Explain the difference between value-added time and nonvalue-added time.
> Jessica Porter works in both the jewelry department and the hosiery department of a retail store. Porter assists customers in both departments and arranges and stocks merchandise in both departments. The store allocates Porter’s $30,000
> The management of Piaggio is planning to invest in a new companywide computerized inventory tracking system. What makes this potential investment risky?
> H20 Sports Company is a merchandiser of three different products. The company’s March 31 inventories are water skis, 40,000 units; tow ropes, 90,000 units; and life jackets, 150,000 units. Management believes that excessive inventories
> KTM is considering expanding a store. Identify three methods management can use to evaluate whether to expand.
> The management of Arctic Catis planning to acquire new equipment to manufacture snowmobiles. What are some of the costs and benefits that would be included in Arctic Cat’s analysis?
> Why should managers set the required rate of return higher than the rate at which money can be borrowed when making a typical capital budgeting decision?
> What is the average amount invested in a machine during its predicted five-year life if it costs $200,000 and has a $20,000 salvage value? Assume that net income is received evenly throughout each year and straight-line depreciation is used.
> Identify two disadvantages of using the payback period for comparing investments.
> Identify four reasons that capital budgeting decisions by managers are risky.
> What is capital budgeting?
> Capital budgeting decisions require careful analysis because they are generally the ________ ________ and ________ decisions that management faces.
> The following is a partially completed lower section of a departmental expense allocation spreadsheet for Cozy Bookstore. It reports the total amounts of direct and indirect expenses allocated to its five departments. Complete the spreadsheet by allocati
> Visit or call a local auto dealership and inquire about leasing a car. Ask about the down payment and the required monthly payments. You will likely find the salesperson does not discuss the cost to purchase this car but focuses on the affordability of t
> Read the chapter opener about Keith Mullin and his company, Gamer Grub. Keith is considering building a new, larger warehousing center to make his business more efficient and reduce costs. He expects that an efficient warehouse could reduce his costs by
> The management of Zigby Manufacturing prepared the following estimated balance sheet for March, 2013: To prepare a master budget for April, May, and June of 2013, management gathers the followinginformation: a. Sales for March total 20,500 units. Forec
> Break into teams and identify four reasons that an international airline such as Southwest or Delta would invest in a project when its direct analysis using both payback period and net present value indicate it to be a poor investment. (Hint: Think about
> Capital budgeting is an important topic and there are Websites designed to helppeople understand the methods available. Access TeachMeFinance.com’s capital budgeting web page (teachmefinance.com/capitalbudgeting.html). This web page con
> Payback period, accounting rate of return, net present value, and internal rate of return are common methods to evaluate capital investment opportunities. Assume that your manager asks you to identify the type of measurement basis and unit that each meth
> A consultant commented that “too often the numbers look good but feel bad.” This comment often stems from estimation error common to capital budgeting proposals that relate to future cash flows. Three reasons for this error often exist. First, reliably p
> Assume that Arctic Cat invests $2.42 million in capital expenditures, including $1.08 million related to manufacturing capacity. Assume that these projects have a seven-year life and that management requires a 15% internal rate of return on those project
> Piaggio’s annual report includes information about its debt and interest rates. One statement in its annual report reveals that Piaggio recently issued 10-year bonds with a market return of about 6.5%. Required Explain how Piaggio would use that 6.5% ra
> Adria Lopez has found that her line of computer desks and chairs has become very popular and she is finding it hard to keep up with demand. She knows that she cannot fill all of her orders for both items, so she decides she must determine the optimal sal
> Marathon Running Shop has two service departments (advertising and administration) and two operating departments (shoes and clothing). During 2013, the departments had the following direct expenses and occupied the following amount of floor space. The
> Holmes Company produces a product that can either be sold as is or processed further. Holmes has already spent $50,000 to produce 1,250 units that can be sold now for $67,500 to another manufacturer. Alternatively, Holmes can process the units further at
> Excel Memory Company can sell all units of computer memory X and Y that it can produce, but it has limited production capacity. It can produce two units of X per hour or three units of Y per hour, and it has 4,000 production hours available. Contribution
> Kando Company incurs a $9 per unit cost for Product A, which it currently manufactures and sells for $13.50 per unit. Instead of manufacturing and selling this product, the company can purchase Product B for $5 per unit and sell it for $12 per unit. If i
> Black Diamond Company produces snow skis. Each ski requires 2 pounds of carbon fiber. The company’s management predicts that 5,000 skis and 6,000 pounds of carbon fiber will be in inventory on June 30 of the current year and that 150,000 skis will be sol
