Question: Lingo Corporation is about to start a

> Neil Wooten has a terminal illness. His doctors have estimated his remaining life expectancy as three years. Neil has a $450,000 life insurance policy but no close relative to list as the beneficiary. He is considering canceling the policy because he nee

> One year from today, Pamela Oliver is scheduled to receive a $32,000 payment from a trust fund her father established. She wants to buy a car today but does not have the money. A friend has agreed to give Pamela the present value of the $32,000 today if

> Kenneth McDaniel rents pontoon boats to customers. He has the opportunity to purchase an additional pontoon boat for $40,000; it has an expected useful life of four years and no salvage value. Kenneth McDaniel uses straight-line depreciation. Expected re

> Kokomo Shuttle Service Inc. is considering whether to purchase an additional shuttle van. The van would cost $45,000 and have a zero salvage value. It would enable the company to increase net income by $6,750 per year. The manufacturer estimates the van’

> Vienna Snowmobile Company is considering whether to invest in a particular new snowmobile model. The model is top-of-the-line equipment for which Vienna expects high demand during the first year it is available for rent. However, as the snowmobile ages,

> The management team at Payne Manufacturing Company has decided to modernize the manufacturing facility. The company can replace an existing, outdated machine with one of two technologically advanced machines. One replacement machine would cost $72,000. M

> Four years ago Charlotte Whitaker decided to invest in a project. At that time, she had projected annual net cash inflows would be $108,000. Over its expected four-year useful life, the project had produced significantly higher cash inflows than anticipa

> Dawn Holman has two alternative investment opportunities to evaluate. The first opportunity would cost $299,024.46 and generate expected cash inflows of $42,000 per year for 17 years. The second opportunity would cost $273,818.88 and generate expected ca

> Clarence Cleaver is the budget director for the Harris County School District. Mr. Cleaver recently sent an urgent e-mail message to Sally Simmons, principal of West Harris County High. The message severely reprimanded Ms. Simmons for failing to spend th

> Cody Wyatt is considering whether to invest in a dump truck. Mr. Wyatt would hire a driver and use the truck to haul trash for customers. He wants to use present value techniques to evaluate the investment opportunity. List sources of potential cash infl

> Elkins Corporation’s desired rate of return is 10 percent. Bristol Division, one of Elkins' five investment centers, earned an operating income of $1,600,000 last year. The division controlled $12,500,000 of operational assets. Required Compute Bristol D

> With annual sales of $1,200,000 and operating assets of $800,000, Culpeper Company achieved a 10 percent ROI. Required 1. If Culpeper reduces expenses by $20,000 and sales remain unchanged, what ROI will result? 2. If Culpeper cannot change either sales

> A Salisbury Corporation investment center shows an operating income of $81,000 and an investment in operating assets of $900,000. Required Compute the return on investment.

> Beth Shields, president of Dover Travel Company, a travel agency, is seeking a method of evaluating her seven branches. Each branch vice president is authorized to hire employees and devise competitive strategies for the branch territory. Ms. Shields won

> Paul Hammond, president of Hammond Door Products Company, is evaluating the performance of Jason Burke, the plant manager, for the last fiscal year. Mr. Hammond is concerned that production costs exceeded budget by $50,000. He has available the Year 2 st

> Yazoo Company has provided the following data for Year 2. Budget Sales $500,000 Variable product costs 164,000 Variable selling expense 46,000 Other variable expenses 8,000 Fixed product costs 70,000 Fixed selling expense 26,000 Other fixed expenses 2,00

> Kent Plano, corporation vice president of research and development, has overall responsibility for employees with the following positions: - Directors of the Houston, Seattle, and Charlotte laboratories - Senior researchers reporting to laboratory direct

> Dexter Corporation divides its operations into three regions: North American, European, and Asian. The following items appear in the company’s responsibility report: - European director’s salary - Revenues of the French branch - Office expenses of the Ja

> The Nashua Division of Leland Company currently produces electric fans that desktop computer manufacturers use as cooling components. The Gilmer Division, which makes notebook computers, has asked the Nashua Division to design and supply 20,000 fans per

