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managerial accounting

Managerial Accounting For Undergraduates 1st Edition Christensen, Theodore E. Hobson, L. Scott Wallace, James S. - Solutions

summary of Glendale Company's manufacturing variance report for May 2016 follows:Standard material cost per unit of product is 0.5 pounds at \($8.40\) per pound, and standard direct labor cost is 1.5 hours at \($14.00\) per hour. The total actual materials cost represents 4,900 pounds purchased at
Jacobs Company manufactures a single product and uses a standard costing system. The nature of its product dictates that it be sold in the period it is produced. Thus, no ending work in process or finished goods inventories remain at the end of the period. However, raw materials can be stored and
Milton Company planned to produce 21,000 units of its only product during the year. Milton established the following standard cost data for this product prior to the beginning of the year:Assume that Milton (1) actually produced 22,000 units, (2) used 68,000 pounds of direct materials in
In determining inventory costs, which of the following cost elements is included when using absorption costing but excluded when using variable costing?.a. Selling costsb. Direct labor costc. Non-factory administrative costsd. Fixed overhead
If unit production exceeds unit sales during the period, absorption income will bea. less than variable income.b. more than variable income.c. equal to variable income.
If unit production is less than unit sales during the period, absorption income will bea. less than variable income.b. more than variable income.c. equal to variable income.
If unit production is equal to unit sales during the period, absorption income will bea. less than variable income.b. more than variable income.c. equal to variable income.
True or false: Variable costing may be used by management in preparing audited financial statements.a. Trueb. False
What is variable costing? List its advantages and disadvantages.
What generalizations can be made about the difference in income reported under variable and absorption costing?
When inventories are increasing, will absorption income be higher or lower than variable income?
Which method, absorption or variable costing, is used for internal management reporting purposes?
Which method, absorption or variable costing, is used for external reporting purposes in accordance with generally accepted accounting principles?
During its first year, Walnut, Inc., showed an \($18\) per-unit profit under absorption costing but would have reported a total profit \($16,000\) less under variable costing. If production exceeded sales by 500 units and an average contribution margin of 62.5% was maintained, what is the
Chandler Company sells its product for \($100\) per unit. Variable manufacturing costs per unit are \($40,\) and fixed manufacturing costs at the normal operating level of 12,000 units are \($240,000.\) Variable selling expenses are \($16\) per unit sold. Fixed administrative expenses total
Lawn RX, Inc. prepares a variable costing income statement for internal management and an absorption costing income statement for its bank.Lawn RX provides a quarterly lawn care service that is sold for \($150.\) The variable and fixed cost data are as follows:During 2016, 10,000 service contracts
During its first year, Concord, Inc., showed a \($21\) per-unit profit under absorption costing but would have reported a total profit \($16,800\) less under variable costing. If production exceeded sales by 700 units and an average contribution margin of 60% was maintained, what is the apparent:a.
