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managerial accounting
Introduction to Managerial Accounting 5th Canadian edition Peter C. Brewer, Ray H. Garrison, Eric Noreen, Suresh Kalagnanam, Ganesh Vaidyanathan - Solutions
Canuck Maple makes maple syrup. It is based in a small town between Montreal and Quebec City. The owner uses a special recipe handed down through several generations in his family to make the highly popular brand of maple syrup. Due to recent growth of the company, the owner wants to develop a
Dawson Toys, Ltd. produces a toy called the Maze. The company has recently established a standard costing system to help control costs with the following standards for the Maze toy:Direct materials: 8 microns per toy at $0.75 per micronDirect labour: 0.9 hours per toy at $12 per hourVariable
During the 2016 Republican primary race to be the nominee of the Republican Party for president in the general election for president of the United States, Donald Trump was accused by his opponents of having hired temporary construction workers from Poland instead of American workers during
You are employed by Olster Company, which manufactures products for the health and nutrition market. As a rising executive in the company, you are scheduled to make a presentation in a few hours to your superior. This presentation relates to last week?s production of Maxitol, Olster?s popular
Erie Company manufactures an MP3 player called the Jogging Mate. The company uses standards to control its costs. The labour and variable overhead standards that have been set for one Jogging Mate MP3 player are as follows: Budgeted fixed overhead was estimated to be $31,500 per month. Fixed
Logistics Solutions provides order-fulfillment services for online merchants. The company maintains warehouses that stock items carried by its online clients. When a client receives an order from a customer, the order is forwarded to Logistics Solutions, which pulls the item from storage, packs it,
Refer to the data in Exercise 11–2. Assume that instead of producing 2,000 units during the month, the company produced only 1,500 units, using 6,500 kilograms of material in the production process. (The rest of the material purchased remained in inventory.)Required:1. Compute the direct
AirCooks, Inc. prepares in-flight meals for a number of major airlines. One of the company’s products is grilled salmon in dill sauce with new baby potatoes and spring vegetables. During the most recent week, the company prepared 4,000 of these meals using 960 direct labour-hours. The company
Huron Company produces a commercial cleaning compound known as Zoom. The direct materials and direct labour standards for one unit of Zoom follow: The budgeted fixed overhead cost is $15,800 per month. The denominator activity level of the allocation base is 800 direct labour-hours. During the
Bandar Industries Berhad of Malaysia manufactures sporting equipment. One of the company’s products, a football helmet for the North American market, requires a special plastic. During the quarter ending June 30, the company manufactured 70,000 helmets, using 45,000 kilograms of plastic in the
Chennai Manufacturing Company (CMC) is a small manufacturer based in southern India. CMC?s controller, Asha Pandey, recently implemented a standard costing system and has decided to use it as a planning and control tool. The following information is available for two of its products (A and
Martin Company manufactures a powerful cleaning solvent. The main ingredient in the solvent is a raw material called Echol. Information on the purchase and use of Echol follows:Purchase of Echol: Echol is purchased in 30-litre containers at a cost of $130 per container. A discount of 3% is offered
Victoria Chocolates, Ltd. makes premium handcrafted chocolate confections in Victoria, British Columbia. The owner of the company is setting up a standard costing system and has collected the following data for one of the company’s products, the Empire Truffle. This product is made with the
What is meant by variance?
Joe Swanson has an opportunity to acquire a franchise from The Yogurt Place, Inc. to dispense frozen yogurt products under the name The Yogurt Place. Swanson has assembled the following information relating to the franchise:a. A suitable location in a large shopping mall can be rented for $3,500
The Wrongway Ad Agency provides cars for its sales staff. In the past, the company has always purchased its cars from a dealer and then sold the cars after three years of use. The company’s present fleet of cars is three years old and will be sold very shortly. To provide a replacement fleet, the
Dr. Helen Floss is the managing partner of the Crestwood Dental Clinic. Floss is trying to determine whether the clinic should move patient files and other items out of a spare room in the clinic and use the room for dental work. She has determined that it would require an investment of $358,950
“As the discount rate increases, the present value of a given future cash flow also increases.” Do you agree? Explain your answer.
Kadalai Company makes metal blanks which it sells to metal fabrication and stamping companies. The sales forecasts for the next four years are 500,000 bars a year. The president estimates that he can save $1,000 per year in fixed cash operating costs plus $0.05/bar during the next four years if he
Manufacturing Division has recommended the purchase of a new model of equipment to save operating costs. Relevant information is shown below:Equipment cost....................................................................................................$ 70,000Salvage value of project equipment
Explain how the cost of capital serves as a screening tool when dealing with the NPV method.
