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Accounting 23rd Edition Carl S. Warren - Solutions

=+b. Should the Cups line be retained? Explain.
=+EX 25-4 Segment analysis, Charles Schwab Corporation obj. 1 Fixed costs are 15% of the cost of goods sold and 40% of the selling and administrative expenses. Suffolk China Ware assumes that fixed costs would not be materially affected if the Cups line were discontinued.a. Prepare a differential
=+d. If Schwab decided to sell its “Institutional Investor” accounts to another company, estimate how much operating income would decline.
=+c. Estimate the contribution margin for each segment.
=+b. Provide a specific example of a variable and fixed cost in the “Individual Investor”segment.
=+a. How do you believe Schwab defines the difference between the “Individual Investor” and “Institutional Investor” segments?
=+EX 25-3 Differential analysis report for a discontinued product obj. 1✔a. Differential income: bowls,$17,980 1164 Chapter 25 Differential Analysis and Product Pricing The Charles Schwab Corporation is one of the more innovative brokerage and financial service companies in the United States. The
=+Sales $54,000 $68,500 $24,500 Cost of goods sold 22,400 31,700 11,900 ________ ________ _______ Gross profit $31,600 $36,800 $12,600 Selling and administrative expenses 28,300 25,300 20,400 ________ ________ _______ Income from operations $ 3,300 $11,500 $ (7,800) ________ ________ ________
=+EX 25-2 Differential analysis report for a discontinued product obj. 1✔a. Differential variable costs,$227,280 The condensed product-line income statement for Suffolk China Ware Company for the month of December is as follows:Suffolk China Ware Company Product-Line Income Statement For the
=+b. Should Royal Cola be retained? Explain.
=+a. Prepare a differential analysis report, dated March 3, 2010, for the proposed discontinuance of Royal Cola.
=+It is estimated that 16% of the cost of goods sold represents fixed factory overhead costs and that 20% of the operating expenses are fixed. Since Royal Cola is only one of many products, the fixed costs will not be materially affected if the product is discontinued.
=+EX 25-1 Lease or sell decision obj. 1✔a. Differential revenue from lease,$20,000 A condensed income statement by product line for British Beverage Inc. indicated the following for Royal Cola for the past year:Sales $254,000 Cost of goods sold 122,000 _________ Gross profit $132,000 Operating
=+b. On the basis of the data presented, would it be advisable to lease or sell the machinery? Explain.
=+PE 25-10B Bottleneck profit obj. 3 EE 25-10 p. 1152 Exercises Inman Construction Company is considering selling excess machinery with a book value of $280,000 (original cost of $400,000 less accumulated depreciation of $120,000)for $292,000, less a 5% brokerage commission. Alternatively, the
=+PE 25-10A Bottleneck profit obj. 3 EE 25-10 p. 1152 Chapter 25 Differential Analysis and Product Pricing 1163 Product A has a unit contribution margin of $45. Product B has a unit contribution margin of $60. Product A requires three testing hours, while Product B requires five testing hours.
