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Accounting 5th Edition Charles T. Horngren, Walter T. Harrison, Linda S. Bamber, Betsy Willis, Becky Jones - Solutions
DE22-14 Using the original information in Daily Exercise 22-9, draw a graph of Grand Canyon Railway's cost-volume-profit relationships. Include the sales revenue line, the fixed expense line, and the total expense line. Label the axes, the breakeven point, the income area, and the loss area.
DE22-15 Consider the original Grand Canyon Railway information in Daily Exercise 22-9. If Grand Canyon expects to sell 7,000 round-trip tickets, compute the margin of safety.a. In units (round-trip tickets)b. In sales dollarsc. As a percentage of expected sales D 300 200 F H 150 The breakeven point
DE22-16 Describe what each letter stands for in the cost-volume-profit graph.
DE22-17 Consider Kay Pak's e-tail poster business. Suppose Pak expects to sell 900 posters. Use the original data on pages 894-896 to compute her margin of safety:a. In units (posters)b. In sales dollarsc. As a pe percentage of expected sales
DE22-18 Kay Pak's e-tail poster business incurs $7.000 of fixed expenses and has the fol- lowing sales and variable expenses per poster: Sale price per unit.... Variable expense per unit Regular Large Posters Posters $35 $70 21 40 Suppose Pak estimates she will sell 10 regular posters for every 2
DE22-19 Refer to the data in Daily Exercise 22-18 and your answer. Computea. The total number of posters Pak must sell to break even.b. The number of regular posters and the number of large posters she must sell to break even.c. Compare your answer to the breakeven point calculated on page 902-903.
DE22-20 Consider the Grand Canyon Railway example from the chapter opening story. Suppose Grand Canyon decides to offer two classes of service: Coach class and Chiel class. Assume Grand Canyon incurs $250,000 of fixed expenses per month and that it has the fol- lowing ticket prices and variable
DE22-21 Refer to the Grand Canyon Railway data in Daily Exercise 22-20 and your answer. Computea. The total number of tickets Grand Canyon must sell to break even.b. The number of Coach class tickets and the number of Chief class tickets the company must sell to break even.
DE22-22 Consider the Sportade example on pages 906-909. Suppose that during April, the company produces 10.000 cases of powdered drink mix, and sells 12.000 cases. Sale price. variable cost per case, and total fixed expenses remain the same as in March. Prepare the April income statement using
DE22-23 Refer to the Sportade example on pages 906-909, and the data and your answer to Daily Exercise 22-22. 1. Prepare the April income statement under absorption costing. 2. Is absorption costing income higher or lower than variable costing income? Explain why.
DE22-24 For a service company like Grand Canyon Railway, will absorption and variable costing give different operating income figures? Explain.
E22-1 Graph the following cost behavior patterns over a relevant range of 0-10.000 units:a. Variable expenses of $8 per unitb. Mixed expenses made up of lixed costs of $20,000 and variable costs of $3 per unitc. Fixed expenses of $15.000
E22-2 Riley Watches April income statement follows: RILEY WATCHES Income Statement For the Month of April 20XX Sales revenue. $720,000 Cost of goods sold. 448.000 Gross profit 272.000 Operating expenses: Marketing expense. $92,000 General and administrative expense. 42,000 134,000 Operating income.
