing plants and retail shops. The retail shops purchase products from the manufacturing plants. Currently, the manufacturing plants are operated as cost centers and only supply the company’s retail shops. The transfer price is cost-based and the retail shops
Brownside Company is highly decentralized. The divisions can issue their own debt, but they must pay their own interest. The manager of Brownside’s Park Division is evaluated based on ROI. He has borrowed a considerable amount of money from the bank for expansion. A large interest expense on that
Lewis is a large manufacturer of office equipment, including copiers. Electronics Division of Lewis is a cost center. Currently, Electronics Division sells circuit boards to other divisions exclusively. Lewis has a policy that internal transfers are to be priced at full cost (fixed + variable).
Susan Byrne, the CEO of Troy Industrial Designs (TID), has called a meeting to evaluate the present method of charging the two offices at Dublin and Shannon, Ireland for the shared services of the Creative Design Group (CDG). She wants to discuss the present cost allocation system and suggest a
In late 2006, Ford Motor Company announced a major reorganization that would streamline decision making and lever its global assets. The company’s CEO, Alan Mulally, stated, “This new leadership will enable us to work together more effectively as one Ford team to continuously improve the
Monsanto is a global agricultural company. In the 1980s, Monsanto noticed that sales were declining in certain foreign markets. The local managers in these markets were asked to increase their advertising and marketing expenditures to try to stem the flow of decline. When the senior managers in the
The following investment opportunities are available to an investment center manager:a. If the investment manager were currently making a return on investment of 16 percent, which project(s) would the manager want to pursue?b. If the cost of capital is 10 percent and the annual earnings approximate
Suppose a division of a company is treated as an investment center. The division manager is currently getting an ROI of 15 percent from existing assets of €1 million.The cost of capital (corporate discount rate) is 10 percent. The manager has the option of choosing among the following projects,
The Alpha division of the Carlson Company manufactures product X at a variable cost of £40 per unit. Alpha division’s fixed costs, which are sunk, are £20 per unit. The market price of X is £70 per unit. Beta division of Carlson Company uses product X to make Y. The variable costs to convert X
Scoff division of World-Wide Paint is currently losing money; therefore senior management is considering selling or closing Scoff. Scoff’s only product, an intermediate chemical called Binder, is used principally by the Latex division of the firm. If Scoff is sold, Latex division can purchase
Disraeli Company has two divisions: Disraeli Bottles and Disraeli Juice. Disraeli Bottles makes glass containers, which it sells to Disraeli Juice and other companies. Disraeli Bottles has a capacity of 10 million bottles a year. Disraeli Juice currently has a capacity of 3 million bottles of juice
A hotel company is divided into two divisions: Construction and Management. The Construction division builds the hotels and the Management division operates the hotels. The Construction division borrows money to cover the cost of construction; the Construction division charges the Management
The Aberdeen Fishing Company operates five trawlers (fishing boats) out of Aberdeen, Scotland. The boats are of different sizes and incur different operating expenses during the year. The following table describes the operating data and value of each boat.a. What is the ROI of each boat, using the
Zwann Systems develops and manufactures residential water filtration units that are installed under the sink. The filtration unit removes chlorine and other chemicals from drinking water. This Dutch company has successfully expanded sales of its units in the European market for the past 12 years.
Multi-National Enterprises (MNE) operates in two countries, X and Y, with tax rates of 40 percent and 10 percent respectively. Production costs are exactly the same in each country. The following summarizes the operating data for the two subsidiaries of MNE.(All data have been converted to euros to
An investment center of an organization has the following investment opportunities:The opportunity cost of capital of the organization is 8 percent.What is the ROI of these investment opportunities and which investment would add value to the organization? Project Required Investment $250,000 X Y S
A manager has control of a division with €10 million in assets and no debt. The division’s profit is €500,000 for the year. The cost of capital is 8 percent.What is the ROI of the division? What is the residual income of the division? How is the division performing?
The ROI of three potential investments is 20 percent, 15 percent, and 10 percent respectively. The cost of capital is 12 percent and the ROI of existing assets is 18 percent.Which investment(s) will the manager choose if the manager is evaluated based on ROI? Which investment(s) will increase
Division A makes 100 units of a product. The fixed cost is £200, and the variable cost is£5 per unit. Division B of the same company purchases the product from Division A. It adds £3 per unit and sells the product to an outside buyer for £13 per unit.What is the profit of the two divisions with
Division A makes 100 units of a product for a fixed cost of \($200\) and a variable cost of\($5\) per unit. Division B of the same company purchases the product from Division A. It adds \($3\) per unit and sells the product to an outside buyer for \($13\) per unit. Division A can sell the 100 units
Division A makes 100 units of a product for a fixed cost of \($200\) and a variable cost of\($5\) per unit. Division B of the same company purchases the product from Division A. It adds \($3\) per unit and sells the product to an outside buyer for \($9\) per unit. There is no other buyer for the
The computer division of Acme Inc. located in France has profits (not including interest expense) of €15 million and investment (total assets) of €120 million. The division has an opportunity cost of capital of 10 percent.What is the division’s residual income?
