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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
A company has the following incomplete production budget data for the first quarter: Ending inventory is budgeted at 5% of projected sales units in the coming month. Required: What is the expected production in February? February January March 12,000 Expected unit sales 4,000 16,000
You have been asked to prepare the monthly cash budget for June and July for the Merchandise and Mercantile Company. The company sells a unique product that is specially made for it by a major product manufacturer. The selling price is $16 per unit. All sales are on account. Merchandise purchases
The following information relates to Old Company for September of this year:Opening cash balance......................................................$16,000Depreciation expense...........................................................4,000Dividends
It is mid-February and a company has just approached its bank with a request for a $300,000 90-day loan to meet its working capital requirements. Inventories peak in April in anticipation of spring sales, and the treasurer believes the company can repay the loan in full by the end of the 90-day
The management of Mecca Copy, a photocopying centre located on University Avenue, has compiled the following data to use in preparing its budgeted balance sheet for next year:
Kat Ltd.’s September balance sheet contains the following information:Cash.............................................................................$ 37,500 (dr)Accounts receivable....................................................126,000 (dr)Allowance for doubtful
All sales of Aegan Electronics Supply are made on credit. Sales are billed twice monthly, on the 10th of the month for sales made in the last half of the prior month, and on the 20th of the month for sales made in the first half of the current month. When payments are made in the month of the sale,
Garden Depot is a retailer that is preparing its budget for the upcoming fiscal year. Management has prepared the following summary of its budgeted cash flows: The company?s beginning cash balance for the upcoming fiscal year will be $20,000. The company requires a minimum cash balance of $10,000
How can budgeting assist a firm in its employment policies?
The controller of Arrowroot Company wishes to improve the company’s control system by preparing a monthly cash budget. The following information relates to the month ending July 31, 20X1:June 30, 20X1, cash
Garden Sales, Inc. sells garden supplies. Management is planning its cash needs for the second quarter. The company usually has to borrow money during this quarter to support peak sales of lawn care equipment, which occur during May. The following information has been assembled to assist in
The production department of Raredon Corporation has submitted the following forecast of units to be produced by quarter for the upcoming fiscal year: Each unit requires 1.4 direct labour-hours, and direct labour-hour workers are paid $21 per hour. In addition, the variable manufacturing overhead
The production department of Rordan Corporation has submitted the following forecast of units to be produced by quarter for the upcoming fiscal year: Each unit requires 0.55 direct labour-hours, and direct labour-hour workers are paid $12 per hour. Required: 1. Construct the company?s direct
Is the use of budgetary slack unethical? Consider a hypothetical conversation between you and the sales and production managers of your company that you recently joined about how the managers estimated their sales and production numbers which drive the budget of your company.Sales Manager: We have
Risky Rolling, Inc. is a rapidly expanding manufacturer of skateboards that have been modified for use on ski slopes during the off-season. This year’s sales are considerably higher than last year’s sales, and sales are expected to double next year. The unexpected growth in sales has presented
Daisy Products Limited of Shenzhen, China, manufactures and distributes toys throughout Southeast Asia.Three cubic centimetres (cc) of solvent Q80 are required to manufacture each unit of Fineclay, one of the company’s products. The company is now planning raw materials needs for the third
The marketing department of Jessi Corporation has submitted the following sales forecast for the upcoming fiscal year: The selling price of the company?s product is $20 per unit. Management expects to collect 65% of sales in the quarter in which the sales are made and 30% in the following
Silver Company makes a product that is very popular as a Mother?s Day gift. Thus, peak sales occur in May of each year. These peak sales are shown in the following sales budget for the second quarter: From past experience, the company has learned that 25% of a month?s sales are collected in the
The following terms pertain to the budgeting process:benchmarks..........................................bottlenecksbudget...................................................budget committeecontrol...................................................imposed from
“The higher the R2 of a regression equation, the better the likelihood that X is an appropriate cost driver for Y.” Is this true or false? Explain your answer.
What is the difference between the scattergraph method and the least-squares regression method?
Why is the least-squares regression method preferred to the high–low method when analyzing mixed costs?
