Question: Lombardi Printing has two support departments
Lombardi Printing has two support departments (administration and editorial) and two operating divisions (college texts and professional publications). Following are the direct costs and allocation bases for each of these areas:
Company management has decided to allocate administration and editorial costs using dollars of assets employed and number of employees, respectively. Use the algebraic method to allocate the support department costs and determine the total operating costs of college textbooks and professional publications
> In the previous problem, suppose fixed costs are $130,000. What is the operating cash flow at 58,000 units? The degree of operating leverage?Previous problem:At an output level of 65,000 units, you calculate that the degree of operating leverage is 3.40.
> At an output level of 65,000 units, you calculate that the degree of operating leverage is 3.40. If output rises to 70,000 units, what will the percentage change in operating cash flow be? Will the new level of operating leverage be higher or lower? Expl
> Consider a project with the following data: accounting break-even quantity = 15,500 units; cash break-even quantity = 13,200 units; life = five years; fixed costs = $140,000; variable costs = $24 per unit; required return = 16 percent. Ignoring the effec
> Night Shades Inc. (NSI) manufactures biotech sunglasses. The variable materials cost is $5.43 per unit, and the variable labor cost is $3.13 per unit.a. What is the variable cost per unit?b. Suppose NSI incurs fixed costs of $720,000 during a year in whi
> Suppose a corporation currently sells Q units per month for a cash-only price of P . Under a new credit policy that allows one month’s credit, the quantity sold will be Q and the price per unit will be P. Defaults will be percent of credit sales. The v
> Consider the following information about two alternative credit strategies:The higher cost per unit reflects the expense associated with credit orders, and the higher price per unit reflects the existence of a cash discount. The credit period will be 90
> Silicon Wafers, Inc. (SWI), is debating whether or not to extend credit to a particular customer. SWI’s products, primarily used in the manufacture of semiconductors, currently sell for $1,140 per unit. The variable cost is $760 per unit. The order under
> The Johnson Company sells 3,300 pairs of running shoes per month at a cash price of $90 per pair. The firm is considering a new policy that involves 30 days’ credit and an increase in price to $91.84 per pair on credit sales. The cash price will remain a
> You own a portfolio equally invested in a risk free asset and two stocks. If one of the stocks has a beta of 1.38 and the total portfolio is equally as risky as the market, what must the beta be for the other stock in your portfolio?
> Bismark Co. is in the process of considering a change in its terms of sale. The current policy is cash only; the new policy will involve one period’s credit. Sales are 40,000 units per period at a price of $510 per unit. If credit is offered, the new pri
> The variance of the daily cash flows for the Pele Bicycle Shop is $890,000. The opportunity cost to the firm of holding cash is 7 percent per year. What should the target cash level and the upper limit be if the tolerable lower limit has been established
> Based on the Miller–Orr model, describe what will happen to the lower limit, the upper limit, and the spread (the distance between the two) if the variation in net cash flow grows. Give an intuitive explanation for why this happens. What happens if the v
> Slap Shot Corporation has a fixed cost associated with buying and selling marketable securities of $40. The interest rate is currently .021 percent per day, and the firm has estimated that the standard deviation of its daily net cash flows is $70. Manage
> Econoline Crush, Inc., uses a Miller–Orr cash management approach with a lower limit of $43,000, an upper limit of $125,000, and a target balance of $80,000. Explain what each of these points represents; then explain how the system will work.
> The All Day Company is currently holding $690,000 in cash. It projects that over the next year its cash outflows will exceed cash inflows by $140,000 per month. How much of the current cash holdings should be retained, and how much should be used to incr
> Debit and Credit Bookkeepers needs a total of $16,000 in cash during the year for transactions and other purposes. Whenever cash runs low, it sells $1,500 in securities and transfers the cash in. The interest rate is 5 percent per year, and selling secur
> White Whale Corporation has an average daily cash balance of $1,300. Total cash needed for the year is $43,000. The interest rate is 5 percent, and replenishing the cash costs $8 each time. What are the opportunity cost of holding cash, the trading cost,
> Given the following information, calculate the target cash balance using the BAT model:Annual interest rate ……………………………….…………. 6%Fixed order cost ………………………………………..……… $25Total cash needed …………………………………..…… $8,500How do you interpret your answer?
> All Night Corporation has determined that its target cash balance if it uses the BAT model is $2,700. The total cash needed for the year is $28,000, and the order cost is $10. What interest rate must All Night be using?
> You own a stock portfolio invested 25 percent in Stock Q, 20 percent in Stock R, 15 percent in Stock S, and 40 percent in Stock T. The betas for these four stocks are .84, 1.17, 1.11, and 1.36, respectively. What is the portfolio beta?
