ISE Managerial Accounting 17th Edition Ray H. Garrison, Eric Noreen, Peter C. Brewer - Solutions

Job-Order Costing and Decision Making LO2–1, LO2–2, LO2–3 Taveras Corporation is currently operating at 50% of its available manufacturing capacity. It uses a job-order costing system with a plantwide predetermined overhead rate based on machine-hours.At the beginning of the year, the company
Applying Overhead Cost; Computing Unit Product Cost LO2–2, LO2–3 Newhard Company assigns overhead cost to jobs on the basis of 125% of direct labor cost. The job cost sheet for Job 313 includes $10,000 in direct materials cost and $12,000 in direct labor cost.A total of 1,000 units were
Job-Order Costing; Working Backwards LO2–1, LO2–2, LO2–3 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
Job-Order Costing for a Service Company LO2–1, LO2–2, LO2–3 Tech Solutions is a consulting firm that uses a job-order costing system. Its direct materials consist of hardware and software that it purchases and installs on behalf of its clients. The firm’s direct labor includes salaries of
Computing Total Job Costs and Unit Product Costs Using Multiple Predetermined Overhead Rates LO2–4 Braverman Company has two manufacturing departments—Finishing and Fabrication. The predetermined overhead rates in Finishing and Fabrication are $18.00 per direct labor-hour and 110%of direct
Computing Total Job Costs and Unit Product Costs Using Multiple Predetermined Overhead Rates LO2–4 Fickel Company has two manufacturing departments—Assembly and Testing & Packaging.The predetermined overhead rates in Assembly and Testing & Packaging are $16.00 per direct labor-hour and $12.00
Computing Total Job Costs and Unit Product Costs Using a Plantwide Predetermined Overhead Rate LO2–3 Mickley Company’s plantwide predetermined overhead rate is $14.00 per direct labor-hour and its direct labor wage rate is $17.00 per hour. The following information pertains to Job A-500:Direct
Apply Overhead Cost to Jobs LO2–2 Luthan Company uses a plantwide predetermined overhead rate of $23.40 per direct labor-hour.This predetermined rate was based on a cost formula that estimated $257,400 of total manufacturing overhead cost for an estimated activity level of 11,000 direct
Compute a Predetermined Overhead Rate LO2–1 Harris Fabrics computes its plantwide predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 20,000 direct labor-hours would be required for the period’s estimated level of production.
Classifying Variable and Fixed Costs and Product and Period Costs LO1–3, LO1–4 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
Cost Classifications for Decision Making LO1–5 Warner Corporation purchased a machine 7 years ago for $319,000 when it launched product P50. Unfortunately, this machine has broken down and cannot be repaired. The machine could be replaced by a new model 300 machine costing $313,000 or by a new
Traditional and Contribution Format Income Statements LO1–6 The Alpine House, Inc., is a large retailer of snow skis. The company assembled the information shown below for the quarter ended March 31:Amount Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost Classification LO1–2, LO1–3, LO1–4, LO1–5 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
Variable and Fixed Cost Behavior LO1–4 Munchak Company’s relevant range of production is between 9,000 and 11,000 units. Last month the company produced 10,000 units. Its total manufacturing cost per unit produced was $70. At this level of activity the company’s variable manufacturing costs
Product and Period Cost Flows LO1–3 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
Cost Behavior; Contribution Format Income Statement LO1–4, LO1–6 Harris Company manufactures and sells a single product. A partially completed schedule of the company’s total costs and costs per unit over the relevant range of 30,000 to 50,000 units is given below:Units Produced and Sold
Differential Costs and Sunk Costs LO1–5 Refer to the data given in Exercise 1–7. Answer all questions independently.Required:1. What is the incremental manufacturing cost incurred if the company increases production from 20,000 to 20,001 units?2. What is the incremental cost incurred if the
Fixed, Variable, and Mixed Costs LO1–4 Refer to the data given in Exercise 1-7. Answer all questions independently.Required:1. If 18,000 units are produced and sold, what is the variable cost per unit produced and sold?2. If 22,000 units are produced and sold, what is the variable cost per unit
