Questions and Answers of Managerial Accounting Tools For Business Decision Making

A job order cost sheet for Michaels Company is shown belowInstructions(a) Answer the following questions.(1) What was the balance in Work in Process Inventory on January 1 if this was the only
Kwik Kopy Company applies operating overhead to photocopying jobs on the basis of machine hours used. Overhead costs are expected to total $290,000 for the year, and machine usage is estimated at
Armando Company manufactures pizza sauce through two production departments: Cooking and Canning. In each process, materials and conversion costs are incurred evenly throughout the process. For the
The Sanding Department of Jo Furniture Company has the following production and manufacturing cost data for March 2017, the first month of operation.Production: 11,000 units finished and transferred
Karlene Industries produces plastic ice cube trays in two processes: heating and stamping. All materials are added at the beginning of the Heating Department process. Karlene uses the
Domestic Fabrics has budgeted overhead costs of $955,000. It has allocated overhead on a plantwide basis to its two products (wool and cotton) using direct labor hours which are estimated to be
Organic Products, Inc., uses a traditional product costing system to assign overhead costs uniformly to all products. To meet Food and Drug Administration (FDA) requirements and to assure its
The controller of Teton Industries has collected the following monthly expense data for use in analyzing the cost behavior of maintenance costs.Instructions (a) Determine the fi xed-cost and
Zion Seating Co., a manufacturer of chairs, had the following data for 2017:Instructions (a) What is the contribution margin ratio?(b) What is the break-even point in dollars?(c) What is the margin
Yard-King manufactures lawnmowers, weed-trimmers, and chainsaws. Its sales mix and unit contribution margins are as follows.Yard-King has fixed costs of $4,620,000.Instructions Compute the number of
Rene Company manufactures and sells three products. Relevant per unit data concerning each product are given below.Instructions(a) Compute the contribution margin per unit of limited resource
The CVP income statements shown below are available for Vericelli Company and Boone CompanyInstructions (a) Compute the degree of operating leverage for each company and interpret your results.(b)
Francis Corporation manufactures and sells three different types of water-sport wakeboards. The boards vary in terms of their quality specifications—primarily with respect to their smoothness and
Maningly Inc. has been manufacturing its own lampshades for its table lamps. The company is currently operating at 100% of capacity. Variable manufacturing overhead is charged to production at the
Tek Enterprises uses a computer to handle its sales invoices. Lately, business has been so good that it takes an extra 3 hours per night, plus every third Saturday, to keep up with the volume of
Benai Lorenzo, a recent graduate of Bonita’s accounting program, evaluated the operating performance of Wasson Company’s six divisions. Benai made the following presentation to the Wasson board
Notown Recording Studio rents studio time to musicians in 2-hour blocks. Each session includes the use of the studio facilities, a digital recorded CD of the performance, and a professional music
Mercury Corporation manufactures car audio systems. It is a division of Country-Wide Motors, which manufactures vehicles. Mercury sells car audio systems to other divisions of Country-Wide, as well
Jake Company expects to have a cash balance of $45,000 on January 1, 2017. Relevant monthly budget data for the fi rst 2 months of 2017 are as follows.Collections from customers: January $100,000.
Asheville Company is preparing its master budget for 2017. Relevant data pertaining to its sales and production budgets are as follows.Sales. Sales for the year are expected to total 2,100,000 units.
Barrett Company has completed all operating budgets other than the income statement for 2017. Selected data from these budgets follow.Sales: $300,000 Purchases of raw materials: $145,000 Ending
Felix Company uses a fl exible budget for manufacturing overhead based on direct labor hours. Variable manufacturing overhead costs per direct labor hour are as follows.Fixed overhead costs per month
The White Division of Mesin Company reported the following data for the current year.Top management is unhappy with the investment center’s return on investment (ROI). It asks the manager of the
Hector Inc., which produces a single product, has prepared the following standard cost sheet for one unit of the product.Direct materials (6 pounds at $2.50 per pound) $15.00 Direct labor (3.1 hours
Manufacturing overhead data for the production of Product H by Yamato Company are as follows. Overhead incurred for 35,000 actual direct labor hours worked $140,000 Overhead rate (variable $3;
BTMS Inc. wants to purchase a new machine for $30,000, excluding $1,500 of installation costs. The old machine was bought five years ago and had an expected economic life of 10 years without salvage
Furst Corporation had the following transactions.1. Paid salaries of $14,000.2. Issued common stock for equipment worth $16,000.3. Sold equipment (cost $10,000, accumulated depreciation $6,000) for
Strong Corporation’s comparative balance sheets are presented below.Additional information:1. Net income was $28,300. Dividends declared and paid were $26,400.2. Equipment that cost $10,000 and had
The income statement for the year ended December 31, 2017, for Kosinski Manufacturing Company contains the following condensed information.Included in operating expenses is a $24,000 loss resulting
The comparative condensed balance sheets of Roadway Corporation are presented below.Instructions (a) Prepare a horizontal analysis of the balance sheet data for Roadway Corporation using 2016 as a
Rondo Corporation’s comparative balance sheets are presented below.Rondo’s 2017 income statement included net sales of $120,000, cost of goods sold of $70,000, and net income of
The events and transactions of Dever Corporation for the year ending December 31, 2017, resulted in the following data. Cost of goods sold $2,600,000 Net sales 4,400,000 Other expenses and losses
Fredricks Company reports the following costs and expenses in MayInstructions From the information, determine the total amount of:(a) Manufacturing overhead(b) Product costs(c) Period costs. Factory
Tommi Corporation incurred the following costs while manufacturing its product.Work-in-process inventory was $10,000 at January 1 and $14,000 at December 31. Finished goods inventory was $60,500 at
Superior Company has the following cost and expense data for the year ending December 31, 2017.Instructions (a) Prepare a cost of goods manufactured schedule for Superior Company for 2017.(b)
Disney faces many situations where it needs to apply the decision tools learned in this chapter, such as using a job cost sheet to determine a film’s profitability. For example, assume Disney uses
Old Rosebud is a Kentucky horse farm that specializes in boarding thoroughbred breeding mares and their foals. Customers bring their breeding mares to Old Rosebud for delivery of their foals and
Magee Inc. pays its sales manager a bonus of $10,000 if the manager meets the sales quota. The sales manager can exert either high effort or low effort. The additional disutility of the manager in
James, Inc., a large mail-order catalog firm, is thinking of expanding into Canada. The Buffalo district office would manage the expansion and must decide how much to spend on the advertising
What are some of the reasons for allocating costs?
