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managerial accounting decision making
Managerial Accounting Information For Decisions 4th Edition Thomas L. Albright , Robert W. Ingram, John S. Hill - Solutions
The Taguchi loss function is represented as a U-shaped function. At the target specification, Obj. 4 the quality loss is zero. As actual measurements move up or down from the target, quality losses occur at an increasing rate.Taguchi also describes two variations of the U-shaped function as
Traditionally, a product was considered acceptable if actual product characteristics fell within Obj. 4 the upper and lower specification limits as determined by design engineers. This method of evaluating product conformance to specifications is known as the "goalpost" approach to quality. In the
Travel-Tow, Inc., is a producer of small utility trailers. The company partners with suppliers Obj. 5 to help reduce inventory carrying costs. Raw material deliveries are made every two hours. Materials are brought directly to the production line for immediate use. The following statistical process
Felicidad, Inc., uses statistical process control charts to determine whether material quantity Ob1. 5 variances are the result of special or common cause variation. The following variances represent the results of analyses over the previous 16 weeks. The week number is in parentheses.
As part of a continuous quality improvement initiative, an accounting department quality team at Dexmar Pharmaceuticals was evaluating the quality of payroll services provided to employees. The team decided to use the percentage of payroll checks containing errors as a measure of payroll quality.
Refer to the information provided in E9-19. Control charts are designed to signal when an out-of-control event has occurred. However, the chart does not indicate the reason for the out-of-control event. Individuals must serve as detectives to investigate possible reasons for special cause
TCC Industries produces specialty tires in a variety of sizes and tread designs for use on trailers and farm equipment. TCC is planning to implement a standard cost accounting system. Valerie Siewert, the controller, has accumulated the following information on the standard cost of a particular
Timber Industries manufactures unfinished furniture, which it sells through retail outlets. Timber produces many different styles of bookcases, tables, chairs, desks, and dressers that customers finish themselves with stain or paint. Timber utilizes a standard cost system and performs variance
Tempro, Inc., uses a standard cost accounting system. Variances for the year ended December 31,2005 , were as follows:Managers at Tempro are considering the following changes in operations for the year ending December 31, 2006.1. An across-the-board pay increase of \(5 \%\) will be given to all
Greenbriar Company is considering the addition of a new machine in its mold injection plant. Greenbriar already has five such machines that are operating three shifts a day. The company uses a standard cost accounting system. The number of pieces that currently are being produced on the existing
Tasha Smith is the president of Modern Machinery, Inc., which manufactures flexible manufacturing systems used in a wide variety of production processes. To remain competitive, Modern is continually improving product performance by increasing the sophistication of electronic controls, diversifying
Management at Precise Manufacturing would like to analyze quality costs associated with the manufacturing process. In Year 1, Precise implemented a statistical process control system. In Year 2, further steps were taken in an effort to improve quality and focus on customer satisfaction. These
Journal Paper Manufacturing produces newsprint paper for use in newspaper publishing. The thickness of the paper can wary slightly during the manufacturing process. If the paper is too thin, it will not hold up under the printing process and will tear, while paper that is too thick can result in
Taguchi explained the basis for his loss function by providing an example from the nursery industry in Japan. Greenhouses typically are covered with plastic sheeting that permits the cor- rect amount of sunlight to penetrate. If manufacturers of plastic sheeting deviate from target specifications,
Power Source, Inc., produces electrical control harnesses used in the production of battery- powered carts and cars for children. These harnesses are sold to a toy manufacturer who re-quires close tolerances related to cable length. Power Source has implemented a statistical process control system
Tuscaloosa Brickworks uses variance analysis to track materials price and quantity variances. Managers recognize that normal fluctuations occur, but want to investigate the cause of sig- nificant favorable or unfavorable variances. To help them assess whether a variance is signif- icant, managers
These three problems are based on one business situation. The three-problem series links quality costs, the Taguchi loss function, and statistical process control. AutoSafe, Inc., produces windshields for major international automobile manufacturers. To produce a shatter-proof windshield, a sheet
These three problems are based on one business situation. The three-problem series links quality costs, the Taguchi loss function, and statistical process control. Refer to P9-11 for a description of AutoSafe's manufacturing process. Managers at AutoSafe collected twenty data points representing a
These three problems are based on one business situation. The three-problem series links quality costs, the Taguchi loss function, and statistical process control. As part of AutoSafe's quality program, control charts are prepared on a regular basis to evaluate whether the process is in a state of
