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managerial accounting

Managerial Accounting 1st Edition Jennifer Cainas, Celina J. Jozsi, Kelly Richmond Pope - Solutions

Some intangible benefits are difficult to estimate and quantify. Give some intangible benefits of setting up an “online store” in addition to having a physical store location.
At the beginning of 2022, Auner Company is considering whether to continue to make a product or to buy the finished product from a supplier. The following data have been gathered:● Expected sales (in units) for the next 4 years are as follows:○ 2022: 40,000○ 2023: 46,000○ 2024: 54,000○
Mr. Ambitious is considering the purchase of a new machine to be used in his dry-cleaning business. The following after-tax cash savings are expected from the $40,000 investment over the next 5 years: years 1 and 2, $15,000 per year; years 3, 4, and 5, $10,000 per year.a. What is the net present
The following facts are known about an investment for Amol Company: The payback period is 4 years, the expected after-tax cash flows per year are $8,000, and the life of the project is 6 years.a. What is the initial cost?b. What is the internal rate of return? Choose one:i. Between 8% and 10%ii.
Cool for School Corporation is a manufacturer of smart boards and plans to purchase new equipment for its manufacturing process. After contacting the appropriate vendors, the purchasing department received differing terms and options from each vendor. The Engineering Department has determined that
If management is not committed to funding a project or does not believe that the project is a strategic fit for the organization, the potential for not approving the project is high, even if the project has a high net present value. Do you agree? Discuss.
Morales Company is planning to invest in high-tech equipment costing $580,000, which has a useful life of 6 years and a $40,000 salvage value. The investment is expected to produce net cash (after taxes) operating savings of $120,000 per year. A repair of $10,000 is anticipated at the end of 2
“The effectiveness of the capital budgeting methodology is questionable because predicting future cash inflows is often difficult and full of uncertainties.” Do you agree with this statement? Explain why or why not.
Cristina Company is considering investing in a new electronic data interchange (EDI) integrated system. The expected data follow. The cost savings are already after taxes, so taxes can be ignored.a. Set up the schedule of relevant cash flows below. Label clearly the relevant items. Calculate the
Sporty is interested in expanding its operations. A new facility will provide cash savings. Additionally, the company can sublease space and realize cash lease revenues. The current facility was acquired 10 years ago at a cost of $500,000.Current after-tax operating data:New facility (after-tax)
The following information is known about Premiere Suits, which sells tailored, hand-detailed suits and provides alteration and tailoring services:● The cash balance on November 1, 2022, is $40,000.● The company's policy is to have on hand 10% of the suits estimated to be sold in the next
Match the following terms with the descriptions provided below by placing the letter of the term in front of the description:a. Manufacturing overhead budgetb. Budgetary slackc. Budget committeed. Top-down budgeting approache. Master budgetf. Sales budgetg. Objectivesh. Participatory budgetingi.
Custom Windows has budgeted annual unit quarterly sales and production data as follows:● Each unit requires 2 pounds of direct materials at a standard cost of $10 per pound.● Payments for purchases of materials are 60% in the same month and 40% in the next month.a. How many units should be
Fancy Runners manufactures and sells table runners for an average price of $18.00. Other facts are as follows:● Materials cost $12 per runner.● The company projects 16,000 runners to be sold in August, 40,000 in September, and 30,000 in October.● The company wishes to have inventory of
Distinguish between short-term and long-term objectives. Provide two examples of each for a car manufacturer.
Explain why objectives need to be quantifiable to provide value to management in the budgeting process.
Identify how prescriptive and descriptive analytics can be used in the capital budgeting process.
True or False: For each of the following statements, identify whether the statement is true (T) or false (F).a. The internal rate of return assumes that funds are reinvested at the company’s cost of capital.b. All projects that have a positive internal rate of return (higher than zero) should be
Find an article that discusses a capital investment decision. Write a one-page summary of the article that includes discussion of the relevant internal and external factors and risks. Make sure to cite your sources.
Companies today face many uncertainties that make predicting future cash flows difficult for major projects. Several such risks are data security breaches (hacking, stealing of data), terrorist attacks, inflation, global competition, and product tampering. How can companies use sensitivity
For each of the statements, indicate which capital budgeting accounting method applies. More than one method may be used for a given item.P = PaybackARR = Accounting rate of returnIRR = Internal rate of returnNPV = Net present valuea. Assumes that funds are reinvested at the company’s cost of
For each of the following scenarios that involve significant investments in technology, provide examples of one tangible benefit and one intangible benefit.a. Wearable technology such as uniforms, smart watches, or shirts that track time spent at stations in a factoryb. Driverless carsc.
Describe the major benefits and weaknesses of the payback period and accounting rate of return methods.