> Refer to QS 10-1 and QS 10-2. What nonfinancial factors should Helix consider before accepting this order? Explain. In QS 10-1 Helix Company has been approached by a new customer to provide 2,000 units of its regular product at a special price of $6 per
> Refer to the data in QS 10-1. Based on financial considerations alone, should Helix accept this order at the special price? Explain. In QS 10-1 Helix Company has been approached by a new customer to provide 2,000 units of its regular product at a specia
> Helix Company has been approached by a new customer to provide 2,000 units of its regular product at a special price of $6 per unit. The regular selling price of the product is $8 per unit. Helix is operating at 75% of its capacity of 10,000 units. Ident
> Signal mistakenly produced 10,000 defective cell phones. The phones cost $60 each to produce. A salvage company will buy the defective phones as they are for $30 each. It would cost Signal $80 per phone to rework the phones. If the phones are reworked, S
> Rory Company has a machine with a book value of $75,000 and a remaining five-year useful life. A new machine is available at a cost of $112,500, and Rory can also receive $60,000 for trading in its old machine. The new machine will reduce variable manufa
> A guitar manufacturer is considering eliminating its electric guitar division because its $76,000 expenses are higher than its $72,000 sales. The company reports the following expenses for this division. Should the division be eliminated? Avoidable
> Below are departmental income statements for a guitar manufacturer. The manufacturer is considering dropping its electric guitar department since it has a net loss. The company classifies advertising, rent, and utilities expenses as indirect. (1) Prepar
> Radar Company sells bikes for $300 each. The company currently sells 3,750 bikes per year and could make as many as 5,000 bikes per year. The bikes cost $225 each to make; $150 in variable costs per bike and $75 of fixed costs per bike. Radar received an
> Label each of the following statements as either true (“T”) or false (“F”). 1. Relevant costs are also known as unavoidable costs. 2. Incremental costs are also known as differential costs. 3. An out-of-pocket cost requires a current and/or future outlay
> Garcia Company has 10,000 units of its product that were produced last year at a total cost of $150,000. The units were damaged in a rain storm because the warehouse where they were stored developed a leak in the roof. Garcia can sell the units as is for
> Esme Company’s management is trying to decide whether to eliminate Department Z, which has produced low profits or losses for several years. The company’s 2013 departmental income statement shows the following. In an
> Near the end of 2013, the management of Dimsdale Sports Co., a merchandising company, prepared the following estimated balance sheet for December 31, 2013. To prepare a master budget for January, February, and March of 2014, management gathers the foll
> Sung Company is able to produce two products, R and T, with the same machine in its factory. The following information is available. The company presently operates the machine for a single eight-hour shift for 22 working days each month. Management is
> Micron Manufacturing produces electronic equipment. This year, it produced 7,500 oscilloscopes at a manufacturing cost of $300 each. These oscilloscopes were damaged in the warehouse during storage and, while usable, cannot be sold at their regular selli
> Alto Company currently produces component TH1 for its sole product. The current cost per unit to manufacture its required 400,000 units of TH1 follows. Direct materials . . . . . . . . . . . $1.20 Direct labor . . . . . . . . . . . . . . . . 1.50 Overhe
> Mervin Company produces circuit boards that sell for $8 per unit. It currently has capacity to produce 600,000 circuit boards per year, but is selling 550,000 boards per year. Annual costs for the 550,000 circuit boards follow. Direct materials . . . .
> Windmire Company manufactures and sells to local wholesalers approximately 300,000 units per month at a sales price of $4 per unit. Monthly costs for the production and sale of this quantity follow. Direct materials . . . . . . . . . . . . . . . . $3
> Maryanne Dinardo manages an auto dealership’s service department. The recent month’s income statement for his department follows. (1) Analyze the items on the income statement and identify those that definitely should
> What are controllable costs?
> Define and describe cycle efficiency.
> Each retail store of Applehas several departments. Why is it useful for its management to (a) collect accounting information about each department and (b) treat each department as a profit center?
> Can management of a company such as Arctic Catuse cycle time and cycle efficiency as useful measures of performance? Explain.
> Define and describe cycle time and identify the components of cycle time.
> Electro Company manufactures an innovative automobile transmission for electric cars. Management predicts that ending inventory for the first quarter will be 75,000 units. The following unit sales of the transmissions are expected during the rest of the
> Polaris delivers its products to locations around the world. List three controllable and three uncontrollable costs for its delivery department.
> Give two examples of products with joint costs.
> KTMaims to give its managers timely cost reports. In responsibility accounting, who receives timely cost reports and specific cost information? Explain.