Grant Company sells its product for \($50\) per unit. Variable manufacturing costs per unit are \($30,\) and fixed manufacturing costs at the normal operating level of 18,000 units are \($90,000.\) Variable selling expenses are \($4\) per unit sold. Fixed administrative expenses total \($155,000.\)
Tech Helpers Company prepares a variable costing income statement for internal management and an absorption costing income statement for its bank. Tech Helpers provides a personal computer maintenance service that is sold for \($100.\) The variable and fixed cost data are as follows:During 2015,
Scott Manufacturing makes only one product with total unit manufacturing costs of \($54,\) of which \($36\) is variable. No units were on hand at the beginning of 2015. During 2015 and 2016, the only product manufactured was sold for \($84\) per unit, and the cost structure did not change. Scott
Summarized data for 2016 (the first year of operations) for Gorman Products, Inc., are as follows:Requireda. Prepare an income statement based on full absorption costing.b. Prepare an income statement based on variable costing.c. Assume that you must decide quickly whether to accept a special
Jensen’s Tailoring provides custom tailoring After the company’s first year of operations, its owner prepared the following summarized scimianaeieaaeaiiaiil data report for 2016:Requireda. Prepare an income statement based on full absorption costing.b. Prepare an income statement based on
Frances Manufacturing makes a product with total unit manufacturing cost of \($64,\) of which \($36\) is variable. No units were on hand at the beginning of 2015. During ax 2015 and 2016, the only product manufactured was sold for \($96\) per unit, and the cost structure did not change. Frances
Summarized data for 2016 (the first year of operations) for Trenton Products, Inc., are as follows:Requireda. Prepare an income statement based on full absorption costing.b. Prepare an income statement based on variable costing.c. Assume that you must decide quickly whether to accept a special
Rocky’s Automotive specializes in performing automobile safety checks. After the company’s first year of operations, its accountant prepared the following summarized data report for the safety checks for 2016:Requireda. Prepare an income statement based on full absorption costing.b. Prepare an
When using differential analysis to analyze two alternatives to the current operation, what factors should not be considered?a. Direct material costs that are differentb. Direct labor costs that exist for only one alternativec. Overhead costs that are the same for both alternativesd. Sales
When considering a special order, management should accept the order if which of the following ax conditions is met?a. Incremental costs are greater than incremental revenues.b. There is excess production capacity.c. Incremental costs are less than incremental revenues.d. Employees are willing to
When considering whether to continue to manufacture a part or buy it from an outside supplier, ys management should buy the part if thea. incremental cost to buy is less than the incremental cost to manufacture the part.b. equipment used for making the part is fully depreciated.c. equipment used
A business segment reports segment revenues of \($1.2\) million, segment costs of \($1.0\) million, and allocated corporate overhead costs of \($300,000.\) If management were to drop the segment, overall corporate profits woulda. increase by \($100,000\).b. decrease by \($100,000\).c. increase by
True or false: Costs incurred to the split-off point in the manufacture of joint products are always relevant to the decision of whether to sell the joint products or process them further.a. Trueb. False
Identify three phases of decision making and briefly discuss the role of each phase in the decision process.
Although separate phases of decision making are identifiable, management is usually involved in all phases at the same time. Explain.
In the chapter we discuss quantitative methods to assist management in making business decisions. Discuss other common aspects of decision making that are not often subject to quantification.
Explain what is meant by the term differential analysis.
Explain how differential analysis can be applied to the following types of decisions:a. Accepting special ordersb. Making or buying product componentsc. Dropping unprofitable segments of the firmd. Selling or processing furthere. Product emphasis
Delton Company produces unassembled picture frames at the following average per-unit costs: direct material, \($X;\) direct labor, \($Y;\) and manufacturing overhead, \($Z.\) Delton can assemble the frames at a unit cost of \($2.50\) and raise the selling price from \($11\) to \($15.\) What is
Explain the concept of constraining resource, and present a general rule for optimizing product mixes.
“In differential analysis, we can generally count on variable cost being relevant and fixed cost being irrelevant.” Comment.
If both approaches to a decision lead to the same conclusion, why might differential analysis be considered superior to a comprehensive analysis that reflects all revenue and costs?
Thomas Corporation has four departments, all of which appear to be profitable except department 4.Operating data for 2016 are as follows:Requireda. Calculate the gross profit percentage for departments 1-3 combined and for department 4.b. What effect would elimination of department 4 have had on
Operating results for department B of Delta Company during 2016 are as follows:If department B could maintain the same physical volume of product sold while raising selling prices an average of 15% and making an additional advertising expenditure of $45,000, what would be the effect on the
Suppose that department B in Exercise E8-2A could increase physical volume of product sold by 10% if it spent an additional \($18,000\) on advertising while leaving selling prices unchanged. What effect would this have on the department’s net income or net loss?