> Indicate the likely impact of each of the following on a company’s target cash balance. Use the letter I to denote an increase and D to denote a decrease. Briefly explain your reasoning in each case:a. Commissions charged by brokers decrease.b. Interest
> Suppose your company imports computer motherboards from Singapore. The exchange rate is given in Figure 21.1 . You have just placed an order for 30,000 motherboards at a cost to you of 204.7 Singapore dollars each. You will pay for the shipment when it a
> Suppose the current exchange rate for the Polish zloty is Z 2.17. The expected exchange rate in three years is Z 2.26. What is the difference in the annual inflation rates for the United States and Poland over this period? Assume that the anticipated rat
> The treasurer of a major U.S. firm has $30 million to invest for three months. The interest rate in the United States is .37 percent per month. The interest rate in Great Britain is .51 percent per month. The spot exchange rate is £.55, and the three-mon
> Use Figure 21.1 to answer the following questions: Suppose interest rate parity holds, and the current six-month risk-free rate in the United States is 2.2 percent. What must the six-month risk-free rate be in Great Britain? In Japan? In Switzerland?Figu
> Suppose the Japanese yen exchange rate is ¥112 = $1, and the British pound exchange rate is £1 = $1.93.a. What is the cross-rate in terms of yen per pound?b. Suppose the cross-rate is ¥209 = £1. Is there an arbitrage opportunity here? If there is, expla
> Suppose the spot exchange rate for the Canadian dollar is Can$1.06 and the six-month forward rate is Can$1.11.a. Which is worth more, a U.S. dollar or a Canadian dollar?b. Assuming absolute PPP holds, what is the cost in the United States of an Elk head
> Use the information in Figure 21.1 to answer the following questions:Figure 21.1:a. What is the six-month forward rate for the Japanese yen in yen per U.S. dollar? Is the yen selling at a premium or a discount? Explain.b. What is the three-month forward
> Use the information in Figure 21.1 to answer the following questions:Figure 21.1:a. Which would you rather have, $100 or £100? Why?b. Which would you rather have, 100 Swiss francs (SF) or £100? Why?c. What is the cross-rate for
> Suppose the spot exchange rate for the Hungarian forint is HUF 152.93. The inflation rate in the United States will be 4.9 percent per year. It will be 8.6 percent in Hungary. What do you predict the exchange rate will be in one year? In two years? In fi
> Consider the following information:a. Your portfolio is invested 30 percent each in A and C, and 40 percent in B. What is the expected return of the portfolio?b. What is the variance of this portfolio? The standard deviation?
> What are the portfolio weights for a portfolio that has 180 shares of Stock A that sell for $45 per share and 140 shares of Stock B that sell for $27 per share?
> Thurton Industrial is considering the installation of a $1,800,000 production conveyor system that would generate the following labor cost savings over its 10-year life:Years Annual Labor Cost Savings1–2…………………………………28000003–5………………………………..34000006–8…………
> Fibre Technologies manufactures fiberglass housings for portable generators. One part of a housing is a metal latch. Currently, the company produces the 120,000 metal latch units required annually. Company management is considering purchasing the latch f
> Seattle Leisure Designs has designed a new athletic suit. The company plans to produce and sell 30,000 units of the new product in the coming year. Annual fixed costs are $600,000, and variable costs are 70 percent of selling price. If the company wants
> Itawa Appliances identified the following failure costs during 2010:a. Rearrange the rows in descending order of magnitude based on the Total Dollars column, and prepare a table using Pareto analysis with the following headings:ModelDollars % of Total Cu
> Westside Warehouse is considering reengineering some production operations with automated equipment. The new equipment would have an initial cost of $5,000,000 including installation. The vendor has indicated that the equipment has an expected life of 7
> Gourmet Grade has just completed its work on a new microwave entrée. After consumer research was conducted, the marketing group has estimated the following quantities of the product can be sold at the following prices over its life cycle:Ini
> Promotional Products produces commercial calendars in a two-department operation: Department 1 is labor intensive and Department 2 is automated. The average output of Department 1 is 45 units per hour. Units from Department 1 are transferred to Departmen
> Managers at Schubert Corp. want to determine the company’s cost of quality. The following information has been gathered from the records for August 2010:Defective units ……………………………..6000Units reworked …………………………..1200Defective units returned…………………………..4
> During 2010 (the first year of operations), Ridenour Company produced 39,800 portable navigation systems. Of total production, 1,000 were found defective by quality appraisers. Six hundred of the defective units were reworked and sold through regular cha
> Evergreen Industries operates a chain of lumber stores. In 2010, corporate management examined industry-level data and determined the following performance targets for lumber retail stores:Asset turnover…………………………………1.9Profit margin ………………………..0.07The ac
> Durham Denim uses backflush costing to account for production costs of its clothing line. During August 2010, the firm produced 150,000 garments and sold 149,000. The standard cost for each garment is:Direct material ………...………………2Conversion costs …………………
> Cost control in the Human Resources Office of Eastern Wholesale is evaluated based on engineered cost concepts. The office incurs both variable and fixed costs. The variable costs are largely driven by the amount of employee turnover. For 2010, budgeted
> Management at Robo Weld Inc. has estimated that each quality control inspector should be able to make an average of 24 inspections per hour. Retired factory supervisors are excellent quality control inspectors because of theirfamiliarity with the product