> Piaggio has many departments. How is a department’s contribution to overhead measured?
> Is it possible to evaluate a cost center’s profitability? Explain.
> What are two main goals in managerial accounting for reporting on and analyzing departments?
> Why should managers be closely involved in preparingtheir responsibility accounting budgets?
> Controllable and uncontrollable costs must be identified with a particular _____ and a definite _____ period.
> What is the difference between operating departments and service departments?
> Selected product data from Piaggio (www.piaggio.com) follow. Required1. Compute the percentage growth in net sales for each product line from fiscal year 2010 to 2011. Round percents to one decimal.2. Which product line’s net sales gr
> Big Sound, a merchandising company specializing in home computer speakers, budgets its monthly cost of goods sold to equal 70% of sales. Its inventory policy calls for ending inventory in each month to equal 20% of the next month’s budgeted cost of goods
> Visit a local movie theater and check out both its concession area and its showing areas. The manager of a theater must confront questions such as: ● How much return do we earn on concessions? ● What types of movies generate the greatest sales? ● What ty
> Brian Linton’s company, United By Blue, sells jewelry and apparel. His company’s plans call for continued expansion into other types of products. Required 1. How can United By Blue use departmental income statements to assist in understanding and contro
> Polaris, and Arctic Cat compete across the world in several markets. Required1. Design a three-tier responsibility accounting organizational chart assuming that you have available internal information for both companies. Use Exhibit 9.1 as an example. T
> This chapter described and used spreadsheets to prepare various managerial reports (see Exhibit 9-6). You can download from Websites various tutorials showing how spreadsheets are used in managerial accounting and other business applications. Exhibit 9-
> Improvement Station is a national home improvement chain with more than 100 stores throughout the country. The manager of each store receives a salary plus a bonus equal to a percent of the store’s net income for the reporting period. The following net i
> Senior Security Co. offers a range of security services for senior citizens. Each type of service is considered within a separate department. Mary Pincus, the overall manager, is compensated partly on the basis of departmental performance by staying with
> Polaris and Arctic Cat compete in several on-road and off-road motorized vehicle categories.Sales, income, and asset information is provided for each company below. Required1. Compute profit margin for each company.2. Compute investment turnover for ea
> Review Polaris’s income statement in Appendix A and identify its revenues for the years endedDecember 31, 2011, December 31, 2010, and December 31, 2009. For the year ended December 31, 2011, Polaris reports the following product revenu
> Success Systems’ second quarter 2014 fixed budget performance report for its computer furnitureoperations follows. The $156,000 budgeted expenses include $108,000 in variable expenses for desks and $18,000 in variable expenses for chair
> Tercer reports the following on one of its products. Compute the direct materials price and quantity variances. Direct materials standard (4 lbs. @ $2/lb.) . . . . . . . . . $8 per finished unit Actual direct materials used . . . . . . . . . . . . . . .
> Quick Dollar Company purchases all merchandise on credit. It recently budgeted the following month-end accounts payable balances and merchandise inventory balances. Cash payments on accounts payable during each month are expected to be: May, $1,600,000;
> Brodrick Company expects to produce 20,000 units for the year ending December 31. A flexible budget for 20,000 units of production reflects sales of $400,000; variable costs of $80,000; and fixed costs of $150,000. If the company instead produces and sel
> Refer to the information from QS 8-10. Compute the variable overhead spending variance and the variable overhead efficiency variance. In QS 8-10 Mosaic Company applies overhead using machine hours and reports the following information. Actual machi
> For the current period, Kayenta Company’s manufacturing operations yield a $4,000 unfavorable price variance on its direct materials usage. The actual price per pound of material is $78; the standard price is $77.50. How many pounds of material are used
> Managers use management by exception for control purposes. (1) Describe the concept of management by exception. (2) Explain how standard costs help managers apply this concept to monitor and control costs.
> The following information describes a company’s usage of direct labor in a recent period. Compute the direct labor rate and efficiency variances for the period. Actual direct labor hours used . . . . . . . . . . . . . . . . . . . . . . . 65,000 Actual d
> The following information describes a company’s usage of direct labor in a recent period. Compute the direct labor rate and efficiency variances for the period. Actual direct labor hours used . . . . . . . . . . . . . . . . . . . . . . . 65,000 Actual d
> In a recent year, BMWsold 216,944 of its 1 Series cars. Assume the company expected to sell 225,944 of these cars during the year. Also assume the budgeted sales price for each car was $30,000, and the actual sales price for each car was $30,200. Compute
> Refer to information in QS 8-19. Compute the overhead volume variance for November. In QS 8-19 AirPro Corp. reports the following for November. Compute the controllable overhead variance for November. Actual total factory overhead incurred . . . . . .