=+PE 25-9B Variable cost markup percentage obj. 2 EE 25-9 p. 1149 Product K has a unit contribution margin of $240. Product L has a unit contribution margin of $200. Product K requires eight furnace hours, while Product L requires five furnace hours. Determine the most profitable product, assuming
=+PE 25-9A Variable cost markup percentage obj. 2 EE 25-9 p. 1149 Crescent Lighting Inc. produces and sells lighting fixtures. An entry light has a total cost of $80 per unit, of which $36 is product cost and $44 is selling and administrative expenses. In addition, the total cost of $80 is made up
=+PE 25-8B Product cost markup percentage obj. 2 EE 25-8 p. 1147 Eden Garden Tools Inc. produces and sells home and garden tools and equipment.A lawnmower has a total cost of $150 per unit, of which $100 is product cost and $50 is selling and administrative expenses. In addition, the total cost of
=+PE 25-8A Product cost markup percentage obj. 2 EE 25-8 p. 1147 Crescent Lighting Inc. produces and sells lighting fixtures. An entry light has a total cost of $80 per unit, of which $36 is product cost and $44 is selling and administrative expenses. In addition, the total cost of $80 is made up
=+PE 25-7B Total cost markup percentage obj. 2 EE 25-7 p. 1145 Eden Garden Tools Inc. produces and sells home and garden tools and equipment.A lawnmower has a total cost of $150 per unit, of which $100 is product cost and $50 is selling and administrative expenses. In addition, the total cost of
=+PE 25-7A Total cost markup percentage obj. 2 EE 25-7 p. 1145 Crescent Lighting Inc. produces and sells lighting fixtures. An entry light has a total cost of $80 per unit, of which $36 is product cost and $44 is selling and administrative expenses. In addition, the total cost of $80 is made up of
=+PE 25-6B Accept business at special price obj. 1 EE 25-6 p. 1142 Eden Garden Tools Inc. produces and sells home and garden tools and equipment.A lawnmower has a total cost of $150 per unit, of which $100 is product cost and $50 is selling and administrative expenses. In addition, the total cost
=+PE 25-6A Accept business at special price obj. 1 EE 25-6 p. 1142 Product R is normally sold for $55 per unit. A special price of $46 is offered for the export market. The variable production cost is $32 per unit. An additional export tariff of 15% of revenue must be paid for all export products.
=+PE 25-5B Process or sell obj. 1 EE 25-5 p. 1141 1162 Chapter 25 Differential Analysis and Product Pricing Product A is normally sold for $6.50 per unit. A special price of $5.60 is offered for the export market. The variable production cost is $4.50 per unit. An additional export tariff of 25% of
=+PE 25-5A Process or sell obj. 1 EE 25-5 p. 1141 Product T is produced for $3.20 per pound, including a $0.20 per pound fixed cost.Product T can be sold without additional processing for $4.10 per pound, or processed further into Product U at an additional cost of $0.50 per pound, including a
=+PE 25-4B Replace equipment obj. 1 EE 25-4 p. 1140 Product D is produced for $60 per gallon, including a $5 per gallon fixed cost. Product D can be sold without additional processing for $85 per gallon, or processed further into Product E at an additional cost of $19 per gallon, including a $3 per
=+PE 25-4A Replace equipment obj. 1 EE 25-4 p. 1140 A machine with a book value of $250,000 has an estimated six-year life. A proposal is offered to sell the old machine for $243,000 and replace it with a new machine at a cost of $320,000. The new machine has a six-year life with no residual value.
=+PE 25-3B Make or buy obj. 1 EE 25-3 p. 1138 A machine with a book value of $48,000 has an estimated five-year life. A proposal is offered to sell the old machine for $50,000 and replace it with a new machine at a cost of $62,000. The new machine has a five-year life with no residual value. The
=+PE 25-3A Make or buy obj. 1 EE 25-3 p. 1138 A restaurant bakes its own bread for $160 per unit (100 loaves), including fixed costs of$38 per unit. A proposal is offered to purchase bread from an outside source for $109 per unit, plus $8 per unit for delivery. Provide a differential analysis of
=+PE 25-2B Discontinue a segment obj. 1 EE 25-2 p. 1137 A company manufactures various sized plastic bottles for its medicinal product. The manufacturing cost for small bottles is $52 per unit (1,000 bottles), including fixed costs of $15 per unit. A proposal is offered to purchase small bottles
=+b. Should Product V be discontinued?
=+PE 25-2A Discontinue a segment obj. 1 EE 25-2 p. 1137 Product V has revenue of $204,000, variable cost of goods sold of $134,000, variable selling expenses of $74,000, and fixed costs of $14,000, creating a loss from operations of$18,000.a. Determine the differential income or loss from sales of
=+b. Should Product L be discontinued?
=+PE 25-1B Lease or sell obj. 1 EE 25-1 p. 1135 Product L has revenue of $56,000, variable cost of goods sold of $29,000, variable selling expenses of $12,000, and fixed costs of $18,000, creating a loss from operations of $3,000.a. Determine the differential income or loss from sales of Product L.
