Questions and Answers of Managerial Accounting Tools For Business Decision Making

What does it mean to say depreciation is a tax shield when evaluating capital projects?
What are the components of the real interest rate?
What are the components of the nominal interest rate?
What are three problems with basing investment decisions on internal rate of return?
An investment opportunity that will involve an investment of $1,000 will generate $300 per year for five years and then earn $140 per year forever.What is the net present value of this investment,
Why is a dollar of initial investment in a building more valuable than a dollar of initial investment in land or working capital?
Demand for DVD Players The demand for DVD players is expanding rapidly, but the industry is highly competitive. A plant to make DVD players costs $40 million, has an annual capacity of 100,000 units,
Why are cash flows but not accounting earnings discounted in capital budgeting analyses?
Watson’s Bay Co. is considering a contract to manufacture didgeridoos. Producing didgeridoos will require an investment in equipment of $100,000 and operating costs of $15 per didgeridoo
A proposed cost-saving device has an installed cost of $59,400. It will be depreciated for tax purposes on a straight-line basis over three years (zero salvage), although its actual life will be five
The Linda Lion Co. has an investment opportunity that involves a current outlay of $1,000 for equipment.The investment will yield net cash inflows for four years. The net cash inflow at the end of
Black Feather Indian Nation is a 900 square-mile territory in North Dakota that has the legal right to sell gasoline without having to collect or pay state and federal taxes on it. Gasoline in North
a. Scottie Corporation has been offered a contract to produce 100 castings a year for five years at a price of $200 per casting. Producing the castings will require an investment in the plant of
A punch press currently in use has a book value of $1,800 and needs design modifications totaling$16,200, which would be capitalized at the present time and depreciated. The press can be sold
Eastern Educational Services is considering the following proposal to sell its teaching machine and purchase a new, improved machine. The following data are presented by the department
Two types of machine tools are available for performing a particular job in Apex Corporation. Tool A has an initial investment of $52,000, with operating costs of $26,000 per year, an economic
What generates agency costs?
How are agency costs reduced, and what limits them?
Define goal incongruence.
How does one achieve goal congruence?
Why are knowledge and decision making linked within a firm?
Name three things markets do automatically that must be replaced with elaborate administrative systems in the firm.
What are influence costs?
Mail delivery during the Christmas holidays of 1990 to U.S. troops stationed in Saudi Arabia for Operation Desert Storm was haphazard. So many letters and packages were mailed during the holidays,
Why do firms exist?
Define decision management and decision control and give an example of each.
Describe the three systems all organizations must construct to control agency problems.
Some economists (e.g., Hayek) argue that decentralization of economic decisions in the economy leads to efficient resource allocation. What differences exist within the firm that make the link
Ideal Manufacturing Company has supported a research and development (R&D) department that has for many years been the sole contributor to the company’s new farm machinery products. The R&D
Building a kayak using the composite method is a very labor-intensive process. In the Fabrication Department, the kayaks go through several steps as employees carefully place layers of Kevlar® in a
The financial statements of Apple Inc. are available online.InstructionsAnswer the following questions.a. Wfvfvfv activities for the year ended September 28,2019? For the year ended September 29,
Information for NoFly Corporation is given in BE6.7. If the company has fixed costs of $269,500, how maDixie Candle Supply makes candles. The sales mix (as a percentage of total dollar sales) of its
Dilithium Batteries is a division of Enterprise Corporation. The division manufactures and sells a long-life battery used in a wide variety of applications. During the coming year, it expects to sell
Personal Electronix sells computer tablets and MP3 players. The business is divided into two divisions along product lines. CVP income statements for a recent quarter’s activity are presented
What is operating leverage? How does a company increase its operating leverage?