Todd Judd separated from his wife, Stella, and filed for divorce. As part of the divorce, Todd realized that he would have to engage in a legal battle with Stella since the couple owned several parcels of property and had considerable investments, including a business Todd had acquired from his
Music Makers normally produces 500,000 CDs each month. Standard quantities and prices per unit of direct materials are as follows:Production during June was higher than normal at 560,000 units. To meet the higher demand, Music Makers purchased a higher than normal amount of materials. Luckily the
A favorable material price variance coupled with an unfavorable material usage variance would most likely be the result of:a. labor efficiency problems.b. machine efficiency problems.c. the purchase and use of higher than standard quality materials.d. the purchase and use of lower than standard
Stellhorn Snacks produces high-quality potato chips. The manufacturing process is highly automated, yet requires labor to handle, inspect, and sort potatoes and chips. Stellhorn has accumulated product costs using process costing in the past and is considering adopting a standard cost accounting
Petro-Flo Corporation designs and manufactures fluid transfer components found in engine and transmission systems of expensive, heavy equipment. These systems often are contained in earth-moving equipment used under harsh conditions ranging from Middle Eastern oil fields to Canadian real estate
Assume you are the plant manager for a medium-sized company that manufactures a variety of types of telephones. The phones are produced by assembling an array of components, including electronic circuit boards that are purchased from another division within the company. Every Friday morning your
Refer to the financial information presented in Self-Study Problem 1. In addition to the financial statement data, your records indicate that the division employed operating assets valued at $20,000,000.Required A. Calculate the division's operating profit margin and describe various ways a man-
Refer to the financial data presented in Self-Study Problem 1. The financial statements represent the operations of your division dur- ing the past 12 months. Assume that you are a divisional manager who purchases raw materials from other divisions within the company. Your company has a
Managers use accounting information to make marketing and operation decisions.a. Managers (agents) are hired by owners to make decisions consistent with the owners' interests.b. Compensation packages are designed to encourage managers to maximize company value.
A responsibility center is defined as any business unit or segment over which managers have control and managerial authority.a. Cost center managers are evaluated on their ability to control costs.b. Revenue center managers are responsible for generating sales or revenues.c. Profit center managers
Managerial performance is often evaluated using ROI and economic value added.a. Return on investment (ROI) is made up of two elements, margin and turnover.b. Margin is defined as operating income \(\div\) sales.c. Turnover is defined as sales \(\div\) operating assets.d. The use of ROI for
Performance evaluation using the balanced scorecard includes four sets of measures:a. Financial: How do we look to shareholders?b. Customer satisfaction: How do customers see us?c. Learning and growth: How may we continue to improve and create value?d. Internal business: At what must we excel?
A number of transfer pricing issues can arise in organizations.a. Transfer pricing issues typically occur in decentralized organizations.b. Financially based evaluation programs often encourage managers to act in the best interests of their own division, rather than the best interests of the
Many of the same issues arise in service organizations.a. Service organizations often are decentralized and face many of the same challenges as manufacturing companies.b. Managers of decentralized service organizations must develop financial (and nonfinancial) measures with which to evaluate
z Heather Stone is a production manager for Bohemia Company. Her father, Alex, is a share holder of the company but does not work for Bohemia. Which of the Stones would be considered an agent for Bohemia? What role does an agent play in an organization?
Tenco Company manufactures high-quality playground equipment. There are several plants within Tenco. Plant A produces plastic slides and swings that are used in manufacturing at Plant B. What type of responsibility center is Plant A? Explain your answer.
Assume that the performance of the plant manager at Tenco's Plant A, discussed in Q10-2, is being evaluated by the vice president of operations at Tenco's headquarters. What performance objectives are most likely to be used to evaluate the manager's performance?
Granite Industries is a multi-divisional corporation in which each division operates autonomously.Obj. 2 Division A is considered an investment center of Granite. Given this, would you expect the divisional manager of Division \(\mathrm{A}\) to be able to make decisions regarding the acquisition of
Logistics, Inc., is a decentralized company with branch operations in 15 of the largest metro politan areas of the United States. Each division is operated as a separate profit center, and there is a corporate vice president in charge at each location. The company has a decentralized
Leslie Greenwood is a plant manager for Ambrose Manufacturing. Leslie's plant is operated and evaluated as a profit center. Leslie has reviewed the plant's sales and costs for the last 12 months in preparation for her annual review. She has noticed that while margins and the cost of goods
Assume that two different companies, Company A and Company B, have earned net income of \(\$ 10\) million and \(\$ 1\) million, respectively, over the same fiscal period. Would it be fair to say that Company A earned a higher ROI than Company B?