=+PE 25-1A Lease or sell obj. 1 EE 25-1 p. 1135 Practice Exercises Chapter 25 Differential Analysis and Product Pricing 1161 Grey Company owns a machine with a cost of $320,000 and accumulated depreciation of $60,000 that can be sold for $250,000, less a 5% sales commission. Alternatively, the
=+15. What is the appropriate measure of a product’s value when a firm is operating under production bottlenecks?
=+14. What is a production bottleneck?
=+13. Under what circumstances is it appropriate to use the target cost concept?
=+12. How does the target cost concept differ from cost-plus approaches?
=+11. What method of determining product cost may be appropriate in settings where the manufacturing process is complex?
=+What other issues must the company consider in deciding whether to accept the business?
=+5. A company accepts incremental business at a special price that exceeds the variable cost.
=+Exabyte stated, “If we’d tried to build our own plants, we could never have grown that fast or maybe survived.” The decision to purchase key product components is an example of what type of decision illustrated in this chapter?
=+2. It was reported that Exabyte Corporation, a fast growing Colorado marketer of backup tape drives, has decided to purchase key components of its product from others.For example, Sony Corporation of America provides Exabyte with mechanical decks, and Solectron Corporation provides circuit
=+Sales price $35 $33 $29 Variable cost 15 15 15 ___ ___ ___ Unit contribution margin $20 $18 $14 ___ ___ ___ ___ ___ ___ Furnace hours 4 3 2 From a profitability perspective, which product should be emphasized in April’s advertising campaign?A. Product 1 C. Product 3 B. Product 2 D. All three
=+5. Mendosa Company produces three products. All the products use a furnace operation, which is a production bottleneck. The following information is available:Product 1 Product 2 Product 3 Unit volume—March 1,000 1,500 1,000 Per-unit information:
=+4. For which cost concept used in applying the cost-plus approach to product pricing are fixed manufacturing costs, fixed selling and administrative expenses, and desired profit allowed for in determining the markup?A. Total cost C. Variable cost B. Product cost D. Standard cost
=+3. Henry Company is considering spending $100,000 for a new grinding machine. This amount could be invested to yield a 12% return. What is the opportunity cost?A. $112,000 C. $12,000 B. $88,000 D. $100,000
=+2. Victor Company is considering disposing of equipment that was originally purchased for $200,000 and has $150,000 of accumulated depreciation to date. The same equipment would cost $310,000 to replace. What is the sunk cost?A. $50,000 C. $200,000 B. $150,000 D. $310,000
=+1. Marlo Company is considering discontinuing a product. The costs of the product consist of$20,000 fixed costs and $15,000 variable costs.The variable operating expenses related to the product total $4,000. What is the differential cost?A. $19,000 C. $35,000 B. $15,000 D. $39,000
=+5. Assume that for the current year, the selling price of Product M was $42 per unit.To date, 60,000 units have been produced and sold, and analysis of the domestic market indicates that 15,000 additional units are expected to be sold during the remainder of the year. Recently, Inez Company
=+4. Assuming that the variable cost concept is used, determine (a) the cost amount per unit, (b) the markup percentage, and (c) the selling price of Product M.
=+(b) the markup percentage, and (c) the selling price of Product M.
=+2. Assuming that the total cost concept is used, determine (a) the cost amount per unit,
=+Inez Company recently began production of a new product, M, which required the investment of $1,600,000 in assets. The costs of producing and selling 80,000 units of Product M are estimated as follows:Variable costs:Direct materials $ 10.00 per unit Direct labor 6.00 Factory overhead 4.00 Selling
=+Hawley Inc. manufactures woven baskets for national distribution. The standard costs for the manufacture of Folk Art style baskets were as follows:Standard Costs Actual Costs Direct materials 1,500 lbs. at $35 1,600 lbs. at $32 Direct labor 4,800 hrs. at $11 4,500 hrs. at $11.80 Factory overhead
=+2. Determine the time variance, rate variance, and total direct labor cost variance for the Folk Art style baskets.
