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managerial accounting

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

Set up a cost-volume graph. Volume should range from zero to 24,000 units (in 4,000-unit increments), and cost should range from zero to \($24,000\) (in \($4,000\) increments). Plot each of the following groups of cost data using different marks for each group. After completing the graph, indicate
Apply the high-low method of cost analysis to the three cost data groups in E6-1A. What cost behavior patterns are apparent? Express each as a cost formula.
The following selected data relate to the major cost categories experienced by Shaw Company at varying levels of operating volumes. Assuming that all operating volumes are within the relevant range, calculate the appropriate costs in each column in which blanks appear. Total Cost Total Cost
Davis Company has analyzed its overhead costs and derived a general formula for their behavior: $60,000 + $14 per direct labor hour employed. The company expects to use 50,000 direct labor hours during the next accounting period. What overhead rate per direct labor hour should be applied to jobs
Set up a break-even chart similar to the one in Exhibit 6-12 with proportional scales from zero to \($72,000\) (in \($12,000\) increments) on the vertical axis and from zero to 12,000 units of production (in 2,000-unit increments) on the horizontal axis. Prepare the break-even chart for Morton
Hailstorm Company sells a single product for \($22\) per unit. Variable costs are \($14\) per unit and fixed costs are \($60,000\) at an operating level of 7,000 to 12,000 units.a. What is Hailstorm Company’s break-even point in units?b. How many units must be sold to earn \($12,000\) before
Warner Company has \($228,000\) of total fixed costs and sells products A and B with a product mix of 40% A and 60% B. Selling prices and variable costs for A and B result in contribution margins per unit of \($10\) and \($6,\) respectively. Compute the break-even point.
The graphs below represent approximations of cost behavior patterns. The horizontal axis of each graph represents units and the vertical axis represents dollars of total cost.Select the graph that best matches each of the situations described below. Each graph may be selected more than once.a.
Selected operating data for Oakbrook Company in four independent situations are shown below.RequiredFill in the blanks for each independent situation. Show your calculations. A $300,000 B $ C. $ e. D $260,000 a. $91,000 $ f. $ b. $62,000 $43,200 $ 89,000 $15,000 d. $28,800 $ (11,000) $ 7.00 0.4 h.
During a recent six-month period, Wade Corporation had the following monthly production volume and total monthly maintenance expense:RequiredAssume that all volumes are in the relevant range.a. Explain why the data indicate that the maintenance expense is neither a fixed nor a variable expense.b.
horewood Manufacturing produces a single product requiring the following direct material and direct labor:Manufacturing overhead consists of indirect material, \($0.60\) per unit of product, indirect labor, \($1,000\) per month plus \($0.70\) per unit of product; factory maintenance, \($14,000\)
Harrison Company has accumulated the following total manufacturing overhead costs for two levels of activity (within the relevant range):The total overhead cost includes variable, fixed, and mixed costs. At 120,000 direct labor hours, the total cost breakdown is as follows:Requireda. Using the
Princeton Manufacturing Company summarizes the following total cost data for the month of March. Princeton has a normal capacity per month of 25,000 units of product that sell for \($40\) each. For the foreseeable future, sales volume should equal normal capacity of production.1. Beyond normal
Superior Corporation sells a single product for \($60\) per unit, of which \($36\) is contribution margin. Fixed costs total \($72,000\) and net income before income tax is \($28,800\).RequiredDetermine the following (show key computations):a. The present sales volume in dollars.b. The break-even
Paulson Company has recently leased facilities for the manufacture of a new product. Based on studies made by its accounting personnel, the following data are available: Estimated annual sales: 40,000 units.Selling expenses are expected to be 10% of sales, and the selling price is $64 per unit.
Grand Company manufactures and sells the following three products:RequiredAssume that total fixed cost is $339,000.a. Compute the net income before income tax based on the sales volumes shown above.b. Compute the break-even point in total dollars of revenue and in units for each product.c. Prove
When moving from the low end to the high end of a relevant range, straight-line depreciation expense per unita. Increases.b. Decreases.c. Remains the same.d. Changes unpredictably.