What is least-squares regression?
Once a regression line has been drawn, how do you determine the fixed cost element? The variable cost element?
What is a regression line? Give the general formula for a regression line. Which term represents the variable cost? The fixed cost?
The Central Valley Company is a manufacturing firm that produces and sells a single product. The company?s revenues and expenses for the last four months are given below. Required: 1. Management is concerned about the losses experienced during the spring and would like to know more about the
What methods are available for separating a mixed cost into its fixed and variable elements using past records of cost and activity data? Which method is considered to be most accurate? Why?
Gallop Corporation prepared the following report for the first quarter of this year: Gallop?s controller, Nancy Johnstone, studied the costs in detail, particularly focusing on cost behaviour. Her analysis revealed the following: ? Sixty-five percent of the cost of goods sold was variable with
Dylan Flaherty, marketing clerk for TipTop Marketing Agency, recorded the following information for last year: He would like to be able to estimate customer service costs using the number of customers as the basis for estimation. However, because he has never taken a course in managerial
Amfac Company manufactures a single product. The company keeps careful records of manufacturing activities, from which the following information has been extracted: The company?s manufacturing overhead cost consists of both variable and fixed cost elements. To have data available for planning,
The Alpine House, Inc. is a large retailer of winter sports equipment. Here is an income statement for the company?s ski department for a recent quarter: THE ALPINE HOUSE, INC.Income Statement?Ski DepartmentFor the Quarter Ended March
The utility costs for Pizza Parlour (PP) amounted to $12,520 and $16,040 in April and December respectively; during these months PP sold 24,000 and 32,000 pizzas (these were the lowest and highest recorded sales). Using the high–low method, develop a cost equation for utility costs.
Sawaya Co., Ltd., of Japan, is a manufacturing company whose total factory overhead costs fluctuate considerably from year to year according to increases and decreases in the number of direct labour-hours worked in the factory. Total factory overhead costs (in Japanese yen, denoted ?) at high and
Bikes Manufacturing produces and sells children’s bikes at an average price of $60. Its costs are as follows: direct materials, $12; direct labour, $7; variable overhead, $3; sales commission, 5% of price. Its fixed monthly costs are $38,000.Required:1. Using the above cost data, set up a monthly
Which of the following are linear cost functions? Which are mixed cost functions? Given: Y = total costs, X1 = production volume, and X2 = number of batches produced.1. Y = 4,000 + 3X1 + 45X22. Y = 1,500 + 6X1 + 4X23. Y = 16,7804. Y = 4.5X25. Y = 12,450 + 3.20X2
Hoi Chong Transport, Ltd. operates a fleet of delivery trucks in Singapore. The company has determined that if a truck is driven 105,000 kilometres during a year, the average operating cost is 12.665 cents per kilometre. If a truck is driven only 70,000 kilometres during a year, the average
Murugan Ltd. had the following results for the year:Sales.........................................................$45,000Less: Operating expenses........................39,000Net operating income.............................$ 6,000The average selling price for the units sold was $15 per unit and
“I truly think that we should use the scattergraph method to analyze mixed costs,” said Suzanne Arthur to her accountant Jane Golding. “It gives us the flexibility to manage the proportion of variable and fixed costs according to the decisions that we are required to make.”Jane wondered
Using the data in Brief Exercise 6–3, repeat part (2) using least-squares regression (using any spreadsheet software). Is units produced a reliable basis for estimating processing costs? Units Processing Month Produced Cost 1 2,500 $28,000 11,000 52,000 3 15,000 59,000 4 5,500 38,000 5 9,000
Mountain View Hospital in Alberta has just hired a new chief administrator, who is anxious to employ sound management and planning techniques in the business affairs of the hospital. Accordingly, she has directed her assistant to summarize the cost structure existing in the various departments to
Refer to the data in Exercise 6–1. 1.Kilometres DrivenTotal Annual Cost*High level of activity....................................................... 105,000$13,298Low level of
Oki Products, Ltd. has observed the following processing costs at various levels of activity over the past 10 months: Required: 1. Prepare a scattergraph by plotting these data on a graph. Plot cost on the vertical axis and units produced on the horizontal axis. Fit a line to your plotted points
