Question: Consider the following two situations—cases A

> Jack Arnoldson is the management accountant for Valley Restaurant Supply (VRS). Bob Gardner, the VRS sales manager, and Jack are meeting to discuss the profitability of one of the customers, Franco’s Pizza. Jack hands Bob the following

> Belmont Corporation has four operating divisions. The budgeted revenues and expenses for each division for 2011 follows: Further analysis of costs reveals the following percentages of variable costs in each division: Closing down any division would r

> The following are the Class Company’s unit costs of manufacturing and marketing a high-style pen at an output level of 20,000 units per month: Required: The following situations refer only to the preceding data; there is no connection

> The Weaver Company produces gas grills. This year’s expected production is 20,000 units. Currently, Weaver makes the side burners for its grills. Each grill includes two side burners. Weaver’s management accountant rep

> Oxford Engineering manufactures small engines. The engines are sold to manufacturers who install them in such products as lawn mowers. The company currently manufactures all the parts used in these engines but is considering a proposal from an external s

> The Northern Division of Grossman Corporation makes and sells tables and beds. The following estimated revenue and cost information from the division’s activity-based costing system is available for 2011. Additional information includ

> Pendleton Engineering makes cutting tools for metalworking operations. It makes two types of tools: R3, a regular cutting tool, and HP6, a high-precision cutting tool. R3 is manufactured on a regular machine, but HP6 must be manufactured on both the regu

> The Wild Boar Corporation is working at full production capacity producing 13,000 units of a unique product, Rosebo. Manufacturing cost per unit for Rosebo is as follows: Manufacturing overhead cost per unit is based on variable cost per unit of $4 and

> Bob Moody manages the Knoxville plant of George Manufacturing. He has been approached by a representative of Darda Engineering regarding the possible replacement of a large piece of manufacturing equipment that George uses in its process with a more effi

> Why is customer-profitability analysis a vitally important topic to managers?

> Larry Miller, the general manager of Basil Software, must decide when to release the new version of Basil’s spreadsheet package, Easy spread 2.0. Development of Easy spread 2.0 is complete; however, the diskettes, compact discs, and use

> Bernie’s Bears, Inc., manufactures plush toys in a facility in Cleveland, Ohio. Recently, the company designed a group of collectible resin figurines to go with the plush toy line. Management is trying to decide whether to manufacture t

> Louisville Corporation produces baseball bats for kids that it sells for $32 each. At capacity, the company can produce 50,000 bats a year. The costs of producing and selling 50,000 bats are as follows: Required: 1. Suppose Louisville is currently prod

> Barry Lee decides that the simple regression analysis used in Problem 10-40 could be extended to a multiple regression analysis. He finds the following results for two multiple regression analyses: Required: 1. Evaluate regression 4 using the criteria

> Fashion Bling operates a chain of 10 retail department stores. Each department store makes its own purchasing decisions. Barry Lee, assistant to the president of Fashion Bling, is interested in better understanding the drivers of purchasing department co

> Bebe Williams wonders if she should run a multiple regression with both number of setups and number of setup-hours, as cost drivers. Required: 1. Run a multiple regression to estimate the regression equation for setup costs using both number of setups a

> Tilbert Toys (TT) makes the popular Floppin’ Freddy Frog and Jumpin’ Jill Junebug dolls in batches. TT has recently adopted activity-based costing. TT incurs setup costs for each batch of dolls that it produces. TT use

> Assume the same information for the Nautilus Company as in Problem 10-36 with one exception. This exception is that Nautilus uses a 90% incremental unit-time learning model as a basis for predicting direct manufacturing labor-hours in its assembling oper

> The Nautilus Company, which is under contract to the U.S. Navy, assembles troop deployment boats. As part of its research program, it completes the assembly of the first of a new model (PT109) of deployment boats. The Navy is impressed with the PT109. It

> Brickman Apparel produces equipment for the extreme-sports market. It has four peak periods, each lasting two months, for manufacturing the merchandise suited for spring, summer, fall, and winter. In the off-peak periods, Brickman schedules equipment mai

> Jayne Barbour is working as a summer intern at Mode, a trendy store specializing in clothing for twenty-somethings. Jayne has been working closely with her cousin, Gail Hubbard, who plans promotions for Mode. The store has only been in business for 10 mo