Tiger Golf Accessories sells golf shoes, gloves, and a laser-guided range-finder that measures distance. Shown below are unit cost and sales data. Unit sales price Unit variable costs Unit
Casas Modernas of Juarez, Mexico, is contemplating a major change in its cost structure. Currently, all of its drafting work is performed by skilled draftsmen. Rafael Jiminez, Casas’ owner, is
Langdon Company produced 9,000 units during the past year, but only 8,200 of the units were sold. The following additional information is also available. Direct materials used
Nathan T Corporation is comparing two different options. Nathan T currently uses Option 1, with revenues of $65,000 per year, maintenance expenses of $5,000 per year, and operating expenses of
Harris Company’s fixed overhead costs are $4 per unit, and its variable overhead costs are $8 per unit. In the first month of operations, 50,000 units are produced, and 46,000 units are sold. Write
At the beginning of last year (2021), Richter Condos installed a mechanized elevator for its tenants. The owner of the company, Ron Richter, recently returned from an industry equipment exhibition
The management of Shatner Manufacturing Company is trying to decide whether to continue manufacturing a part or to buy it from an outside supplier. The part, called CISCO, is a component of the
Maize Company incurs a cost of $35 per unit, of which $20 is variable, to make a product that normally sells for $58. A foreign wholesaler offers to buy 6,000 units at $30 each. Maize will incur
Hank Jewell is a production manager at a metal fabricating factory. Last night, he read an article about a new piece of equipment that would dramatically reduce his division’s costs. Hank was very
Darcy Roofing is faced with a decision. The company relies very heavily on the use of its 60-foot extension lift for work on large homes and commercial properties. Last year, Darcy Roofing spent
Brislin Company has four operating divisions. During the first quarter of 2022, the company reported aggregate income from operations of $213,000 and the following divisional resultsAnalysis reveals
Blake Romney became chief executive officer of Peters Inc. 2 years ago. At the time, the company was reporting lagging profits, and Blake was brought in to “stir things up.” The company has three
Data visualization can help Broadway theatre analysts to understand ticket prices.Example: Recall the Service Company Insight box “How Much Did You Pay for That Seat?” presented in the chapter.
Each day, Adama Corporation processes 1 ton of a secret raw material into two resulting products, AB1 and XY1. When it processes 1 ton of the raw material, the company incurs joint processing costs
Riggs Company purchases sails and produces sailboats. It currently produces 1,200 sailboats per year, operating at normal capacity, which is about 80% of full capacity. Riggs purchases sail at $250
Riggs Company purchases sails and produces sailboats. It currently produces 1,200 sailboats per year, operating at normal capacity, which is about 80% of full capacity. Riggs purchases sails at $250
Innova uses 1,000 units of the component IMC2 every month to manufacture one of its products. The unit costs incurred to manufacture the component are as follows.Overhead costs include variable
Anna Garden recently opened her own basketweaving studio. She sells finished baskets in addition to selling the raw materials needed by customers to weave baskets of their own. Unfortunately, owing
Data visualization can help Broadway theatre analysts to understand ticket pricesExample: Recall the Service Company Insight box “How Much Did You Pay for That Seat?” presented in the chapter. As
Mussatto Corporation produces snowboards. The following unit cost information is available: direct materials $12, direct labor $8, variable manufacturing overhead $6, fixed manufacturing overhead
a. What is a budget?b. How does a budget contribute to good management?
For Gundy Company, units to be produced are 5,000 in quarter 1 and 7,000 in quarter 2. It takes 1.6 hours to make a finished unit, and the expected hourly wage rate is $15 per hour. Prepare a direct
Alex Company reported the following information for 2022.Additional information:1. Operating expenses include depreciation expense of $40,000.2. Land was sold at its book value for cash.3. Cash
Moss Corporation had the following transactions.1. Issued $160,000 of bonds payable.2. Paid utility expenses.3. Issued 500 shares of preferred stock for $45,000.4. Sold land and a building for
Miguel, Inc. reported net income of $2.5 million in 2022. Depreciation for the year was $160,000, accounts receivable decreased $350,000, and accounts payable decreased $280,000. Compute net cash
Pendleton Automotive Corp. is a medium-sized wholesaler of automotive parts. It has 10 stockholders who have been paid a total of $1 million in cash dividends for 8 consecutive years. The board’s
Condensed financial data of Granger Inc. follow.Additional information:1. New plant assets costing $100,000 were purchased for cash during the year.2. Old plant assets having an original cost of
Data for Granger Inc. are presented in P13.9. Further analysis reveals that accounts payable pertain to merchandise creditors.InstructionsPrepare a statement of cash flows for Granger Inc. using the
Hoffman Corporation reported income taxes of $370,000,000 on its 2022 income statement. Its balance sheet reported income taxes payable of $277,000,000 at December 31, 2021, and $528,000,000 at
Here are comparative financial statement data for Duke Company and Lord Company, two competitors. All data are as of December 31, 2022, and December 31, 2021.Instructionsa. Prepare a vertical
Harbinger Inc. reported sales of $2 million for 2022. Accounts receivable decreased $150,000 and accounts payable increased $300,000. Compute cash receipts from customers, assuming that the
Waterways Corporation has proposed comparative balance sheets and income statements for 2021 and 2022. This case asks you to prepare horizontal and vertical analyses of the income statements and to
Your parents are considering investing in Apple Inc. common stock. They ask you, as an accounting expert, to make an analysis of the company for them. Financial statements of Apple are available
During 2022, Hrabik Corporation had the following amounts, all before calculating tax effects: income before income taxes $500,000, loss on operation of discontinued music division $60,000, gain on
Trayer Corporation has income from continuing operations of $290,000 for the year ended December 31, 2022. It also has the following items (before considering income taxes).1. An unrealized loss of
Net income was $500,000 in 2020, $485,000 in 2021, and $518,400 in 2022. What is the percentage of change (a) from 2020 to 2021 (b) from 2021 to 2022? Is the change an increase or a
The following data are taken from the financial statements of Colby Company.Compute for each year (a) the accounts receivable turnover (b) the average collection period. What conclusions
What is the equation for computing the payout ratio? Do you expect this ratio to be high or low for a growth company?