MOP factors were described as important considerations for the success of projects. For each of the items described, select the appropriate category. Choose from:M = Management view, including strategic fit and economic supportO = Operational considerations such as scheduling, employee skills, and
If the net present value is zero, the project has no value in the present and should be rejected. Do you agree with this statement? Explain why or why not.
If the future cash flows are different in various years, only payback period and accounting rate of return models should be used. Do you agree with this statement? Explain why or why not.
You are reviewing a capital budgeting analysis that was prepared by your boss (the controller) at the request of the director of marketing. The director wants to purchase new software to manage all the company’s customer information and buying preferences. The analysis assumes the cost savings
Cash flows for capital budgeting projects should be estimated solely by accountants since they would have the most expertise and objectivity in the company. Do you agree with this statement? Explain why or why not.
You are the outside accountant for ABC Company. During your audit, you learn that the controller is planning to purchase a new piece of equipment for the company. You have also heard that the salesperson is a friend of the controller. Even though other bids were lower, the controller has indicated
Companies may choose to use both a nondiscounted cash flow model, such as payback period, and a discounted cash flow model, such as net present value, to get a more complete picture of a capital budgeting decision. Do you agree? Discuss.
The following articles provide some insight into the current and emerging trends and considerations in capital investment decisions. Select one of the articles from the list below.●“Tervis selling Sarasota County headquarters”, News-Press,
Modern Notes, Inc. had a $47,000 cash balance on May 1. The following information was also gathered:● Half of all sales are on credit. Of the credit sales, 80% are collected in the same month, 10% are collected in the next month, and 10% are uncollectible.● Sales for April were $100,000, and
Verde is a retailer whose fiscal year ends on June 30. The following data are provided for Verde’s operations:Other Information: ● Credit sales are collected as follows: 60% during the month of sale, 40% in the next month.● The gross profit ratio on merchandise inventory is 30%
The accounts receivable balance on June 30 is $12,000. Total sales for July are estimated to be $90,000. Sales are typically 10% cash and 90% credit sales. Of the credit sales, 40% is collected in the month of sale and the other 60% in the subsequent month.a. What are the total cash collections
For each of the following items, select for the current period only one financial document that best describes where the item would appear:a. Budgeted statement of cash receipts and cash disbursementsb. Income statementc. Balance sheet Document Item Amount not collected from credit
Describe the role and responsibilities of the budget committee and the budget director.
Identify each of the following statements as either T (True) or F (False).a. Objectives can be either measurable with a deadline for achievement or long-term subjective ideals that other companies in the industry currently have.b. The strategic plan serves as the foundation for the company’s
Most companies do not view “participatory budgeting” as a positive and feasible concept. Do you agree? If you do not agree, explain the benefits offered by participatory budgeting. Be specific.
The following information has been compiled for Quilliam Company. The company is in the office paper products industry.● Projected cash and credit sales schedule:● Collection policy for credit sales: 30% in month of sale; 60% in subsequent month. Remaining 10% are uncollectible and written off
You have been given the following annual 2023 cash flow projections for Expert House Cleaners:Other information:● The company charges an average fee of $2,000 per customer (house) monthly.● The company currently has 240 customers.a. Which costs appear to be variable,
If the direct labor budget is combined with the manufacturing overhead budget, the result is the same as the cost of goods sold budget. Do you agree? If you do not agree, explain why not. Be specific.
Refer to the data provided in Problem 6, but assume that the number of units expected to be sold will equal the number of units expected to be produced. Also assume that Quality Cases manufactures the product rather than buys the finished units. As such, the company would need a schedule of
Pine Company manufactures end tables that sell for $125 per table. Budgeted unit sales for the next six months are as follows:a. Prepare a sales budget for the third quarter of the calendar year covering July, August, and September.b. Prepare a sales budget for July, August, and September if the
The following sales budget information is known for East Company, which sells wall hangings for $20 per unit:Also known:● 30% of the sales are cash sales.● Credit sales are collected as follows: 60% in the same month and the rest in the following month.a. Prepare a schedule of cash collections
Beisswanger Company is preparing a master budget for 2023. Relevant data pertaining to its sales and production budgets are as follows:● Sales for the year are expected to total $1,200,000. Quarterly sales, as a percentage of total sales, are expected to be 20%, 25%, 30%, and 25%,
Manufacturers often set production budgets as follows: expected costs of producing the estimated units to be sold plus desired ending inventory less beginning inventory of finished units. Extra inventory can be expensive, so why would companies plan to have additional units in ending inventory?
Denisco Doughnuts has applied for a loan with a local bank. The bank has requested a budgeted balance sheet as of May 31, 2023. The controller of Denisco has assembled the following information:● May 31 inventory balance: $19,355● May payments of inventory paid for in cash: $5,400● May
If a company has clear measurable short-term objectives, then it can ignore long-term objectives because the future is so unpredictable. Do you agree? If you do not agree, explain why not. Be specific.
