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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
Classify the following activities as unit level, batch level, product level, or facility level acObj. 3 cording to the activity-based costing hierarchy developed by Cooper.- Machine setups between batches of two different products- Quality control inspections for specialty items- Hours of machine
Managers often make decisions about keeping or dropping a product after evaluating the profitability of each product in the product line. Bimini Products, Inc., recently completed an activity-based costing study. Management wishes to compare the results with the cost data produced by their
U-Build-It produces carpentry tools for homeowners. The company recently completed an Obj. 4 activity-based costing study and is attempting to understand the results. The following table summarizes sales volume and overhead cost information for a sample of five products. In some cases, the
Good Earth Bakery traditionally has allocated manufacturing overhead to its product line usObj. 4 ing raw material weight as a cost driver. Assume the dough and other ingredients for one loaf weigh one pound. While evolving into an activity-based costing system, Good Earth explored the use of
Data from the accounting and production records of Hasgrow Company are as follows:Managers wish to understand material, labor, and activity costs of each product to help guide their pricing decisions.Compute the cost per unit of product 1 , product 2 , and product 3 . Why do the costs differ across
Refer to the facts as shown in E5-14. The cost system designers at Hasgrow selected the numObj. 4 ber of setups as a cost driver to allocate setup costs to products. As an alternative, they could allocate setup costs to batches based on the number of setup hours for each changeover.a. What
Gonzalez Manufacturing traced the following levels of activity to the products it manufacObj. 4 tured during the first quarter of this year:Determine the total overhead cost charged to each product for the quarter. In addition, calculate the overhead cost per unit. Activity Pool Machine setups
America Outback is a rapidly growing service company that offers wilderness backpacking, Obj. 5 canoeing, and rock-climbing expeditions at numerous locations across the United States. Management wants to gain a better understanding of overhead costs associated with various expeditions. The
Refer to the facts presented in E5-17.a. Identify each cost as a unit-level, batch-level, product-level, or facility-level overhead cost.b. Justify your answer.c. How might America Outback use more accurate cost information in planning future expeditions?
Justin owns a small factory that produces buttons for the garment industry. He wants to buy a new machine and has applied to a bank for financing. The loan officer has asked for operating statements for the past year. The company's net income has not been very good over that time, and inventory has
Mallory Chemical Corporation produces two products: A and B. The company's expected factory overhead costs for the coming year are as follows:All labor costs \(\$ 10\) per hour; materials cost \(\$ 1.80\) per pound for product \(\mathrm{A}\) and \(\$ 2.40\) per pound for product
Cast-Rite Company produces a variety of cast iron pipe products used by municipalities for water and sewer systems. Though many different product configurations are possible, products primarily differ on the basis of pipe diameter, length, and bell type (the type of fitting applied to the end of a
Refer to the facts presented in P5-3. The activity-based costing study revealed the following revised cost estimates:Predetermined overhead rate based on cost per ton \(\$ 300\) Cost to change molds between batches of product \(\quad 700\) Cost to apply cement lining (per pipe) 100 Note: Total
Auto-Plex produces windshields for a major international automobile manufacturer. The company is under increasing pressure to reduce costs. Thus, management authorized an activitybased costing study to help understand how various activities contribute to overhead costs. The following is an excerpt
Refer to the information provided in P5-5. Assume the company employs six individuals who set up the equipment between runs of different products. Setup crew members devote approximately \(90 \%\) of their time to physically changing machine specifications and molds to accommodate a different
Randall Foundry uses four activity pools to assign costs to its products. Each pool has its own cost driver, the activity base used to calculate and apply overhead costs. Last year Randall prepared the following estimates of overhead costs and activity levels for the first quarter of this
Dynamic Products, Inc., manufactures a wide variety of products in its plant in Macon, Georgia. Management has identified the following manufacturing and administrative activities:1. Special equipment is used to add a protective finish to various products.2. Purchase orders are issued to acquire
Web-books.com is an Internet company that sells books on the World Wide Web. The president of the company authorized an activity-based costing study to understand the cost of various activities that are driving overhead at Web-books.com. Selected activities include:- Web site maintenance-costs do
Refer to the information in P5-9. Assume the company employs three systems engineers at an annual salary of \(\$ 75,000\) each. The engineers devote \(85 \%\) of their time to Web site maintenance and \(15 \%\) to improving technical aspects of order retrieval. Eight people who pick orders consume
Objs. 1, 4, 5 Franklin County Bank has a commercial loan department that makes loans to businesses that meet the bank's strict criteria. The department is staffed by eight loan officers. Each loan officer can grant loans up to a certain amount without the approval of the bank's lending committee.