E22-3 For its top managers, Blue Sea Travel formats its income statement as follows: BLUE SEA TRAVEL Contribution Margin Income Statement Three Months Ended March 31, 20XX Sales revenue.. $ 320,000 Variable expenses... 96.000 Contribution margin. 224.000 210,000 $ 14.000 Fixed expenses... Operating
E22-4 Baker Breakfast Co. produces frozen bagels. The company has fixed expenses of $63,000, and variable expenses of $1.10 per package. Each package sells for $2.00. Required 1. Compute the contribution margin per package and the contribution margin ratio. 2. Determine the breakeven point in units
E22-5 Noodles Now fast-food restaurant has been doing such great business that owner May Chen is considering franchising her restaurant concept. She believes that customers across the country will happily pay $6 for a large bowl of noodles, veggies, and meat. Variable costs are $2.10 a bowl. Chen
E22-6 West Coast Motor Freight delivers freight throughout California. Oregon, and Washington. The company has monthly fixed expenses of $490.000 and a contribution mar- ocol 70% of revenues Required 1. Compute West Coast's monthly breakeven sales in dollars. Use the contribution margin ratio
E22-7 William Calhoun is considering starting a Web-based educational business, e-Prep MBA. He plans to offer a short-course review of mathematics for students entering MBA pro- grams. The materials would be available on a password-protected Web site and students would complete the course through
E22-8 Suppose that Coors Field. the home of the Colorado Rockets, earns total revenue that averages $18 for every ticket sold. Assume that annual fixed expenses are $24 million, and variable expenses are $2 per ticket. Required 1. Prepare the ballpark's CVP graph under these assumptions. Label the
E22-9 Waldron's drug store has a monthly target operating income of $11.000. Variable expenses are 60% of sales, and monthly fixed expenses are $9.000. Required 1. Compute the monthly margin of safety in dollars if the store achieves its income goal. 2. Express Waldron's margin of safety as a
E22-10 Three college friends open an off-campus shop named Campus Sweats. They plan to sell a standard sweatshirt for $18 and a fancier version for $22. The $18 sweatshirt costs them $10, and the $22 sweatshirt costs them $12. The friends expect to sell two fancy sweatshirts for every three
E22-11 The 20X4 data that follow pertain to Oakley, a manufacturer of solid oak coffee tables (Oakley has no beginning inventories in January 20X4.) Sale price $350 Fixed manufacturing Variable manufacturing overhead $2,000,000 expense per table 275 Fixed operating expense...... 250,000 Sales
E22-12 Solo, Inc., manufactures two styles of climbing shoe-the Mountaineer and the Pro Mountaineer. The following data pertain to the Mountaineer: Variable manufacturing cost. $ 70 Variable operating cost. Sale price.. 20 160 Solo's monthly fixed expenses total $140.000. When Mountaineers and Pro
P22-1A Lelaine Johnson is in charge of the Los Angeles Regional Head Start program. Legislators have just cut the program's funding by 15%. Johnson cannot cut total fixed costs like the rent for the program's offices or salaries of the administrative staff. The other main costs are salaries for
P22-2A The budgets of four companies yield the following information: Target sales. Variable expenses. Fixed expenses Operating income (loss). Units sold. Contribution margin per unit.. Contribution margin ratio. Company E F G H $340,000 $ $550,000 $ 100.000 82,000 280.000 104.000 138,000 $ 60,000
P22-3A The Royal Blue schooner sails in the U.S. Virgin Islands during the winter. The aver- cruise has 45 tourists on board, and each person pays $75 for a day's sail. The ship sails 80 days each year. The Royal Blue also has a crew of fifteen, each earning an average of $95 per cruise. The crew
P22-4A Studio Signatures imprints T-shirts with company logos. Studio has fixed expenses of $585.000 per year plus variable expenses of $4.20 per T-shirt. Each T-shirt sells for $12.00. Required 1. Use the income statement equation approach to compute the number of T-shirts Studio must sell each
P22-5A Pacific Paradise Travel is opening an office in Seattle. Fixed monthly expenses are office rent ($3.700). depreciation on office furniture ($300), utilities ($210), a special tele- phone line ($650), a connection with the airlines computerized reservation service ($480). and the salary of a
P22-6A The contribution margin income statement of Brick Oven Pizza for February 20XX follows: BRICK OVEN PIZZA Contribution Margin Income Statement For the Month of February 20XX Sales revenue. $185.000 Variable expenses: Cost of goods sold. $32.000 Marketing expense. 25,000 General and