> Fitzgerald Manufacturing has been using activity-based costing to determine the cost of product X-678. One of the activities, “Inspection,” occurs just before the product is finished. Fitzgerald inspects every 10th uni

> Anna Martinez, the financial manager at the Casa Real restaurant, is checking to see if there is any relationship between newspaper advertising and sales revenues at the restaurant. She obtains the following data for the past 10 months: She estimates t

> Local Harvest, a cooperative of organic familyowned farms outside of Columbus, Ohio, has recently started a fresh produce club to provide support to the group’s member farms, and to promote the benefits of eating organic, locally-produc

> Ken Howard, financial analyst at KMW Corporation, is examining the behavior of quarterly maintenance costs for budgeting purposes. Howard collects the following data on machine hours worked and maintenance costs for the past 12 quarters: Required: 1. E

> In 2013, only 760,500 Mealman meals were produced and sold to the hospitals. Smith suspects that hospital controllers had systematically inflated their 2013 meal estimates. Required: 1 . Recall that Mealman uses the master-budget capacity utilization to

> Cayzer Associates operates a chain of 10 hospitals in the Los Angeles area. Its central food-catering facility, Mealman, prepares and delivers meals to the hospitals. It has the capacity to deliver up to 1,300,000 meals a year. In 2012, based on estimate

> Required: 1. If EBL sells all 250,000 bulbs produced, what would be the effect on operating income of using each type of capacity as a basis for calculating manufacturing cost per unit? 2. Compare the results of operating income at different capacity lev

> Earth’s Best Light (EBL), a producer of energy-efficient light bulbs, expects that demand will increase markedly over the next decade. Due to the high fixed costs involved in the business, EBL has decided to evaluate its financial perfo

> Spirelli Company is about to enter the highly competitive personal electronics market with a new optical reader. In anticipation of future growth, the company has leased a large manufacturing facility, and has purchased several expensive pieces of equipm

> Carlisle Company is a manufacturer of precision surgical tools. It initiated standard costing and a flexible budget on January 1, 2011. The company president, Monica Carlisle, has been pondering how fixed manufacturing overhead should be allocated to pro

> Borkenstick makes a very popular undyed cloth sandal in one style, but in Regular and Deluxe. The Regular sandals have cloth soles and the Deluxe sandals have cloth covered wooden soles. Borkenstick is preparing its budget for June 2012, and has estimate

> Koshu Corporation is a manufacturer of computer accessories. It uses absorption costing based on standard costs and reports the following data for 2011: There are no price, spending, or efficiency variances. Actual operating costs equal budgeted operat

> Required: 1. If the plant manager of the Austin Brewery gets a bonus based on operating income, which denominator level capacity concept would he prefer to use? Explain. 2. What denominator-level capacity concept would Lucky Lager prefer to use for U.S.

> Lucky Lager has just purchased the Austin Brewery. The brewery is two years old and uses absorption costing. It will “sell” its product to Lucky Lager at $45 per barrel. Paul Brandon, Lucky Lager’s co

> University Press produces textbooks for college courses. The company recently hired a new editor, Leslie White, to handle production and sales of books for an introduction to accounting course. Leslie’s compensation depends on the gross

> Hinkle Company uses standard costing. Tim Bartina, the new president of Hinkle Company, is presented with the following data for 2012: Required: 1 . At what percentage of denominator level was the plant operating during 2012? 2. How much fixed manufact

> It is the end of 2011. The All-Fixed Company began operations in January 2010. The company is so named because it has no variable costs. All its costs are fixed; they do not vary with output. The All-Fixed Company is located on the bank of a river and ha

> The Mavis Company uses an absorption-costing system based on standard costs. Total variable manufacturing cost, including direct material cost, is $3 per unit; the standard production rate is 10 units per machine-hour. Total budgeted and actual fixed man

> Eco-Green Company manufactures cloth shopping bags that it plans to sell for $5 each. Budgeted production and sales for these bags for 2011 is 800,000bags, with a standard of 400,000 machine hours for the whole year. Budgeted fixed overhead costs are $47

> Supreme Canine Products produces high quality dog food distributed only through veterinary offices. To ensure that the food is of the highest quality and has taste appeal, Supreme has a rigorous inspection process. For quality control purposes, Supreme h