The East State Veterinary Clinic provides veterinary services for small domestic animals. Three certified veterinarians and four technical assistants work at the clinic. The clinic has three separate areas of operations: examinations, surgeries, and laboratory tests. The technical assistants help
Objs. 3, 4, 5 The Clearwater SCUBA Shop, owned and operated by Floyd Ridges, offers three types of services: retail sales, SCUBA instruction, and dive boat charters. As with many service organizations, the three elements of Floyd's business are not independent. Floyd earns revenue from SCUBA
Music Makers manufactures CDs for software and music companies. It classifies its products into two types: data CDs and music CDs. Because of the greater quality demands of music \(\mathrm{CDs}\), the manufacturing process requires greater quality control and longer manufacturing time for this
Multiple-Choice Overview of the Chapter}1. Overhead allocation based on volume alone:a. is a key element of activity-based costing.b. systematically overcosts high-volume products and undercosts low-volume products.c. systematically overcosts low-volume products and undercosts high-volume
C. Berry Manufacturing Company produces two guitar models. One is a standard acoustic guitar that sells for \(\$ 600\) and is constructed from medium-grade materials. The other model is a custom-made amplified guitar with pearl inlays and a body constructed from special woods. The custom guitar
Forest Industries Paper Company (FIPC) was a small, closely held paperboard manufacturer that produced a broad line of paperboard in large reels, termed parent rolls. These parent rolls were sold to converters who further processed them into containers used for a variety*Case prepared by Dr. Thomas
Marco Co. constructs commercial buildings. Marco must keep accurate and timely information about its construction activities and costs.Required Describe the modules of a computerized information system that Marco would need to keep track of its cost information and why they are important.
Suppose you want to automate a production system so that ma- terials and labor costs can be determined and tracked based on inputs within the production system.Required Describe a computerized system for this purpose.
The description of Kwiki Oil Company's job-order system refers to tables, forms, queries, and reports that are used in the systern. Required Describe the purpose of tables, forms, queries, and reports and how each of these is related to the others.
Most manufacturing companies use computerized accounting systems. Typically, these systems are part of larger information systems that integrate various management functions throughout an organization.
Computerized information systems are separated into modules. Common modules include sales, purchasing and materials management, human resources, production, asset management, financial management, and general ledger/financial reporting.
Enterprise resource planning (ERP) systems integrate the various management functions into a comprehensive information system.
ERP systems, like SAP, include many functions such as financial accounting, controlling, asset management, project management, human resources, quality management, production planning, materials management, and sales and distribution.
A goal of many companies is to automate their supply chain so that interaction with customers and vendors can be handled by the computer system with little human intervention.
Computer systems receive, store, and process data to create useful information that can be reported to decision makers.
E-business uses computer networks to provide customer sales.
Application software is part of a computer system that includes computer programs that permit data to be recorded and processed.
Data are stored in databases, and database management systems control the database functions to ensure accuracy and security of data.
Client-server networks provide for interaction by users through client workstations to application and database servers that process and store data.
The production module obtains input from the materials, human resources, asset management, and other modules. The production module accumulates production costs and allocates these to individual units based on the number of units produced during a period or job.