Kilpauk Corporation, located in London, Ontario, has gathered data on its overhead activities and associated costs for the past 12 months. Nancy Cruder, a member of the controller?s department, has convinced management that the purchasing department?s overhead costs can be better estimated and
Molina Company is a value-added computer reseller that specializes in providing services to small companies. The company owns and maintains several vehicles for use by its sales staff. All expenses of operating these vehicles have been entered into an automobile expense account on the company?s
Repeat parts (1) and (2) of Exercise 6–1 using least-squares regression (you may use a spreadsheet to compute the fixed and variable costs). Comment on the reliability of using occupancy-days as an allocation base. Custodial Supplies Expense Month Occupancy-Days March 18,000 $2,500 April 12,500
The Royal Canadian Lodge in Banff, Alberta, has accumulated records of the total electrical costs of the hotel and the number of occupancy-days over the last year. An occupancy-day represents a room rented out for one day. The hotel?s business is highly seasonal, with peaks occurring during the ski
Coral, Inc. manufactures a variety of products. The following data pertains to its plant in Chennai, India, which is relatively new and manufactures auto parts. Management wants to better understand the behaviour of overhead costs in order to better estimate and manage these costs. Management
The Lakeshore Hotel?s occupancy-days and custodial supplies expense over the last seven months were as follows: Occupancy-days are a measure of the overall activity at the hotel. For example, when a guest stays at the hotel for three days, it is counted as three occupancy-days. Required: 1.
Espresso Express operates a number of espresso coffee stands in busy suburban malls. The fixed weekly expense of a coffee stand is $2,200, and the variable cost per cup of coffee served is $0.18. Required: 1. Complete the following table with your estimates of total costs and cost per cup of
Consider the following data for Magnimus Corporation. Required: 1. What is the average price per unit sold?2. Write the cost equation for direct materials.3. Write the cost equation for direct labour.4. Write the cost equation for manufacturing overhead.5. Write the cost equation for sales
?A dollar of gross margin per briefcase? That?s ridiculous!? roared Art Dejans, president of CarryAll, Inc. ?Why do we go on producing those standard briefcases when we?re able to make over $15 per unit on our specialty items? Maybe it?s time to get out of the standard line and focus the whole
AnoDigi Inc. (ADI) uses a traditional approach to overhead allocation. The company produces two different models of weight scales for use in homes: Analog (an analog scale) and Digital (a digital weight scale with readout). Prices for the two products are based on full costs of production (i.e.,
Manson Co. produces two products?Model S and Model T?and allocates its fixed manufacturing costs using a predetermined overhead rate based on estimated total overhead for the year and estimated machine-hours for the year. The estimates are as follows: Estimated total overhead for the
Brown Inc. manufactures and distributes two types of household items. The items, Mops and Dusters, are manufactured on a common assembly line by the same direct labourers. Different direct materials are used in each type, and the machinery is retooled for each product. Until now, manufacturing
What are the major limitations of ABC?
Jordan?s Lakeside is a popular restaurant located on Lake Muskoka in Ontario. The owner of the restaurant has been trying to better understand costs at the restaurant and has hired a student intern to conduct an ABC study. The intern, in consultation with the owner, identified the following major
Review what you have learned about activity-based costing.Required:1. Identify the four steps involved in an ABC system.2. Identify one benefit of ABC compared with a traditional costing system.3. Identify one limitation of ABC.
Chomyn Corporation provides a variety of consulting services to a diverse range of clients. The company has three support departments and two operating departments, whose cost details for a typical quarter are presented below: Support DepartmentsInformation
Munoz Corporation uses ABC to determine product costs for external financial reports. At the beginning of the year, management made the following cost and activity estimates in the company?s five activity cost pools: Required: 1. Compute the activity rate (i.e., predetermined overhead rate) for
Kramer Corporation is an office supplier dealing in a number of different products. It currently allocates its ordering and delivery costs to its residential and business customer groups on the basis of order value. However, the company has recently decided to implement activity-based costing
Why is ABC described as a “two-stage” costing method?