Food services at Oxbridge University provides meals to Oxbridge’s conference facility.It also provides catering to off-campus organizations at an average cost of £30 per person. Off-campus events require additional services to transport staff, food, and equipment to these locations. The cost of
The following data summarizes the operating performance of your company’s wholly owned Spanish subsidiary for 2014 to 2016. The opportunity cost of capital for this subsidiary is 10 percent.Calculate the ROI and residual income of the subsidiary for each year. Millions of Euros 2014 2015 2016
A chair manufacturer has two divisions: framing and upholstering. The framing costs are \($100\) per chair and the upholstering costs are \($200\) per chair. The company makes 5,000 chairs each year, which are sold for \($500\) each.a. What is the profit of each division if the transfer price is
Drivers for long-haul (international and cross-country) moving companies (e.g., Allied Van Lines, Euro Transport) are often independent contractors, whereas inter-city movers are usually employees of the company.Why are long-haul drivers often not employees of a company?
In a bank, the employee interacting with someone seeking a loan does not have the authority to grant the loan.Why is the employee not given the responsibility to grant the loan?
Mary Sweet has just opened a candy shop. The store is open from 10 a.m. to 8 p.m. each day, which means that Mary must work a minimum of 10 hours a day for seven days a week. In addition to sales, she also must spend time on purchasing, paying bills, and cleaning up. Mary quickly decides that she
In the UK, professional football teams generally have a team manager who is responsible for selecting new talent, training the team, making decisions on game day, and also signing player contracts. The team manager is responsible for the team both on and off the field. In North America,
Samson Company is an engineering firm. Many of the employees are engineers who are working individually on different projects. All of the design work takes place on networked computers, thereby allowing employees to ‘surf’ the Internet.The president is concerned about productivity among her
Many college and university classes now require students to buy e-textbooks.Technology allows professors to monitor how much time each student is spending reading the text, which pages are being skipped, what passages are being underlined, and whether a student is not underlining the appropriate
The president of the Canby Insurance Company has just read an article on the balanced scorecard. A balanced scorecard is a set of performance measures that reflect the diverse interests and goals of all the stakeholders (shareholders, customers, employees, and society) of the organization.
The new president of the Sawtooth division of the Waterhouse Company is complaining about the limitations that the CEO of Waterhouse Company has placed on him. The Sawtooth division is composed of several logging mills in the Pacific Northwest of the United States. These mills were designed to cut
Royal Motors is an auto manufacturer. Until recently, the company has operated as an assembly line. The chassis started at one end of the factory, and as it moved through the plant, parts were added until a completed car emerged from the other end of the plant.Royal Motors has recently decided to
The Travel Magazine executive group is very unhappy with its photographer. She had been sent to Tahiti to take some pictures of sunny beaches to entice visitors to Tahiti.Unfortunately, all the pictures taken by the photographer have a greyish tinge to them;the beaches appear to be rather ordinary
The local electric utility receives thousands of payments every day from its customers.The following processes occur in handling the payments: opening the letters, recording the amount of the check and the customer’s account, filling in a deposit slip for the bank, and depositing the checks with
The manufacturing division manager of a computer chip company had traditionally been evaluated based on costs. As long as she could produce computer chips more cheaply than the previous year, she received her bonus. The initial benchmark for the bonus was established based on the first year of
Eastern Bank serves both university students and regular customers. For university students, the bank charges \($0.10\) per withdrawal. Regular customers get free withdrawal services. The bank earns 10 percent on the customer deposits by lending the money to other clients, but pays the customers 5
After an extensive cost-benefit analysis, Mercy General Hospital has made a decision to outsource its ambulance operations to a private company. The administration has narrowed down its decision to two companies that meet the initial bid specifications.Hell’s Bell’s Company submitted a bid of
Europark Entertainment is trying to decide what price to charge customers to enter its new amusement park. The cost of operating the park is fixed at €300,000 per day. All rides are free with the price of admission. The expected daily attendance depends on the daily admission fee. Management
FloorCare manufactures, packages, and sells floor wax to hospitals. Truck shipments of chemicals are delivered to FloorCare, which then mixes and packages the floor wax in containers of various sizes. FloorCare maintains an average daily inventory of \($500,000\) of one chemical, X7666, which is