> The Curious Accountant in this chapter discussed some of the budgeting issues facing the United States Olympic and Paralympic Committee (USOPC). First, to get a basic understanding of the sources of revenues and expenses of the USOPC, review its “Audited

> Dayton Company makes household water filtration equipment. The Murray Division manufactures filters. The Franklin Water Division sells to consumers. The Murray Division has the capacity to produce 8,000 filters per month at the following cost per unit. V

> Welch Insurance Company (WIC) earned operating income of $24,000,000 on operating assets of $200,000,000 during Year 2. The Automobile Insurance Division earned $4,770,000 on operating assets of $36,000,000. WIC has offered the Automobile Insurance Divis

> The Florence Division of Hampton Garage Doors Inc. is currently achieving a 12 percent ROI. The company’s target ROI is 8 percent. The division has an opportunity to invest in operating assets an additional $375,000 at 10 percent but is reluctant to do s

> Supply the missing information in the following table for Greenwood Company.

> Logan Oil Change operates two divisions. The following pertains to each division for Year 2. Required 1. Compute each division’s residual income. 2. Which division increased the company’s profitability more?

> Yesterday, Dexter Corporation’s board of directors appointed Lucy Varden as the new president and chief executive officer. This morning, Ms. Varden presented to the board a list of her management team members. The vice presidents are Zachary East, region

> Everton Manufacturing Company had an excellent year. The company hired a new marketing director in January. The new director’s great motivational appeal inspired the sales staff, and, as a result, sales were 20 percent higher than expected. In a recent m

> Loretto Technologies Company’s Year 2 master budget called for using 60,000 hours of labor to produce 180,000 units of software. The standard labor rate for the company’s employees is $50 per direct labor hour. Demand exceeded expectations, resulting in

> At the beginning of its most recent accounting period, Zelma Company had planned to clean 400 house roofs at an average price of $450 per roof. By reducing the service charge to $400 per roof, the company was able to increase the actual number of roofs c

> Salem Cable Installation Services Inc. is planning to open a new regional office. Based on a market survey Salem commissioned, the company expects services demand for the new office to be between 30,000 and 40,000 hours annually. The firm normally charge

> The annual budget of the United States is very complex, but this case requires that you analyze only a small portion of the historical tables that are presented as a part of each year’s budget. The fiscal year of the federal government ends on September

> Use the standard price and cost data provided in Exercise 8-1B. Assume the actual sales price was $14.75 per unit and the actual variable cost was $6.80 per unit. The actual fixed manufacturing cost was $33,500, and the actual selling and administrative

> Use the information provided in Exercise 8-1B. 1. Determine the sales and variable cost volume variances. 2. Classify the variances as favorable or unfavorable. 3. Comment on the usefulness of the variances with respect to performance evaluation and iden

> Compute variances for the following items and indicate whether each variance is favorable (F) or unfavorable (U).

> Indicate whether each of the following variances is favorable (F) or unfavorable (U). The first one has been done as an example.

> Higbee Manufacturing Company established a predetermined fixed overhead cost rate of $80 per unit of product. The company planned to make 19,000 units of product but actually produced 20,000 units. Actual fixed overhead costs were $1,600,000. Required 1.

> Brisco Manufacturing Company established a predetermined variable overhead cost rate of $12.00 per direct labor hour. The actual variable overhead cost rate was $11.40 per direct labor hour. Brisco planned to use 150,000 hours of direct labor. It actuall

> Fashion Hair is a hair salon. It planned to provide 240 hair color treatments during December. Each treatment was planned to require 0.6 hour of labor at the standard labor price of $25.00 per hour. The salon actually provided 250 treatments. The actual

> Sparta Landscaping Company established the following standard labor cost data to provide complete lawn care service (cutting, edging, trimming, and blowing) for a small lawn. Sparta planned each lawn to require 2 hours of labor at a cost of $18.00 per ho

> Monroe Manufacturing Company incurred an unfavorable labor price variance. Required 1. Describe a scenario in which the personnel manager is responsible for the unfavorable price variance. 2. Describe a scenario in which the production manager is respons

> Wayne Pittman Inc. makes ice cream that it sells in 5-gallon containers to retail ice cream parlors. During Year 2, the company planned to make 100,000 containers of ice cream. It actually produced 97,000 containers. The actual and standard quantity and