Sherri Rowland had recently been transferred to the home security systems division of National Home Products. Shortly after taking over her new position as divisional accountant, she came to know that each of the three division presidents had a lot of autonomy in decision making and reporting. In
Refer to the data in Exercise 5?3 for Sylvan Company. The activities during the year were distributed across the company?s four products as follows: Required: Compute the amount of overhead cost applied to each product during the year. Activity Cost Pool Product A Product B Product D Actual
Midwest Industrial Products Corporation makes two products: product H and product L. Product H is expected to sell 30,000 units and product L 50,000 units next year. A unit of either product requires 0.2 direct labour-hours. The company’s total manufacturing overhead for the year is expected to
Hunter Corporation uses ABC to determine product costs for external financial reports. At the beginning of the year, management made the following cost and activity estimates in the company?s five activity cost pools: Required: 1. Compute the activity rate (i.e., predetermined overhead rate) for
Sylvan Company uses activity-based costing to determine product costs for external financial reports. Some of the entries have been completed to the manufacturing overhead account for the current year, as shown by entry (a) below: Required: 1. What does entry (a) represent? 2. At the beginning of
Klumper Corporation is a diversified manufacturer of industrial goods. The company?s ABC system has the following six activity cost pools and activity rates: Cost and activity data have been supplied for the following products: Required: Compute the unit product cost of each of the products
Look in the Yellow Pages or contact your local chamber of commerce or local chapter of CMA-Canada to find the names of manufacturing companies in your area. Call or make an appointment to meet with the controller or chief financial officer of one of these companies.Required:Ask the following
?Does charging a uniform price to all customers really make sense?? This was the question that Lori Peters, founder and CEO of One Stop Shop (OSS), asked her management team. ?Charging a uniform price assumes that all customers are the same in terms of the resources they consume; this can?t
Siegel Corporation manufactures a product available in both a deluxe and a regular model. The company has made the regular model for years; the deluxe model was introduced several years ago to capture a new segment of the market. Since the introduction of the deluxe model, the company?s profits
Harrison Company makes two products and uses a conventional costing system in which a single plantwide, predetermined overhead rate is computed based on direct labour-hours. These products are customized to some degree for specific customers. Data for the two products for the upcoming year
Why is ABC growing in popularity?
ClassicWindows is a small company that builds specialty wooden windows for local builders. For the year 20X4, Lori Newman prepared the following profitability statement for two of the company?s major customers: For years, the small company has relied on a simple costing system that allocated all
Juneau Company manufactures a variety of products in a single facility. Consultants hired by the company to do an ABC analysis have identified the following activities carried out in the company on a routine basis:a. Machines are set up between batches of different products.b. The company’s
The following activities are carried out in Greenberry Company, a manufacturer of consumer goods:a. Direct labour workers assemble a product.b. Engineers design a new product.c. A machine is set up to process a batch.d. Automated machines cut and shape materials.e. The HR department trains new
At the end of April, Department Z at the Tucumcare Glue Factory transferred all production to finished goods inventory. During May, the department started and fully completed 800 units. The month-end work in process (WIP) was 100% complete with respect to direct materials and 0% complete with
Saskatchewan Pulses Company makes flour from high-protein lentils. It uses a process costing system. In the month of January, the company started 12,000 units and completed and transferred out 8,000 units. There were no beginning inventories in January. January’s ending inventories were 75%
Last month, the Finishing Department of Rohirrim Inc. started 12,000 units into production. The department had 3,600 units in process at the beginning of the month, and these units were 50% complete with respect to conversion costs. There were 4,800 units in process at the end of the month, and
MacroMin Co. uses a weighted average process costing system. The following data are for the production department for December. The December ending work-in-process inventory was 75% complete with respect to both materials and conversion costs. The department completed and transferred 60,000
The BerryPhoenix BrickWorks, in Saskatoon, Saskatchewan, manufactures high-quality bricks used in residential and commercial construction. The firm is small but highly automated and typically produces about 300,000 bricks per month. A brick is created in a continuous production operation. In the
Omartian Inc. uses the weighted average cost method in its process costing system. Information for department A for July is as follows: Required: 1. Calculate the degree of completion for direct materials and conversion cost in ending inventory. 2. How would the ?total costs accounted for? be
Under process costing, it is often suggested that a product is like a rolling snowball as it moves from department to department. Why is this an apt comparison?
