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managerial accounting
Managerial Accounting 1st Edition Jennifer Cainas, Celina J. Jozsi, Kelly Richmond Pope - Solutions
The Apple Everything Company has three products with the following data:a. Which product should be processed further (if any)?b. Which of the following pieces of information should management also consider?● The joint costs before split-off (growing the apples)● The demand for each
Gonska manufactures 20,000 units of computer accessories per year and sells them for $9.00 each. The costs per unit are as follows:Bailey has offered to sell Gonska the 20,000 units of part G for $5.25 per unit. Following are independent assumptions as to what would happen to the fixed costs.
Describe the decision-making process in general. Consider one decision that you have faced in the last month and discuss what relevant factors you used to analyze the decision.
Canasi currently makes 10,000 units of part D with the following costs per unit: direct materials, $6; direct labor, $15; variable overhead, $6; and fixed overhead, $8. Eriksen has offered to sell Canasi 10,000 units of part D for $37 per unit. If Canasi accepts Eriksen’s offer, the released
To make appropriate decisions, companies attempt to consider not only the quantifiable costs but also relevant qualitative costs. It is also helpful to estimate in dollars the qualitative factors so that the factors are included and not just identified but then disregarded.For each of the following
For a make or buy decision, only the relevant future variable manufacturing costs need to be considered. Do you agree? Explain.
Many mistakes are made in business because the relevant amounts and factors are not properly identified rather than because the amounts are not correctly calculated.For each of the following scenarios and decisions, give examples of:▪ Relevant quantitative items▪
We Are Printers has decided to discontinue its basic printer model. The company has some partially completed units on hand with incurred costs of $50 per unit. The company could complete the printers with the following additional unit costs: direct materials, $11; direct labor, $19; variable
Management is considering dropping a product line. The freed-up productive capacity can be used elsewhere. Management ignores the fixed costs and examines only the contribution margin of the product line under consideration to be dropped. Has management included the appropriate relevant costs in
For a make or buy decision, the company produced the following fishbone diagram outlining problems with one of the new products. The company is considering paying considerably more just to buy the finished product from an external supplier.Based on the fishbone diagram, give five relevant factors
Contentious Law Firm offers litigation, divorce, and estate planning services. The partners are concerned about the profitability of their litigation business. If the firm drops the litigation work, the lawyers might do more divorce work. The firm estimates that 20% of the fixed costs associated
Pet Services offers two product lines: home sitting and grooming. Income statement data for the most recent year is presented below:a. Assuming fixed costs remain unchanged, how would dropping the home sitting line affect operating income?b. Discuss whether each of the following costs would likely
Alive Company sells two cosmetics products, Bright and Shine, with contribution margins per unit of $10 and $14, respectively. Bright takes 2 hours to produce and Shine 3½ hours. The total machine hours available are 5,000 and fixed costs are $6,000.a. What is the contribution margin per hour for
Give the criteria used to analyze whether to introduce a new product line to replace an existing one.
Le Industries is considering a special order of 1,000 units at $64 per unit. Currently, Le sells 11,000 units at $98 per unit. The current per-unit costs are $47 cost of goods sold and $18 selling cost. The fixed factory overhead is $13 per unit and the fixed selling costs are $3 per unit. A
The increase in total profits from accepting a special order is the number of units in the special order multiplied by the gross margin. Do you agree? Explain.
Superior Lessons offers three product lines: music lessons, sports lessons, and early grades tutoring after school lessons. The following represents the income statements for the most recent period:Qualitative factors that may impact future performance:● A competitor has opened up within 2
Joint costs are relevant for special decisions of whether to produce products further, since the joint cost must be incurred. Do you agree? Explain.
Chundas is considering dropping product X, which last year reported a net loss of $12,000. The income statement showed variable costs of $70,000 and sales of $90,000. If product X is dropped, the productive capacity will not be used to produce any other product. Which of the following statements is
Superior Lessons offers three product lines: music lessons, sports lessons, and early grades tutoring after school lessons. The following charts were produced using Google Sheets to visualize the relationships between sales, segment income and net income. Segment income represents the income
When considering whether to rework defective products, management should focus on which products require the least amount of direct materials to correct. Do you agree? Explain.
Indicate whether each of the following statements is true or false.a. Important qualitative considerations for a special order include all of the following: impact on current customers if they learn that other customers paid less for the same items, future expectations of the special order
Snacks Company is considering adding a new product line called Party Munchies. The company currently has excess productive capacity that could be used to produce Party Munchies. Each Party Munchies would sell for $12 and the variable costs per unit would be $5. Expected demand for Party Munchies
In a multiproduct firm with multiple constraints, the product with the highest contribution margin per unit should be the only product produced. Do you agree? Explain.