Product Costs and Period Costs; Variable and Fixed Costs LO1–3, LO1–4 Refer to the data given in Exercise 1-7. Answer all questions independently.Required:1. For financial accounting purposes, what is the total amount of product costs incurred to make 20,000 units?2. For financial accounting
Direct and Indirect Costs LO1–1 Kubin Company’s relevant range of production is 18,000 to 22,000 units. When it produces and sells 20,000 units, its average costs per unit are as follows:Average Cost per Unit Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . $7.00 Direct labor
Traditional and Contribution Format Income Statements LO1–6 Cherokee Inc. is a merchandiser that provided the following information:Amount Number of units sold . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 Selling price per unit . . . . . . . . . . . . . . . . . . . . . . . . . . $30
Differential, Sunk, and Opportunity Costs LO1–5 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
Fixed and Variable Cost Behavior LO1–4 Espresso Express operates a number of espresso coffee stands in busy suburban malls. The fixed weekly expense of a coffee stand is $1,200 and the variable cost per cup of coffee served is $0.22.Required:1. Fill in the following table with your estimates of
Classifying Costs as Product or Period Costs LO1–3 Suppose that you have been given a summer job as an intern at Issac Aircams, a company that manufactures sophisticated spy cameras for remote-controlled military reconnaissance aircraft.The company, which is privately owned, has approached a bank
Classifying Manufacturing Costs LO1–2 The PC Works assembles custom computers from components supplied by various manufacturers.The company is very small and its assembly shop and retail sales store are housed in a single facility in a Redmond, Washington, industrial park. Listed below are some
Identifying Direct and Indirect Costs LO1–1 Northwest Hospital is a full-service hospital that provides everything from major surgery and emergency room care to outpatient clinics.Required:For each cost incurred at Northwest Hospital, indicate whether it would most likely be a direct cost or an
A company seeking a line of credit at a bank was turned down. Among other things, the bank stated that the company’s 2 to 1 current ratio was not adequate. Give reasons why a 2 to 1 current ratio might not be adequate.
If a stock’s market value exceeds its book value, then the stock is overpriced. Do you agree? Explain.
The president of a plastics company was quoted in a business journal as stating, “We haven’t had a dollar of interest-paying debt in over 10 years. Not many companies can say that.” As a stockholder in this company, how would you feel about its policy of not taking on debt?
What is meant by the term financial leverage?
What is meant by the dividend yield on a common stock investment?
Would you expect a company in a rapidly growing technological industry to have a high or low dividend payout ratio?
Assume that two companies in the same industry have equal earnings. Why might these companies have different price-earnings ratios? If a company has a price-earnings ratio of 20 and reports earnings per share for the current year of $4, at what price would you expect to find the stock selling on
What is the basic purpose for examining trends in a company’s financial ratios and other data? What other kinds of comparisons might an analyst make?
Distinguish between horizontal and vertical analysis of financial statement data.
What is the difference between net cash provided by operating activities and free cash flow?
Would a sale of equipment for cash be considered a financing activity or an investing activity? Why?
If the Accounts Receivable balance increases during a period, how will this increase be recognized using the indirect method of computing the net cash provided by operating activities?
A business executive once stated, “Depreciation is one of our biggest operating cash inflows.” Do you agree? Explain.
How do the direct and the indirect methods differ in their approach to computing the net cash provided by operating activities?
Assume that a company repays a $300,000 loan from its bank and then later in the same year borrows $500,000. What amount(s) would appear on the statement of cash flows?
Why aren’t transactions involving accounts payable considered to be financing activities?
If an asset is sold at a gain, why is the gain subtracted from net income when computing the net cash provided by operating activities under the indirect method?
What general guidelines can you provide for interpreting the statement of cash flows?
What are the three major sections on a statement of cash flows, and what type of cash inflows and outflows should be included in each section?
