Questions and Answers of Managerial Accounting 4th Edition

Assume that we tour Apple’s factory where it makes iPhones. List three direct costs and three indirect costs that we are likely to see. List several examples of nonmanufacturing costs.
List several examples of nonmanufacturing costs.
Many companies use direct labor cost to apply factory overhead to jobs. Identify another activity base a company might use to apply overhead costs.
Distinguish between a receiving report and a materials requisition.
What is cost-plus pricing?
Can services be provided through process operations? Support your answer with an example.
List four ways managers can use process cost information.
Do process costing systems use multiple Factory Overhead accounts?
How does a process manufacturer compute the cost of a completed unit?
Assume Samsung uses activity-based costing to allocate customer support costs to products. For two of its laptop models, assume the company reports the data below. The Galaxy Book S sells for $1,000
Assume Apple uses activity-based costing to allocate customer support costs to products. For a MacBook Pro model, assume Apple budgets annual customer support costs of $850,000. Also assume Apple
Assume Google and Apple use activity-based costing to allocate customer support costs to products. For a similar laptop model, assume the companies report the following information. Required 1.
How could a production cost report be used to determine if a program to reduce water usage is successful?
What is a cost object?
Which overhead allocation methods can be used for external reporting?
What is an activity cost driver?
What are value-added activities?
Throughout the chapter the budget preparation process was illustrated with detailed budgets for baseball pants. Using information in the text and Exhibits 5.5, 5.6 and 5.8, prepare a detailed
Carson Construction Consultants performs cement core tests in its Greenville laboratory. The following standard cost for the tests have been developed by the company's controllers Landon
Define the term segment margin.
Lybrand Company is a leading manufacturer of sunglasses. One of Lybrand’s products protects the eyes from ultraviolet rays. An upscale sporting goods store has contacted Lybrand about purchasing
Whirlwind Indus tries is a multiproduct company with several manufacturing plants. The Brownwood Plant manufactures and distributes two carpet cleaning products, Household and Commercial, under the
Decision Carter Electronics manufactures several hand-held battery-operated devices. To maintain quality. Carter has always manufactured its own batteries. However, after reviewing the number of
Ridley and Scott Mercantile operates two stores, one on Maple Avenue and the other on Fenner Road. Results for the month of May, which is rep resentative of all months, are as follows:The following
Capital Toys’ management is considering eliminating product A, which has been showing a loss for several years. The company’s annual income statement, in S000s, is as follows:Requireda. Restate
PlayTime, Inc., is a leading manufacturer of sporting equipment. The company is in the process of evaluating the best use of its Plastics Division, which is currently manufacturing molded fishing
Susan Shi owns TestTutor, an educational tutoring center in Greenville, South Carolina. The center offers private tutoring in math, writing, and science. Information about the tutoring sessions is as
Marwick Innovations, Inc. produces exercise and fitness gear. Two of its newer products require a finishing process that can only be completed on machines that were recently purchased for this
Elizabeth Lee is a top seller on eBay. In fact, her business has grown so large that she can no longer manage her items on eBay’s website and ship her products to the auction winners in a timely
Benson ProSystems needs a new signal conditioner module for a large process control system it is designing. Current market conditions will support annual sales of 2,000 systems. Engineers estimate
Klump Trekkers, Inc., manufactures engines that are used in recreational equipment, such as motorcycles and personal watercraft. The company currently assembles the camshafts for these motors in its
Guilford Packaging Company is a leading manufacturer of card board boxes and other product packaging solutions. One of the company’s major product lines is custom-printed cake boxes that are sold
Liv Herrera, an up-and-coming fashion designer, created a new line of men’s fashion socks in response to the growing number of celebrities who are expressing their individuality by replacing
Physical Phitness, Inc. operates three divisions, Weak, Average, and Strong. As it turns out, the Weak division has the lowest operating income, and the president wants to close it. “Survival of
Wendy’s Wind Toys manufactures decorative kites, banners, and windsocks. During the month of January, Wendy received orders for 3,000 Valentine’s Day banners and 1,200 Easter kites. Because
Umbrella Co. is considering the introduction of three new products. Per unit sales and cost information are as follows:The company has only 1,500 direct labor hours available to commit to production
Merit Bay Communications operates a customer call center that handles billing inquiries for several large insurance firms. Since the center is located on the outskirts of town, where there are no
Madison Ironworks made 400 defective units last month. Fortunately, the units were identified as defective before they were sold to customers. They are currently included in Madison’s ending
How should managers determine the best way to allocate constrained resources among products or operations?
What information needs to be evaluated in an outsourcing arrangement?
If a business continually has the capacity to accept special orders, what should managers consider?
Define the terms avoidable and unavoidable in the context of decision making. Provide a decision scenario and identify the avoidable and unavoidable costs.
Cherry, Inc., currently has a machine that costs $50,000 per year to operate. The machine can produce 60,000 units per year. Two years ago the company borrowed $450,000 to purchase the machine; it
What event or series of events often motivates managers to consider eliminating an operation or product line?
What are some limited resources that can constrain business operations?
What kinds of processes or inputs can be outsourced?
Why might a business be willing to sell a product or service for an amount that is lower than the normal price?
What two criteria must information meet to be considered relevant for decision making?
