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business
managerial accounting

Questions and Answers of Managerial Accounting

Digger Company is evaluating an investment of $330,000 in earth moving equipment. Management anticipates net cash savings of $100,000 in year 1. The savings will increase by 40% in year 2 and then
Oxford Company has limited funds available for investment and must ration the funds among five competing projects. Selected information on the five projects follows: The net present values above
A piece of labour-saving equipment has just come onto the market, which Mitsui Electronics Ltd. could use to reduce costs in one of its plants in Japan. Relevant data relating to the equipment follow
Raul Martinas, a professor of languages at Eastern University, owns a small office building adjacent to the university campus. He acquired the property 10 years ago at a total cost of $530,000?that
The management of Revco Products is exploring five different investment opportunities. Information on the five projects under study follows: The company?s required rate of return is 10%; thus, a
The management of Unter Corporation is considering an investment with the following characteristics: Required: 1. Determine the payback period of the investment. 2. Would the payback period be
Use an online directory, such as http://www.yellowpages.ca or http://www.411.ca, to find a manufacturer in your area that has a website. Make an appointment with the controller or chief financial
Bilboa Freightlines, S.A. of Panama has a small truck that it uses for local deliveries. The truck is in bad repair and must be either overhauled or replaced with a new truck. The company has
Labeau Products Ltd., of Perth, Australia, has $122,500 to invest. The company is trying to decide between two alternative uses for the funds. The alternatives follow: The company?s discount rate
Marlon Plastics purchased a new machine one year ago at a cost of $750,000. Although the machine operates well, the president of the company is considering replacing it with a new electronic machine
Windhoek Mines Ltd. of Namibia is contemplating the purchase of equipment to exploit a mineral deposit located on land to which the company has mineral rights. An engineering and cost analysis has
Tischler the Honey Man (THM) purchases honeycombs from beekeepers for $4.40 per kilogram. THM produces two main products from the honeycombs—honey and beeswax. Honey is drained from the honeycombs,
Javelin Cycling Vacations Ltd. offers cycling tours in Canada and France. Each year a single tour is offered. For 20X5, the company is offering a tour of the Continental Divide. Following is an
The Brain Teasers (TBT) specializes in creating and manufacturing board games for youth. Each game has a unique game board to accompany the other pieces of the game. The company is at the final
The Engine Guys produces specialized engines for “snow climber” buses. The company’s normal monthly production volume is 1,000 engines, whereas its monthly production capacity is 2,000 engines.
Cora Corporation produces refrigerator units. The company?s normal production and sales volume of Standard units is 3,000 units per month, and units sell for $800 each. The costs of manufacturing and
SpeedCar Corporation makes toy cars that it can sell for $25 per car. Production manager Alex Carvahllo is considering whether to refurbish or replace the moulds that SpeedCar uses in the
Anchor Company manufactures a variety of tool boxes. The firm is currently operating at 80% of its full capacity of 7,500 machine-hours per month. Each unit requires 30 minutes of machine time. Its
Hearty Dairy is trying to decide whether it should sell the milk that it processes “as is” or further process it into butter. Management has collected the following data pertaining to
Montreal Corporation (MC) has received an offer from an outside supplier to supply 10,000 units of parts used annually in the manufacture of its main product at $36 per unit. The following current
We Make Company has traditionally manufactured a number of different standard machine parts. It is now exploring an outsourcing decision for several of the parts that it currently produces. Cost
Your Retail Store?s accountant prepared the following income statement for the ladies? accessories product line: Management is concerned about the loss and is considering dropping the product line.