A $100,000 investment is expected to generate $27,740 in cash savings at the end of each year for five years.Required:What is the approximate internal rate of return?
Kathy Myers frequently purchases shares and bonds, but she is uncertain how to determine the rate of return that she is earning. For example, three years ago she paid $20,000 for 200 common shares of Malti Company. She received a $620 cash dividend on the shares at the end of each year for three
Digger Company is evaluating an investment of $330,000 in earth moving equipment. Management anticipates net cash savings of $100,000 in year 1. The savings will increase by 40% in year 2 and then increase by another 50% in year 3. The minimum desired rate of return is 15%.Required:What is the
Oxford Company has limited funds available for investment and must ration the funds among five competing projects. Selected information on the five projects follows: The net present values above have been computed using a 10% discount rate. The company wants your assistance in determining which
A piece of labour-saving equipment has just come onto the market, which Mitsui Electronics Ltd. could use to reduce costs in one of its plants in Japan. Relevant data relating to the equipment follow (currency is in thousands of yen, denoted by ¥):Purchase cost of the
Raul Martinas, a professor of languages at Eastern University, owns a small office building adjacent to the university campus. He acquired the property 10 years ago at a total cost of $530,000?that is, $50,000 for the land and $480,000 for the building. He has just received an offer from a realty
The management of Revco Products is exploring five different investment opportunities. Information on the five projects under study follows: The company?s required rate of return is 10%; thus, a 10% discount rate has been used in the preceding present value computations. Limited funds are
The management of Unter Corporation is considering an investment with the following characteristics: Required: 1. Determine the payback period of the investment. 2. Would the payback period be affected if the cash inflow in the last year were several times as large? Investment Year Cash Inflow
Use an online directory, such as http://www.yellowpages.ca or http://www.411.ca, to find a manufacturer in your area that has a website. Make an appointment with the controller or chief financial officer of the company. Before your meeting, find out as much as you can about the organization’s
Bilboa Freightlines, S.A. of Panama has a small truck that it uses for local deliveries. The truck is in bad repair and must be either overhauled or replaced with a new truck. The company has assembled the following information (Panama uses the U.S. dollar as its currency): If the company keeps
Labeau Products Ltd., of Perth, Australia, has $122,500 to invest. The company is trying to decide between two alternative uses for the funds. The alternatives follow: The company?s discount rate is 6%. Required: Which alternative would you recommend that the company accept? Show all
Marlon Plastics purchased a new machine one year ago at a cost of $750,000. Although the machine operates well, the president of the company is considering replacing it with a new electronic machine that has just entered the market. The new machine would slash the annual operating costs by
Windhoek Mines Ltd. of Namibia is contemplating the purchase of equipment to exploit a mineral deposit located on land to which the company has mineral rights. An engineering and cost analysis has been made, and it is expected that the following cash flows would be associated with opening and
Tischler the Honey Man (THM) purchases honeycombs from beekeepers for $4.40 per kilogram. THM produces two main products from the honeycombs—honey and beeswax. Honey is drained from the honeycombs, and then the honeycombs are melted down to form cubes of beeswax. The beeswax is sold for $3.30 per
Javelin Cycling Vacations Ltd. offers cycling tours in Canada and France. Each year a single tour is offered. For 20X5, the company is offering a tour of the Continental Divide. Following is an estimate of the revenues and costs for this tour: JAVELIN
The Brain Teasers (TBT) specializes in creating and manufacturing board games for youth. Each game has a unique game board to accompany the other pieces of the game. The company is at the final development stage of a new game called “Inverted World” based on a recent fictional book and
The Engine Guys produces specialized engines for “snow climber” buses. The company’s normal monthly production volume is 1,000 engines, whereas its monthly production capacity is 2,000 engines. The current selling price per engine is $1,260. The cost per unit of manufacturing and marketing
Cora Corporation produces refrigerator units. The company?s normal production and sales volume of Standard units is 3,000 units per month, and units sell for $800 each. The costs of manufacturing and marketing a Standard model are as follows: Variable manufacturing cost per unit
SpeedCar Corporation makes toy cars that it can sell for $25 per car. Production manager Alex Carvahllo is considering whether to refurbish or replace the moulds that SpeedCar uses in the manufacturing process. The original cost of the moulds, purchased three years ago, was $600,000. They have an
Anchor Company manufactures a variety of tool boxes. The firm is currently operating at 80% of its full capacity of 7,500 machine-hours per month. Each unit requires 30 minutes of machine time. Its sales manager has been looking for special orders to make productive use of the excess capacity. JCL
Hearty Dairy is trying to decide whether it should sell the milk that it processes “as is” or further process it into butter. Management has collected the following data pertaining to milk:Wholesale selling price ($5.30 per 4 litres) ............................................... $5.30Less:
Montreal Corporation (MC) has received an offer from an outside supplier to supply 10,000 units of parts used annually in the manufacture of its main product at $36 per unit. The following current cost data is available in the manufacture of the product:
We Make Company has traditionally manufactured a number of different standard machine parts. It is now exploring an outsourcing decision for several of the parts that it currently produces. Cost information for one such machine part is given below:Variable cost/unit
Your Retail Store?s accountant prepared the following income statement for the ladies? accessories product line: Management is concerned about the loss and is considering dropping the product line. If the product line is dropped, a job has to be created elsewhere for a long-term employee
Standard Machine Parts Ltd. makes specialized machine parts for several customers, all of whom are major manufacturers. Standard is considering replacing one of the special machines used in the production of a specific product; this machine was purchased eight years ago for $750,000 and has seven
The Hyatt Company is trying to decide whether it should purchase new equipment so that it can continue to make its engines, a key component of its final product, internally or whether production should be discontinued and the engines purchased from an outside supplier.New equipment for producing
“In my opinion, we ought to stop making our own drums and accept that outside supplier’s offer,” saidWim Niewindt, managing director of Antilles Refining, N.V., of Aruba. “At a price of 36 florins per drum, we would be paying 10 florins less than it costs us to manufacture the drums in our
Golfers, Inc. (GI) manufactures golf related equipment including golf balls. This year?s expected production of golf balls is 100,000 packs (each consisting of four golf balls). Cost data are as follows: The full cost of one pack of golf balls is $2.12. GI has received an offer from an outside
Soft and Cuddly Friends (SCF) produces soft dolls. Demand for the dolls is increasing, and management wants you to identify an economical sales and production mix for the coming year. The following information is available: The following additional information is available: a. The company?s plant
Barlow Company manufactures three products: A, B, and C. The selling price, variable costs, and contribution margin for one unit of each product follow: The same raw material is used in all three products. Barlow Company has only 5,000 kilograms of material on hand and will not be able to obtain
Imperial Jewellers is considering a special order for 20 handcrafted gold bracelets for a major upscale wedding. The gold bracelets are to be given as gifts to members of the wedding party. The normal selling price of a gold bracelet is $199.95 and its unit product cost is $169, as shown:Materials
Cora Limited’s normal monthly production output is 3,800 units of a product that sells for $30 per unit. Its total variable costs amount to $22 per unit and total monthly fixed costs amount to $10,250, A special order is received for 100 units at a price of $25 per unit.Required:Assume that Cora
Benoit Company produces three products, A, B, and C. Data concerning the three products follow (per unit): Demand for the company?s products is very strong, with far more orders each month than the company has raw materials available to produce. The same material is used in each product. The
Delta Company produces a single product. The cost of producing and selling a single unit of this product at the company’s normal activity level of 60,000 units per year is as follows:Direct materials ................................................................... $6.10Direct labour
For many years, Futura Company has purchased the starters that it installs in its standard line of farm tractors. Due to a reduction in output of some of its products, the company has idle capacity that could be used to produce the starters. The chief engineer has recommended against this move,
Autoway Inc. is a wholesale Winnipeg-based distributor supplying a wide range of moderately priced auto equipment to large chain stores. Autoway manufactures about 40% of these products and the rest are purchased from other manufacturers. One department of Autoway currently manufactures side view
Han Products manufactures 55,500 units of part S-6 each year for use on its production line. At this level of activity, the cost per unit for part S-6 is as follows:Direct materials ........................ $ 6.66Direct labour ............................. 18.50Variable overhead
Thalassines Kataskeves, S.A., of Greece, makes marine equipment. The company has been experiencing losses on its bilge pump product line for several years. The most recent quarterly income statement for the bilge pump product line follows: The currency in Greece is the euro, denoted by ?. The
Hollings Company sells office furniture in the Rocky Mountain area. As part of its service, Hollings delivers furniture to customers. The costs associated with the acquisition and annual operation of a delivery truck are given below:Insurance
Profits have been decreasing for several years at Pegasus Airlines. In an effort to improve the company?s performance, consideration is being given to dropping several flights that appear to be unprofitable. A typical income statement for one such flight (Flight 482) follows: The following
Bed & Bath, a retailing company, has two departments: hardware and linens. A recent monthly income statement for the company follows: A study indicates that $340,000 of the fixed expenses being charged to linens are sunk costs or allocated costs that will continue even if the linens
Waukee Railroad is considering the purchase of a powerful, high-speed wheel grinder to replace a standard wheel grinder now in use. Selected information on the two machines follows: Required: Prepare a computation covering the five-year period that will show the net advantage or disadvantage of
Rasoi Equipment manufactures a variety of cooking equipment and related accessories. The data given below is for a special heavy-duty exhaust fan.Annual production capacity (units) .......................... 10,000Price (per unit) .........................................................