The manager of Zelta Corporation's southeast region, Art McCormick, must improve the in vestment center's margin in order to achieve the performance goals established for his segment of the company. A \(5 \%\) increase in sales price would achieve the desired margin. After meeting with the sales
Elmer Woods is a plant manager for Lima Corporation, a producer of paints and solvents. Elmer's performance evaluation, and his bonus compensation, is based in part on his plant's turnover ratio. Elmer wants to increase the turnover ratio in order to maximize his bonus. What are the two elements of
The board of directors at Mays Company calculates the company president's performance based strictly on the turnover ratio. The denominator for the calculation is cash, accounts receivables, inventory, and fixed assets. The company has been engaged in a plant revitalization project over the past
Lana Martinez is a divisional manager with Power Source, Inc. Over the last several years, Lana has trimmed equipment maintenance costs in an effort to improve her division's operating income and improve financial performance measures. What effect, if any, will such a move have on the long-term
For establishing transfer prices between divisions of a company, what alternative is there to using current market prices or a cost-based formula? What are the strengths and weaknesses of such an approach?
The chapter describes the primary modules available in SAP, a producer of ERP systems.Required Explain the functions provided by each of the following modules and why they are important for a manufacturing company: (a) financial accounting, (b) controlling, (c) materials management, and (d)
ERP systems provide for a variety of functions associated with planning, operating, and evaluating production activities.Required In what ways would you be likely to interact with an ERP system in a manufacturing system if you were (a) a shop employee, (b) a manufacturing division supervisor, (c) a
You have just been hired as a human resources manager for a large manufacturing company. Your supervisor shows you to your desk, which contains a workstation. She explains that the workstation is part of a network connecting all of the company's manufacturing operations through a client-server
Open an Access database like the Kwiki Oil Co. database described in this chapter. Examine the Tools menu in the database window.Required What database management functions are provided by the Tools menu options? Based on your examination, what are some of the primary purposes of a database
DVD Co. has decided to automate its supply chain. It has developed a web site so that customers can identify products and order them online. It has signed agreements with vendors that permit it to place orders through the Internet for materials.Required Describe a network configuration that DVC
Newbury Company produces industrial machinery. Materials are purchased from vendors throughout North America, primarily using Internet connections. Purchases are made on credit and materials are placed into production when received. Newbury uses a relational database for its information
Exhibit 8 in this chapter provides an example of a table that might appear in a company's relational database. Exhibit 9 provides an example of a form.Required Using these exhibits as examples, explain the purpose of tables and forms in a relational database. Be specific about what the rows and
Connect to http://www.dell.com on a web browser.Required Identify the data items that are collected and processed by Dell's web interface as part of selecting and placing an order for a computer. Which components of Dell's database system are likely to be directly affected by a customer's
You have been assigned the responsibility of developing a purchasing module for a manufacturing company.Required Identify the tables that you think would be necessary as part of a relational database that will store data for the module. Identify the fields that will be important in each table and
Linden Co. uses over 100 different types of nuts, bolts, and screws in its manufacturing process. Each type has an identification number and is described by its type, size, and material composition.Required Linden Co. is developing a database system for its materials inventory. What fields would be
Niven Co. manufactures ornamental flamingoes. The flamingoes are sold to wholesalers who then sell the goods to retailers. The flamingoes come in a variety of colors, sizes, and materials. Niven produces its products once an order is received. Each order is treated as a job and the company tracks
Plaxa Co. developed a design for its material ordering system that consisted of three tables. Tables and associated fields are listed below. The primary keys for each table are underlined.Materials Table [Product ID, Description, Quantity Available] Vendor Table [Vendor ID, Name, Address, City,
1. All of the following are advantages of a computerized accounting system EXCEPT:a. many accounting cycle steps are performed by the computer.b. it is easier to control than a manual system.c. it is faster than a manual system.d. fewer opportunities for error exist than in a manual system.2. The
Kwiki Oil Co. completed job number 1007 on March 8, 2004. The job required an F150 oilhitt:://albright. swleaming.comDownload database file (also available on the student
Atta Baby Company produces infant seats for use in automobiles. During a recent fiscal period, the company incurred the following cost:The company produced and sold 3,190 seats at \(\$ 50\) per seat. Each inspector can inspect up to 2,000 seats during a period. Half of the utilities costs are
Calhoun Carpets is considering a new line of carpeting for boats. The carpet would cost $3.00 a yard to make and would sell for $10.00 a yard. Calhoun would have to build a new plant and buy new equipment-at an annual cost of $4.2 million-to produce the new line.\section*{Required}A. How many yards
Kokomo Manufacturing Company produces a single product, model airplanes. A list of selected cost and operating data for last year follows:\section*{Required}A. Assuming that Kokomo uses absorption costing, compute the inventory cost per unit, and prepare an income statement for the year using a
Manufacturing costs may be classified according to their behavior with respect to changes in production volume as follows:a. Variable costs change in total with volume but are fixed per unit.b. Fixed costs do not change in total with volume but vary per unit.c. Semivariable or mixed costs combine
Companies can use two different methods to assign product cost.a. The variable-costing method classifies costs by behavior, breaking costs down into variable and fixed components.b. The absorption-costing method classifies costs by function, manufacturing and nonmanufacturing.