P22-7A=Link Back to Chapter 19 (Manufacturing Company Income Statement) and Chapter 20 (Manufacturing Overhead). Magical Melodies manufactures music boxes, which it sells for $45 each. The company uses the FIFO inventory costing method, and it computes a new monthly fixed manufacturing overhead
P22-1B Techman Computer Parts is opening early next year. India Landrum, the owner, is considering two plans for obtaining the plant assets and the sales force needed for operations. Plan I calls for purchasing all equipment and paying the sales force straight salaries. Under plan 2. Techman would
P22-2B The budgets of four companies yield the following information: Company P Q R S Target sales Variable expenses $360,000 108,000 $600,000 $190,000 $ 130,000 Fixed expenses 312.000 100.000 Operating income (loss) $ 15,000 $ $ $160.000 Units sold 112,000 Contribution margin per unit..... $6
P22-3B Bahama Sunset sails a schooner from Nassau, Bahamas. The average cruise has 80 tourists on board. Each person pays $85 for a day's sail in the Atlantic. The ship sails 100 days each year The schooner has a crew of 12. Each crew member earns an average of $105 per cruise. The crew is paid
P22-4B Colorworks imprints calendars with company names. The company has fixed expenses of $415,000 each month plus variable expenses of $2.49 per carton of calendars. Colorworks sells each carton of calendars for $4.15. Required 1. Use the income statement equation approach to compute the number
P22-5B Small World Travel is opening an office in Chicago. Fixed monthly expenses are office rent ($3,700), depreciation of office furniture ($190). utilities ($160), a special tele- phone line ($390), a connection with the airlines' computerized reservation service ($480), and the salary of a
P22-6B The November 20X4 contribution margin income statement of Fazzio Fashion accessories store follows: FAZZIO FASHION Contribution Margin Income Statement For the Month of November 20X4 Sales revenue $60,000 Variable expenses: Cost of goods sold. $22,000 Marketing expenses. 13,000 General and
P22-7B Link Back to Chapter 19 (Manufacturing Company Income Statement) and Chapter 20 (Manufacturing Overhead). Spacesaver Corporation manufactures plastic storage bins, which it sells for $8 each. The company uses the FIFO inventory costing method, and it computes a new monthly fixed
Case 1. Companies like Compaq and Proctor & Gamble have recently added a new employee benefit-on-site dinner-to-go. Employees can order reheatable pre-packaged din- ners during the day, and have these meals delivered to their offices at 5:00 PM. Similar to a company cafeteria, employees pay less
Case 2. Link Back to Chapter 19 (Just-in-Time Philosophy). Suppose you serve on the board of directors of American Faucet, a manufacturer of bathroom fixtures that recently adopted just-in-time production. Part of your responsibility is to develop a com- pensation contract for Toni Moen, the Vice
SpringSong is a medium-sized manufacturer of squirrel-proof bird feeders. Your father, the plant manager, helped you get a summer internship working for SpringSong's CFO. Your father has told you that the company is struggling and that he is worried about his job. With a breakeven point at 80% of
Refer to Target Corporation's Consolidated Results of Operations, included in the financial statements in Appendix A. Ignoring interest expense and taxes, answer the following ques- tions: 1. Is Target Corporation's cost of sales a fixed cost or a variable cost? Is depreciation and amortization a
Paktape Manufacturing produces filament packaging tape. In 20X4, Paktape produced and sold 15 million rolls of tape. The company has recently expanded its capacity, so it can now produce up to 30 million rolls per year. Paktape's accounting records show the following results from 20X4: Sale price
Rainforest Caf, Inc., is a restaurant that recreates the atmosphere of a tropical rainforest and includes a retail facility that offers an assortment of creative, signature items. Approximately 40 Rainforest Cafs are located in the United States, United Kingdom, Canada, France, Mexico, Singapore,
What are four benefits of budgeting?
List the components of a master budget.
Talt Corporation installs a budgeting system in which the president sets all the goals for the company. The vice president checks up on all 90 employees to ensure that they are meeting the president's budget goals. What is the weakness in this budgeting system? How can the sys- tem be improved?