> The following trial balance was drawn from the records of Havel Company as of October 1, Year 2. Required 1. Divide the class into groups, each with four or five students. Organize the groups into three sections. Assign Task 1 to the first section, Task

> Amity Company makes paint that it sells in 1-gallon containers to retail home improvement stores. During Year 3, the company planned to make 190,000 gallons of paint. It actually produced 198,000 gallons. The standard and actual quantity and cost of the

> Thelma Merritt manages the Spring Candy Shop, which was expected to sell 4,000 servings of its trademark candy during July. Each serving was expected to contain 6 ounces of candy. The standard cost of the candy was $1.20 per ounce. The shop actually sold

> Imboden Manufacturing Company established the following standard price and cost data. Sales price $  15 per unit Variable manufacturing cost $ 7 per unit Fixed manufacturing cost $32,500 total Fixed selling and administrative cost $24,000 total Imboden p

> Clement Oil Corporation, which distributes gasoline products to independent gasoline stations, had $240,000 of cost of goods sold in January. The company expects a 2.5 percent increase in cost of goods sold during February. The ending inventory balance f

> Glendo Grocery buys and sells groceries in a community far from any major city. Travis Glendo, the owner, budgeted the store’s purchases as follows. Glendo’s suppliers require that 70 percent of accounts payable be pai

> Elgin Drugstores Inc. sells prescription drugs, over-the-counter drugs, and some groceries. The purchasing manager prepared the following inventory purchases budget. For this year, Elgin expects an ending inventory balance equal to 10 percent of the foll

> Temple Greetings Corporation sells greeting cards for various occasions. Required Write a brief memo describing the sales pattern that you would expect Temple Greetings to experience during the year. In which months will sales likely be high? Explain why

> Plano International Company has three subsidiaries, Seymour Trading Company, Archer Medical Supplies Company, and Milsap Shipping Company. Because the subsidiaries operate in different industries, Plano’s corporate budget for the coming

> Mansfield Imports Inc. sells goods imported from Europe. Using the second quarter’s sales budget, Stan Farrell is trying to complete the schedule of cash receipts for the quarter. The company had accounts receivable of $155,000 on April

> Maria Gutierrez and Devin Cuncan recently graduated from the same university. After graduation they decided not to seek jobs at established organizations but, rather, to start their own small business hoping they could have more flexibility in their pers

> Horatio Restaurant is opening for business in a new shopping center. Carl Mendoza, the owner, is preparing a sales budget for the next three months. After consulting friends in the same business, Mr. Mendoza estimated July revenues as shown in the follow

> Hansboro Corporation’s budget planning meeting is like a zoo. Neil Gleason, the credit manager, is naturally conservative and Rachel Lawson, the marketing manager, is the opposite. They have argued back and forth about the effect of var

> Edgar Tilley, the president of Hellock Corporation, has been working with his controller to manage the company’s cash position. The controller provided Edgar the following data. Balance of accounts receivable, June 30 $ 30,000 Balance of line of credit,

> Oscar Fox, the accounting manager of Onaka Antique Company, is preparing his company’s cash budget for the next quarter. Onaka desires to maintain a cash balance of $2,000 at the end of each month. As cash flows fluctuate, the company e

> Ted Noolan, managing partner of Noolan Business Consulting, is preparing a budget for January Year 1, the first month of business operations. Ted estimates the following monthly selling and administrative expenses: office lease, $2,700; utilities, $800;

> The controller for Braddock Laundry Services prepared the following list of expected selling and administrative expenses. All expenses requiring cash payments except salary expense and insurance are paid for in the month incurred. Salary is paid in the m

> Beverly Keegan has been at odds with her brother and business partner, Leon, since childhood. The sibling rivalry is not all bad, however; their garden shop, Keegan Gardens and Gifts, has been very successful. When the partners met to prepare the coming

> Eric Lane, the controller of Harrison Industries, is very popular. He is easygoing and does not offend anybody. To develop the company’s most recent budget, Mr. Lane first asked all department managers to prepare their own budgets. He then added together

