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managerial accounting 4th edition
Managerial Accounting 4th Edition Charles E. Davis, Elizabeth Davis - Solutions
In using the net present value method, what determines whether or not a project is acceptable?
How is the payback period calculated when a project’s annual cash flows are equal? When its annual cash flows are unequal?
What is the difference between return of investment and return on investment?
What happens to a project’s net present value if the discount rate is increased? If the discount rate is decreased?
How is the accounting rate of return calculated?
Margaret wants to buy a car when she graduates from Central University four years from now. She believes that she will need $40,000 to buy the car:Requireda. Calculate how much money Margaret must put into her savings account today to have $40,000 in four years, assuming she can earn 10% compounded
Astridis, Inc. reported the following statement of cash flows in its 2020 annual report. Amounts are shown in thousands of dollars.RequiredAnalyze Astridis’s statement of cash flows by making at least two observations about each section of the statement. Astridis, Inc. Statement of Cash Flows For
Blake Weaver, Cook Enterprises’ controller, is preparing the financial statements for 2020. He has completed the comparative balance sheets and income statement, which follow, and has gathered this additional information:On December 31, 2020, Cook sold a piece of equipment with an original cost
Kate Petusky prepared Addison Controls’ balance sheet and income statement for 2020. Before she could complete the statement of cash flows, she had to leave town to attend to a family emergency. Because the full set of statements must be provided to the auditors today, Addison’s president.
Classify each of the following items as a source or use of cash. If the item is a source or use of cash, then classify each item as a cash flow provided by an operating, investing, or financing activity. Type of Cash Flow Type of Activity Source Use Not a Cash Flow Operating Investing Financing 1.
Vincent Fairfield, CEO of MetroAir, sat at his desk., examining the company’s latest financial statements. “This just doesn’t make sense to me,” Vincent thought. “We’re reporting $1,662,015 in net income, yet our Cash balance decreased by over $350,000. With these results, I would think
How do you calculate customer net profit? Customer profit margin?
Wingo Widgets makes and sells widgets to individual and corporate customers. Widgets cost $4.25 to make and are sold for $6.00 each. Individual customers typically require little service beyond order processing. Because widgets don’t differ much from one producer to the next, corporate customers
Stoner Excursions offers several services to customers. Susan Stoner realizes that some customers use more services than others, so the company has conducted a customer profitability analysis that identified the following cost pools and activity drivers:Requireda. Calculate the activity rate for
Corley Communications performed a customer profitability analysis and obtained the following results for its bottom five customers:Chris Corley, vice president for marketing, believes that if these five customers are dropped, the selling expenses required to serve them will be eliminated. Company
Time Solutions, Inc. is an employment services firm that places both temporary and permanent workers with a variety of clients. Temporary placements account for 70% of Time Solutions’ revenue; permanent placements provide the remaining 30%. President Gia Johnson recently read an article that
After attending a seminar on measuring customer profitability, Mason Ford decided to examine Olson Optics’ customers to determine if the company truly knew how profitable its customers were.Olson Optics already uses an activity-based costing system to determine the product cost of its two
Ray Panneton, president of Okus Designs, met with his CFO and vice president of marketing to discuss the profitability of the company’s top 10 customers. These customers account for 80% of the company’s revenues. The following table was prepared by the accounting department to assist Ray in his
Water Movers, Inc. is known throughout the world for its H20-X high-capacity water pump, used in irrigation systems. The company uses a standard costing system, and the pump’s standard cost is as follows. The company’s predetermined fixed overhead rate is based on an expected capacity of
Washington WaterWorks manufactures snorkel gear. During the past month, Washington purchased 3,000 pounds of plastic to use in its dive masks, at a cost of $5,800. The standard price for the plastic is $1.80 per pound. The company actually used 2,900 pounds of the plastic to produce 10,000 dive
Phelps Gold manufactures award medals. W August, Phelps produced 4,500 medals, 300 more than expected. During the month, the company purchased 2,000 ounces of gold for 3190,000. The standard price for the gold is $350 per ounce. The company actually used 1,900 ounces of gold for
The following information is available for Claire's Delights:Actual production . . . . . . . . . . . 16,000 unitsBudgeted production . . . . . . . . . .
Shevlin Enterprises purchased 50,000 gallons of direct materials during the year at a price of $2.50 per gallon. Bennett's direct materials price variance was $2,000 FRequiredCalculate the standard price per gallon of direct materials.