Key to variable costing is contribution margin, the difference between sales and variable expenses over a period. Profit is the contribution margin less fixed expenses.
The variable-costing method helps managers understand the relationship among costs, volume, and profits, an understanding that is basic to breakeven-point analysis, targetprofit analysis, and profit-sensitivity analysis.
Operating risk increases as the percentage of fixed costs to total costs rises.
Both variable and absorption costing can be used to calculate unit product cost, an important element in a company's pricing decisions.a. Using variable costing, only those production costs that vary with volume are included in the unit product cost calculation.b. Using absorption costing, all
The way in which the methods treat inventory also has an impact on the net income figure each produces-a factor in the evaluation of managerial performance.
Variable costing is a managerial tool.a. Its proponents insist that it is more accurate than absorption costing and that it is critical to managerial decisions about costs, volume, and profits.b. Its critics argue that it is a tactical decision-making tool, useful only for making short-run
Absorption costing must be used for financial reporting. Some companies also use absorption costing for internal decision making.a. Absorption costing can be more effective than variable costing for strategic decision making.b. One limitation of the method is that it can create an incentive for
Service organizations, like manufacturing companies, rely on variable or absorption costing to make managerial decisions, particularly decisions about pricing.
You decide to study for an upcoming accounting exam with a friend. Your friend says that Obj. 1 fixed costs are considered fixed because they remain constant, or "fixed," for each unit produced. Do you agree? Explain your answer.
Pagoda Company manufactures metal picture-framing materials. Part of the manufacturing Obj. 1 process is the coating and painting of the metal with finishes. Management of Pagoda believes the painting process is a variable cost that is incurred evenly for each unit that passes through the painting
Explain the importance of cost behavior as it relates to various levels of production activity. obj. 1 Why is information about cost behavior important to managers? Identify some decisions that managers make that require information about cost behavior.
Jane Pratt is the president of Capital Products, Inc. Capital manufactures adjustable baseball Obj. 2 caps embroidered with the logos of college teams. The company is planning to produce a special hat with the logo of a university that recently won the national football championship. The hats
Ampco Industries, Inc., produces audio and video circuit boards. Ampco sold 12,500 circuit boards Obj. 2 last month, which was its breakeven point in sales units. Explain what the breakeven point is.
Enterprises produces and sells a specialty soft drink called PowerPunch. The contribution marObj. 2 gin ratio for PowerPunch is \(40 \%\). What percentage of total sales is used to cover variable costs? Will these percentages change with a rise or fall in sales volume? What does PowerPunch's
Snow Manufacturing Company produces a snowshoe that is sold in many parts of the upper Midwest. The company's production manager has decided to change the materials used in the production process, a change that should produce a savings in direct materials costs of \(\$ 12\)per pair of snowshoes.
An automobile manufacturer is considering buying new robotic welders for its frame assembly Obj. 3 operations that will replace existing manual welding. This change is expected to result in lower overall costs and higher quality. Explain the impact of this decision in terms of operating risk.