=+3. Determine the controllable variance, volume variance, and total factory overhead cost variance for the Folk Art style baskets
=+1. The actual and standard direct materials costs for producing a specified quantity of product are as follows:Actual: 51,000 lbs. at $5.05 $257,550 Standard: 50,000 lbs. at $5.00 $250,000 The direct materials price variance is:A. $50 unfavorable. C. $2,550 unfavorable.B. $2,500 unfavorable. D.
=+3. The actual and standard factory overhead costs for producing a specified quantity of product are as follows:Actual: Variable factory overhead $72,500 Fixed factory overhead 40,000 $112,500 _______ Standard: 19,000 hrs. at $6($4 variable and $2 fixed) 114,000 If 1,000 hours were unused, the
=+4. Ramathan Company produced 6,000 units of Product Y, which is 80% of capacity. Each unit required 0.25 standard machine hour for production. The standard variable factory overhead rate is $5.00 per machine hour. The actual variable factory overhead incurred during the period was $8,000. The
=+1. What are the basic objectives in the use of standard costs?
=+4. How often should standards be revised?
=+6.a. What are the two variances between the actual cost and the standard cost for direct materials?
=+b. Discuss some possible causes of these variances.
=+8.a. What are the two variances between the actual cost and the standard cost for direct labor?
=+b. Who generally has control over the direct labor cost?
=+10. Would the use of standards be appropriate in a nonmanufacturing setting, such as a fast-food restaurant?
=+11.a. Describe the two variances between the actual costs and the standard costs for factory overhead.
=+b. What is a factory overhead cost variance report?
=+12. What are budgeted fixed costs at normal volume?
=+15. Briefly explain why firms might use nonfinancial performance measures.
=+PE 23-1A Direct materials variances obj. 3 EE 23-1 p. 1051 McLean Company produces a product that requires three standard gallons per unit.The standard price is $18.50 per gallon. If 2,500 units required 8,000 gallons, which were purchased at $18.00 per gallon, what is the direct materials (a)
=+PE 23-1B Direct materials variances obj. 3 EE 23-1 p. 1051 Norris Company produces a product that requires 3.5 standard hours per unit at a standard hourly rate of $12 per hour. If 500 units required 1,500 hours at an hourly rate of$11.50 per hour, what is the direct labor (a) rate variance, (b)
=+PE 23-2A Direct labor variances obj. 3 EE 23-2 p. 1053 McLean Company produces a product that requires two standard hours per unit at a standard hourly rate of $18 per hour. If 2,500 units required 5,500 hours at an hourly rate of $19 per hour,
=+what is the direct labor (a) rate variance, (b) time variance, and(c) cost variance?
=+PE 23-2B Direct labor variances obj. 3 EE 23-2 p. 1053 Norris Company produced 500 units of product that required 3.5 standard hours per unit. The standard variable overhead cost per unit is $0.70 per hour. The actual variable factory overhead was $1,200. Determine the variable factory overhead
=+PE 23-3A Factory overhead controllable variance obj. 4 EE 23-3 p. 1056 McLean Company produced 2,500 units of product that required two standard hours per unit. The standard variable overhead cost per unit is $2.50 per hour. The actual variable factory overhead was $12,900. Determine the
=+PE 23-3B Factory overhead controllable variance obj. 4 EE 23-3 p. 1056 Norris Company produced 500 units of product that required 3.5 standard hours per unit. The standard fixed overhead cost per unit is $0.30 per hour at 1,800 hours, which is 100% of normal capacity. Determine the fixed factory
=+PE 23-4A Factory overhead volume variance obj. 4 EE 23-4 p. 1058 McLean Company produced 2,500 units of product that required two standard hours per unit. The standard fixed overhead cost per unit is $1.30 per hour at 4,600 hours, which is 100% of normal capacity. Determine the fixed factory
=+PE 23-4B Factory overhead volume variance obj. 4 EE 23-4 p. 1058 Practice Exercises 1070 Chapter 23 Performance Evaluation Using Variances from Standard Costs Norris Company produced 500 units that require six standard pounds per unit at $1.25 standard price per pound. The company actually used
=+PE 23-5A Standard cost journal entries obj. 5 EE 23-5 p. 1061 McLean Company produced 2,500 units that require three standard gallons per unit at$18.50 standard price per gallon. The company actually used 8,000 gallons in production. Journalize the entry to record the standard direct materials
=+PE 23-5B Standard cost journal entries obj. 5 EE 23-5 p. 1061 Prepare an income statement through gross profit for Norris Company using the variance data in Practice Exercises 23-1A, 23-2A, 23-3A, and 23-4A. Assume Norris sold 500 units at $105 per unit.