> AirPro Corp. reports the following for November. Compute the controllable overhead variance for November. Actual total factory overhead incurred . . . . . . . . . . . . . . . . . . . $28,175 Standard factory overhead: Variable overhead . . . . . . . . .
> Fogel Co. expects to produce 116,000 units for the year. The company’s flexible budget for 116,000 units of production shows variable overhead costs of $162,400 and fixed overhead costs of $124,000. For the year, the company incurred actual overhead cost
> Hardy Company’s cost of goods sold is consistently 60% of sales. The company plans to carry ending merchandise inventory for each month equal to 20% of the next month’s budgeted cost of good sold. All merchandise is purchased on credit, and 50% of the pu
> Refer to information in QS 8-14. Assume that actual sales are $480,000, actual variable costs for the year are $112,000, and actual fixed costs for the year are $145,000. Prepare a flexible budget performance report for the year. In QS 8-14 Brodrick Com
> Based on predicted production of 24,000 units, a company anticipates $300,000 of fixed costs and $246,000 of variable costs. If the company actually produces 20,000 units, what are the flexible budget amounts of fixed and variable costs?
> Farad, Inc. specializes in selling used SUVs. During the first six months of 2013, the dealership sold 50 trucks at an average price of $9,000 each. The budget for the first six months of 2013 was to sell 45 trucks at an average price of $9,500 each. Com
> Mosaic Company applies overhead using machine hours and reports the following information. Compute the total variable overhead cost variance. Actual machine hours used . . . . . . . . . . . . . . . . . . . . . 4,700 hours Standard machine hours . . . .
> Refer to the information in QS 8-8. Alvarez records standard costs in its accounts. Prepare the journal entry to charge overhead costs to the Goods in Process Inventory account and to record any variances. In QS 8-8 Alvarez Company’s output for the curr
> Alvarez Company’s output for the current period yields a $20,000 favorable overhead volume variance and a $60,400 unfavorable overhead controllable variance. Standard overhead charged to production for the period is $225,000. What is the actual total ove
> Frontera Company’s output for the current period results in a $20,000 unfavorable direct labor rate variance and a $10,000 unfavorable direct labor efficiency variance. Production for the current period was assigned an $400,000 standard direct labor cost
> Juan Company’s output for the current period was assigned a $150,000 standard direct materials cost. The direct materials variances included a $12,000 favorable price variance and a $2,000 favorable quantity variance. What is the actual total direct mate
> Refer to information in QS 8-2. Assume the actual cost to manufacture one metal bat was $40. Compute the cost variance and classify it as favorable or unfavorable. In QS 8-2 BatCo makes metal baseball bats. Each bat requires 1 kg. of aluminum at $18 per
> BatCo makes metal baseball bats. Each bat requires 1 kg. of aluminum at $18 per kg. and 0.25 direct labor hours at $20 per hour. Overhead is assigned at the rate of $40 per labor hour. What amounts would appear on a standard cost card for BatCo?
> Use the information in Exercise 7-3 and the following additional information to prepare a budgeted income statement for the month of July and a budgeted balance sheet for July 31. a. Cost of goods sold is 55% of sales. b. Inventory at the end of June is
> Beech Company sold 105,000 units of its product in May. For the level of production achieved in May, the budgeted amounts were: sales, $1,300,000; variable costs, $750,000; and fixed costs, $300,000. The following actual financial results are available f
> Kenya Company’s standard cost accounting system recorded this information from its June operations. Standard direct materials cost . . . . . . . . . . . . . . . . . . . . . . . . $130,000 Direct materials quantity variance (favorable) . . . . . . . . .
> Guadelupe Company has set the following standard costs per unit for the product it manufactures. Direct materials (10 lbs. @ $3.00 per lb.) . . . . . . . . . . . $30.00 Direct labor (4 hr. @ $6 per hr.) . . . . . . . . . . . . . . . . . . . .24.00 Overh
> Suncoast Company set the following standard costs for one unit of its product. Direct materials (4.5 lb. @ $6 per kg.) . . . . . . . . . . $27 Direct labor (1.5 hrs. @ $12 per hr.) . . . . . . . . . . . . . 18 Overhead (1.5 hrs. @ $16 per hr.) . . . . .
> Refer to the information in Problem 8-3B. Tohono Company’s actual income statement for 2013 follows. In Problem 8-3B Tohono Company’s 2013 master budget included the following fixed budget report. It is based on an e