Hendee Productions Company does personal and commercial videotaping. Hendee accumulates Obj. 4 the cost of each video production on a per-job basis using the variable-costing method. Pete Conrad, the owner of the company, recently noticed that selling and administrative expenses are not included in
Sam Merchant was recently hired as a cost accountant by Dolls and Such Manufacturing. The obj. 4 company's management desires more useful information. The controller asked Sam to review the company's inventory records and to convert the carrying value of each item in inventory from an
Over the past year, Darren, Inc., has seen its finished goods inventory go up significantly. Dar- prepares financial statements for its stockholders using absorption costing. The company prepares another set of financial statements for its managers using variable costing. Which of the two
Juanita Perez is the president of Allgood Manufacturing, Inc. Allgood manufactures electric Obj. 4 power tools. The company uses the absorption-costing method. Over the past year, sales increased significantly at Allgood, reducing the company's inventories \(60 \%\) from the beginning of the year.
7-13 Suppose that the number of units in a company's ending inventory equals the number of units Obj. 4 in its beginning inventory and that its fixed costs have not changed from the previous year. Which costing method-variable or absorption costing-would yield a higher net income?
Coyote Battery Company manufactures rechargeable nickel cadmium batteries. The company Obj. 4 uses the variable-costing method to accumulate inventory costs. At the end of its fiscal year, Coyote has to prepare its financial statements and tax returns. Can Coyote use its inventory values for
Jan and Fran Hook are hairdressers with over 40 years of experience between them. Recently Obj. 4 they decided to combine their savings and buy a factory to produce men's hairpieces. Jan has assumed responsibility for administration, including the development of accounting procedures. Fran does not
Absorption costing defers certain costs. Which costs are deferred? Where? When are these Obj. 4 costs expensed? How does variable costing treat these costs?
Randy Lightfoot is vice president of operations for MultiCo, Inc. He is responsible for the operations of the company's two manufacturing plants, one in Atlanta and one in St. Louis. Each plant has a manager who oversees the daily operations. During a recent review of operations for the year,
Ruth Peevey is president of Tuffee Tools Company. Tuffee manufactures a wide variety of hand tools and sells them throughout the South. Ruth just completed a review of next year's budget and plans, which project an operating loss. Knowing that Tuffee's stockholders and
Write a short definition of each of the terms listed in the Terms and Concepts Defined in this Chapter section.
Use (a) variable costs, (b) fixed costs, (c) semivariable costs, and (d) step-pattern costs to classify each of the following costs based on its cost behavior. Provide a brief explanation of your answer. a. Direct materials b. Direct labor c. Depreciation d. Salary of production supervisor e.
The data for costs \(\mathrm{A}, \mathrm{B}\), and \(\mathrm{C}\) are as follows. Determine the cost behavior (variable, fixed, or semi ariable) of Cost \(\mathrm{A}\), Cost \(\mathrm{B}\), and Cost \(\mathrm{C}\). Prepare a graph depicting the cost behavior of each of the three costs, using total
Sheldon Nast, an entry-level cost accountant, was asked by his supervisor to analyze maintenance costs. Sheldon produced the following plot of maintenance costs by production level:a. Do maintenance costs increase in a linear fashion as production levels increase? Why or why not?b. What effect, if
Taylor, Inc., produces a child's wall clock that chimes the tune "Three Blind Mice" every hour. The contribution margin for this clock is \(\$ 8\), and the breakeven point is 8,000 units. How much profit will Taylor make if it sells 11,000 clocks? What are the company's total fixed costs?
The following partial information is from Brown Bag, Inc.'s income statement for 2006, preObj. 2 pared using variable costing:Brown Bag's contribution margin ratio is \(40 \%\). What percentage of Brown Bag's revenue is used to cover variable costs? What were variable costs at this sales volume?
Double R Company's most recent income statement, prepared on a contribution-margin bssis, is as follows:Prepare a new income statement under each of the following independent conditions:a. Sales volume increases \(20 \%\).b. The selling price drops \(\$ 4\) per unit, and sales volume increases \(30
Joey Company manufactures a product that sells for \(\$ 27\) per unit. Its variable costs are \(\$ 15\) per unit, and its fixed costs are \(\$ 132,000\) per year.a. What is the product's contribution margin ratio?b. What is the breakeven point in sales dollars?c. Assume that sales go up \(\$
Penquin Industries, Inc., manufactures a variety of plastic food containers and serving dishes. The company's income statement for this year in a variable-costing format is as follows:Penquin's management believes that it can increase prices by an average of \(6 \%\) next year without affecting the
JLC Enterprises is a rapidly growing gardening supply company. Information for the year just ended is as follows:What is JLC's breakeven point in dollars? Sales revenue Units sold Unit contribution margin Total fixed costs $300,000 20,000 $10 $120,000
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