Handy Fabricators is exploring adoption of an activity-based costing system. In a first step towards implementation the company identified four cost pools—fabricating, assembly, quality control,
Highland Manufacturing produces two products in its Saratoga plant, baizene and galvene. Since it opened its doors in 1965, Highland has been using a single manufacturing overhead pca1 to accumulate
Elliot-Jones manufactures two large-screen television models. The 65-inch flat-panel LED model has been in production since 2012 and sells for $900. The company introduced a 55-inch 4K ultra HD in
Santamaria Skiffs manufactures three models of speedboats—Superior, Deluxe, and Ultra—which are sold through marine retail stores. Budgeted information for the coming year is as
Lancaster Orthopedics specializes in hip, knee, and shoulder replacement surgery. In addition to the actual surgery, the company provides its patients with preoperative and postoperative inpatient
Refer to the information about Voss Visuals in Problem 7.20. Voss’s managers have gathered the following information about selling and administrative costs.Requireda. Using the information given
Ellis Perry is an electronics components manufacturer. Information about the company’s two products follows:The company incurs $840,000 in overhead per year and has traditionally applied overhead
In July2007, the U.S. Postal Service altered its pricing strategy based on the results of an activity-based costing analysis. Specifically, the new rates were designed to encourage customers to use
Jay Krue makes two products, Simple and Complex. As their names suggest, Simple is the more basic product, and Complex comes with all the bells and whistles. The company has always allocated overhead
Refer to the data in exercise 7.7. Eric Parker is taking the next step in his exploration of activity-based costing and wants to examine the overhead costs that would be allocated to two of the
Preston Plastics approved several capital projects in a previous budgeting cycle. Three years later, the company conducted a capital budgeting audit to determine how well managers were estimating
Oglesby Service Corporation has three divisions that are treated as profit centers. The Printing division provides services to the other two divisions, as well as to external customers. In the middle
The following statement of cash flows is adapted from Shanteza, Inc.’s 2020 annual report. Amounts are shown in millions of dollars.RequiredAnalyze Shanteza’s statement of cash flows by making at
Which of the two methods of calculating cash flows is preferred by the Financial Accounting Standards Board? Which of the two methods is more popular in practice?
Baldwin Industries, a manufacturer of construction equipment, is considering the purchase of KayNet Cables, one of its suppliers. Baldwin’s board of directors has given preliminary approval for the
Foster Fabricators prepared the following balance sheet in preparing a loan application.RequiredPrepare a common-size balance sheet for each fiscal year, rounding all percentages to one decimal
What could cause a company’s current ratio to be high but its acid-test ratio to be low?
Peterson Papers makes personalized stationery of the highest quality. The company maintains a stock of blank note cards, calling cards, stationery, and envelopes. Customers order online, indicating
What are key performance indicators? How does a company decide which performance indicators are the key indicators?
What is a lagging indicator of performance? What is a leading indicator of performance? Provide some examples of each.
Mims Corporation recently announced a bonus plan to reward the manager of its most profitable division. The three divisional managers are to decide which performance measure will be used to evaluate
What two ratios can be multiplied to calculate ROI? Define those ratios.
What is segment margin? How is it calculated?
What is residual income? How is it calculated?
What are capital assets?
In 2018 Yum! Brands, Inc., the world’s largest quick-service restaurant company (Pizza Hut, Kentucky Fried Chicken, and Taco Bell), opened 1,108 new Pizza Hut restaurants and closed 708
Elroy Racers makes bicycles. It has always purchased its bicycle tires from the M. Wilson Tires at $25 each but is currently considering making the tires in its own factory. The estimated costs per
The Outland Company manufactures 5,000 units of a part that could be purchased from an outside supplier for $16 each. Outland’s costs to manufacture each part are as follows:Direct materials
What are some ways a bottleneck can be alleviated?
Freeman Corporation has the excess manufacturing capacity to fill a special order from Nash, Inc. Using Freeman’s normal costing process, variable costs of the special order would be $27,500 and
If a product has a positive segment margin but isn’t as profitable as other products, what should managers do?
What is the minimum price that a business could charge for a special order and not lose money on the order?
What is an allocated cost? What happens to allocated costs if one of the cost objects (operations, products) is eliminated?
How does customer demand affect the allocation of constrained resources?
What is an opportunity cost? How does it relate to an outsourcing decision?
How should a company that is operating at capacity decide whether to accept a special order?
What is a sunk cost? Could sunk costs ever be informative?
Wieters Industries manufactures several products including a basic case for a popular smartphone. The company is considering adopting an activity-based costing approach for setting its budget. The
Place an X in the columns to indicate whether each of the following activities would be included in a bank’s customer profitability analysis. Included Not included a. Opening a bank account b.
Eric Parker has been studying his department’s profitability reports for the past six months. He has just completed a managerial accounting course and is beginning to question the company’s
When a company switches from a traditional costing system to activity based costing, overhead costs typically shift from the high-volume/low complexity product to the low-volume/high-complexity
Why might a company decide to keep a customer who is unprofitable?
Smith Machining makes three products. The company’s annual budget includes $1200,000 of overhead. In the past, the company allocated overhead based on expected capacity of 40,000 direct labor
What does using a “traditional” costing system mean in terms of overhead costs?
What can a company do if it has identified customers who are unprofitable?
Pletzke Company manufactures dental instruments. The company’s product line includes products as simple as dental picks and products as complex as panoramic x-ray machines. Carol Lindquist, a
Raising the selling price of a product that is unprofitable based on activity-based costs is not always a good idea. What do managers need to evaluate before taking such an action?
Why are organization-level costs not allocated to products under activity-based costing?
Give an example of customers who tend to drive up a company’s costs. Explain.
How does activity-based management allow managers to use information about activities to improve operations?
How are product costs determined in an activity-based costing system?
How do non-value-added activities affect product costs?

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