POD Incansements manufactures protective cases for cell phones. Dosing November, the company's workers clocked 800 more direct labor hours than the flexble budget amount of 25,000 hours to complete 100,000 casts for the Christmas season. All workers were paid $9.25 per hour, which was $0.50 more
TechSolvers produces 5-foot 1166 cables. During the past year, the company purchased 230,000 feet of plastic-coated wire at a price 3$0.30 per foot. The direct materials standard for the cal4w alloy. 6 feet of wire at a standard price of $0.32. Timing the year, the company used a total of 260,000
Pelligrini, Inc. mattes high-quality swimsuits. During the year, the company produced NO suits, using 1,500 yards of material, and the company purchased 1,300 yards of material for $3,850. The direct materials standard for the swimsuits allows 1.5 yards of material at a standard price of $5 per
Levine Labs used 50,000 ounces of specimen adhesive during the year. The direct materials standard allows 2 ounces of adhesive at a price 451.10 per ounce for each pathology test. The direct materials quantity variance was $440 U.RequiredHow ma, pathology tests did Levine Labs complete during the
The following information is available for Talley Company: Production:Budgeted . . . . . . . . . 75,000 unitsActual . . . . . . . . . 76,000 unitsStandard
The following information is available for Chad's Chocolates:Actual production . . . . . . . . . . . . . . .
ImpressMe Products embosses. notebooks with school and corporate logos. Last year, the company's direct labor payroll to $461,280 for 50,200 direct labor hours. The standard wage rate is $9.25 per direct labor hour.RequiredCalculate ImpressMe's direct Labor rate variance.
Gerald/Brooke, Ltd., manufactures shirts, which it sells to customers for embossing with various slogans and emblems. The standard cost card for the shirts is as follows.The annual budgets were based on the production of 1,000,000 shirts, using 250,000 direct labor hours. Due to slight
Pochard Paints manufactures artist's oil paints. Each 40 ml tube of paint requires 6 minutes of direct labor, and the standard labor rate is $10.50 per direct labor hour. In September, Pochard incurred 11,900 direct labor hours at a cost of $125,400 to produce 122,000 tubes of
Faced with three young children who were always complaining “I’m bored,” Ann Newton looked for an interesting after-school activity. Finding nothing available in the community, she decided to solve her problem by renting an old bakery and turning it into Kiddie Kitchen.
Will Sanders is preparing the City of Summerville's budget for the coming quarter. For the past five years, the town has used the following payment pattern when preparing the cash payments budget: 30% of payments made in the month of purchase, 60% of payments made in the month after purchase, and
What is a direct labor rate variance?
What is a direct materials price variance?
Joseph A. Knab distributes men’s suits in the Southwest. The following information was gathered to prepare the budget for the third quarter.• Suits are budgeted to sell for an average price of $225. Unit sales are expected to be as follows: June 4,000 suits July 4,500
After preparing the budget for the second quarter based on the parameters in Case 5.38, Kim Klandon was not satisfied with the projected results and began to investigate the following alternatives. Each of the alternatives is independent of all others.a. Reducing the price of a bag of rocks to
Klandon Company manufactures decorative rocks for aquariums. Kim Klandon is preparing the budget for the quarter ended June 30. She has gathered the following information.1. Klandon’s sales manager reported that the company sold 15,000 bags of rocks in March. He has developed
Aaron Furniture builds high-end hand-made dining tables. Attacus Simmons, the company’s owner, has developed the following sales forecast for 2022.Because of the time needed to create each table, Aaron maintains an ending Finished Goods Inventory of 20% of the following quarter’s
Simmons Enterprises is a boutique guitar manufacturer. The company produces both acoustic and electric guitars for rising and established professional musicians. Vanessa Aaron, the company’s sales manager, prepared the following sales forecast for 2022. The forecasted sales prices include a
Bill Thomas, Bates & Hill’s controller, has received all the budgets prepared by the various operating units and is ready to compile the pro-forma financial statements for the first quarter. The company’s balance sheet as of December 31 is as follows:Cash
John Wills, Bates & Hill Fabricators’ budget director, has received budget information from several managers and is preparing the company’s cash budget. In addition to the information he received from these managers, John knows the following:Bates & Hill plans to have $32,400 in
Topper, Inc. prepared the following cash budget for the fourth quarter.RequiredFill in the missing amounts, assuming that Topper desires to maintain a $15,000 minimum monthly cash balance. Any required borrowings and repayments must be made in even increments of $1,000. October November
Joshua Hill, Bates & Hill Fabricators’ production manager, has just completed the company’s production budget (see Exercise 5.11) and manufacturing overhead budget (see Exercise 5.19) for the first quarter. He also has received the direct materials purchases budget (see Exercise 5.15)
Joshua Hill, Bates & Hill Fabricators’ production manager, has just completed the company’s production budget and direct labor budget for the first quarter. He has identified the following monthly expenses that will be needed to support the company’s manufacturing
Joshua Hill, Bates & Hill Fabricators’ production manager, has just completed the company’s production budget for the first quarter. Each brick requires 12 minutes to produce, and Joshua expects to pay workers $18 per direct labor hour in the coming year.RequiredPrepare Bates &
Rider Auto has developed the following production plan for its new auto part.Each unit contains four pounds of raw material. The desired raw materials ending inventory is 40% of the next month’s production needs, plus an additional 100 pounds. December’s ending inventory meets