> The Beal Manufacturing Company’s costing system has two direct-cost categories: direct materials and direct manufacturing labor. Manufacturing overhead (both variable and fixed) is allocated to products on the basis of standard direct m

> Super Bookstore (SB) is a large city bookstore that sells books and music CDs, and has a café. SB operates at capacity and allocates selling, general, and administration (S, G & A) costs to each product line using the cost of merchandise

> The Mancusco Company uses a flexible budget and standard costs to aid planning and control of its machining manufacturing operations. Its costing system for manufacturing has two direct-cost categories (direct materials and direct manufacturing labor&aci

> Dawn Floral Creations, Inc., makes jewelry in the shape of flowers. Each piece is hand-made and takes an average of 1.5 hours to produce because of the intricate design and scrollwork. Dawn uses direct labor hours to allocate the overhead cost to product

> Jo Nathan Publishing Company specializes in printing specialty textbooks for a small but profitable college market. Due to the high setup costs for each batch printed, Jo Nathan holds the book requests until demand for a book is approximately 500. At tha

> Pointe’s Fleet Feet, Inc., produces dance shoes for stores all over the world. While the pairs of shoes are boxed individually, they are crated and shipped in batches. The shipping department records both variable direct batch-level cos

> Sarah Beth’s Art Supply Company produces various types of paints. Actual direct manufacturing labor hours in the factory that produces paint have been higher than budgeted hours for the last few months and the owner, Sarah B. Jones, is

> Nolton Products uses standard costing. It allocates manufacturing overhead (both variable and fixed) to products on the basis of standard direct manufacturing labor-hours (DLH). Nolton develops its manufacturing overhead rate from the current annual budg

> Best Around, Inc., is a manufacturer of vacuums and uses standard costing. Manufacturing overhead (both variable and fixed) is allocated to products on the basis of budgeted machine-hours. In 2012, budgeted fixed manufacturing overhead cost was $17,000,0

> Required: 1. Prepare journal entries for variable and fixed manufacturing overhead (you will need to calculate the various variances to accomplish this). 2. Overhead variances are written off to the Cost of Goods Sold (COGS) account at the end of the fis

> Kitchen Whiz manufactures premium food processors. The following is some manufacturing overhead data for Kitchen Whiz for the year ended December 31, 2012: Budgeted number of output units: 888 Planned allocation rate: 2 machine-hours per unit Actual nu

> The Wellesley Corporation makes printed cloth in two departments: weaving and printing. Currently, all product first moves through the weaving department and then through the printing department before it is sold to retail distributors for $1,250 per rol

> Stuckey, Inc., manufactures industrial 55 gallon drums for storing chemicals used in the mining industry. The body of the drums is made from aluminum and the lid is made of chemical resistant plastic. Andy Jorgenson, the controller, is becoming increasin

> Iceland, Inc., is a fast-growing ice-cream maker. The company’s new ice-cream flavor, CherryStar, sells for $9 per pound. The standard monthly production level is 300,000 pounds, and the standard inputs and costs are as follows: Molly

> Sonnet, Inc., has the following budgeted standards for the month of March 2011: Sales of 1,500,000 units are budgeted for March. The expected total market for this product was 7,500,000diskettes. Actual March results are as follows: Unit sales and prod

> You are a new junior accountant at Clearview Corporation, maker of lenses for eyeglasses. Your company sells generic-quality lenses for a moderate price. Your boss, the Controller, has given you the latest month’s report for the lens tr

> Shayna’s Smart Shawls, Inc., is a small business that Shayna developed while in college. She began hand-knitting shawls for her dorm friends to wear while studying. As demand grew, she hired some workers and began to manage the operation. Shayna’s shawls

> On May 1, 2012, Bovar Company began the manufacture of a new paging machine known as Dandy. The company installed a standard costing system to account for manufacturing costs. The standard costs for a unit of Dandy follow: The following data were obtai

> Morro Bay Surfboards manufactures fiberglass surfboards. The standard cost of direct materials and direct manufacturing labor is $225 per board. This includes 30 pounds of direct materials, at the budgeted price of $3 per pound, and 9 hours of direct man