Standard Machine Parts Ltd. makes specialized machine parts for several customers, all of whom are major manufacturers. Standard is considering replacing one of the special machines used in the
The Hyatt Company is trying to decide whether it should purchase new equipment so that it can continue to make its engines, a key component of its final product, internally or whether production
“In my opinion, we ought to stop making our own drums and accept that outside supplier’s offer,” saidWim Niewindt, managing director of Antilles Refining, N.V., of Aruba. “At a price of 36
Golfers, Inc. (GI) manufactures golf related equipment including golf balls. This year?s expected production of golf balls is 100,000 packs (each consisting of four golf balls). Cost data are as
Soft and Cuddly Friends (SCF) produces soft dolls. Demand for the dolls is increasing, and management wants you to identify an economical sales and production mix for the coming year. The following
Barlow Company manufactures three products: A, B, and C. The selling price, variable costs, and contribution margin for one unit of each product follow: The same raw material is used in all three
Imperial Jewellers is considering a special order for 20 handcrafted gold bracelets for a major upscale wedding. The gold bracelets are to be given as gifts to members of the wedding party. The
Cora Limited’s normal monthly production output is 3,800 units of a product that sells for $30 per unit. Its total variable costs amount to $22 per unit and total monthly fixed costs amount to
Benoit Company produces three products, A, B, and C. Data concerning the three products follow (per unit): Demand for the company?s products is very strong, with far more orders each month than the
Delta Company produces a single product. The cost of producing and selling a single unit of this product at the company’s normal activity level of 60,000 units per year is as follows:Direct
For many years, Futura Company has purchased the starters that it installs in its standard line of farm tractors. Due to a reduction in output of some of its products, the company has idle capacity
Autoway Inc. is a wholesale Winnipeg-based distributor supplying a wide range of moderately priced auto equipment to large chain stores. Autoway manufactures about 40% of these products and the rest
Han Products manufactures 55,500 units of part S-6 each year for use on its production line. At this level of activity, the cost per unit for part S-6 is as follows:Direct materials
Thalassines Kataskeves, S.A., of Greece, makes marine equipment. The company has been experiencing losses on its bilge pump product line for several years. The most recent quarterly income statement
Hollings Company sells office furniture in the Rocky Mountain area. As part of its service, Hollings delivers furniture to customers. The costs associated with the acquisition and annual operation of
Profits have been decreasing for several years at Pegasus Airlines. In an effort to improve the company?s performance, consideration is being given to dropping several flights that appear to be
Bed & Bath, a retailing company, has two departments: hardware and linens. A recent monthly income statement for the company follows: A study indicates that $340,000 of the fixed expenses being
Waukee Railroad is considering the purchase of a powerful, high-speed wheel grinder to replace a standard wheel grinder now in use. Selected information on the two machines
Rasoi Equipment manufactures a variety of cooking equipment and related accessories. The data given below is for a special heavy-duty exhaust fan.Annual production capacity (units)
Tracey Douglas is the owner and managing director of Heritage Garden Furniture Ltd., a South African company that makes museum-quality reproductions of antique outdoor furniture. Tracey would like
Murl Plastics Inc. purchased a new machine one year ago at a cost of $30,000. Although the machine operates well, the president of Murl Plastics is wondering if the company should replace it with a
MotoMover makes three models of motorized skateboards. At present, all indirect costs are applied to production using a single predetermined overhead (OH) rate based on direct labour-hours.
This activity requires teamwork to reinforce the understanding of the hierarchy of activities commonly found in ABC systems in manufacturing companies.Required:1. The team should discuss and then
Krueger Ltd. wishes to earn a before-tax profit equal to 20% of sales revenue. Its monthly fixed costs are $40,000 and contribution margin ratio is equal to 40%.Required:1. Determine the annual
In 2018, Paton Ltd.’s margin of safety was 24% of the break-even sales level of $2,450,000 (at $49 per unit). The (actual) annual fixed costs amounted to $860,000.Required:What was the annual
Croftsman Company recorded the following information for its main product:Selling price per unit...................................................................$200Costs per unit (at the normal
Craig Company Inc. earns a contribution margin ratio of 36% on its main product sold at $120 per unit. Assume that the annual break-even point is 80,000 units.Required:1. Compute the annual fixed
Carter Manufacturing Company manufactures exclusive pens which sell for $60 per unit. Its unit variable costs are $28 and fixed expenses are $384,000. The company pays income tax at the rate of
Engberg Company?s most recent monthly income statement is given below: Required: 1. Compute the company?s degree of operating leverage. 2. Using the degree of operating leverage, estimate the
Fletcher Corporation prepared the following income statement for the fourth quarter in 2018.Sales revenue (30,000 units).............................................$930,000Less: Costs of goods
Brewer Corporation estimated its quarterly break-even sales for 2017 to be 45,800 units, priced at $38 each. Its actual sales for the year amounted to $7,752,000 and actual quarterly fixed expenses
Al’s Auto Wash charges $4 to wash a car. The variable costs of washing a car are 15% of sales. Fixed expenses total $1,700 monthly. How many cars must be washed each month for Al to break even?
Sultan Corporation operated at its normal capacity during the current year, producing 60,000 units of its single product. Sales totalled 50,000 units at an average price of $30 per unit. Variable
Molander Corporation sells a sun umbrella used at resort hotels. Data concerning the next month?s budget are given below: Required: 1. Compute the company?s margin of safety. 2. Compute the
Draaksh Corporation sells premium quality wine for $50 per bottle. Its direct materials and direct labour costs are $9 and $6 respectively per bottle. It pays its direct labour employees a wage of
Refer to the data in Brief Exercise 8–6. Assume a 40% tax rate, and assume that the profits in the figures shown in parts (1) and (2) are after-tax amounts.Required:Redo Brief Exercise 8–6.Brief
Krait Products sells camping equipment. One of the company’s products, a camp lantern, sells for $90 per unit. Variable expenses are $63 per lantern, and fixed expenses associated with the lantern
Lin Corporation has a single product, whose selling price is $180 and whose variable cost is $100 per unit. The company’s monthly fixed expenses are $60,000.Required:1. Using the equation method,
Wesley Company manufactures and sells a single product. The company?s sales and expenses for last quarter follow: Required: 1. What is the monthly break-even point in units sold and in sales
“A 10% decrease in the selling price of a product will have the same impact on net income as a 10% increase in the variable expenses.” Do you agree? Why, or why not?