High Flyers manufactures competition stunt kites. In November, Jerry Box prepared the following production budget for the first quarter of the coming year. Desired ending inventory is based on the following month’s budgeted sales.Following lower-than-expected sales in December, Jerry
Bates & Hill Fabricators’ marketing department has identified the following monthly expenses that will be needed to support the company’s sales and administrative functions. In addition to these monthly expenses, the company will pay a commission to its salespeople equal to 8%
Maverick Wings, Inc. manufactures airplanes for use in stunt shows. Maverick’s factory is highly automated, using the latest in robotic technology. To keep costs low, the company employs as few factory workers as possible. Since each plane has different features (such as its
Northcoast Manufacturing Company, a small manufacturer of appliance parts, has just completed its first year of operations. The company’s controller, Vic Trainor, has been reviewing the results for the year and is concerned about the application of factory overhead. Trainor is using the
Bates & Hill Fabricators produces commemorative bricks that organizations use for fundraising projects. Aaron Bates, the company’s vice president of marketing, has prepared the following sales forecast for the first six months of the coming year. The company plans to sell
Mama Fran’s Bakery makes a variety of home-style cookies for upscale restaurants in the Atlanta metropolitan area. The company’s best-selling cookie is the double chocolate almond supreme. Mama Fran’s recipe requires 20 ounces of a commercial cookie mix, 7 ounces of milk
What is a master budget? What are the component parts of the master budget, and how are those components related?
What is budgetary slack? Why is it an issue in budget preparation?
Mathis Music Stands manufactures decorative wooden music stands for discriminating musicians. Each completed music stand contains 3.5 board feet of American cherry wood. In the process of matching the wood grain and cutting decorative scrollwork, 1.25 board feet of wood are
How does a budget that is prepared using interim periods, such as quarters or months, provide additional information that is not available in a budget that reports the year’s final results?
What are the components of a product’s standard cost?
How does top-down budgeting differ from bottom-up budgeting? What are the advantages of each approach?
3. Why is an accurate sales forecast so important in budget preparation?
Why is it better to prepare monthly or quarterly cash budgets instead of annual cash budgets?
What is the difference between a standard price and a standard cost?
“Budgeting is needed only in large organizations. As a small business owner, I don’t need to waste time preparing a budget.” Do you agree with this statement? Why or why not?
Which financial statement is prepared last? Why is that the case?
2. List the components of the operating budget. How are the components of the operating budget related?
Why do companies set a minimum cash balance?
Explain the difference between ideal and practical standards. Which type of standard would you want to be evaluated against? Why?
Whose responsibility is it to set the budget?
Explain the relationship between the master budget and the pro-forma financial statements.
What is an operating budget?
Describe the components of the cash budget.
What is a standard? Give three examples of standards that were not discussed in this unit.
Why do organizations prepare budgets?
C&C Sports has determined the following unit costs for each of its products:On May 31, C&C Sports’ Work in Process Inventory consisted of the following items:During June, a total of $253,800 in direct materials and $123,380 in direct labor costs were incurred. Units finished
Mallet Music Company makes custom marimbas and xylophones. Since much of the work on these musical instruments is done by hand, the company uses direct labor hours as its manufacturing overhead application base. The company’s annual budgeted overhead costs for 40,000 direct labor
Lassen Artworks creates hand-painted picture frames. The frames are cast from resin in an automated process. Once the casting is done, talented artisans hand-paint one of fifteen designs on each frame. In the final assembly process, a worker inserts the glass pane and attaches the
ErgoFurn, Inc. manufactures ergonomically designed computer furniture. ErgoFurn uses a job order costing system. On November 30, the Work in Process Inventory consisted of the following jobs:On November 30, ErgoFurn’s Direct Materials Inventory account totaled $150,000, and its
E. Cain, Ltd. produces decorative lamps in several styles and finishes. The company uses a job order costing system to accumulate product costs. Because much of the production process is automated, E. Cain, Ltd. has selected machine hours as its overhead application base.In April, E. Cain,
Paladin Parabolics Company produces high-quality microscopes for education and health care uses. The company uses a job order costing system. Because the microscopes’ optics require significant manual labor to ensure adherence to strict manufacturing specifications, the company
Oberti Guitar Company makes high-quality customized guitars. Oberti uses a job order costing system. Because the guitars are handmade, the company applies overhead based on direct labor hours. At the beginning of the year, the company estimated that total manufacturing overhead costs would be
Of all the times this hard drive could crash, it had to be now,” Marcy cried. “How can I finish the June financial reports without all the information? I knew I should have backed up the disk last night before I left work.” News of the disaster traveled quickly through the office,
Revisit Exercise 4.14 about Drew Corp. If you have not already completed that exercise, do so before answering the following questions.Data from Exercise 4.14:Drew Corp. designs and manufactures mascot uniforms for high school, college, and professional sports teams. Since each team’s
Refer to the data in Exercise 4.12. At the end of the year, Rector Company had worked 245,000 direct labor hours, used 410,000 machine hours, and incurred $2,515,000 in manufacturing overhead.Data from Exercise 4.12:Rector Company manufactures a line of lightweight running shoes.