In a typical cost formulaa. Fixed costs are per unit and variable costs are per unit.b. Fixed costs are per unit and variable costs are in total.c. Fixed costs are in total and variable costs are in total.d. Fixed costs are in total and variable costs are per unit.
At the break-even pointa. Contribution margin = fixed costs.b. Variable costs = fixed costs.c. Sales = contribution margin.d. Contribution margin = 0.
Contribution margin ratio isa. Unit sales price/unit contribution margin.b. I/margin of safety.c. Total contribution margin/sales.d. Variable cost/fixed cost.
Net income before income tax isa. Net income/(1 — income tax rate).b. Income tax rate/net income.c. Net income + contribution margin.d. Net income/income tax rate.
Identify some common activity bases in terms of which the volume of a manufacturing operation might be stated. What general criterion might be used in choosing an activity base?
Name and define briefly the three most widely recognized cost behavior patterns.
Explain (a) how a mixed cost can be considered “partly fixed and partly variable,” and (b) why a firm’s total cost is best represented by the mixed cost pattern.
Briefly describe the two most straightforward techniques for dividing a mixed cost into its fixed and variable components.
“Actual costs often behave in a nonlinear fashion. Therefore, assumptions of linearity invalidate most cost behavior analyses.” Do you agree or disagree with this statement? Briefly defend your position.
Describe how fixed and variable costs per unit respond to volume increases.
Present a formula based on units for planning total cost, and explain how mixed costs are incorporated into the formula.
Define and briefly explain three approaches to break-even analysis.
Patrick’s Bakery Shop has fixed costs per month of $3,600, and variable costs are 55% of sales. What amount of monthly sales allows the shop to break even?
Quality Car Wash has fixed costs per month of \($16,800,\) and variable costs are 20% of sales. The average amount collected per car washed during the past year has been \($5.\) How many cars must be washed per month to break even?
You have graphed the cost-volume-profit relationships for a company on a break-even chart after being informed of certain assumptions. Explain how the lines on the chart would change if (a) fixed costs increased over the entire range of activity, (b) selling price per unit decreased, and (c)
Define contribution margin. Is it best expressed as a total amount or as a per-unit amount? In what way is the term descriptive of the concept it represents?
Explain the approach to break-even analysis that is used for a mix of two or more products.
Explain how break-even formulas can provide income-planning analyses.
In planning net income, how can (post tax) net income be incorporated into the planning formula?
Hickory Grill Company manufactures two types of cooking grills: the Gas Cooker and the Charcoal Smoker. The Cooker is a premium product sold in upscale outdoor shops; the Smoker is sold in major discount stores. Following is information pertaining to the manufacturing costs for the current
Refer to the previous exercise in P5-1B for Hickory Grill.Requireda. Comment on the differences between the solutions to requirements (a) and (b). Which is more accurate? What errors might managers make if all manufacturing overhead costs are assigned on the basis of direct labor dollars?b. Comment
High Country Outfitters, Inc., makes backpacks for large sporting goods chains that are sold under the customers’ store brand names. The accounting department has identified the following overhead costs and cost drivers for next year:Total predicted direct labor hours for next year is 60,000. The
Rogers Aeronautics, LTD, is a British aeronautics subcontract company that designs and manufactures electronic control systems for commercial airlines. The vast majority of all commercial aircraft are manufactured by Boeing in the U.S. and Airbus in Europe;however, there is a relatively small group
Montreat Manufacturing has developed the following activity cost pool information for its 2016 manufacturing activities:Actual 2016 production information is as follows:Requireda. Determine the unit cost of each product for Montreat Manufacturing.b. Explain why the unit cost of the specialty
Fairfield Mortgage Company is a full-service residential mortgage company in the Atlanta area that operates in a very competitive market. The CEO, Richard Sissom, is concerned about operating costs associated with processing mortgage applications and has decided to install an ABC costing system to