Klyne Corporation manufactures pharmaceutical products that are sold through a network of sales agents. The agents are paid a commission of 18% of sales. The income statement for the year ending
The Hartford Symphony Guild is planning its annual dinner and dance. The committee has assembled the following expected costs for the event:Dinner (per
Mauro Products has a single product, a woven basket whose selling price is $54, and variable cost is $45 per unit. The company’s monthly fixed expenses are $26,550.Required:1. Compute the
What is meant by operating leverage?
Data for Hermann Corporation are shown below: Fixed expenses are $40,000 per month, and the company is selling 2,000 units per month. Required: 1. The marketing manager argues that a $4,000
The marketing manager, Raj Mehta, picked up the phone to call Susan Ahmed, the company’s cost accounting assistant and Raj’s personal friend.Mehta: Hi, Susan. Can you help me understand something
Klinken Corporation’s contribution margin ratio on the sale of its most popular product is 42%. The product is priced at $80, annual fixed expenses are $800,000. Management is evaluating two
Allen Moving and Storage prepared the following income statement for 2018: Upon reviewing the income statement for 2018, chief financial officer Suzie Allen called a meeting to discuss the
Miller Company?s most recent income statement follows: Required: Prepare a new income statement under each of the following conditions (consider each case independently): 1. The sales volume
Whirly Corporation?s most recent income statement is shown below: Required: Prepare a new income statement under each of the following conditions (consider each case independently): 1. The sales
What is a product’s CM ratio? How is this ratio useful in planning business operations?
A company has the following excess (deficiency) of cash receipts over cash disbursements projected for the next year on a quarterly basis. It will not have any cash at the start of the year. The
At the end of August, there was $90,000 in inventory. The change in inventory balance for September was (10,000). The following entries were posted to the GL at the end of September: Required: 1.
The Red Company is a relatively new company. The company?s accountant has assembled the following information pertaining to the company?s operations budget for the year ended December 31, 20X0: Sales
The following schedule shows the excess of cash receipts over cash disbursements projected for the Zoptic Company for 20X1: The company borrows and repays from an open line of credit in round
A company has the following incomplete production budget data for the first quarter: Ending inventory is budgeted at 5% of projected sales units in the coming month. Required: What is the expected
You have been asked to prepare the monthly cash budget for June and July for the Merchandise and Mercantile Company. The company sells a unique product that is specially made for it by a major
The following information relates to Old Company for September of this year:Opening cash balance......................................................$16,000Depreciation
It is mid-February and a company has just approached its bank with a request for a $300,000 90-day loan to meet its working capital requirements. Inventories peak in April in anticipation of spring
The management of Mecca Copy, a photocopying centre located on University Avenue, has compiled the following data to use in preparing its budgeted balance sheet for next year:
Kat Ltd.’s September balance sheet contains the following information:Cash.............................................................................$ 37,500 (dr)Accounts
All sales of Aegan Electronics Supply are made on credit. Sales are billed twice monthly, on the 10th of the month for sales made in the last half of the prior month, and on the 20th of the month for
Garden Depot is a retailer that is preparing its budget for the upcoming fiscal year. Management has prepared the following summary of its budgeted cash flows: The company?s beginning cash balance
How can budgeting assist a firm in its employment policies?
The controller of Arrowroot Company wishes to improve the company’s control system by preparing a monthly cash budget. The following information relates to the month ending July 31, 20X1:June 30,
Garden Sales, Inc. sells garden supplies. Management is planning its cash needs for the second quarter. The company usually has to borrow money during this quarter to support peak sales of lawn care
The production department of Raredon Corporation has submitted the following forecast of units to be produced by quarter for the upcoming fiscal year: Each unit requires 1.4 direct labour-hours,
The production department of Rordan Corporation has submitted the following forecast of units to be produced by quarter for the upcoming fiscal year: Each unit requires 0.55 direct labour-hours,
Is the use of budgetary slack unethical? Consider a hypothetical conversation between you and the sales and production managers of your company that you recently joined about how the managers
Risky Rolling, Inc. is a rapidly expanding manufacturer of skateboards that have been modified for use on ski slopes during the off-season. This year’s sales are considerably higher than last
Daisy Products Limited of Shenzhen, China, manufactures and distributes toys throughout Southeast Asia.Three cubic centimetres (cc) of solvent Q80 are required to manufacture each unit of Fineclay,
The marketing department of Jessi Corporation has submitted the following sales forecast for the upcoming fiscal year: The selling price of the company?s product is $20 per unit. Management expects
Silver Company makes a product that is very popular as a Mother?s Day gift. Thus, peak sales occur in May of each year. These peak sales are shown in the following sales budget for the second
The following terms pertain to the budgeting process:benchmarks..........................................bottlenecksbudget...................................................budget
“The higher the R2 of a regression equation, the better the likelihood that X is an appropriate cost driver for Y.” Is this true or false? Explain your answer.
What is the difference between the scattergraph method and the least-squares regression method?
Why is the least-squares regression method preferred to the high–low method when analyzing mixed costs?
What is least-squares regression?

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