Venus Family Packaging is a privately owned business that has been in operation since the late 1800s. The business, which has grown at a moderate pace, has remained competitive due to its dedication to customer service and quality.In February 2015 the company hired production manager
The following events occurred over the course of a year at Bagby Corp., which uses a job order costing system:1. Direct materials purchases totaled $583,000.2. $132,000 of indirect materials were used in production. Bagby uses a separate Supplies Inventory account for indirect
Jestus Church Furniture manufactures custom pews, altars, and pulpits for churches across the southern United States. Since each order is unique, Jestus uses a job order costing system. During the month of June, Jestus worked on orders for three churches: Faith Church, Grace Church, and Hope
Bob Jones owns a catering company that prepares banquets and parties for individual and corporate functions throughout the year. Jones’s business is seasonal, with a heavy schedule during the summer and on year-end holidays and a light schedule the rest of the year. Fixed operating
Bricktown Bats buys wood as a direct material for its baseball bats. The Forming Department processes the baseball bats, which are then transferred to the Finishing Department, where a sealant is applied. During the month of March the Forming Department began manufacturing 13,500
Lucy Sportswear manufactures a line of specialty T-shirts using a job order costing system. In March the company incurred the following costs to complete Job ICU2: direct materials, $19,200, and direct labor, $5,200. The company also incurred $1,200 of administrative costs and $2,400 of selling
Barnes & Coffman Industries makes artificial Christmas trees. The unit costs for producing a tree are:Direct materials . . . . . . . . . . . . . $30Direct labor . . . . . . . . . . . . . $12Variable overhead . . . . . . . . . . . . .
Furr Fabricators produces protective covers for smart phones. Since the covers must be customized to each smart phone model, Furr uses a job order costing system. On September 1, the company reported the following inventory balances:Direct Materials . . . . . . . . . . . . . . . . . . .
Gray Manufacturing Company makes pennants for college and university athletic teams. The company uses a process costing system to accumulate product costs as the pennants move through the two stages of production: cutting and silk-screening. All materials are added at the
Drew Corp. designs and manufactures mascot uniforms for high school, college, and professional sports teams. Since each team’s uniform is unique in color and design, Drew uses a job order costing system. On January 1, the T-accounts for some of Drew’s primary balance sheet accounts
Ruth Dennis, CEO of Prescott Industries, is concerned about the recent volatility in the company’s operating income. She believes that since the number of units sold has been fairly stable over the past three years that operating income also should have been stable. Ruth asked
The following data were prepared by the Waco Wagon Company.Requireda. Under absorption costing, what is the unit product cost?b. Under variable costing, what is the unit product cost?c. Under absorption costing, what is the cost of goods sold?d. Under variable costing, what is the cost of
Regal Printing, Inc., prints and binds encyclopedias. The following information was found in the accounting records:Sales price per unit . . . . . . . . . $ 120Direct materials per unit
Refer to the information in T2-5. Sury also reported the following cost information in April:Data From T2-5:Sury Company reported the following physical unit information for the month of April:Work in Process
Beltran Corporation produces wooden and aluminum baseball bats. In preparing the current budget, Beltran’s management estimated a total of $460,000 in manufacturing overhead costs and 20,000 machine hours for the coming year. In December, Beltran’s accountants reported actual
Sarah Stoner sells handmade jewelry that she designs herself. The items aren’t expensive, and she has a loyal following in her town and the surrounding area. Sarah incurred the following unit costs to produce 60,000 items.Direct materials . . . . . . . . $4.00Direct labor
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