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business
managerial accounting 17th
Managerial Accounting 17th Edition Ray Garrison, Eric Noreen, Peter Brewer - Solutions
For the year just completed, Hanna Company had net income of $35,000. Balances in the company’s current asset and current liability accounts at the beginning and end of the year were as follows:The Accumulated Depreciation account had total credits of $20,000 during the year. Hanna Company did
Below are certain events that took place at Hazzard, Inc., last year:a. Collected cash from customers.b. Paid cash to repurchase its own stock.c. Borrowed money from a creditor.d. Paid suppliers for inventory purchases.e. Repaid the principal amount of a debt.f. Paid interest to lenders.g. Paid a
Matheson Electronics has just developed a new electronic device it believes will have broad market appeal. The company has performed marketing and cost studies that revealed the following information:a. New equipment would have to be acquired to produce the device. The equipment would cost $315,000
Linda Clark received $175,000 from her mother’s estate. She placed the funds into the hands of a broker, who purchased the following securities on Linda’s behalf:a. Common stock was purchased at a cost of $95,000. The stock paid no dividends, but it was sold for $160,000 at the end of three
“I’m not sure we should lay out $250,000 for that automated welding machine,” said Jim Alder, president of the Superior Equipment Company. “That’s a lot of money, and it would cost us $80,000 for software and installation, and another $36,000 per year just to maintain the thing. In
Henrie’s Drapery Service is investigating the purchase of a new machine for cleaning and blocking drapes. The machine would cost $137,320, including freight and installation. Henrie’s estimated the new machine would increase the company’s cash inflows, net of expenses, by $40,000 per year.
What is net present value? Can it ever be negative? Explain.
What is meant by the term discounting?
“In my opinion, we ought to stop making our own drums and accept that outside supplier’s offer,” said Wim Niewindt, managing director of Antilles Refining, N.V., of Aruba. “At a price of $18 per drum, we would be paying $5.20 less than it costs us to manufacture the drums in our own plant.
Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 30,000 Rets per year. Costs associated with this level of production and sales are given below:The Rets normally sell for $50 each. Fixed manufacturing overhead is $270,000
Jackson County Senior Services is a nonprofit organization devoted to providing essential services to seniors who live in their own homes within the Jackson County area. Three services are provided for seniors—home nursing, Meals On Wheels, and housekeeping. Data on revenue and expenses for the
Han Products manufactures 30,000 units of part S-6 each year for use on its production line. At this level of activity, the cost per unit for part S-6 is:Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3.60Direct labor . . . . . . . . . . . . .
How does opportunity cost enter into a make or buy decision?
Wilderness Products, Inc., has designed a self-inflating sleeping pad for use by backpackers and campers. The following information is available about the new product:a. An investment of $1,350,000 will be necessary to carry inventories and accounts receivable and to purchase some new equipment
“If a product is generating a loss, then it should be discontinued.” Do you agree? Explain.
“Variable costs and differential costs mean the same thing.” Do you agree? Explain.
Shimada Products Corporation of Japan plans to introduce a new electronic component to the market at a target selling price of $15 per unit. The company is investing $5,000,000 to purchase the equipment it needs to produce and sell 300,000 units per year. Its required rate of return on all
Are variable costs always relevant costs? Explain.
What is a relevant cost?
Ariel Tax Services prepares tax returns for individual and corporate clients. As the company has gradually expanded to 10 offices, the founder Max Jacobs has begun to feel as though he is losing control of operations. In response to this concern, he has decided to implement a performance
Kilmer Company has demand for its only product that exceeds its manufacturing capacity. The company provided the following information for the machine whose limited capacity is prohibiting the company from producing and selling additional units.Actual run time this week . . . . . . . . . . . . . .
The table shown below contains three performance measures for each of the four perspectives of the balanced scorecard.
The table shown below contains a variety of performance measures that companies might use as internal business process measures in their balanced scorecards. Each measure is accompanied by a + or − to indicate whether the performance measure should increase or decrease over time.Required:For each
Why do companies measure their corporate social responsibility performance?
The table shown below contains four performance measures for four different companies. Each set of performance measures contains one measure for each of the four perspectives of the balanced scorecard.Required:1. For each of companies A, B, C, and D:a. Label each of the four measures as relating to
Why should companies link their balanced scorecard measures to their employee reward systems?