In each of four independent cases, the amount of differential revenue or differential cost is as follows (parentheses indicate decreases):For each case, determine the missing amount that would be necessary for the net differential amount to bea. $10,000b. ($6,000)Indicate whether your answers
Carson Manufacturing, Inc., sells a single product for \($36\) per unit. At an operating level of 8,000 units, variable costs are \($18\) per unit and fixed costs \($10\) per unit.Carson has been offered a price of \($20\) per unit on a special order of 2,000 units by Big Mart Discount Stores,
Eastside Company incurs a total cost of \($120,000\) in producing 10,000 units of a component needed in the assembly of its major product. The component can be purchased from an outside supplier for \($11\) per unit. A related cost study indicates that the total cost of the component includes fixed
Jensen Manufacturing Company makes a partially completed assembly unit that it sells for \($36\) per unit. Normally, 42,000 units are sold each year. Variable unit cost data on the assembly are as follows:The company is now using only 70% of its normal capacity; it could fully use its normal
Cheyenne, Inc. produces three products from a common input. The joint costs for atypical quarter follow:The revenues from each product are as follows:Management is considering processing Product A beyond the split-off point, which would increase the sales value of Product A to \($116,000.\)
The following analysis of selected data is for each of the two services Gates Corporation provides.In the Gates operation, labor capacity is the company’s constraining resource. Each unit of A requires 3 hours of labor, and each unit of B requires 2 hours of labor. Assuming that all services can
Penn Corporation has four departments, all of which appear to be profitable except department 4.Operating data for 2016 are as follows:a. Calculate the gross profit percentage for departments 1-3 combined and for department 4.b. What effect would elimination of department 4 have had on total firm
Operating results for department B of Shaw Company during 2016 a are as follows:If department B could maintain the same physical volume of product sold while raising selling prices an average of 10% and making an additional advertising expenditure of \($50,000,\) what would be the effect on the
If department B could maintain the same physical volume of product sold while raising selling prices an average of 10% and making an additional advertising expenditure of \($50,000,\) what would be the effect on the department’s net income or net loss?
In each of four independent cases, the amount of differential revenue or differential cost is as follows (parentheses indicate decreases):For each case, determine the missing amount that would be necessary for the net differential amount to bea. \($24,000\)b. \($16,000\)Indicate whether your
Northern Company regularly sells its only product for \($34\) per unit and has a 25%profit on each sale. The company has accepted a special order for a number of units, the production of ax which would use part of its unused capacity. The special order sales price is 50% of the normal price, os and
Harper Company incurs a total cost of \($252,000\) in producing 20,000 units of a component needed in the assembly of its major product. The component can be purchased from an outside ax supplier for \($6\) per unit. A related cost study indicates that the total cost of the component includes fixed
Turner Manufacturing Company makes a partially completed assembly unit LO5 that it sells for \($50\) per unit. Normally, 35,000 units are sold each year. Variable unit cost data on theassembly are as follows:The company is now using only 75% of its normal capacity; it could fully use its normal
The following analysis of selected data is for each of the two services Rockville Corporation provides.In Rockville’s operation, labor capacity is the company’s constraining resource. Each unit of G requires 3 hours of labor, and each unit of H requires 1 hour of labor. Assuming that all
Richmond’s is a retail store with eight departments, including a garden department that has been operating at a loss. The following condensed income statement gives the een latest year’s operating results:Requireda. Calculate the gross profit percentage for the garden department and for the