The following articles provide some insight into the current and emerging trends and considerations in supply chain management. Select one of the articles from the list below.“Mitigating Supply Chain Risk” JLL Industrial,
Companies should never sell any product lines with revenues below the variable costs. Do you agree? Explain.
Liles Company sells a product for $110 per unit. In 2022, it reported sales of $770,000 and a contribution margin of $308,000. The gross profit percentage was 50%. Variable costs consist of manufacturing and selling costs. Fixed costs of $108,000 are two-thirds manufacturing costs and one-third
Give five special decisions discussed in the chapter.
Review each of the following independent scenarios.Scenario 1: A salesperson was able to secure a special order that would increase his commission for this period. He is concerned that production will not be able to fill the order as he promised to the new potential customer. The salesperson gives
Administrative costs should typically be ignored for special decisions since they will not be avoidable and, therefore, do not represent relevant costs. Do you agree? Explain.
Find an article that discusses the role of data analytics in supply chain management. Write a one-page summary of the article. Make sure to cite your sources.
In deciding how to price special orders, the cost of goods sold during the period should be considered. Do you agree? Explain.
The production costs up to the inspection point are irrelevant to scrap or rework decisions for defective units. Do you agree? Explain.
Fixed costs are always sunk costs and are thus irrelevant. Do you agree? Explain.
Past information, although always irrelevant for special decisions, may be very useful. Future information is not reliable because future amounts are only estimates; it is also probably not very useful. Do you agree? Explain.
Gross profit is synonymous with contribution margin. Do you agree? Explain.
Discuss why topics such as supply chain and theory of constraints are important when considering relevant costing decisions.
Why do companies conduct post-audit reviews of their relevant costing decisions?
Describe why data analytics is relevant to supply chain management. Recall that supply chain management is the process of designing, implementing, controlling, and monitoring all activities along the supply chain.
The Humble Company determined that feet of lumber was the appropriate measure of activity for the cutting department. A sample of actual cost data for 2022 was selected as follows:a. Draw the sample observations on a scatterplot. Apply visual approximation to determine the variable and fixed costs.
PNH Company produces plastic specialty toys. In 2022, the company produced and sold 80,000 toys. Each toy was sold at $8 and has the following production costs:Selling and administrative costs for the year consisted of variable costs of $0.50 per toy and fixed costs of $140,000 for the period.a.
For each of the following statements, indicate whether the statement is true or false.a. The high–low method is superior to regression analysis because the high–low method consistently uses the highest and lowest activity levels in each period.b. The equation for total costs is represented as x
Confused Company is considering changing its legal fee representation. Information on the current and proposed annual costs is as follows:● Current structure: $7,000 fixed retainer fee and $120 per legal hour billed.● Proposal from new firm: $3,000 fixed retainer fee, $80 per associate legal
On March 1, Winston Company had 25,000 units of beginning inventory in work in process, which were 60% complete with the following costs:During March, 60,000 units were started. There were 15,000 units remaining in work in process at the end of the month, which were 80% complete. Materials are
On March 1, Winston Company had 25,000 units of beginning inventory in work in process, which were 60% complete with the following costs:During March, 60,000 units were started. There were 15,000 units remaining in work in process at the end of the month, which were 80% complete. Materials are
Awesome Clothes has two departments. Other facts are as follows:● In the first department, material is introduced at the beginning of the process.● In the second department, material is introduced at the end of the process.● Conversion costs are applied uniformly throughout both processes.●
Sturdy Paper, which uses a process costing system, had the following production data during September:● 10,000 units were in the beginning inventory.● 80,000 units were started in production.● 60,000 units were completed.● The remaining units were one-fourth complete.● The materials are
Awesome Clothes has two departments. Other facts are as follows:● In the first department, material is introduced at the beginning of the process.● In the second department, material is introduced at the end of the process.● Conversion costs are applied uniformly throughout both processes.●
Sturdy Paper, which uses a process costing system, had the following production data during September:● 10,000 units were in the beginning inventory.● 80,000 units were started in production.● 60,000 units were completed.● The remaining units were one-fourth complete.● The materials are
Examine these graphs for Kristen Company and answer the following questions.Assume that if activity increased beyond 40 units, a new relevant range would apply (for example, if fixed costs are expected to be $280 from 41 to 80 units).a. What is the cost equation?b. Explain why the total cost graphs
Discuss the differences between fixed costs, variable costs, and mixed costs.