Computerized information systems use relational databases, which store data in related tables. Forms are used to enter data in tables, and queries are used to retrieve and manipulate data for preparing reports.
Why are integrated business systems more efficient than using individual systems for differObj. 1 ent functions in a business?
How would the human resources module for a manufacturing company differ from that for Obj. 1 a retail or service company?
Irmo Co.'s asset management module lists each piece of equipment the company has purObj. 1 chased, when it was purchased, its cost, its expected life, and its location in the company. Why would the company want this information?
Kreel Co.'s financial management module lists each loan the company has outstanding, when obj. 1 the money was borrowed, the amount borrowed, the interest rate, the dates payments were made, and the amounts of these payments. Why is this information important to the company?
What purposes does a manufacturing company's purchasing module serve? What accounts Obj. 1 and types of transactions will be associated with this module?
What purposes does a manufacturing company's human resources module serve? What acObj. 1 counts and types of transactions will be associated with this module?
Street Inc.'s purchasing module lists each vendor's name, address, the materials purchased Obj. 1 from the vendor, and when purchases were made. What uses might the company make of this information?
Why would the sales module of Dell Computer Corporation differ from the sales module of obj. 1 Wal-Mart? What transactions would Dell record as part of its sales process that would differ from those of Wal-Mart?
Why is it important for the accounting department of a manufacturing company to receive Obj. 1 data from human resources? What internal control function is served by this process?
Why is it important for the accounting department of a manufacturing company to receive Obj. 1 data from purchasing and receiving? What internal control function is served by this process?
What is a computer network? Why are they used by businesses to maintain accounting sysObj. 2 tems?
Suppose a company sells to customers through the web. Customers are required to pay for Obj. 3 their orders with credit cards at the time of the order. What primary activities would be required of the sales module to process and account for these orders?
Complete each sentence with the appropriate term.1. Systems that integrate most of the business information functions are referred to as 2. The use of computer networks, like the Internet, to provide for customer sales is referred to as \(\qquad\) .3. \(\qquad\) includes the computer programs that
Match each term with the appropriate definition.a. application softwaree. enterprise resource planning (ERP) sys-b. database management system temsc. databasef. relational databased. E-business 1. a set of computerized files where company data are stored in a form that facilitates retrieval and
Complete each sentence with the appropriate term for a component in the information system.The \(\qquad\) receives sales order data from customers and maintains accounts receivable information.2. The \(\qquad\) provides purchase order data to vendors. Vendors are those who supply specific products
Dell Computer Corporation is a large, well-known manufacturer of computers for home and obj. 1 business. Assume you logged onto its web site, ordered a computer system, and paid for it by credit card. Describe the business activities that would occur at Dell, including linkages from the sales order
Great Plains Manufacturing Co.'s receiving department received an order of raw materials.How will information about the order affect the various modules of the company's information system?
For each of the functions listed below, identify the module of an ERP system that would proobj. 1 vide that function from the following list.a. financial accountingf. quality managementb. controlling g. production planningc. asset management h. materials managementd. project systems i. sales and
What does it mean to automate a company's supply chain? What are the advantages of auObj. 1 tomating the supply chain for a manufacturing company?
Computer networks in many organizations include client applications, business management Obj. 2 programs and databases on servers, and connections among the computers running these programs. For each of the following activities, identify the portions of the computer system that would be affected.
Modern accounting information systems often are maintained as relational databases. What Obj. 3 is a relational database, and what are the advantages of these database systems? Identify the parts of a relational database and explain the purpose of each part.
Howard Co. manufactures household goods and maintains its accounting system using a re-lational database. In order to prepare information about purchase transactions, the company uses the following tables in its database. The fields that appear in each table are in brackets following the table.-
Write a short definition for each of the terms listed in the Terms and Concepts Defined in this Chapter section.