Total cost data follow for Glendale Manufacturing Company, which has a normal capacity per period of 8,000 units of product that sell for \($60\) each. For the foreseeable future, regular sales volume should continue to equal normal capacity.1. Beyond normal capacity, fixed overhead costs increase
Allen Corporation currently makes the nylon convertible top for its main product, a fiberglass boat designed especially for water skiing. The costs of producing the 1,500 tops needed each year follow:Dustin Company, a specialty fabricator of synthetic materials, can make the needed tops of
Based on the following analysis of last year’s operations of Bingham, Inc., a financial vice president of the company believes that the firm’s total net income could be increased by \($200,000\) if its engineering division were discontinued. (Amounts are given in thousands of
The Sun-Kissed Company manufactures two skin-care lotions, Soft Skin and Silken Skin, ax out of a joint process. The joint (common) costs incurred are \($420,000\) for a standard production run© that generates 180,000 gallons of Soft Skin and 120,000 gallons of Silken Skin. Additional processing
Lowell Corporation manufactures both a deluxe and a standard model of a household food blender. Because of limited demand, for several years production has been at 80% of estimated capacity, which is thought to be limited by the number of machine hours available. At current operation levels, a
If a company uses participative budgeting, which group should prepare the initial set of budget dollar amounts?a. Budget committee b. Operating department managers c. Top managementd. Accounting department
Which of the following budgets will typically have the longest budget period?a. Capital expenditures budget b. Cash budget c. Sales budgetd. Budgeted income statement
Which of the following budgets should be prepared before all of the others listed below?a. Cash budget b. Direct materials budget c. Manufacturing overhead budgetd. Production budget
If the beginning inventory of a company that manufactures only one product is 5,000 units, the sales forecast is 34,000 units sold, and the desired ending inventory is 6,000 units, how many units should be produced?a. 35,000 b. 33,000 c. 40,000d. 39,000
Smith Company started business on September 1. Smith had credit sales of \($200,000\) in September and \($300,000\) in October. The pattern for collection of cash from customers is expected to be 40% in the month of sale (subject to a 2% cash discount), 50% in the month following the month of sale,
What is a planning horizon? How will it differ between strategic planning and operational planning?
Describe operational planning.
Define budgeting.
List and briefly explain four advantages of budgeting.
Describe the budget committee.
What is meant by continuous budgeting?
What is the master budget? List, in the order of preparation, the various budgets that the master budget for a small manufacturing company might comprise.
Why do most firms prepare the sales budget first?
Beginning finished goods inventory is 10,000 units, anticipated sales volume is 60,000 units, and the desired ending finished goods inventory is 12,000 units. What number of units should be produced?
Three pounds of material R (costing \($5\) per pound) and 4 pounds of material S (costing \($7\) per pound) are required to make one unit of product T. If management plans to increase the inventory of material R by 500 pounds and reduce the inventory of material S by 800 pounds during a period when
Carroll Manufacturing Company has two labor operations in its factory: machining and assembly. Workers in the machining department are paid \($14\) per hour; workers in the assembly department are paid \($12\) per hour. During January, 10,000 units of product A and 20,000 units of product B are to
Johnson Manufacturing Company has budgeted 30,000 direct labor hours for March. The budgeted cost formula for monthly manufacturing overhead is \($4\) per direct labor hour plus \($65,000.\) What is the manufacturing overhead budget for March?
Acompany collects cash from its credit sales in the following pattern: 30% in the month of sale, 50% in the month following the month of sale, and 20% in the second month following the month of sale. What percentage of which months’ credit sales will be collected during October?
What are the three major groupings of cash flows in the budgeted statement of cash flows?