Why should the capital expenditures budget be prepared before the cash budget, the budgeted balance sheet. and the budgeted statement of cash flows?
How does a company budget inventory purchases? In your answer, show the relationships among purchases. cost of goods sold, and inventory.
Outline the four steps in preparing an operating budget.
Is sales forecasting important only to a profit-seeking business, or is it used by nonprofit organizations such as colleges and hospitals? Give your reason.
Why are computer spreadsheets and budget manage- ment software well suited for budgeting?
Which manager will control expenses better: Grant. whose performance is measured by his department's sales, or Bruns, whose performance is gauged by her department's income? Why?
Identify four types of responsibility centers, and give examples of each. State the information they report.
A company owns 50 Burger King restaurants in Philadelphia. Pittsburgh, and Harrisburg. In each city, a local manager oversees operations. Starting at the indi- vidual store level, describe the likely flow of information in a responsibility accounting system. What data are reported?
What is the objective of management by exception?
Identify a reasonable allocation base for the following indirect expenses: heating expense, depreciation of man- ufacturing equipment used by three departments, and advertising expense.
Why do companies allocate indirect costs to depart- ments?
DE23-1 What are the key roles managers play in running their business operations? How do budgets help managers with each role?
DE23-2 Consider Ram Dharan's budget for his travel itinerary business (page 928). Explain how Dharan benefits from preparing the budget.
DE23-3 In what order should you prepare the following components of the master budget? Budgeted income statement Budgeted statement of cash flows Budgeted balance sheet Operating expense budget Purchases and cost of goods sold budget Sales budget Cash budget Capital expenditures budget Inventory
DE23-4 In a series of Daily Exercises, we are going to prepare parts of the master budget for Shadz, a major East Coast retailer of high-end sunglasses. We will concentrate on Shadz's budget for January and February. Shadz expects to sell 3,000 pairs of glasses for $235 each in January, and 4,500
DE23-5 In Daily Exercise 23-4. Shadz expects cost of goods sold to average 65% of sales rev- ene and the company expects to sell 4.300 pairs of sunglasses in March for $240 each. Shadz's target ending inventory is $10,000 plus 50% of the next month's cost of goods sold. Use this information and the
DE23-6 Turn to the Whitewater Sporting Goods example on pages 932-940. Suppose June sales are expected to be $84.000 rather than $60,000. Revise Whitewater's sales budget. What other components of Whitewater's master budget would be affected by this change in the sales budget?
DE23-7 Refer to the original Whitewater Sporting Goods example on pages 932-940. Suppose cost of goods sold averages 65% of sales rather than 70%. Revise Whitewater's pur- chases, cost of goods sold, and inventory budget for April and May, What other components of Whitewater's master budget would
DE23-8 Turn to the original Whitewater Sporting Goods example on pages 932-940. Suppose 30% of sales are cash and 70% are credit. Revise Whitewater's sales budget and bud- geted cash collections from customers for April and May
DE23-9 Refer to the original Whitewater Sporting Goods example on pages 932-940. Suppose Whitewater pays for 40% of inventory purchases in the month of the purchase and 60% during the next month. Revise Whitewater's budgeted cash payments for purchases of inventory for April and May. (Hint: Assume
DE23-10 You prepared Shadz's sales budget in Daily Exercise 23-4. Now assume that Shdz's sales are 25% cash and 75% on credit. Shadz's collection history indicates that credit sales are collected as follows: 30% in the month of the sale 60% in the month after the sale 6% two months after the sale
DE23-11 Refer to Daily Exercise 23-10. Shadz's has $8,300 cash on hand on January 1. The company requires a minimum cash balance of $7,500. January cash collections are $531.705 (as you calculated in Daily Exercise 23-10). Total cash payments for January are $583.200. Prepare a cash budget for
DE23-12 Return to the original Whitewater Sporting Goods example on pages 932-940. Suppose Whitewater can borrow only in notes payable of $2,000 each, at an annual interest rate of 15%. The notes payable require ten equal monthly payments of the principal. Whitewater must also pay interest on the
DE23-13 How has information technology affected sensitivity analysis in budgeting?