Advertising Technologies, Inc. (ATT) specializes in providing both published and online advertising services for the business marketplace.The company monitors its costs based on the cost per column inch of published space printed in print advertising media and based on the cost per minute of
CarryAll Company produces briefcases from leather, fabric, and synthetic materials in a single production department. The basic product is a standard briefcase made from leather and lined with fabric. CarryAll has a good reputation in the market because the standard briefcase is a high-quality item
The comparative financial statements prepared at December 31, 2010, for Pinnacle Plus showed the following summarized data:One-half of all sales are on credit.During 2010, cash dividends amounting to $6,600 were declared and paid.Required:1. Complete the two final columns shown beside each item in
Use the data given in PA13-1 for Pinnacle Plus.Required:1. Compute the gross profit percentages in 2010 and 2009. Round the percentages to one decimal place. Is the trend going in the right direction?2. Compute the net profit margin ratios in 2010 and 2009. Round the percentages to one decimal
A condensed income statement for Simultech Corporation and a partially completed vertical analysis are presented below.Required:1. Complete the vertical analysis by computing each line item (a)-(f) as a percentage of sales revenues. Round to the nearest whole percentage.2. Does Simultech’s Cost
Coke and Pepsi are well-known international brands. Coca-Cola sells nearly \($32\) billion worth of beverages each year while annual sales of Pepsi products exceed \($43\) billion. Compare the two companies as a potential investment based on the following ratios:Required:1. Which company appears
The 2010 financial statements for Royale and Cavalier companies are summarized here:These two companies are in the same line of business and the same state but different cities. One-half of Royale’s sales and one-quarter of Cavalier’s sales are on credit. Each company has been in operation for
Use the information for Chevron Corporation in E13-1 to complete the following requirements.Required:1. Compute the gross profit percentage for each year (one decimal place). Assuming that the change for 2007 to 2008 is the beginning of a sustained trend, is Chevron likely to earn more or less
According to the producer price index database maintained by the Bureau of Labor Statistics, the average cost of computer equipment fell 20.9 percent between 2007 and 2008. Let’s see whether these changes are reflected in the income statement of Computer Tycoon Inc. for the year ended December
Use the information in E13-3 to complete the following requirements.Required:1. Compute the gross profit percentage for each year (one decimal place). Assuming that the change for 2007 to 2008 is the beginning of a sustained trend, is Computer Tycoon likely to earn more or less gross profit from
Use the information in E13-3 to complete the following requirement.Required:Compute the times interest earned ratios for 2008 and 2007. In your opinion, does Computer Tycoon generate sufficient net income (before taxes and interest) to cover the cost of debt financing?Data from E13-3According to
The income statement and selected balance sheet information for Calendars Incorporated for the year ended December 31, 2010, is presented below.Required:Prepare the cash flows from operating activities section of the 2010 statement of cash flows using the indirect method. Income Statement Selected
Audio City, Inc., is developing its annual financial statements at December 31, 2010. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statement are summarized below:Additional Data:a. Bought equipment for cash, \($60,000.\)b.
Dive In Company was started several years ago by two diving instructors. The company’s comparative balance sheets and income statement are presented below, along with additional information.Additional Data:a. Prepaid Expenses relate to rent paid in advance.b. Other Operating Expenses were paid in
Refer to the information in PB12-2.Required:Prepare the cash flows from operating activities section of the 2010 statement of cash flows using the direct method.Data from PB12-2The income statement and selected balance sheet information for Calendars Incorporated for the year ended December 31,
Which of the following ratios incorporates cash flows from operations?a. Inventory turnover.b. Earnings per share.c. Quality of income.d. All of the above.
A consumer products company reported a 25 percent increase in sales from 2009 to 2010. Sales in 2009 were \($200,000.\) In 2010, the company reported Cost of Goods Sold in the amount of \($150,000.\) What was the gross profit percentage in 2010? Round to one decimal place.