Walton Company has measured its quality costs for the past two years. After the company gathers its quality cost data, it summarizes those costs using the four categories shown below:Required:1. Calculate the total cost of quality last year and this year.2. For last year, calculate the cost in each
The table shown below contains five measures under the column heading If and five measures under the column heading Then.Required:1. For each row in the table, write an if-then hypothesis statement that connects the two measures. Be sure to indicate whether each measure is expected to increase or
Why should the measures included in a balanced scorecard be linked together in the form of if-then hypothesis statements?
Askew Company is interested in adopting the balanced scorecard. As a first step, the company just completed a brainstorming activity to define areas where it needs to improve with respect to learning and growth, internal business process performance, customer satisfaction, and financial results.
Jefferson Company’s demand for its only product exceeds its manufacturing capacity. The company provided the following information for the machine whose limited capacity is prohibiting the company from producing and selling additional units.Actual run time this week . . . . . . . . . . . . . . .
What is the difference between delivery cycle time and throughput time? What four elements make up throughput time? What elements of throughput time are value-added and what elements are non-value added?
What are the four types of costs summarized in a quality cost report? How do companies generally seek to lower their cost of quality?
What are the four categories of measures in a balanced scorecard?
What is a budget? What is budgetary control?
High Desert Pottery works makes a variety of pottery products that it sells to retailers. The company uses a job-order costing system in which departmental predetermined overhead rates are used to apply manufacturing overhead cost to jobs. The predetermined overhead rate in the Molding Department
What are the three major types of product costs in a manufacturing company?
Define the following:(a) Direct materials(b) Indirect materials(c) Direct labor(d) Indirect labor(e) Manufacturing overhead.
Distinguish between(a) A variable cost(b) A fixed cost(c) A mixed cost.
Northeast Hospital’s Radiology Department is considering replacing an old inefficient X-ray machine with a state-of-the-art digital X-ray machine. The new machine would provide higher quality X-rays in less time and at a lower cost per X-ray. It would also require less power and would use a color
What effect does an increase in the activity level have on—a. Average fixed costs per unit?b. Variable costs per unit?c. Total fixed costs?d. Total variable costs?
Define the following terms:(a) Cost behavior(b) Relevant range
The Devon Motor Company produces automobiles. On April 1st the company had no beginning inventories and it purchased 8,000 batteries at a cost of $80 per battery. It withdrew 7,600 batteries from the storeroom during the month. Of these, 100 were used to replace batteries in cars being used by the
What is the contribution margin?
Define the following terms: differential cost, sunk cost, and opportunity cost.
Wollogong Group Ltd. of New South Wales, Australia, acquired its factory building 10 years ago. For several years, the company has rented out a small annex attached to the rear of the building for $30,000 per year. The renter’s lease will expire soon, and rather than renewing the lease, the
The Alpine House, Inc., is a large retailer of snow skis. The company assembled the information shown below for the quarter ended March 31:
Below are listed various costs that are found in organizations.1. Hamburger buns in a Wendy’s restaurant.2. Advertising by a dental office.3. Apples processed and canned by Del Monte.4. Shipping canned apples from a Del Monte plant to customers.5. Insurance on a Bausch & Lomb factory
The following cost data pertain to the operations of Montgomery Department Stores, Inc., for the month of July.Corporate legal office salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $56,000Apparel Department cost of sales—Evendale Store . . . . . . . . . . . .
Marwick’s Pianos, Inc., purchases pianos from a large manufacturer for an average cost of $2,450 per unit and then sells them to retail customers for an average price of $3,125 each. The company’s selling and administrative costs for a typical month are presented below:Costs . . . . . . . . . .
The Dorilane Company produces a set of wood patio furniture consisting of a table and four chairs. The company has enough customer demand to justify producing its full capacity of 2,000 sets per year. Annual cost data at full capacity follow:Direct labor . . . . . . . . . . . . . . . . . . . . . .
What is job-order costing?