Identify the cost behavior in the graph. Dollars 400 350 300 250 200 150 100 50 0 0 10 Total Mixed Costs ? 20 ? Activity (Units) 30 40 ?
Assume the following information is known for Simple Watches Company:● The average sales price per unit is $37.● Total costs at the lowest observed activity of 150 units are $3,822 and at the highest observed activity of 310 units are $5,902.● The relevant range is from 0 units to 350
Hi-Tech Company sells small labeling machines for $60 each. Expected units, sales, and total costs in the next four quarters are as follows:a. What are fixed costs? Assume that the linear relationship assumption is appropriate within the relevant range of 0 to 15,000 units. The company uses the
Which information is found in the contribution margin statement that is not found in the traditional (functional) income statement?
All Weather Company makes umbrellas and outerwear items for rainy and snowy days. It had the following cost structure for the past year:a. What is the product cost per unit and gross margin per unit for each product line under the traditional (functional) income statement format?b. What is the
From the visual fit, do you believe that there is a strong relationship between activity and costs and that all observations are a good representation? Costs Y Activity X
Style Company sells luggage sets for $200 each. its variable costs include $80 of manufacturing costs and $10 for selling costs. In 2022, the company sold 2,000 luggage sets. Its fixed costs depend on the number of sets produced and sold, as shown in the following table:a. Determine operating
For retailers and service companies, product costs are variable and period costs are fixed. As such, retailers and service companies do not need to break down costs into variable and fixed costs. Do you agree? If you do not agree, explain why not.
The Outer Border Company determined that its packaging costs were a function of the weight of the packages. For budgeting purposes, the company wishes to identify the fixed costs and the variable costs of the packaging department. A sample of actual cost data from 2022 is provided in the table:a.
Simple Company compensates its salespeople based on a percentage of sales volume (items sold). Some of the salespeople have sold to customers with bad credit. The new chief operating officer has suggested that the commission be based on net contribution margin (deducting uncollected amounts), so
Direct materials and direct labor will always be completely variable. Do you agree? If you do not agree, explain why not.
Bellis Company produces pottery items. Bellis sells each item for an average sales price of $10. The company has a choice of two production methods: hand-crafting and painting versus machine production, with costs as follows:● Hand-crafting and painting: $7 variable costs per unit and $900 fixed
Fun in the Sun sells beach chairs. The following facts are known for 2022:● Each chair sells for $15.● Variable costs are $80,000 for 10,000 chairs.● Current production and sales are 16,000 chairs.● Fixed costs are as follows:a. What is the operating income for the 16,000 chairs produced
Match the following terms to the definitions below:Terms:i. Variable costii. Fixed costiii. Independent variableiv. Dependent variablev. Scatter diagramvi. High–low methodvii. Regression analysisviii. Outliersix. Account analysisDefinitions:a. Method used to allocate costs based on review of the
Contribution margin is the same as gross profit. Do you agree? If you do not agree, explain why not.
Hayes Consulting Company builds database and point-of-sale systems for golf courses and country clubs. Mr. Hayes is trying to determine total revenues for the coming year and feels he can estimate revenues based on the number of customers each month. He gathers the following data for the prior 12
As R2 approaches +1, we are given a higher level of assurance that the independent variable accounts for most of the variability in the dependent variable. Do you agree? Explain.
An experienced company uses account analysis to separate its costs. For each of the following costs, indicate the category in which it would likely be classified:i. Variableii. Fixediii. MixedCosts:a. Sale representatives’ commissionsb. Direct materials (ignore purchasing discounts)c. Training
The wages of salespeople who are paid strictly on commission will always be variable, and the wages of those who are paid only a salary will be considered fixed. Do you agree? If you do not agree, explain why the statement is false.
FQR’s Gadgets manufactures and sells a single product. A partially completed schedule of the company’s total and per-unit costs over a relevant range of 60,000 to 100,000 units produced and sold during a given year is provided here:a. Complete the schedule for the company’s total and unit
Stuart Advertising Company decided to analyze its travel and entertainment expenses based on the number of customers it serviced each month. The regression analysis for the prior 12 months gave the following results:a. Identify the R-square value, the fixed costs, and the variable costs.b. What is
“Committed costs” is a term used to refer to fixed costs, whereas “discretionary costs” refers to variable costs. Do you agree? If you do not agree, explain why the statement is false.