=+PE 23-6A Income statement with variances obj. 5 EE 23-6 p. 1063 Prepare an income statement through gross profit for McLean Company using the variance data in Practice Exercises 23-1B, 23-2B, 23-3B, and 23-4B. Assume McLean sold 2,500 units at $214 per unit.
=+PE 23-6B Income statement with variances obj. 5 EE 23-6 p. 1063 The following are inputs and outputs to the cooking process of a restaurant:Percent of meals prepared on time Number of unexpected cook absences Number of times ingredients are missing Number of server order mistakes Number of hours
=+PE 23-7A Activity inputs and outputs obj. 6 EE 23-7 p. 1064 The following are inputs and outputs to the copying process of a copy shop:Percent jobs done on time Number of times paper supply runs out Number of pages copied per hour Number of employee errors Number of customer complaints Copy
=+Identify whether each is an input or output to the copying process.
=+PE 23-7B Activity inputs and outputs obj. 6 EE 23-7 p. 1064 Exercises Bavarian Chocolate Company produces chocolate bars. The primary materials used in producing chocolate bars are cocoa, sugar, and milk. The standard costs for a batch of chocolate (5,000 bars) are as follows:
=+EX 23-1 Standard direct materials cost per unit obj. 2 Chapter 23 Performance Evaluation Using Variances from Standard Costs 1071 Ingredient Quantity Price Cocoa 510 lbs. $0.40 per lb.Sugar 150 lbs. $0.64 per lb.Milk 120 gal. $1.25 per gal.
=+Determine the standard direct materials cost per bar of chocolate.
=+Hickory Furniture Company manufactures unfinished oak furniture. Hickory uses a standard cost system. The direct labor, direct materials, and factory overhead standards for an unfinished dining room table are as follows:Direct labor: standard rate $18.00 per hr.standard time per unit 2.5
=+Variable factory overhead: standard rate $2.80 per direct labor hr.Fixed factory overhead: standard rate $1.20 per direct labor hr.Determine the standard cost per dining room table.
=+EX 23-2 Standard product cost obj. 2 Warwick Bottle Company (WBC) manufactures plastic two-liter bottles for the beverage industry. The cost standards per 100 two-liter bottles are as follows:Standard Cost per 100Two-Liter Cost Category Bottles Direct labor $1.32 Direct materials 5.34 Factory
=+At the beginning of July, WBC management planned to produce 650,000 bottles. The actual number of bottles produced for July was 700,000 bottles. The actual costs for July of the current year were as follows:Actual Cost for the Cost Category Month Ended July 31, 2010 Direct labor $ 9,400 Direct
=+b. Prepare a budget performance report for manufacturing costs, showing the total cost variances for direct materials, direct labor, and factory overhead for July.
=+c. Interpret the budget performance report.
=+EX 23-3 Budget performance report obj. 2✔b. Direct labor cost variance, $160 U The following data relate to the direct materials cost for the production of 2,000 automobile tires:Actual: 54,600 lbs. at $1.80 $98,280 Standard: 53,400 lbs. at $1.85 $98,790
=+a. Determine the price variance, quantity variance, and total direct materials cost variance.
=+b. To whom should the variances be reported for analysis and control?

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