Identify which items you would include in a budgeted cash flow statement and budgeted income statement for yourself for the next month. Be sure to consider cash receipts from your salary, contributions from your parents or scholarships, planned payments for books, gasoline, rent, credit card and
The sales budget is the cornerstone of the master budget. What are some of the factors that a software developer considers in a sales budget for the year?
Select a small business or service line that you would like to own and operate. Research what the annual operating, investing, and finance inflows and outflows would be if you operated such a business in your area. Some possible references include the following:www.sba.gov: Information on
If a college dean overestimates enrollment so as to have more resources allocated to that particular college, are his or her actions unethical? Discuss.
The following information is known for Eskew Company:● A four-month insurance policy will be purchased on October 1 for $800.● Salaries of $5,000 will be paid on October 1 for the period from October 1 to December 22 and accrued for $1,000 on December 31.● Dividends in the amount of $2,250
The following articles provide some insight into the macro-level factors affecting organizations as the result of the COVID-19 pandemic. Select one of the articles from the list below.●“As consumers keep adapting, how will your business keep changing with them?” EY,
Manufacturers often budget to have extra direct materials in an effort to protect against unexpected delays in production from equipment downtime, defective materials or delays in materials arriving, labor errors, supplier strikes, or even difficulty of predicting sales. Do you agree with such a
Review the Statement of Ethical Professional Practice Standards promulgated by the Institute of Management Accounting (IMA): competence, confidentiality, credibility, and integrity. Now consider these five independent budgeting situations:i. The technology team intentionally padded the budget so
Contrast a rolling forecast with the master budget. Discuss the potential advantages of a rolling forecast.
Several components of the master budget are listed as follows:● Direct materials budget● Cost of goods sold budget● Production budget● Budgeted balance sheet● Manufacturing overhead budget● Sales budget● Budgeted income statement● Cash receipts and disbursements (combined cash
Mindy Copper saw a budget for the home delivery business in which all costs were calculated as a percentage of revenues. She has asked you for clarification. Specifically, she would like your opinion on whether the costs should be budgeted as variable versus fixed costs.
Why is there a need for a combined cash budget if the company has already prepared the income statement?
Quality Cases, a small company that provides services and makes protective cases for phones and tablets, has gathered data to prepare a master budget. Assume the following data for Quality Cases:Other information: ● The collection policy for credit sales is as follows: 25% in the
What are some of the major differences between a cash receipts and disbursements budget and a budget income statement? Sales Cost of Goods Sold Selling and Administrative Investing Financing Cash Receipts and Disbursements Income Statement
A master budget should be prepared annually by top management and revised monthly or even weekly by middle- and lower-level managers so that the numbers are up to date. Do you agree? If you do not agree, explain why not. Be specific.
Discuss whether operational or nonfinancial data should be considered in the budgeting process.
What is the difference in the master budget for a manufacturer versus the master budget for a merchandiser?
Flexible budgets are synonymous with rolling budgets. Do you agree? Discuss if you disagree.
Find an article that discusses the budgeting process. Write a one-page summary of the article that includes discussion of the relevant internal and external factors and risks. Make sure to cite your sources.
Why do companies compile a budget balance sheet?
The following information is known about Marilyn Company:● The company anticipates sales of 20,000 units in July.● The company plans to have 3,000 units at the end of July as desired ending inventory.● 1,400 units are on hand at the beginning of July.● Each unit requires 2 direct labor
Explain why examining cost behavior is important when using cost-volume-profit analysis.
For each of the following statements, indicate whether the statement is true or false.a. Companies with the highest degree of operating leverage include those in service industries, such as insurance agencies, realtors, and law firms. Companies with the lowest degree of operating leverage include
Assume the following information is known for Wonderful Wallets Company:● The average sales price per unit is $40.● Variable costs per wallet are $12, and fixed costs are $2,184.● The relevant range is from 0 units to 350 units.● The company uses the high–low method to separate total
What is meant by the term operating leverage? How is operating leverage relevant to cost-volume-profit analysis?
Able Company manufactures and sells boxes of envelopes. The company sold 50,000 boxes of envelopes, with revenue of $200,000, variable costs of $120,000, and operating income of $30,000.a. What is the total contribution margin and what is the contribution margin per unit?b. What are the total fixed
Fancy Company reported a contribution margin of $10 per unit. The company’s fixed costs per period were $30,000. Sales were $48,000 for the 3,200 units sold during the period. The income tax rate is 25%.a. What is current net income?b. What is the breakeven point (BEP) in units?c. If the income
For each of the following independent situations, compute the required calculations.a. Basic Company has fixed costs of $50,000 and breakeven sales of $250,000. What is the projected income at $400,000 sales?b. Pride Company has sales of $500,000 and a margin of safety of $200,000. The contribution
Incentive Company compensates salespeople on a monthly basis at 5% of the average sales achieved in the previous three months and 10% if the monthly sales exceed the average monthly sales of the previous quarter. J. Smith realized that he would be paid twice the commission amount if he convinced
Name some internal and external business risks that a company needs to consider for cost-volume-profit analysis. Why is it important to consider these risks?