> Benton Company produces and sells a food processor that it prices at a 32 percent markup on total cost. Based on data pertaining to producing and selling 50,000 food processors, Benton computes the sales price per food processor as follows. Unit-level co

> Describe the qualitative factors that Wilcox should consider before making the decision described in Exercise 6-7B. Data from Exercise 6-7B: Wilcox Automotive Company manufactures an engine designed for motorcycles and markets the product using its own

> Refer to Problem 6-32A. Required 1. Prepare a spreadsheet to solve Requirements a, b, and c in Problem 6-32A. 2. While constructing formulas for Requirement a of Problem 6-32A, include a formula to calculate contribution margin per labor hour. 3. While c

> Wilcox Automotive Company manufactures an engine designed for motorcycles and markets the product using its own brand name. Although Wilcox has the capacity to produce 50,000 engines annually, it currently produces and sells only 30,000 units per year. T

> Avery Textile Company manufactures high-quality bed sheets and sells them in sets to a well-known retail company for $80 a set. Avery has sufficient capacity to produce 150,000 sets of sheets annually; the retail company currently purchases 100,000 sets

> Two years ago, Corey Jemison bought a truck for $35,000 to offer delivery services. Corey earns $40,000 a year operating as an independent trucker. He has an opportunity to sell his truck for $18,750 and take a position as an instructor in a truck drivin

> Costs can be classified into one of four categories, including unit-level, batch-level, product-level, or facility-level costs. Required Classify each of the items listed below into one of the four categories listed previously. The first item has been ca

> Ender Phones Inc. makes telephones that it sells to department stores throughout the United States. Ender is trying to decide which of two telephone models to manufacture. The company could produce either telephone with its existing machinery. Cost data

> Norwood Technologies has the capacity to annually produce either 50,000 desktop computers or 28,000 laptop computers. Relevant data for each product follow. Required Assuming that Norwood can sell all it produces of either product, should the company pro

> Because their three adult children have all at last left home, Joseph and Audrey Peck recently moved to a smaller house. Joseph owns a riding lawnmower he bought three years ago to take care of the former house’s huge yard; it should la

> McCoy Company, a Texas-based corporation, paid $120,000 to purchase an air conditioner on January 1, Year 1. During Year 10, surging energy costs prompted management to consider replacing the air conditioner with a more energy-efficient model. The new ai

> Norita Company makes and sells a toy plane. Norita incurred the following costs in its most recent fiscal year. Cost Items Reported on Income Statement Shipping and handling costs ($0.75 per unit) Cost of renting the administrative building Utility costs

> Sim Company is considering whether to replace some of its manufacturing equipment. Information pertaining to the existing equipment and the potential replacement equipment follows. *The amounts shown for operating expenses are the cumulative total of all

> Dorina Company makes cases of canned dog food in batches of 1,000 cases and sells each case for $15. The plant capacity is 50,000 cases; the company currently makes 40,000 cases. Doggie-Mart has offered to buy 1,500 cases for $12 per case. Because produc

> Orr Electronics management are trying to decide whether to continue operating their current plant or purchase a replacement plant. The following information was presented to management to assist them in their decision: - The old manufacturing plant was p

> Harris Fishing Tours Inc. owns a boat that originally cost $120,000. Currently, the boat’s net book value is $36,000, and its expected remaining useful life is four years. Harris has an opportunity to purchase for $80,000 a replacement boat that is extre

> Valez Corporation is considering the elimination of one of its segments. The following fixed costs pertain to the segment. If the segment is eliminated, the building it uses will be sold. Required Based on this information, determine the amount of avoida

> Kerston Company divides its operations into six divisions. A recent income statement for the Southwood Division follows. Required 1. Should Kerston eliminate the Southwood Division? Support your answer by explaining how the division’s e

> Reid Company operates three segments. Income statements for the segments imply that Reid could improve profitability by eliminating Segment X. Required 1. Explain the effect on Reid’s profitability if Segment X is eliminated. 2. Prepare

> Baxter Doors Company currently produces the doorknobs for the doors it makes and sells. The monthly cost of producing 5,000 doorknobs is as follows. Unit-level materials $ 16,000 Unit-level labor 30,000 Unit-level overhead 4,000 Product-level costs* 32,