Tracey Douglas is the owner and managing director of Heritage Garden Furniture Ltd., a South African company that makes museum-quality reproductions of antique outdoor furniture. Tracey would like advice concerning the advisability of eliminating the model C3 lawn chair. These lawn chairs have been
Murl Plastics Inc. purchased a new machine one year ago at a cost of $30,000. Although the machine operates well, the president of Murl Plastics is wondering if the company should replace it with a new electronic machine that has just come on the market. The new machine would slash annual operating
MotoMover makes three models of motorized skateboards. At present, all indirect costs are applied to production using a single predetermined overhead (OH) rate based on direct labour-hours. Management would like you to provide an analysis of the costs of manufacture of the three models that
This activity requires teamwork to reinforce the understanding of the hierarchy of activities commonly found in ABC systems in manufacturing companies.Required:1. The team should discuss and then draft a brief description of how the ABC system allocates overhead to products. All team members should
Krueger Ltd. wishes to earn a before-tax profit equal to 20% of sales revenue. Its monthly fixed costs are $40,000 and contribution margin ratio is equal to 40%.Required:1. Determine the annual break-even sales.2. Compute the sales level required to achieve the desired profit level.
In 2018, Paton Ltd.’s margin of safety was 24% of the break-even sales level of $2,450,000 (at $49 per unit). The (actual) annual fixed costs amounted to $860,000.Required:What was the annual income in 2018?
Croftsman Company recorded the following information for its main product:Selling price per unit...................................................................$200Costs per unit (at the normal capacity of 20,000 units):Direct
Craig Company Inc. earns a contribution margin ratio of 36% on its main product sold at $120 per unit. Assume that the annual break-even point is 80,000 units.Required:1. Compute the annual fixed costs.2. What is the contribution margin for every unit sold beyond the break-even point?
Carter Manufacturing Company manufactures exclusive pens which sell for $60 per unit. Its unit variable costs are $28 and fixed expenses are $384,000. The company pays income tax at the rate of 30%.Required:1. How many units must Carter sell to earn an after-tax income of $22,400?2. Re-compute the
Engberg Company?s most recent monthly income statement is given below: Required: 1. Compute the company?s degree of operating leverage. 2. Using the degree of operating leverage, estimate the impact on net income of a 10% decrease in sales. 3. Verify your estimate from part (2) by constructing a
Fletcher Corporation prepared the following income statement for the fourth quarter in 2018.Sales revenue (30,000 units).............................................$930,000Less: Costs of goods sold....................................................586,600Gross
Brewer Corporation estimated its quarterly break-even sales for 2017 to be 45,800 units, priced at $38 each. Its actual sales for the year amounted to $7,752,000 and actual quarterly fixed expenses were $618,250.Required:1. Compute the annual margin of safety in units and dollars.2. Compute the
Al’s Auto Wash charges $4 to wash a car. The variable costs of washing a car are 15% of sales. Fixed expenses total $1,700 monthly. How many cars must be washed each month for Al to break even?
Sultan Corporation operated at its normal capacity during the current year, producing 60,000 units of its single product. Sales totalled 50,000 units at an average price of $30 per unit. Variable cost of goods sold amounted to $10 per unit, and sales commissions were paid out at $5 per unit sold.