Low Volume Company reported the following results for last year:a. What is the contribution margin per unit?b. What are fixed costs?c. To break even, how many additional units would the company have to sell? Sales for 20,000 units Variable costs Operating loss $200,000 $80,000 ($30,000)
Assume that the breakeven point of Dollar Company is $37,500 in terms of sales. Fixed costs are $15,000.a. What is the contribution margin ratio?b. What is the sales price if the variable costs are $18 per unit?c. What is the amount of the margin of safety both in units and in dollars if 1,400
For each of the following changes, indicate the effect on contribution margin and breakeven point. Use + for increase, – for decrease, and 0 for no effect. Change (a) New data analytics software and computer installed; no change in selling price or variable costs (b) Increase in sales of the
Mixed Company is evaluating the following two options:Option A: Sell a product domestically that will require a significant capital investment of $400,000 and variable costs of $20 per unit. The company would like to price the product at $52 per unit.Option B: Produce and sell a product in a
Most companies have a sales mix (they sell more than one type of product or service). For each of the following, provide an example of a product line or service line: grocery stores, hospitals, bakery, bank, computer store.
Clean Company reported the following information on its current-year contribution margin income statement:a. What was the dollar amount of the margin of safety?b. The marketing department suggests that a new advertising campaign costing $15,000 can increase the contribution margin by 10%. What is
If a company has a sales mix, the company cannot perform cost-volume-profit analysis. Do you agree? If you do not agree, explain.
Natsuko Company produces decorative art figurines with the following sales mix:a. What is the weighted average contribution margin and weighted average contribution margin ratio?b. What is the number of units required for breakeven by product line?c. If the company wishes to have $19,375 in
When analyzing cost-volume-profit scenarios, what other information would you seek beyond just the costs, revenues, and volume?
Thompson is interested in entering the after-school tutoring business. He estimates that his fixed costs will be $18,000 per year and his variable costs will be 25% of sales. His tutoring price is $15 per hour.a. What is the contribution margin per unit? What is his breakeven point (BEP) in hours
Identify two advantages and two disadvantages of using CVP analysis.
Able Company manufactures and sells boxes of envelopes. The company sold 50,000 boxes of envelopes at a contribution margin of $80,000 or $1.60 per unit. The total fixed costs were $50,000. The current breakeven point was 31,250 units. Management has proposed increasing the contribution margin
Natasha is interested starting an after-school gymnastics program for kids ages 5 to 10. She estimates that her fixed costs will be $9,000 per year and her contribution margin will be $15 per hour. She desires to achieve an operating profit of $15,000. She believes by increasing her advertising,
Following are important terms described in Chapter 8:a. Post-auditb. Incremental analysisc. Total quality managementd. Inspection pointe. Avoidable costf. Split-off pointg. Relevant costsh. Price-takeri. Opportunity costj. Idle capacityk. Target costingl. Sunk costsm. Complementary goodn.
In an input-process-output system for relevant costing special decisions, the input is the data gathered, the process is the analysis of the specific decision, and the output is the units or service revenue being generated. Do you agree? Explain.
The following represents the activity for last year:a. What is the contribution margin?b. What is the gross margin?c. Why is contribution margin different than gross margin? Is contribution margin more useful for product costing or for relevant costing special decisions? Explain.d. What is net
Give the definition of opportunity costs. Discuss whether opportunity costs are relevant for product costing, planning and control, and special decisions.
Janitorial Service, Inc., manufactures household cleaners. Revenue per unit is $6.50. The household cleaners have a cost of goods sold of $6.00 per unit, of which $3.20 is for allocated fixed overhead. Total selling expenses for the 300 household cleaners currently being sold per week are $100, of
Veronic Company sells shoes for an average of $100 per pair. Variable manufacturing costs in 2022 were $220,000 and variable selling costs were $20,000. Total sales in 2022 were $600,000. The total fixed costs of $160,000 were 80% for manufacturing and 20% for selling. The following changes are
Relevant information for special decisions must be the same in the future as in the past, be different between alternatives, and be precise. Do you agree? Explain.
Mighty Confectioners faces the decision of whether to make or buy specialty cupcakes. Manufacturing costs per unit for the cupcakes are direct materials, $0.50; direct labor $2; and variable overhead, $0.10. Fixed overhead is $1,600 per period. If the company buys the finished product at $2.00 per
Ideal Movers has the following product lines:The Packing line includes “junk removal.” Maximum production time for the company is 500 hours per year. Fixed costs will not be affected.a. What is the contribution margin per hour for each product line?b. How many units of each product line should

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