Below is information about Gandalf Corp., a chemical producer, for October:Work in process, beginning inventory..................................................50,000 unitsTransferred in..........................................................................................100% completeDirect
The Mixing Department of Saiorise Ltd., a producer of fabric for Broadway shows, has the following information regarding costs and output for March:Units:
Sauron Company incurred $140,000 in direct materials costs during May. Additionally, the 12,000 units in the work-in-process inventory on May 1 had a direct materials balance of $40,000 but were only 5% complete as to direct materials. No additional units were transferred into work-in-process
What is a quantity schedule, and what purpose does it serve?
Callisto Company manufactures chemical additives for industrial applications. As the new cost accountant for Callisto, you have been assigned the task of completing the production cost report for the most recent period. Callisto uses the weighted average cost method of process costing. The
Victor Company had 30,000 units in process on December 31, 2014, 80% complete as to materials and 40% complete as to conversion costs. The company’s records show that 60,000 units were transferred to the finished goods inventory during 2015. Furthermore, 22,500 units were on hand at the end of
Lambda Company made an error in computing the percentage of completion of the current year’s beginning work-in-process inventory. The error resulted in the assignment of a higher percentage of completion to each unit of the inventory than actually was the case. There was no ending work-in-process
The following information pertains to production activities in the Refining Department of Storm Corporation. All units in work in process were costed using the weighted average cost flow assumption. Required: 1. What were the conversion costs per equivalent unit of production last period and this
Iron Inc. manufactures paint in a highly automated process. Its costing system uses two cost categories: direct materials and conversion costs. Each batch of product must pass through the Mixing Department and the Testing Department. Direct materials are all added at the beginning of the production
In June, 4,750 units were completed and transferred out of the mixing process at Mudslide Industries Ltd. The ending work-in-process inventory was 500 units, 40% complete as to conversion costs and 50% complete as to materials costs. The month’s charges were $19,800 for conversion costs and
Pureform, Inc. manufactures a product that passes through two departments. Data for a recent month for the first department follow: The beginning work-in-process inventory was 80% complete as to materials and 60% complete as to processing labour and overhead. The ending work-in-process inventory
Earth Company is a manufacturer of circuit boards. The company?s chief financial officer is trying to verify the accuracy of the ending work-in-process and finished goods inventories prior to closing the books for the year. You have been asked to assist in this verification. The year-end balances
Refer to the data for Helox, Inc. in Exercise 4?4 and to the equivalent units and costs per equivalent unit you have computed there. Required: Complete the following cost reconciliation for the first process: Cost Reconciliation EUs Total Cost Materials Conversion Cost accounted for as follows:
Superior Micro Products uses the weighted average cost method in its process costing system. Data for the assembly department for May are given below: Required: 1. Compute the cost per equivalent unit for materials, labour, and overhead. 2. Compute the total cost per equivalent whole unit.
The production report includes a quantity schedule, the computation of equivalent costs and costs per equivalent units, and a cost reconciliation.Required:1. Learning teams of three (or more) members should be formed. Each team member must select one of the following sections of the production
Weston Products manufactures an industrial cleaning compound that goes through three processing departments?Grinding, Mixing, and Cooking. All raw materials are introduced at the start of work in the Grinding Department, with conversion costs being incurred evenly throughout the grinding process.
Helox, Inc. manufactures a product that passes through two production processes. A quantity schedule for a recent month for the first process follows: Costs in the beginning work-in-process inventory of the first processing department were materials, $4,000, and conversion cost, $14,200. Costs
Builder Products, Inc. manufactures a caulking compound that goes through three processing stages prior to completion. Information on work in the first department, Cooking, is given below for May: Materials are added at several stages during the cooking process, whereas labour and overhead costs
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