This Excel worksheet relates to the Dickson Company example that is summarized in Exhibit 2–5. The workbook, and instructions on how to complete the file, can be found in Connect.You should proceed to the requirements below only after completing your worksheet.Required:1. Check your worksheet by
Wixis Cabinets makes custom wooden cabinets for high-end stereo systems from specialty woods. The company uses a job-order costing system. The capacity of the plant is determined by the capacity of its constraint, which is time on the automated bandsaw that makes finely beveled cuts in wood
What is absorption costing?
Security Pension Services helps clients to set up and administer pension plans that are in compliance with tax laws and regulatory requirements. The firm uses a job order costing system in which overhead is applied to clients’ accounts on the basis of professional staff hours charged to the
What is normal costing?
Platinum Web Services designs and maintains websites for small business entrepreneurs. Competition has been intensifying in recent years and the company has been losing business to larger web design firms. Summary data concerning the last two years of operations follow:The company applies its
Pat Miranda, the new controller of Vault Hard Drives, Inc., has just returned from a seminar on the choice of the activity level in the predetermined overhead rate. Even though the subject did not sound exciting at first, she found that there were some important ideas presented that should get a
Siegel Company manufactures a product that is available in both a deluxe model and a regular model. The company has manufactured the regular model for years. The deluxe model was introduced several years ago to tap a new segment of the market. Since introduction of the deluxe model, the company’s
Java Source, Inc., (JSI) buys coffee beans from around the world and roasts, blends, and packages them for resale. Some of JSI’s coffees are very popular and sell in large volumes, while a few of the newer blends sell in very low volumes. JSI prices its coffees at manufacturing cost plus a markup
Hahn Company uses a job-order costing system. Its plantwide predetermined overhead rate uses direct labor-hours as the allocation base. The company pays its direct laborers $15 per hour. During the year, the company started and completed only two jobs—Job Alpha, which used 54,500 direct
Sigma Corporation applies overhead cost to jobs on the basis of direct labor cost. Job V, which was started and completed during the current period, shows charges of $5,000 for direct materials, $8,000 for direct labor, and $6,000 for overhead on its job cost sheet. Job W, which is still in process
Kingsport Containers Company makes a single product that is subject to wide seasonal variations in demand. The company uses a job-order costing system and computes plantwide predetermined overhead rates on a quarterly basis using the number of units to be produced as the allocation base. Its
Osborn Manufacturing uses a predetermined overhead rate of $18.20 per direct labor-hour. This predetermined rate was based on a cost formula that estimates $218,400 of total manufacturing overhead for an estimated activity level of 12,000 direct labor-hours.The company actually incurred $215,000 of
What is underapplied overhead? Overapplied overhead?
“Blast it!” said David Wilson, president of Teledex Company. “We’ve just lost the bid on the Koopers job by $2,000. It seems we’re either too high to get the job or too low to make any money on half the jobs we bid.”Teledex Company manufactures products to customers’ specifications
Larned Corporation recorded the following transactions for the just completed month.a. $80,000 in raw materials were purchased on account.b. $71,000 in raw materials were used in production. Of this amount, $62,000 was for direct materials and the remainder was for indirect materials.c. Total labor
Primare Corporation has provided the following data concerning last month’s manufacturing operations.Purchases of raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $30,000Indirect materials used in production . . . . . . . . . . . . . . . . . . . . . . . . .
How do you compute the cost of goods manufactured?
Supreme Videos, Inc., produces short musical videos for sale to retail outlets. The company’s balance sheet accounts as of January 1, are given below.Because the videos differ in length and in complexity of production, the company uses a job-order costing system to determine the cost of each
In what ways are job-order and process costing similar?
Assume that a company has two processing departments—Mixing followed by Firing. Prepare a journal entry to show a transfer of work in process from the Mixing Department to the Firing Department.
Woodbury Hospital has three service departments and three operating departments. Estimated cost and operating data for all departments in the hospital for the forthcoming quarter are presented in the table below:The costs of the service departments are allocated by the step-down method using the
Builder Products, Inc., uses the weighted-average method in its process costing system. It manufactures a caulking compound that goes through three processing stages prior to completion. Information on work in the first department, Cooking, is given below for May:Required:1. Compute the equivalent
Lubricants, Inc., produces a special kind of grease that is widely used by race car drivers. The grease is produced in two processing departments—Refining and Blending. Raw materials are introduced at various points in the Refining Department. The following incomplete Work in Process account is
Cooperative San José of southern Sonora state in Mexico makes a unique syrup using cane sugar and local herbs. The syrup is sold in small bottles and is prized as a flavoring for drinks and for use in desserts. The bottles are sold for $12 each. The first stage in the production process is
What is the meaning of contribution margin ratio? How is this ratio useful in planning business operations?