> KatharineStanley is the owner of Better Bikes, a company that produces high quality cross-country bicycles. Better Bikes participates in a supply chain that consists of suppliers, manufacturers, distributors, and elite bicycle shops. For several years Be

> You are a student preparing for a job interview with a Fortune 100 consumer products manufacturer. You are applying for a job in the finance department. This company is known for its rigorous case-based interview process. One of the students who successf

> Styles, Inc., manufactures a full line of well-known sunglasses frames and lenses. Styles uses a standard costing system to set attainable standards for direct materials, labor, and overhead costs. Styles reviews and revises standards annually, as necess

> Snark Corporation manufactures a product called the snark, which it sells to merchandising firms such as Snark Republic (SR), Snarks-R-Us (SRU), Neiman Snark-us (NS), Snark Buy (SB), Snark-Mart (SM), and Wal-Snark (WS). The list price of a snark is $50,

> Stevie McQueen has run Lightning Car Detailing for the past 10 years. His static budget and actual results for June 2011 are provided next. Stevie has one employee who has been with him for all 10 years that he has been in business. In addition, at any g

> Tuscany Statuary manufactures bust statues of famous historical figures. All statues are the same size. Each unit requires the same amount of resources. The following information is from the static budget for 2011: Standard quantities, standard prices,

> Jag Meerkat owns three upscale hair salons: Hair Suite I, II, and III. Each of the salons has a manager and 10 stylists who rent space in the salons as independent contractors and who pay a fee of 10% of each week’s revenue to the salon as rent. In excha

> Delma Company manufactures a variety of products in a variety of departments, and evaluates departments and departmental managers by comparing actual cost and output relative to the budget. Departmental managers help create the budgets, and usually provi

> Follete Inc. operates at capacity and makes plastic combs and hairbrushes. Although the combs and brushes are a matching set, they are sold individually and so the sales mix is not 1:1. Follette Inc. is planning its annual budget for fiscal year 2011. In

> On December 1, 2011, the Itami Wholesale Co. is attempting to project cash receipts and disbursements through January 31, 2012. On this latter date, a note will be payable in the amount of $100,000. This amount was borrowed in September to carry the comp

> Retail outlets purchase snowboards from Slopes, Inc., throughout the year. However, in anticipation of late summer and early fall purchases, outlets ramp up inventories from May through August. Outlets are billed when boards are ordered. Invoices are pay

> Slopes, Inc., manufactures and sells snowboards. Slopes manufactures a single model, the Pipex. In the summer of 2011, Slopes’ management accountant gathered the following data to prepare budgets for 2012: Slopes’ CE

> Refer to the information in Problem 6-33. Assume the following: Pet Luggage (PL) does not make any sales on credit. PL sells only to the public, and accepts cash and credit cards; 90% of its sales are to customers using credit cards, for which PL gets th

> Pet Luggage Company makes two pet carriers, the Cat-allac and the Dog-eriffic. They are both made of plastic with metal doors, but the Cat-allac is smaller. Information for the two products for the month of April is given in the following tables: Pet L

> Unified Chemical Company has a joint production process that converts Zeta into two chemicals: Alpha and Beta. The company purchases Zeta for $12 per pound and incurs a cost of $30 per pound to process it into Alpha and Beta. For every 10 pounds of Zeta,

> Barney Briggs owns a restaurant franchise that is part of a chain of “southern homestyle” restaurants. One of the chain’s popular breakfast items is biscuits and gravy. Central Warehouse makes and freezes the biscuit dough, which is then sold to the fran

> Easecom Company is a manufacturer of videoconferencing products. Regular units are manufactured to meet marketing projections, and specialized units are made after an order is received. Maintaining the videoconferencing equipment is an important area of

> The Scarborough Corporation manufactures and sells two products: Thingone and Thingtwo. In July 2011, Scarborough’s budget department gathered the following data to prepare budgets for 2012: The following direct materials are used in

> DryPool T-Shirt Factory manufactures plain white and solid colored T-shirts. Inputs include the following: Additionally, the colored T-shirts require 3 ounces of dye per shirt at a cost of $0.20 per ounce. The shirts sell for $15 each for white and $20

> Logo Specialties manufactures, among other things, woolen blankets for the athletic teams of the two local high schools. The company sews the blankets from fabric and sews on a logo patch purchased from the licensed logo store site. The teams are as foll