Describe some ways cost allocations can affect cash flows.
How do cost allocations act as a tax system?
Define externality and give an example of one.
What is the difference between a positive and a negative externality?
How are externalities reduced within a firm?
Describe the three cases to consider when determining if a cost allocation is beneficial.
Should common costs be allocated?
Describe how a noninsulating allocation promotes cooperation among managers and encourages mutual monitoring.
Why would senior managers want to distort factor prices by using cost allocations?
Giza Farms in Cairo, Egypt, has a corporate headquarters staff and three operating divisions: consulting services, chemicals, and agricultural products. Giza is considering allocating 160 million
The Chicago Omni Hotel is a 750-room luxury hotel offering guests the finest facilities in downtown Chicago. The hotel is organized into four departments: lodging, dining, catering, and retail
What is the death spiral and how is it prevented?
What are some reasons to allocate service department costs, independent of which allocation method is chosen?
What is step-down allocation? What are some criticisms of this allocation method?
How do the direct allocation and step-down methods differ?
How does the cost per unit of service vary over the sequence of service departments when the step-down method is used?
What are joint costs? How do they differ from common costs?
Describe some methods for allocating joint costs.
What are the advantages and disadvantages of the net realizable method of allocating joint costs?
A bank has three service centers: EDP (electronic data processing), copying, and accounting. These service centers provide services to one another as well as to three operating divisions: A, B, and
A firm has four service centers, S1, S2, S3, and S4, which provide services to each other, as well as to three operating divisions, A, B, and C. The distribution of each service center’s output as
What are the two distinct absorption systems?
Describe the flow of costs through the T-accounts in a job order cost system.
Suppose that during the production of a particular job, a machine malfunctions, destroying $2,750 of raw materials.How should the cost of these materials be handled? Should they be charged to the job
Why would you use a prospective overhead rate to accumulate the overhead costs of a job?
Give a reason why you might have overabsorbed overhead at the end of the year.
Give the three ways to eliminate the balance in the overhead account at the end of the year.
Why are input measures used in calculating prospective overhead rates?
How are flexible budgets used in absorption cost systems?
Why should normal volume be used to determine overhead rates?
Why should one-time write-offs of fixed capital be used in absorption cost systems?
Why will using multiple overhead rates produce more accurate estimates of product costs?
There are three general methods of allocating overhead costs:plantwide rates, rates for each expense category, and departmental rates. Describe when each is the most useful.
What is process costing? Is it useful for decision making?What are its limitations?
Increased global competition has spurred most firms to take a hard look at their costs and become “lean and mean.” Rochco, a large industrial complex, has seen offshore competition erode its
Neweway Plastics manufactures an acrylic compound used in automobile bumpers in a continuous flow process. Raw material is added at the beginning of the process and conversion costs are incurred
What is the danger in viewing unit costs as variable costs?
How can managers increase profit artificially when an absorption cost system is used?
Name four ways to mitigate the incentives for managers to overproduce.
Give two claimed advantages of variable costing. Give two potential problems with variable costing.
Using the data from Table 10–6, recast the analysis with one change of assumption: Instead of assuming that an additional $17,000 of overhead was incurred in both years, assume that overhead was
UniCom produces a wide range of consumer electronics. UniCom’s Newark, New York, plant produces two types of cordless phones: 2.4 GHz and 6.0 GHz. The following table summarizes operations at the
Why does traditional absorption costing often yield inaccurate product costs?
In a plant producing multiple products, would absorption costing overcost or undercost the more complex products?Why?
What are the four mutually exclusive categories used in activity-based cost accounting?
Does activity-based costing allocate more or less total costs to products than unit-based costing?
What are two purposes for implementing activity-based costing?
What problems are associated with tracking historical costs?
How does the trade-off between decision management and decision control affect the form that an absorption cost system takes within a particular firm?
Under unit-based absorption costing systems, are high- or low-volume products overcosted? Why?
Define standard cost.
Name three areas in which standard costs can be used in the decision-making process.
Can standard costs be viewed as a proxy for opportunity costs?
How do standard costs illustrate the trade-off between decision making and control?
What is target costing? How does it differ from traditional standard costing?
What are the three sets of standard cost variances produced by most firms?
What are the two components of direct labor variances?
When might large favorable variances be viewed as bad?
What are the components of the direct materials variance?
What are some of the incentive effects when standard cost variances are used as part of the performance evaluation system?

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