Complete each of the following sentences with the proper term or terms.1 . Managerial accounting information is used primarily by decision makers.2. An accountant who produces information for use within a specific company is referred to as a(n) .3. involves the identification of long-run goals and
Alberta Enterprises is being audited by a local public accounting firm. The management of Alberta hired an independent accountant to prepare financial statements in good form for presentation to the board of directors. The financial statements will contain an auditor's report stating that the
Dream Easy, a manufacturer of mattresses, sells 10 different models of mattresses. Each model generates $4,000,000 in sales each year. Dream Easy currently does not have the resources to be able to determine the profitability of each product line. Steve, the company president, has a hunch that one
An advertising firm has 100 clients, each generating $500,000 in sales. It currently generates profitability reports only by office. One office president suggests that the firm produce profitability reports for each individual client. He estimates that 30 clients are running at a net loss of 20% on
During the planning process, a company identifies its goals, its objectives, and its plans for reaching those goals. To ensure these plans are implemented, managers must control employees'behavior. One method of control is measuring the outcomes of behavior. Managerial accountants develop accurate
Identify each of the following as a planning or control decision:a. Decision to buy new production machinery.b. Decision to change the mix in a chemical compound used to produce a synthetic fiber to reduce the cost of the product.c. Decision to replace a factory that is no longer efficient.d.
Ally's Bowling produces bowling balls. The company focuses on making high-end, custom 2, 3 balls. Ally's decides to enter a new highly competitive market, in which it will focus on a lowcost strategy. Describe Ally's changes in information needs with the new product line.
Unisco Products manufactures a line of children's toys that are painted in bright, colorful 2, 3 tones. One of the most popular toy colors is yellow oxide. The company has become aware, however, that the yellow oxide paint it is using is possibly toxic. Accordingly, the company has sought a
A manufacturer of printers is considering making a new high-end laser printer. Market re-3 search estimates your company could sell 2,000 of these printers per year at $3,000 each, without reducing the sales of any other product. The marketing manager asks you, a managerial accountant, to determine
The vice president of marketing is struggling at determining the selling price of a new toaster Obj. 3 oven. He estimates that the company could sell 20,000 units if the price is set at $30 each, but if the price is dropped to $25 each, he estimates sales would rise to 23,500 units. What managerial
Many business organizations have adopted codes of ethics that describe expected behavior for managers with respect to other stakeholders. For example, United Technologies Corporation publishes an extensive Code of Ethics that describes the relationships between the company and other parties.
An-Hour Foto provides film processing at a single store location. The store has a policy that film will be developed in 24 hours, or the processing is free. It also has a policy that it will refund customers' money for any pictures that were poorly developed.In order to improve income without
Ned Bonapart is purchasing manager for a clothing store. On April 12, Ned received the fol- lowing weekly report for men's suits purchased from one of the company's suppliers. Ned im- mediately ordered another 12 wool suits and another 20 cotton suits from the manufacturer.Required A. What
Rebecca owns several successful coffeehouses. Each one has its own manager and is operated independently of the others. Rebecca meets with the manager of each location each month to review operating results. During this meeting, the manager must present a projection of operations for t he coming
Workout Enterprises owns a chain of successful fitness centers. The founder and CEO, Sally, sets a company-wide return on assets goal of 30%. In order to meet this objective Sally determines that she will need to open three new fitness centers in the next year. Sally looks at 30 potential sites for
Myrla Rhyman is planning to start a new business as a systems consultant. She has saved $7,000 to invest in the business. She expects to receive $3,800 each month, on average, from sales to customers. She expects that she will need cash to pay the following items each month, on average:rent, $900;
ObJ. 2 Joyce Mercer is manager of the Long-Term Care Division of the Olin County Health Department. The division has a \(\$ 100\) million budget and is responsible for providing long-term care services (often in nursing homes) to the elderly and physically disabled. The division contracts with