Molander Corporation sells a sun umbrella used at resort hotels. Data concerning the next month?s budget are given below: Required: 1. Compute the company?s margin of safety. 2. Compute the company?s margin of safety as a percentage of its sales. Selling price Variable expense $48 per unit $28
Draaksh Corporation sells premium quality wine for $50 per bottle. Its direct materials and direct labour costs are $9 and $6 respectively per bottle. It pays its direct labour employees a wage of $12 per hour. The company performed a regression analysis using the past 12 months’ data and
Refer to the data in Brief Exercise 8–6. Assume a 40% tax rate, and assume that the profits in the figures shown in parts (1) and (2) are after-tax amounts.Required:Redo Brief Exercise 8–6.Brief Exercise 8–6Lin Corporation has a single product, whose selling price is $180 and whose variable
Krait Products sells camping equipment. One of the company’s products, a camp lantern, sells for $90 per unit. Variable expenses are $63 per lantern, and fixed expenses associated with the lantern total $135,000 per month.Required:1. Compute the company’s break-even point in number of lanterns
Lin Corporation has a single product, whose selling price is $180 and whose variable cost is $100 per unit. The company’s monthly fixed expenses are $60,000.Required:1. Using the equation method, compute the unit sales that are required to earn a target before-tax profit of $10,000.2. Using the
Wesley Company manufactures and sells a single product. The company?s sales and expenses for last quarter follow: Required: 1. What is the monthly break-even point in units sold and in sales dollars? 2. Without resorting to computations, calculate the total contribution margin at the break-even
“A 10% decrease in the selling price of a product will have the same impact on net income as a 10% increase in the variable expenses.” Do you agree? Why, or why not?
Klyne Corporation manufactures pharmaceutical products that are sold through a network of sales agents. The agents are paid a commission of 18% of sales. The income statement for the year ending December 31, 2017, is as follows: Klyne is considering hiring its own sales staff to replace the
The Hartford Symphony Guild is planning its annual dinner and dance. The committee has assembled the following expected costs for the event:Dinner (per person)..................................................................$28Favours and program (per
Mauro Products has a single product, a woven basket whose selling price is $54, and variable cost is $45 per unit. The company’s monthly fixed expenses are $26,550.Required:1. Compute the company’s break-even point in unit sales using the equation method.2. Compute the company’s break-even
What is meant by operating leverage?
Data for Hermann Corporation are shown below: Fixed expenses are $40,000 per month, and the company is selling 2,000 units per month. Required: 1. The marketing manager argues that a $4,000 increase in the monthly advertising budget would increase monthly sales by $9,000. Should the advertising
The marketing manager, Raj Mehta, picked up the phone to call Susan Ahmed, the company’s cost accounting assistant and Raj’s personal friend.Mehta: Hi, Susan. Can you help me understand something that came up at a meeting earlier today? It was about break-even when we were discussing cost
Klinken Corporation’s contribution margin ratio on the sale of its most popular product is 42%. The product is priced at $80, annual fixed expenses are $800,000. Management is evaluating two options: (1) lowering variable costs by 10% and (2) reducing fixed expenses by 10%.Required:Calculate the
Allen Moving and Storage prepared the following income statement for 2018: Upon reviewing the income statement for 2018, chief financial officer Suzie Allen called a meeting to discuss the company?s financial status. She invited sales manager Heidi Strom and controller Gautam Singh. Allen: Our
Miller Company?s most recent income statement follows: Required: Prepare a new income statement under each of the following conditions (consider each case independently): 1. The sales volume increases by 15%, and the selling price decreases by $1.00. 2. The selling price decreases by $2.50 per
Whirly Corporation?s most recent income statement is shown below: Required: Prepare a new income statement under each of the following conditions (consider each case independently): 1. The sales volume increases by 1,000 units. 2. The sales volume decreases by 1,000 units. 3. The sales volume is
What is a product’s CM ratio? How is this ratio useful in planning business operations?
A company has the following excess (deficiency) of cash receipts over cash disbursements projected for the next year on a quarterly basis. It will not have any cash at the start of the year. The quarterly interest rate is 2%, and any borrowing and repayment of principal must be in round $1,000
At the end of August, there was $90,000 in inventory. The change in inventory balance for September was (10,000). The following entries were posted to the GL at the end of September: Required: 1. Calculate the purchases made in September. 2. What is the total amount of cash disbursements made in
The Red Company is a relatively new company. The company?s accountant has assembled the following information pertaining to the company?s operations budget for the year ended December 31, 20X0: Sales price.........................................................................$40 per unitDirect
The following schedule shows the excess of cash receipts over cash disbursements projected for the Zoptic Company for 20X1: The company borrows and repays from an open line of credit in round $100 amounts. The current balance (principal plus accrued interest) in the line of credit account is
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