DE23-14 Fill in the blanks with the phrase that best completes the sentence. A cost center An investment center A profit center A responsibility center Lower A revenue center Highera. The Maintenance Department at the San Diego Zoo isb. The concession stand at the San Diego Zoo is.c. The Menswear
DE23-15 In Exhibit 23-18, the first line of the district manager's report and the first line of the branch manager's report consist entirely of expenses. Describe the kinds of expenses that would be included in these categories. Explain why the store manager's report at the bottom of Exhibit 23-18
DE23-16 Examine the performance report in Exhibit 23-18. On which variances should the Beale store manager focus his efforts next month, according to the management by exception principle? For these variances, compute the variance as a percent of the budgeted amount. and suggest some questions that
DE23-17 Exhibit 23-18 shows that the Beale store had a favorable food expense variance. Does this favorable variance necessarily mean that the Beale store manager is doing a good job? Explain.
DE23-18 Listed below are several cost drivers. Number of loads of materials moved Number of purchase orders Number of shipments received Number of customer complaints Number of inches Number of machine hours Number of pages Number of square feet Number of employees Which of these is most likely the
DE23-19 Consider the WorldPC example on page 952. Suppose the Hardware Department occupies 15,000 square feet and the Software Department occupies 5,000 square feet. How would the $600.000 rent expense be allocated?
DE23-20 Link Back to Chapter 20 (uses of product cost information). Study the summary review problem on pages 954-955. Why might the general manager of the new Ritz- Carlton hotel in St. Thomas want to know the cost per occupied room for the Club Accommodations and the Regular Accommodations?
E23-1 John Smith owns a store that sells athletic shoes. Last year, his sales staff sold 10.000 pairs of shoes at an average sale price of $65. Variable expenses were 80% of sales revenue. and the total fixed expense was $100.000. This year the store sold more expensive product lines. Sales were
E23-2 1-Tote is an e-tailer of womens' accessories. Their sales budget for the nine months ended September 30 follows: Quarter Ended. Nine-Month March 31 June 30 Sep. 30 Total Cash sales, 30%; Credit sales, 70% $ 30,000 Total sales. 100% 70,000 $100,000 $ 45,000 105.000 $150,000 $ 37.500 87,500
E23-3 Suresale is a real-estate firm. Suppose that its San Francisco office projects that 20X4 quarterly sales will increase by 4% in quarter 1. by 3% in quarter 2. by 5% in quarter 3, and by 6% in quarter 4. Management expects operating expenses to be 85% of revenues during each of the first two
E23-4 Scents Unlimited is a distributor of fragrances. For each of items a throughc. compute the amount of cash receipts or payments Scents will budget for September. The solution to one item may depend on the answer to an earlier item.a. Management expects to sell equipment that cost $12,000 at a
E23-5 Harrison Woods, a family-owned gardening store. began October with $7,500 cash. Management forecasts that collections from credit customers will be $9.500 in October and $13,000 in November. The store is scheduled to receive $6,000 cash on a business note receiv- able in October. Projected
E23-6 Use the following information to prepare a budgeted balance sheet for Cinderella's Closet at March 31, 20X2. Show computations for the cash and owners' equity amounts.a. March 31 inventory balance. $14,000b. March payments for inventory. $5.900c. March payments of accounts payable and accrued
E23-7 Identify each responsibility center as a cost center, a revenue center, a profit center, or an investment center.a. The bakery department of a Kroger supermarket reports income for the current year.b. Netscape Communication is a subsidiary of America Online, Inc.c. A personnel department of
E23-8 D*Books.com is a New York company that sells discount books on the Web. D*Books.com has assistant managers for its adult-fiction and adult-nonfiction operations. These assistant managers report to the manager of adult books, who with the manager of chil- dren's books reports to the manager
E23-9 Johnston Fabricating incurred the following indirect costs in April: Indirect labor expense.... Equipment depreciation expense. Marketing expense.. $16,000 22,500 24,000 Data for cost allocations: Department Priming Welding Custom Orders Sales revenue $70,000 $50,000 $80,000 Indirect labor
E23-10 Hold-It.com is an e-tailer of cedar and plastic storage containers. It has two divisions: Cedar and Plastic. The company's income statement for 20X3 appears as follows: Sales revenue... Cost of goods sold. Gross profit... Operating expenses: Salaries expense. Depreciation expense..