(All of the knowledge required to solve this problem is not contained in this chapter. The problem is based on material covered in financial accounting and is included here to prompt thinking about accounting problems, accounting processes, and decisions.) Van Gogh is considering a business
Oo/S. 2. 3 UniversEd employs faculty from various universities on a part-time basis for specific education and consulting jobs. These professors come from many disciplines including accounting, economics, finance, information systems, marketing, operations, and strategic planning.UniversEd has two
Ob,s 2.3 (All of the knowledge required to solve this problem is not contained in this chapter. The problem is based on material covered in financial accounting and is included here to prompt thinking about accounting problems, accounting processes, and decisions.) You are working as an assistant
Music Makers produces compact disks for various software and music companies. Music Makers receives a master version of the software or music from a customer in computer form. The company copies the master version of the data to blank CDs, packages the CDs, and ships the completed product to the
1. Management accounting is concerned primarily with providing:a. information in accordance with generally accepted accounting principles.b. information to stockholders, creditors, and others outside the organization.c. information to managers inside the organization.d. information to regulatory
Most states now require five years of education for accounting graduates to sit for the Certified Public Accountant (CPA) examination. Many accounting jobs, however, do not require a CPA license, so some students still seek only four-year degrees. The Business School at Cassidy University offers
Greencut Manufacturing produces energy-efficient lawn mowers for homeowners. Workers at Greencut manufacture the mower bodies from steel sheets and then attach a gasoline-powered engine, a blade, a handle, and four wheels to each unit. The following events took place during the month of January:1.
To solve this problem, use the information in Self-Study Prob- lem 1. In addition, assume Greencut does not carry work-in- process or finished goods inventory. All units are completed and sold during the month. Salespersons earned commissions of $10,000 in January.\section*{Required}A. Prepare an
Greencut is considering adding a mulching lawn mower to its product line. The new mower cuts grass clippings into fine par- ticles, eliminating raking, bagging, and disposing of lawn wastes. The new product is intended to meet the needs of urban and environmentally conscious homeowners. Greencut
Costs may be classified according to a number of categories including:a. Product cost versus period expense.b. Direct materials, direct labor, or overhead.
Manufacturing costs flow through an accounting system as products physically move through the factory.a. When raw materials are acquired, their value is added to raw materials inventory.b. When raw materials are placed into production, their costs, along with the costs of labor and overhead, are
Managers use cost information to help them make better decisions.a. Understanding the value chain enables managers to work with their customers and suppliers to minimize costs and to provide high-quality products or services.b. Just-in-time inventory practices help companies reduce inventory levels
Organizations that produce services instead of tangible products also incur production costs.a. The costs of services are classified as direct or indirect.b. Service organizations often implement cost control procedures to identify and eliminate waste.
Your textbook is manufactured from a number of materials including paper, ink, and glue. obj. 1 Typically, publishing company accountants consider paper and ink direct materials; however, they consider glue an indirect material. How do accountants make these distinctions?
Wendell Fromm Company manufactures hand tools that are used in many factory applicaobj. 1 tions. The company manufactures tools from metal alloys and incurs labor and overhead costs during the manufacturing process. What costs should Wendell Fromm include in the cost of goods sold section of its
Carlton Industries manufactures orthopedic devices, such as hips and joints, from specialty obj. 1 metals. Each device is produced individually based on the dimensions of a specific patient. The company ships the devices to surgeons as soon as production is completed. Define and explain the
The nurses on the fourth floor of Western Medical Center care for and administer drugs to obj. 1 patients who have undergone orthopedic surgery. Also located on the fourth floor is a mobile X-ray station that Western recently purchased for \(\$ 250,000\). How would you classify the costs of nursing
If product costs eventually become expenses when a product is sold, why are accountants so obj. 1 careful when making product cost and period expense classifications?
Can service organizations, such as legal and accounting firms, report work-in-process and fin Obj. 1 ished goods inventories on their balance sheets?
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