> Applewood Electronics, a division of Elgin Corporation, manufactures two large-screen television models: the Monarch, which has been produced since 2006 and sells for $900, and the Regal, a newer model introduced in early 2009 that sells for $1,140. Base

> The Tracy Corporation has a machining facility specializing in jobs for the aircraft-components market. Tracy’s previous simple job-costing system had two direct-cost categories (direct materials and direct manufacturing labor) and a si

> Nivag’s Netballs is a manufacturer of high quality basketballs and volleyballs. Setup costs are driven by the number of batches. Equipment and maintenance costs increase with the number of machine-hours, and lease rent is paid per squar

> Uppervale Health Center runs two programs: drug addict rehabilitation and aftercare (counseling and support of patients after release from a mental hospital). The center’s budget for 2010 follows: Muriel Clayton, the director of the c

> Pumpkin Bags (PB) is a designer of high quality backpacks and purses. Each design is made in small batches. Each spring, PB comes out with new designs for the backpack and for the purse. The company uses these designs for a year, and then moves on to the

> Pacific Décor, Inc., designs, manufactures, and sells contemporary wood furniture. Ling Li is a furniture designer for Pacific. Li has spent much of the past month working on the design of a high-end dining room table. The design has been we

> Pharmacare, Inc., a distributor of special pharmaceutical products, operates at capacity and has three main market segments: a. General supermarket chains b. Drugstore chains c. Mom-and-Pop single-store pharmacies Rick Flair, the new controller of Pharma

> Annie Warbucks runs a dance studio with childcare and adult fitness classes. Annie’s budget for the upcoming year is as follows: Other budget information follows: Required: 1. Determine which costs are direct costs and which costs a

> Roxbury’s Radiology Center (RRC) performs X-rays, ultrasounds, CT scans, and MRIs. RRC has developed a reputation as a top Radiology Center in the state. RRC has achieved this status because it constantly reexamines its processes and pr

> Allen’s Aero Toys makes two models of toy airplanes, fighter jets, and cargo planes. The fighter jets are more detailed and require smaller batch sizes. The controller has asked you to compare plant-wide, department, and activity-based

> Wigan has two classifications of professional staff: partners and associates. Hanley asks his assistant to examine the relative use of partners and associates on the recent Widnes Coal and St. Helen’s jobs. The Widnes job used 24 partne

> Hanley asks his assistant to collect details on those costs included in the $21,000 indirect-cost pool that can be traced to each individual job. After analysis, Wigan is able to reclassify $14,000 of the $21,000 as direct costs: Hanley decides to calc

> Kingston Company manufactures modular homes. The company has two main products that it sells commercially: a 1,000 square foot, one-bedroom model and a 1,500 square foot, two-bedroom model. The company recently began providing emergency housing (huts) to

> Tamden, Inc., prints custom marketing materials. The business was started January 1, 2010. The company uses a normal-costing system. It has two direct cost pools, materials and labor and one indirect cost pool, overhead. Overhead is charged to printing j

> Brady Company uses normal costing in its job-costing system. The company produces custom bikes for toddlers. The beginning balances (December 1) and ending balances (as of December 30) in their inventory accounts are as follows: Additional information

> Needham Company uses normal costing in its job-costing system. Partially completed T-accounts and additional information for Needham for 2011 are as follows: Additional information follows: a. Direct manufacturing labor wage rate was $15 per hour. b. M

> Parson Container Corporation is considering implementing a JIT production system. The new system would reduce current average inventory levels of $2,000,000 by 75%, but would require a much greater dependency on the company’s core suppliers for on-time d

> New Rise, Inc., produces porcelain figurines. The production is semi-automated where the figurine is molded almost entirely by operator-less machines and then individually hand-painted. The overhead in the molding department is allocated based on machine

> Gibson Manufacturing uses normal costing for its job-costing system, which has two direct-cost categories (direct materials and direct manufacturing labor) and one indirect-cost category (manufacturing overhead). The following information is obtained for

> The Zaf Radiator Company uses a normal-costing system with a single manufacturing overhead cost pool and machine-hours as the cost-allocation base. The following data are for 2011: Machine-hours data and the ending balances (before proration of under-