What is the meaning of operating leverage?
What is the meaning of break-even point?
Last year Minden Company introduced a new product and sold 15,000 units of it at a price of $70 per unit. The product’s variable expenses are $40 per unit and its fixed expenses are $540,000 per year.Required:1. What was this product’s net operating income (loss) last year?2. What is the
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $20 per unit. Variable expenses are $8 per unit, and fixed expenses total $180,000 per year. Its operating results for last year were as follows:Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Shirt Works sells a large variety of tee shirts and sweatshirts. Steve Hooper, the owner, is thinking of expanding his sales by hiring high school students, on a commission basis, to sell sweatshirts bearing the name and mascot of the local high school.These sweatshirts would have to be ordered
Ida Company produces a handcrafted musical instrument called a gamelan that is similar to a xylophone. The gamelans are sold for $850. Selected data for the company’s operations last year follow:Units in beginning inventory . . . . . . . . . . . . . . . . . . . 0Units produced . . .
Refer to the data in Exercise 6–1 for Ida Company. The absorption costing income statement prepared by the company’s accountant for last year appears as shown:Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 191,250Cost of goods sold . . . . . . . . . . .
Piedmont Company segments its business into two regions—North and South. The company prepared the contribution format segmented income statement as shown below:Required:1. Compute the companywide break-even point in dollar sales.2. Compute the break-even point in dollar sales for the North
Lynch Company manufactures and sells a single product. The following costs were incurred during the company’s first year of operations:Variable costs per unit:Manufacturing:Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6Direct labor . . . . . . . . . . . . .
Wingate Company, a wholesale distributor of electronic equipment, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement:Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,000,000Variable
Sierra Company incurs the following costs to produce and sell its only product.Variable costs per unit:Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Raner, Harris & Chan is a consulting firm that specializes in information systems for medical and dental clinics. The firm has two offices—one in Chicago and one in Minneapolis. The firm classifies the direct costs of consulting jobs as variable costs. A contribution format segmented income
Refer to the data in Exercise 6–16. Assume that Minneapolis’ sales by major market are:The company would like to initiate an intensive advertising campaign in one of the two market segments during the next month. The campaign would cost $5,000. Marketing studies indicate that such a campaign
Should a company allocate its common fixed costs to business segments when computing the break-even point for those segments? Why?
During Heaton Company’s first two years of operations, it reported absorption costing net operating income as follows:The company’s $18 unit product cost is computed as follows:Production and cost data for the first two years of operations are:Required:1. Using variable costing, what is the
Tami Tyler opened Tami’s Creations, Inc., a small manufacturing company, at the beginning of the year. Getting the company through its first quarter of operations placed a considerable strain on Ms. Tyler’s personal finances. The following income statement for the first quarter was prepared by
Piedmont Fasteners Corporation makes three different clothing fasteners in its manufacturing facility in North Carolina. All three products are sold in highly competitive markets, so the company is unable to raise prices without losing an unacceptable numbers of customers. Data from the most recent
What are unit-level, batch-level, product-level, customer-level, and organization-sustaining activities?
Flash Express purchases USB flash drives from suppliers and then applies corporate logos to the exterior of those flash drives for its customers. The company maintains a dedicated piece of equipment for each type of product that is processes, such as “top hat” flash drives, credit card flash
Durban Metal Products, Ltd., of the Republic of South Africa makes specialty metal parts used in applications ranging from the cutting edges of bulldozer blades to replacement parts for Land Rovers. The company uses an activity-based costing system for internal decision-making purposes. The company
Fogerty Company makes two products—titanium Hubs and Sprockets. Data regarding the two products follow:Additional information about the company follows:a. Hubs require $32 in direct materials per unit, and Sprockets require $18.b. The direct labor wage rate is $15 per hour.c. Hubs require special
Discuss some of the major reasons why companies prepare budgets.
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