A manufacturer reported an inventory turnover ratio of 8.6 during 2009. During 2010, manage- ment introduced a new inventory control system that was expected to reduce average inventory levels by 25 percent without affecting sales volume. Given these circumstances, would you expect the inventory
In 2009, Big W Company reported earnings per share of \($2.50\) when its stock was selling for \($50.00.\) In 2010, its earnings increased by 10 percent. If all other relationships remain constant, what is the price of the stock? Explain.
The income statement and selected balance sheet information for Direct Products Company for the year ended December 31, 2010, is presented below.Required:Prepare the cash flows from operating activities section of the 2010 statement of cash flows using the indirect method. Income Statement Selected
XS Supply Company is developing its annual financial statements at December 31, 2010. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statement are summarized:Additional Data:a. Bought equipment for cash, \($21,000.\)b. Paid
Heads Up Company was started several years ago by two hockey instructors. The company’s comparative balance sheets and income statement follow, along with additional information.Additional Data:a. Bought new hockey equipment for cash, \($500.\)b. Borrowed \($1,000\) cash from the bank during the
Refer to the information in PA12-2.Required:Prepare the cash flows from operating activities section of the 2010 statement of cash flows using the direct method.Data From PA12-2The income statement and selected balance sheet information for Direct Products Company for the year ended December 31,
Assume the same facts as PA12-4, except for the income statement and additional data item a.The new income statement is shown on the following page. Instead of item a from PA12-4, assume that the company bought new equipment for \($1,500\) cash and sold existing equipment for \($500\) cash. The
Suppose your company sells services of \($150\) in exchange for \($100\) cash and \($50\) on account. Depreciation of \($40\) also is recorded.Required:1. Show the journal entries to record these transactions.2. Calculate the amount that should be reported as net cash flow from operating
New Vision Company completed its income statement and balance sheet for 2010 and provided the following information:Required:1. Present the operating activities section of the statement of cash flows for New Vision Com' pany using the indirect method.2. Of the potential causes of differences
Company accumulated the following data for 2016:Requireda. Calculate the company-wide manufacturing overhead rate using machine hours as the allocation base.b. Calculate the company-wide manufacturing overhead rate using direct labor hours as the allocation base.c. Calculate departments overhead
Assume that Panasonic Company has determined its estimated total manufacturing overhead cost for one of its plants to be $204,000, consisting of the following activity cost pools for the current month:Total direct labor hours used during the month were 8,000. Panasonic produces many different
Gonalong, Inc., has 10 customers that account for all of its \($4,500,000\) of net income. Its activity-based costing system is able to assign all costs, except for \($650,000\) of general administrative costs, to key activities incurred in connection with serving its customers. A customer
Grand Haven is a senior living community that offers a full range of LO2 services including independent living, assisted living, and skilled nursing care. The assisted living di- SERVICE AND provides residential space, meals, and medical services (MS) to its residents. The current costing system
Merlot Company has determined its activity cost pools and cost drivers to be the following:One product made by Merlot, metal casements, used the following activities during the period to produce 500 units:Requireda. Calculate the cost per unit of activity for each activity cost pool for Merlot
Red River Banking Company has ten automatic i) AND teller machines (ATMs) spread throughout the city maintained by the ATM Department. You have been assigned the task of determining the cost of operating each machine. Management will use the information you develop, along with other information
LaMesa produces machine parts as a contract provider for a large manufacturing company. LaMesa produces two particular parts, shafts and gears. The competition is keen among contract producers, and LaMesa’s top management realizes how vulnerable its market is to cost-cutting competitors. Hence,
For each of the following activities, select the most appropriate cost driver. Each cost driver may be used only once. 1. Pay vendors 2. Evaluate vendors Activity 3. Inspect raw materials Cost Driver a. Number of different kinds of raw materials b. Number of classes offered c. Number of tables 4.