What are cash equivalents, and why are they included with cash on a statement of cash flows?
What is the purpose of a statement of cash flows?
What is the major criticism of the payback and simple rate of return methods of making capital budgeting decisions?
What is meant by the term payback period? How is the payback period determined?How can the payback method be useful?
How is the profitability index computed, and what does it measure?
Refer to Exhibit 14–8. Is the return on this investment proposal exactly 14%, more than 14%, or less than 14%? Explain.
As the discount rate increases, the present value of a given future cash flow also increases. Do you agree? Explain.
Explain how the cost of capital serves as a screening tool when using (a) the net present value method and (b) the internal rate of return method.
What is meant by an investment project’s internal rate of return? How is the internal rate of return computed?
If a company has to pay interest of 14% on long-term debt, then its cost of capital is 14%. Do you agree? Explain.
Identify two simplifying assumptions associated with discounted cash flow methods of making capital budgeting decisions.
What is net present value? Can it ever be negative? Explain.
Why are discounted cash flow methods of making capital budgeting decisions superior to other methods?
Why isn’t accounting net income used in the net present value and internal rate of return methods of making capital budgeting decisions?
What is meant by the term discounting?
What is meant by the term time value of money?
What is the difference between capital budgeting screening decisions and capital budgeting preference decisions?
Airlines sometimes offer reduced rates during certain times of the week to members of a businessperson’s family if they accompany him or her on trips. How does the concept of relevant costs enter into the decision by the airline to offer reduced rates of this type?
What guideline should be used in determining whether a joint product should be sold at the split-off point or processed further?
From a decision-making point of view, should joint costs be allocated among joint products?
Define the following terms: joint products, joint costs, and split-off point.
How will relating product contribution margins to the amount of the constrained resource they consume help a company maximize its profits?
Give at least four examples of possible constraints.
How does opportunity cost enter into a make or buy decision?
What is the danger in allocating common fixed costs among products or other segments of an organization?
“If a product is generating a loss, then it should be discontinued.” Do you agree?Explain.
Prentice Company is considering dropping one of its product lines. What costs of the product line would be relevant to this decision? What costs would be irrelevant?
“All future costs are relevant in decision making.” Do you agree? Why?
“Variable costs and differential costs mean the same thing.” Do you agree? Explain.
“Sunk costs are easy to spot—they’re the fixed costs associated with a decision.” Do you agree? Explain.
Are variable costs always relevant costs? Explain.
Define the following terms: incremental cost, opportunity cost, and sunk cost.
What is a relevant cost?
What is the Global Reporting Initiative?
Why do companies measure their corporate social responsibility performance?
Why should companies link their balanced scorecard measures to their employee reward systems?
Why does the balanced scorecard include financial performance measures as well as measures of how well internal business processes are doing?
Why should the measures included in a balanced scorecard be linked together in the form of if-then hypothesis statements?
Why do the measures used in a balanced scorecard differ from company to company?
What does a manufacturing cycle efficiency (MCE) of less than 1 mean? How would you interpret an MCE of 0.40?
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?
Why is using sales dollars as an allocation base usually a poor choice for allocating fixed costs to operating departments?
Why should a service department’s budgeted costs, rather than its actual costs, be charged to operating departments?
What does suboptimization mean?
What is a transfer price?
In what way can the use of ROI as a performance measure for investment centers lead to bad decisions? How does the residual income approach overcome this problem?
What is meant by residual income?
What is meant by the terms margin and turnover in ROI calculations?
Distinguish between a cost center, a profit center, and an investment center.
What benefits result from decentralization?
What is meant by the term decentralization?
Why can undue emphasis on labor efficiency variances lead to excess work in process inventories?
If variable manufacturing overhead is applied to production on the basis of direct laborhours and the direct labor efficiency variance is unfavorable, will the variable overhead efficiency variance be favorable or unfavorable, or could it be either? Explain.

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ISE Managerial Accounting 17th Edition Ray H. Garrison, Eric Noreen, Peter C. Brewer - Solutions

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