Clean Company reported the following information on its current-year contribution margin income statement:a. The marketing department suggests that a new advertising campaign costing $15,000 can increase the contribution margin by 10%. What is the net effect on operating income? Ignore the effect
Why is the organization of costs by behavior (variable versus fixed) useful for budgeting profits at different volume levels?
Following are two income statements: internal (contribution margin income statement, with costs classified by behavior) and external (a traditional income statement, with GAAP-based costs classified by function).a. Identify the items that would have a different amount reported (not just placement
Party Planner is considering two options, as follows:● Pay a variety entertainer (a comedian who is also a musician) a fixed amount of $10,000 and $100 per job● Pay the entertainer $600 per joba. How many jobs must be booked for both options to cost the same amount?b. Which option is cheaper
Why might there be a difference in operating income in a contribution margin income statement compared to a traditional income statement?
Understanding cost behavior is important. Select the graph for Williams Company that matches each description given. The vertical (or y) axes represent total dollars and the horizontal (or x) axes represent activity for a year. Letters may be used more than once, and not all letters need to be
For each of the following fixed costs, indicate if the costs are committed costs or discretionary costs:i. Committed costsii. Discretionary costsFixed costs:a. Company picnic costsb. Salary of factory supervisorc. Cost of potential additional advertising campaignd. Cost of proposed enhanced
WKC Company reported the following overhead charges for the first 3 months:a. Which of the costs are fixed? Explain why.b. Which of the costs are variable? Explain why.c. Which of the costs are mixed? Explain why. Cost Item Electricity Rent Direct materials Activity for each month January
BBC manufactures whiteboards. In March 2022, the variable production costs per unit were $15 and the average fixed production costs per unit (based on 5,000 whiteboards produced and sold) were $25. The relevant range is 0 to 8,000 units.a. What are fixed costs?b. What are the total production costs
Match the terms with their descriptionsa. Transferred-in costsb. Conversion costsc. Normal spoilaged. Process costinge. Equivalent unitsf. FIFO methodg. Weighted average methodh. Abnormal spoilage(1) Waste that is inherent in the process and cannot be avoided(2) Process costing method that assumes
Light Plastics uses a process costing system. The following is known for September:● The company transferred out 66,000 units.● The beginning work in process was 10,000 units.● The ending work in process was 4,000 units.How many units were started during
Under process costing, a unit cost is determined for each product and then used to price the product at a margin above cost. Do you agree? If you disagree, explain why.
When is process costing used?
Great Paint Company uses a process costing system. The following applies to materials for June:● Materials are added halfway through the process.● The company started 20,000 units.● There were 2,000 units in the beginning inventory.● There
Under process costing, since all units are the same, there is no distinction in the cost accumulation between direct materials costs and conversion costs. Do you agree? If you disagree, explain why.
Shiny Metals had a cost per equivalent unit of $6.00 for direct materials. Materials are added at the beginning of the first process. There were 20,000 units in work in process at the beginning of the period. During the period, 45,000 units were started. At the end of the month, only 5,000 units
Describe the cost flow for a process costing system.
Indicate whether job order costing or process costing best fits the scenario.a. Flour millb. Breweryc. Tire manufacturerd. Printing shope. Identical units are made continuouslyf. Costs are accumulated by departmentsg. Large number of homogeneous productsh. Unit costs are calculated for materials,
Give the steps used to allocate costs in a process costing system.
Flour Everywhere uses a process costing system. The following applies to conversion costs for April:● Conversion costs are added uniformly throughout the process.● The company started 40,000 units.● There were 8,000 units in the beginning inventory.●
Flowers uses a weighted average process costing system. The following is known for November:a. What were the total costs to account for and allocate?b. What is the cost of goods completed and transferred out? Equivalent units for materials Equivalent units for transferred-in costs Equivalent units
Pencils and Pens uses a weighted average process costing system. The following applies to conversion costs for October:● 27,000 units were completed and transferred out.● 6,000 units were in the ending work in process, which were 50% completed.● Cost of
Explain what is meant by the term equivalent unit as used in process costing.
How are unit costs calculated under the weighted average method and under the FIFO method?
How are unit cost calculations different in the first and second production departments of a process costing system?
Cable Products uses a weighted average costing system with two departments: cutting and packaging. The following is known for February:a. What are the equivalent units for transferred-in costs in the packaging department?b. What is the transferred-in cost associated with the units completed and
If a company does not have any beginning inventory in work in process, unit costs will be the same under the weighted average and FIFO process costing methods. Do you agree? If you disagree, explain why.
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