> Martinez Computers currently purchases for $40 each keyboard it uses in the 50,000 computers it makes and sells annually. Each computer uses one keyboard. The company has idle capacity and is considering whether to make the keyboards that it needs. Marti

> Clayton Corporation makes and sells skateboards. Clayton currently makes the 60,000 wheels used annually in its skateboards but has an opportunity to purchase the wheels from a reliable manufacturer. The costs of making the wheels follow. Annual Costs As

> Swartz Boats Company currently produces a battery used in manufacturing its boats. The company annually manufactures and sells 5,000 units of a particular model of fishing boat. Because of the low volume of activity, Swartz is unable to obtain the econom

> Zach Randolph is planning to rent a small shop for a new business. He can sell either sandwiches or donuts. The following costs pertain to the two products. Required Identify each cost as relevant or irrelevant to Mr. Randolph’s product

> John Dillworth is in charge of buying property used as building sites for branch offices of the National Bank of Commerce. Mr. Dillworth recently paid $110,000 for a site located in a growing section of the city. Shortly after purchasing this lot, Mr. Di

> In the early months of 2020, Nordstrom’s Inc., like many retailers, faced declining revenues and profits related to the coronavirus pandemic. The company outlined its plans to deal with these challenges in a series of Form 8-Ks (“Report of unscheduled ma

> Skinner Shoes Corporation produces three brands of shoes: Brisk, Pro, and Runner. Relevant information about Skinner's overhead activities, their respective costs, and their cost drivers follows. Required 1. Skinner currently allocates all overhead costs

> Maduro Sporting Goods Inc. produces indoor treadmills. The company allocates its overhead costs using activity-based costing. The costs and cost drivers associated with the four overhead activity cost pools follow. Producing 5,000 units of PFT200, one of

> Use the information in Exercise 5-6B to complete the following requirements. Assume that before shifting to activity-based costing, Rankin Industries allocated all overhead costs based on direct labor hours. Direct labor data pertaining to the two surge

> Rankin Industries produces two surge protectors: K2761 with six outlets and D3354 with eight outlets and two telephone line connections. Because of these product differences, the company plans to use activity-based costing to allocate overhead costs. The

> Canton Company makes two types of cell phones. Handy is a thin, pocket-size cell phone that is easy to carry around. Action is a palm-size phone convenient to hold while the user is talking. During its most recent accounting period, Canton incurred $270,

> Describe a set of circumstances in which labor cost could be classified as a unit-level, a batch-level, a product-level, or a facility-level cost.

> Sentry Corporation, a furniture manufacturer, uses an activity-based costing system. It has identified the following selected activities: 1. Packaging completed furniture in boxes for shipment. 2. Inspecting completed furniture for quality control. 3. Pu

> Provide at least one example of an appropriate cost driver (allocation base) for each of the following activities: 1. Engineers design a product production layout. 2. Engineers set up machines to produce a product. 3. The production supervisor completes

> Rich Ingram, the president of Merkel Industries Inc., was beaming when he was reviewing the company’s quality cost report. After he had implemented a quality-control program for three years, the company’s defect rate had declined from 20 percent to 3 per

> York Corporation produces two types of juice that it packages in cases of 24 cans per case. Selected per-case data for the two products for the last month follow. York allocates production overhead using activity-based costing but allocates monthly packa

> State law permits the State Department of Revenue to collect taxes for municipal governments that operate within the state’s jurisdiction and allows private companies to collect taxes for municipalities. To promote fairness and to ensure the financial we

> Using automated production processes, Pruitt Videos produces two models of digital camcorders: N100 for the novice and D200 for the hobbyist. The company has found activity-based costing useful in assigning overhead costs to its products. It has identifi

> Kaito Manufacturing is developing an activity-based costing system to improve overhead cost allocation. One of the first steps in developing the system is to classify the costs of performing production activities into activity cost pools. Required Using

> On January 1, Lehmann Corporation paid the annual royalty of $720,000 for rights to use patented technology to make batteries for laptop computers. Lehmann plans to use the patented technology to produce five different models of batteries. Lehmann uses m