A grocery store makes pricing decisions based on product cost. All other costs to operate the store are fixed at \($800,000\) per year. The average cost of inventory at the store is \($1million.\) The inventory turns over eight times per year.a. If prices are set at 12 percent above cost, what is
The Peter Paint Company makes water- and oil-based paints for houses. Recently, the firm has been investigating other opportunities. One possibility is producing ‘finger paints’ for children. Finger paints are considerably different from house paints, since they must be designed and produced to
Internetco offers a wireless connection to the Internet in Edinburgh, Scotland. The wireless connection is achieved with a remote modem that sends and receives signals through a network of antennae located throughout the city. The network has already been established. The customer simply buys the
The FastBike Company manufactures bicycles and is trying to identify which activities are value-added and which activities are non-value-added. Describe each of the following activities as value-added or non-value-added:• engineering and designing the bicycle• storing the finished bicycles•
A bank spends considerable time in evaluating loan applicants. People come to banks to request loans to purchase houses, cars, or for business reasons. The loan officers must analyze these requests to decide which applicants would be successful.a. How does the process of evaluating a loan request
In the United States, no universal health-care system, comparable to those in Canada, the United Kingdom and Europe, exists. US businesses often provide health insurance for their employees, but have found that doing so has become increasingly costly. One approach to contain these costs is the use
First Union Corporation in the United States uses ‘Einstein,’ an in-house computer program, to rank customers based on their profitability. ‘Profitable’ customers keep several thousand dollars in their accounts, use bank clerks less than once a month, and rarely make calls to the bank’s
Your company makes computer mouse pads. The mouse pads are popular gift items due to their registered use of sports team logos. The annual fixed costs of the mouse pads are \($50,000\) and the variable costs per unit are \($1.\) The company president has asked you to choose a price for the mouse
For each of the companies listed as follows, identify whether its competitive strategy is:a. innovative product/service designb. high-quality products and servicesc. low-cost production.i. Apple Computer Inc.ii. ALDI iii. Dell Computer Inc.iv. Shell Service Stations v. InterContinental Hotels vi.
Scoop’s Ice Cream is a small company that makes its own premium ice cream and sells ice cream cones and cartons of ice cream in a retail space of the establishment. The company has been known for its 23 flavors of ice cream. The owner of Scoop’s, however, is thinking of adding a twenty-fourth
Avanti Airlines is attempting to estimate the direct cost of flying a passenger from Bologna, Italy to Bordeaux, France. The estimation of direct costs is the initial step in determining a new pricing strategy for the firm. A careful examination of operations, however, indicates that very few costs
Describe the following activities as unit-level, batch-level, product-level, or facility level.a. Sending truck shipments of products to customers.b. Providing computer networking processing services for the office.c. Operating a machine to make products.d. Setting up machines to make different
Are each of the following statements true or false?a. ______ ABC is likely to benefit multi-product firms more than single product firms.b. ______ A move from a single unit-based cost driver to ABC is likely to shift overhead from low-volume products to high-volume products.c. ______ ABC improves
A railroad company is trying to decide how to charge its customers for carrying freight.A manager suggests the following would be a good measure upon which to base the price of transporting freight: multiply the weight in kilograms times the distance travelled in kilometers.a. What types of
Japan Airlines Group (JAL) announced a medium-term business plan with a focus on product competitiveness. Included in the plan were a decrease in the number of large aircraft, especially on international routes, and a reduction in aircraft types and cabin configurations. In the longer term, JAL
In Britain, the Municipality of Progress is considering a reimbursement fee to recover costs of its Fire Authority in cases where the local court finds the parties responsible for the fire guilty of gross negligence. If the program is successful, the municipality may extend the program to all
A fast-food restaurant is trying to determine the cost of its two services: counter service/eat-in and drive-through/take-out. Describe the typical activities associated with a fast-food restaurant.Which activities are common to both services and which activities are only related to one service?
Applegate Farms is currently selling 100 dozen eggs monthly to the Jiffy Super Market for \($0.50\) per dozen. The manager at Applegate Farms estimates that the cost of feeding and caring for the chickens and collecting the eggs is \($0.30\) per dozen. Applegate Farms makes four deliveries a month
The Benson Shoe Company makes 100,000 pairs of sandals each year. The company has fixed costs of \($200,000\) per year and variable costs of \($10\) per pair of sandals. The company would like to have earnings 20 percent greater than total costs.What price should the company charge?