For each independent situation below, determine the amounts indicated by the question marks: Beginning inventory Produced Available.. Sold Ending inventory. A C D 10,000 ? 7,000 ? 40,000 ? 27,000 ? 60,000 ? 26,000 64,000 45,000 28,000 ? ? ? 10,000 6,000 2,000
Collins Company is preparing its master budget for April. Use the given estimates to determine the amounts necessary for each of the following requirements. (Estimates may be related to more than one requirement.)a. What should total sales revenue be if territories A and B estimate sales of 10,000
Westport Company is preparing its master budget for May. Use the estimates provided to determine the amounts necessary for each of the following requirements. (Estimates may be related to more than one requirement.)a. What should total sales revenue be if territories E and W estimate sales of
Spencer Consulting, which invoices its clients on terms 2/10, n/30, had credit sales for May and June of \($70,000\) and \($80,000,\) respectively. Analysis of Spencer’s operations indicates that the pattern of customers’ payments on account is as follows (percentages are of total monthly
The following various elements relate to Whitfield, Inc.’s cash budget for April of the current year. For each item, determine the amount of cash that Whitfield should receive or pay in April.a. At\($28\) each, unit sales are 5,000 and 6,000 for March and April, respectively. Total sales are
Brewster Corporation expects the following cash receipts and disbursements during the first quarter of 2016 (receipts exclude new borrowings and disbursements exclude interest payments on borrowings since January 1, 2016):The expected cash balance at January 1, 2016, is \($42,000.\) Brewster wants
Prepare a cash budget for the month ended May 31, 2016. Campton Company anticipates a cash balance of \($84,000\) on May 1, 2016. The following budgeted transactions for May 2016 present data related to anticipated cash receipts and cash disbursements:1.For May, budgeted cash sales are \($60,000\)
For each independent situation below, determine the amounts indicated by the question marks. Number of Units A B C D Beginning inventory 9,000 ? 6,000 ? Produced Available... 15,000 ? 27,000 ? 75,000 ? 46,000 85,000 Sold 18,000 28,000 ? ? Ending inventory. ? 3,000 8,000 11,000
Reeves Company is preparing its master budget for July. Use the given estimates to determine the amounts necessary for each of the following requirements. (Estimates may be related to more than one requirement.)a. What should total sales revenue be if territories A and B estimate sales of 8,000 and
Tuttle Company is preparing its master budget for November. Use the estimates provided to determine the necessary amounts for each of the following requirements. (Estimates may be related to more than one requirement.)a. What should total sales revenue be if territories N and S estimate sales of
Lowell Consulting, which sells on terms 2/10, n/30, had credit sales for March and April of \($60,000\) and \($50,000,\) respectively. Analysis of Lowell’s operations indicates that the pattern of customers’ payments on account is as follows (percentages are of total monthly credit
The following various elements relate to Murphy, Inc.’s cash budget for October of the current year. For each item, determine the amount of cash that Murphy should receive or pay in October.a. At \($24\) each, unit sales are 10,000 and 12,000 for September and October, respectively. Total sales
Windsor Corporation expects the following cash receipts and disbursements during the first quarter of 2016 (receipts exclude new borrowings and disbursements exclude interest payments on borrowings since January 1, 2016):The expected cash balance at January 1, 2016, is \($75,000.\) Windsor wants to
McCall Company anticipates a cash balance LO4 of \($100,000\) on July 1, 2016. The following budgeted transactions for July 2016 present data related to anticipated cash receipts and cash disbursements:1.For July, budgeted cash sales are \($72,000\) and budgeted credit sales are \($600,000.\)
Whitney’s, Inc., sells on terms of 5% discount for “cash and carry” or 2/10, n/30 and estimates its total sales for the second calendar quarter of next year as follows: April, \($300,000\);May,\($240,000;\) and June, \($360,000.\) An analysis of operations indicates the following customer
During the first calendar quarter of 2016, Clinton Corporation is planning to manufacture a new product and introduce it in two regions. Market research indicates that sales will be 6,000 units in the urban region at a unit price of \($53\) and 5,000 units in the rural region at \($48\) each.
Grove, Inc. is a wholesaler for its only product, deluxe wireless electric drills, which sell for \($90\) each and cost Grove \($54\) each. On December 1, 2016, Grove’s management requested a cash budget for December. The following selected account balances at November 30, 2016, were gathered by
Manufacturing, Inc. is preparing budgets for the third quarter of 2016. Hancock produces only one y product in its factory. This product requires 5 pounds of material B, 2 pounds of material G, and a component, K, that is purchased from another manufacturer. Hancock operates on a just-in-time
Fairfield Stores, a retailer in a shopping mall, prepared the following income statement for its operations for the month just ended:Sales commissions were 5% of sales. Income taxes were 30% of income before income taxes. Both should continue at the same rate for the remainder of the year.Fairfield

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