The following financial information is for Priscoll Company.Additional information:1. Inventory at the beginning of 2021 was $115,000.2. Accounts receivable (net) at the beginning of 2021 were
The comparative statements of Wahlberg Company are presented here.All sales were on credit. Net cash provided by operating activities for 2022 was $220,000. Capital expenditures were $136,000, and
Data visualization can be used to help improve forecasts.Example: Recall the section “Flexible Budget—A Case Study” presented in the chapter. Flexible budgeting is useful because it enables
Elbert Company classifies its selling and administrative expense budget into variable and fixed components. Variable expenses are expected to be $24,000 in the first quarter, and $4,000 increments
For Roche Inc., variable manufacturing overhead costs are expected to be $20,000 in the first quarter of 2022, with $5,000 increments in each of the remaining three quarters. Fixed overhead costs are
Gundy Company expects to produce 1,200,000 units of Product XX in 2022. Monthly production is expected to range from 80,000 to 120,000 units. Budgeted variable manufacturing costs per unit are direct
Using the information in E10.3, assume that in July 2022, Myers Company incurs the following manufacturing overhead costs.The Rockies Division operates as a profit center. It reports the following
Sterling, Inc. reports the following financial information for its sports clothing segment.Average operating assets .........................$3,000,000Controllable margin
UrLink Company is a newly formed company specializing in high-speed Internet service for homes and businesses. The owner, Lenny Kirkland, divided the company into two segments: Home Internet Service
The Mixing Department manager of Malone Company is able to control all overhead costs except rent, property taxes, and salaries. Budgeted monthly overhead costs for the Mixing Department, in
Horatio Inc. has three divisions that are operated as profit centers. Actual operating data for the divisions listed alphabetically are as follows.Instructionsa. Compute the missing amounts. Show
Explain the ways in which ROI can be improved.
Using the information in P11.3, compute the overhead controllable variance and the overhead volume variance.P11.3Rudd Clothiers is a small company that manufactures tall-men’s suits. The company
Using the information in P11.5, compute the overhead controllable variance and the overhead volume variance.P11.5Hart Labs, Inc. provides mad cow disease testing for both state and federal government
Jane’s Auto Care is considering the purchase of a new tow truck. The garage doesn’t currently have a tow truck, and the $60,000 price tag for a new truck would represent a major expenditure. Jane
The Balanced Scorecard Institute is a great resource for information about implementing the balanced scorecard. One item of interest provided at its website is an example of a balanced scorecard for
Kansas Company uses a standard cost accounting system. In 2022, the company produced 28,000 units. Each unit took several pounds of direct materials and 1.6 standard hours of direct labor at a
Using the information in P11.1, compute the overhead controllable variance and the overhead volume variance.P11.1Rogen Corporation manufactures a single product. The standard cost per unit of product
Using the information in P11.2, compute the overhead controllable variance and the overhead volume variance.P11.2Ayala Corporation accumulates the following data relative to jobs started and finished
Seacrest Company’s overhead rate was based on estimates of $240,000 for overhead costs and 24,000 direct labor hours. Seacrest’s standards allow 2 hours of direct labor per unit produced.
Waterways prepared the balance sheet and income statement for the irrigation installation division for 2022. Now the company also needs to prepare a statement of cash flows for the same division.
The financial statements of PepsiCo and The Coca-Cola Company are available online. The complete annual reports of PepsiCo and Coca-Cola, including the notes to the financial statements, are
Waterways Corporation competes in a market economy in which its products must be sold at market prices. Its emphasis is therefore on manufacturing its products at a cost that allows the company to
Greetings, Inc., a retailer of greeting cards and small gift items, needs to change its transfer pricing strategy for its Wall Décor division. In this case, you will have the opportunity to evaluate
The financial statements of Amazon.com, Inc. and Walmart Inc. are available online. The complete annual reports of Amazon and Walmart, including the notes to the financial statements, are available
Sosa Company reported a net income of $190,000 for 2022. Sosa also reported a depreciation expense of $35,000 and a loss of $5,000 on the disposal of plant assets. The comparative balance sheets show
On January 2, 2021, Twilight Hospital purchased a $100,000 special radiology scanner from Bella Inc. The scanner had a useful life of 4 years and was estimated to have no disposal value at the end of

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