WireOne makes mobile telephones. It currently has plans to manufacture the AZZ01 model. By redesigning the case at a cost of £95,000, it estimates that it can cut the repair cost of warranty work by half when defective units are returned. WireOne expects to sell 300,000 AZZ01s in the first year.
Along with its existing models of mobile telephones, WireOne currently has plans to manufacture the TEL99 model. By redesigning the telephone’s motherboard at a cost of £495,000, WireOne estimates that it can cut the telephone’s production cost by £0.72 per unit when defective telephones are
Based on customer demand and competition, an auto manufacturer has decided to offer a 100,000-kilometer warranty on all parts. Using current parts and production standards, the warranty will cost the company €100 million per year. Using parts that last longer will cost €40 million per year more
Precision Timepieces has identified customers who would be willing to buy stopwatches with specific characteristics for £20 apiece. Precision wants a 20 percent profit margin on anything that it makes and sells.What is the target cost to achieve the 20 percent profit margin on the stopwatches?
Alpaca Products imports Peruvian sweaters and sells them wholesale. Lidla is a large retailer with 50 different warehouse stores across Europe. Alpaca normally purchases sweaters for €5 each and ships them via boat to Amsterdam for €0.50 apiece. Alpaca normally sells the sweaters for €10
Warpco has asked for bids for making 1,000 mechanical arms. The Hand Company has offered to supply them for \($10\) each and the Elbow Company has offered to supply them for \($11\) apiece. If Warpco accepts the Hand Company offer, Warpco will have to send a manager to Hand Company at a cost of
A nursery has the choice of planting trees in the ground or in pots prior to sale. The pots cost \($5\) each and potted trees must be watered 100 times per year. Trees that are planted in the ground must be watered 25 times per year. Each watering costs \($0.05\) in water and labor. When sold, the
The Xeron Computer Company is considering a design change that would reduce the weight of its high-end desktop computer by 2 kilograms. This design change would cost \($300,000\) to implement for all computers sold. The cost saving from this change is the reduced shipping cost. The company expects
A bank generates cash to make car and motorcycle loans by selling fixed-rate savings bonds. One-year savings bonds are sold in denominations of \($1,000,\) \($10,000,\) and\($100,000.\) The processing cost of selling savings bonds is \($50\) for all denominations.What interest rate should the bank
John Jitters, owner of the Virtual Buzz Coffee House, has a dilemma. Many customers have expressed disappointment that the Virtual Buzz does not serve espresso hot chocolate. Currently, Virtual Buzz serves both espresso and hot chocolate separately, but not together. The espresso sells for
Euromaster Artworks buys and sells paintings. During March, the company had the following paintings (with their costs) in inventory. Some of the paintings have been sold and the sales price is also reported.Euromaster Artworks also has the following period costs during March: rent,
Southwestern Bank provides house loans for the region. Customers seeking a loan to buy a house initially talk to a loan officer who gathers the appropriate information about the customers. The bank then hires a local appraiser to evaluate the home being purchased. The customer and appraisal
A car repair shop applies overhead to different service jobs using direct labor hours.The manager estimates that total indirect costs will be \($30,000\) and total direct labor hours will be 2,000.a. What is the application rate for indirect costs?b. If a service job requires five direct labor
Collins Sheet Metal Shop is considering adding a metal dry box for rafts to its product mix. The metal box requires 20 square meters of 0.35 cm. aluminum. The cost of the aluminum sheet metal is £5 per square meter. Direct labor on the box is estimated to be five hours at £10/hour. The following
A tennis racquet manufacturer makes several kinds of tennis racquets. At the start of the year, the manufacturer estimates overhead to be equal to €4 million. The overhead is applied to tennis racquets based on direct labor dollars, which are estimated to be €2 million in the coming year.