As the chief engineer of a small fabrication shop, Brenda Tolliver refers to herself as a ‘Sack-of-all-trades.” When an order for a new product comes in, Brenda must do the following:1. Design the product to meet customer requirements.2. Prepare a bill of materials (a list of materials required
National Technology, LTD. has developed the following activity cost information for its manufacturing activities:Filling an order for a batch of 50 fireplace inserts that weighed 150 pounds each required the following:. Three batch moves. Two sets of inspections. Drilling five holes in each unit.
a large paint manufacturer, has determined the following activity cost pools and cost driver levels for the latest period:The following data are for the production of single batches of two products, Mirlite and Subdue:Required Determine the batch and unit costs per gallon of Mirlite and Subdue
HyStandard Services, Inc. provides residential painting services for three home building companies, Alpine, Blue Ridge, and Pineola, and it uses a job costing system for determining the costs for completing each job. The job cost system does not capture any cost incurred by HyStandard for return
As part of a continuous improvement program, you have been asked to determine the activities involved in the baggage handling process of a major airline at one of the airline’s hubs. Prior to conducting observations and interviews, you decide that a list of possible activities would help you to
An economics professor at Prances University devotes 50 percent of her time to teaching, 35 percent of her time to research and writing, and 15 percent of her time to service activities such as committee work and student advising. The professor teaches two semesters per year. During each semester,
is presented for the activity costs of Oxford Wholesale Company:The following information pertains to Oxford Wholesale Company’s activities in Massachusetts for the month of March 2016:RequiredDetermine the profitability of sales in Massachusetts for March 2016. Activity Cost per Unit of Activity
Detroit Foundry, a large manufacturer of heavy equipment components, has determined the following activity cost pools and cost driver levels for the year:The following data are for the production of single batches of two products, C23 Cams and U2 Shafts during the month of August:RequiredDetermine
Slack Corporation has the following predicted indirect costs and cost drivers for 2016 for the given activity cost pools:The following activity predictions were also made for the year:It is assumed that the cost per unit of activity for a given activity does not vary between departments. Slack’s
Which of the following is not an element of ABC? a. Tracing costs to cost objects b. Calculating a predetermined ratec. Identifying the cost drivers d. All are elements of ABC.
ABC differs from traditional product costing in which of the following ways? a. Overhead is allocated to products in ABC. b. Estimated costs are used. c. Diverse cost drivers are used.d. Itis completely accurate.
Which of the following is not a benefit of customer profitability analysis? a. Identifies unprofitable customers b. Helps track cost spent on customers c. Helps managers identify actions to improve specific customer profitabilityd. Speeds up production process
Summarize the concepts underlying activity-based costing in two sentences.
What steps are required to implement the two-stage activity-based costing model?
Define activity cost pool, activity cost driver, and cost per unit of activity.
Name two possible activity cost drivers for each of the following activities: maintenance, materials movement, machine setup, inspection, materials purchases, and customer service.
What is the premise of activity-based costing for product costing purposes?
In what ways does ABC product costing differ from traditional product cost methods?
Explain why ABC often reveals that low-volume products are overcosted and high-volume products are under-costed.
How can ABC be used to improve customer profitability analysis?
Explain activity-based management and how it differs from activity-based costing.
Godfrey Manufacturing, Inc., operates a plant that produces its own regionally-marketed Spicy Steak Sauce. The sauce is produced in two processes, blending and bottling. In the Blending Department, all materials are added at the start of the process, and labor and overhead are incurred evenly
Arrow Company processes a food seasoning powder through its Compounding and Packaging departments. In the Compounding Department, direct materials are added at the beginning of the process, and direct labor and manufacturing overhead are incurred evenly throughout the process. Arrow uses the
Reston Manufacturing Corporation produces a cosmetic product in three consecutive processes. The costs of Department | for May 2016 were as follows:Department | handled the following units during May:On average, the May | units were 30% complete. The May 31 units were 60% complete. Materials are

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