E23-11 You recently began a job as an accounting intern at Trailblazers Ltd. Your first task was to help prepare the cas i budget for February and March. Unfortunately, the computer with the budget file crashed and you did not have a backup or even a hard copy. You ran a program to salvage bits of
P23-1A Representatives of the various departments of Software Direct have assembled the following data. As the business manager, you must prepare the budgeted income statements for August and September 20X3.a. Sales in July were $184,000. You forecast that monthly sales will increase 2% in August
P23-2A Refer to Problem 23-1A. Software Direct's sales are 50% cash and 50% credit. Credit sales are collected in the month after sale. Inventory purchases are paid 70% in the month of purchase and 30% the following month. Salaries and sales commissions are paid three-fourths in the month earned
P23-3A The Book Closet has applied for a loan. Westside Bank has requested a budgeted balance sheet at June 30, 20X5, and a budgeted statement of cash flows for June. As the con- troller (chief accounting officer) of The Book Closet, you have assembled the following infor- mation:a. May 31
P23-4A Refer to Problem 23-3A. Before granting a loan to The Book Closet, Westside Bank asks for a sensitivity analysis assuming that June sales are only $65.000 rather than the $85.000 originally budgeted. (While cost of goods sold will change, assume that purchases. depreciation, and the other
P23-5A Is each of the following most likely a cost center, a revenue center, a profit center, or an investment center?a. Personnel Department of E Trade. the on-line brokerb. Quality Control Mayfield Dairies Department ofc. European subsidiary of Coca-Colad. Payroll Department of the University of
P23-6A Audio and Video is a chain of home electronics stores. Each store has a manager who answers to a city manager, who in turn reports to a statewide manager. The actual income statements of Store No. 13, all stores in the Topeka area (including Store No. 13), and all stores in the state of
P23-7A The Printed Page has both a Printing and a Copy Services Department. At May 31. the end of the fiscal year, the bookkeeper prepared the adjusted trial balance on page 964. The Printed Page owns its printing equipment and leases a high-speed copier from Xerox. The Printed Page performs print
P23-1B The budget committee of Morton Restaurant Supply Co. has assembled the follow- ing data. As the business manager, you must prepare the budgeted income statements for May and June 20X2.a. Sales in April were $31.300. You forecast that monthly sales will increase 2.4% in May and 2.4% in
P23-2B Refer to Problem 23-1B. Morton's sales are 70% cash and 30% credit. Credit sales are collected in the month after sale. Inventory purchases are paid 60% in the month of purchase and 40% the following month. Salaries and sales commissions are paid hall in the month earned and half the next
P23-3B Frank's Used Cars of Asheville, North Carolina, has applied for a loan. Bank of America has requested a budgeted balance sheet at April 30, 20X4. and a budgeted statement of cash flows for April. As the controller (chief accounting officer) of Frank's Used Cars, you have assembled the
P23-4B Refer to Problem 23-3B. Before granting a loan to Frank's Used Cars. Bank of America asks for a sensitivity analysis assuming April sales are only $60.000 rather than the $90.000 originally budgeted. (While the cost of goods sold will change, assume that pur- chases, depreciation, and the
P23-5B Is each of the following most likely a cost center, a revenue center, a profit center, or an investment center?a. Shipping department of Amazon.comb. Eastern district of a salesperson's terri- toryc. Music director of a church or syna- gogued. Catering operation of Sonny's BBQ restaurante.
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