A manufacturing firm has the following expected overhead costs, cost drivers, and expected cost-driver usage:What is the indirect cost of a product that uses 100 direct labor hours and requires five batches to make 100 units? Overhead Item President's salary Personnel dept. Machine set-ups Cost
Your company, Day-Glo Painting, has just finished its first year of operation. During the first year of operation, you painted the exterior of 20 houses in pink with purple trim. Although the first few homeowners were unsure about the colors and threatened to sue the company, the pink and purple
Neptune Corporation is planning on making 1,000 units of toy planets. The planets use\($1\) of raw materials per unit and 10 minutes of direct labor at \($12\) per hour. The manufacture of the 1,000 planets also uses the following overhead cost drivers:a. Describe each of the cost drivers as
A road contractor has been using kilometers of road constructed as a cost driver. Based on last year’s costs, he estimates that he can build a mile of road for \($3\) million. The county has recently asked him for an estimate to build 20 kilometers of road.Before making his bid based on his
During the last 10 months, the Arcade Corporation has had the following indirect costs.The Arcade Corporation is trying to determine a good cost driver for the indirect costs.The usage of two potential cost drivers, direct labor hours and machine hours, has also been recorded over the last 10
GMPK treats its administrative support group as an indirect cost for its three major services: auditing, tax, and consulting. The estimated costs of the administrative support group are €300,000 for the year. The firm is considering the following cost drivers with the corresponding usage by each
Dellana Lab operates four blood testing labs in Boston. The four labs are identical. They employ the same production technology, process the same types of blood tests, and buy raw materials from the same companies at the same prices. Wage rates are also the same at the four labs. In reviewing
A large public accounting firm, reporting findings of a survey on corporate directors’compensation, remarked, “Since there are usually greater growth rates in smaller companies, share options offer directors a good chance at investment appreciation at no cost to the company.”A share option
Increased demand, security fears, depleted oil reserves, and production cut-backs all contributed to an increase in the world price of crude oil. In 2012, for example, the market price was close to \($130\) per barrel for UK-traded Brent crude. The market price in 2008 had been around \($70\) per
Indurin Company manufactures Syndex, a popular drug for headaches. Recently, Indurin has been subject to increased competitive pressure as other pharmaceutical firms have developed and marketed new products. The president of Indurin is considering the introduction of Syndex Plus. Syndex Plus will
The Itagi Computer Company based in Japan is looking to build an integrated circuit manufacturing facility in the US. Itagi Computer is concerned about the safety and well-being of its employees and wants to locate in a community with good schools. The company also wants the manufacturing plant to
The UK National Audit Office has costed recent peacekeeping and military operations by the UK military in other countries. The calculation is based on the cost of paying and supplying personnel, movement of material and personnel to the problem area, depreciation on equipment, and armaments used.
Maverick Productions organizes rock concerts. Last year, the company rented the local sports arena for a rock concert that included the Rolling Rocks. The concert was a big success and Maverick Productions made $150,000 on the concert. This year, Maverick Productions is planning to bring the
A Blu-ray disk manufacturer feels that he needs better information on the quality of disks that the plant is producing. He is considering purchasing a scanning machine that would identify defects in the Blu-ray disks as they are being produced. The scanner would have to be operated full time by an
The city water department is responsible for supplying water to the city. Water is pumped from deep wells to reservoirs, chlorine is added, and the water is piped to the different customers in the city. The pumps only operate when the reservoirs decline to a certain level. The reservoirs are
The department of accounting of the University of New North Wales is responsible for teaching the accounting classes at the university. The accounting department is analyzing what it does. The purpose of the analysis is to operate more efficiently and allocate responsibilities among the professors.
A business consulting firm has recently begun to construct interactive web pages for 10 of its clients. The consulting firm foresees considerable future demand for website and webpage construction, but is uncertain whether it can compete in this area. To compete successfully, the consulting firm
The Fantastic Software Company offers customer support to users of its software via the telephone and online. The telephone service is located in one room, with space and telephone lines for five service representatives, who provide advice and technical support over the telephone. Each
A recent news story described how an employee at Boston University no longer worries about the cost of sending his two children to college because his employer picks up the tab. Moreover, this perquisite is even better than it first appears, because it is tax free. He estimates he would have to
A grocery retailer is deciding how to use a particular space in the store. One option is to lease a freezer to put in the space and sell a variety of ice cream treats. The ice cream treats should generate annual revenues of \($10,000\) but will reduce revenues from other ice cream sales by
Yorkshire Ltd has a cafeteria for its employees. The cafeteria requires fixed costs of £4,700 per month and variable costs of 40 percent of sales. Cafeteria sales are currently averaging £12,000 per month. Yorkshire can replace the cafeteria with vending machines. Gross customer spending at the
A Munich hardware store is considering opening on Sunday. The differential cost of paying for salespeople and utilities is €1,000 per Sunday. Sales on Sunday are expected to be €10,000. The sales price of an item is determined by taking the purchase price of the item and adding 20 percent.a. If
The Indo Corporation is considering leasing a private jet to fly between the corporate offices in Copenhagen, Denmark and the firm’s main plant in Lisbon, Portugal. The commercial carrier has one flight leaving Copenhagen each morning and one returning flight departing Lisbon in the afternoon.
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