> Fred’s Freight employs three drivers who are paid $20 per hour for regular time and $30 for overtime. A single pickup and delivery requires, on average, one hour of driver time. Drivers are paid for a 40-hour week because they must be on call all day. On
> Wakowski Company’s annual budget for its three support departments (administration, legal/accounting, and maintenance/engineering) and its two production departments (processing and finishing) is as follows:a. Prepare a cost distributio
> San Fran Cycles manually manufactures three unique bicycle models: racing, touring, and basic. All of the skilled craftspeople employed at San Fran can make each of the three models. Because it takes about a year to train each craftsperson, labor is a fi
> Management at Southeast Crafts has decided to begin using throughput as a divisional performance measure. The Durham Division is a job shop that carefully crafts furniture to customer specifications. The following first quarter information is available f
> La Maya Corp. wants to compute its throughput for August 2010. The following production data are available:Good units produced and sold …………….2923200Total units produced ……………3360000Total processing time …………….144,000 hoursValue-added time ……………50,400 ho
> High Flight Toys manufactures frisbees. The following information is available for 2010, the company’s first year in business when it produced 300,000 units. Revenue of $480,000 was generated by the sale of 180,000 frisbees.a. What is t
> Just Nuts, a macadamia nut cannery, is analyzing its throughput for September. The following statistics are obtained for the month:Cans packed and sold ………………………...700000Total cans packed …………………………742040Value-added processing time …………………………650 hrsTotal
> Use the information for Prosperous Bank in Exercise 12 to compute the total cost for each revenue-generating area using the algebraic method.Information given in Exercise 12:Prosperous Bank has three support areas (administration, human resources, and ac
> Weinberg Canning produces fillet, smoked salmon, and salmon remnants in a single process. The same amount of disposal cost is incurred whether a product is sold at split-off or after further processing. In October 2010, the joint cost of the production p
> Prosperous Bank has three support areas (administration, human resources, and accounting) and three revenue-generating areas (checking accounts, savings accounts, and loans). Monthly direct costs and the interdepartmental support structure are shown in t
> The following chart indicates the percentage of support department services used by other departments. Service departments are designated S1, S2, and S3; operating departments are designated RP1 and RP2.Direct costs of the period were $170,000, $360,000,
> Dim Witt is the county commissioner of Clueless County. He decided to institute tolls for local ferry boat passengers. After the tolls had been in effect for four months, Astra Astute, county accountant, noticed that collecting $1,450 in tolls incurred a
> You are considering buying one of two local firms (Olson Corp. and Miami Inc.). Olson Corp. uses a substantial amount of direct labor in its manufacturing operations and its salespeople work on commission. Miami Inc. uses the latest automated technology
> Use the information in Exercise 12 to compute total cost for each revenue-generating area if Prosperous Bank uses the step method of cost allocation.Information given in Exercise 12:Prosperous Bank has three support areas (administration, human resources
> LaNora White received her accounting degree in 1992. Since graduating, she has obtained significant experience in a variety of job settings. Her skills include auditing, income and estate taxation, and business consulting. White currently has her own pra
> Birmingham Bolt, Inc., has been approached by one of its customers about producing 800,000 special-purpose parts for a new home product. The parts would be produced at a rate of 100,000 per year for 8 years. To provide these parts, Birmingham would need
> Jill Haas is a divisional manager within Tulsa GPS Guidance Systems. Haas is concerned about the amount of the division’s production. The following production data are available for April 2010:Total units completed ……………………………846720Total good units compl
> Four goals should be considered when trying to design an effective spreadsheet model: communication, reliability, auditability, and maintainability. We also noted that a spreadsheet design that results in formulas that can be copied is usually more effec
> Refer to question 23 at the end of Chapter 2. Implement a spreadsheet model for this problem and solve it using Solver.In Question 23 at the end of Chapter 2The Quality Desk Company makes two types of computer desks from laminated particle board. The Pre
> Refer to question 22 at the end of Chapter 2. Implement a spreadsheet model for this problem and solve it using Solver.In Question 22 at the end of Chapter 2Zippy motorcycle manufacturing produces two popular pocket bikes (miniature motorcycles with 49cc
> Refer to question 19 at the end of Chapter 2. Implement a spreadsheet model for this problem and solve it using Solver.In Question 19 at the end of Chapter 2American Auto is evaluating their marketing plan for the sedans, SUVs, and trucks they produce. A
> Refer to question 15 at the end of Chapter 2. Implement a spreadsheet model for this problem and solve it using Solver.In Question 15 at the end of Chapter 2The Gourmet Grill Company manufactures and sells two different types of grills: propane and elect
> A bank has $650,000 in assets to allocate among investments in bonds, home mortgages, car loans, and personal loans. Bonds are expected to produce a return of 10%, mortgages 8.5%, car loans 9.5%, and personal loans 12.5%. To make sure the portfolio is no
> Tuckered Outfitters plans to market a custom brand of packaged trail mix. The ingredients for the trail mix will include Raisins, Grain, Chocolate Chips, Peanuts, and Almonds costing, respectively, $2.50, $1.50, $2.00, $3.50, and $3.00 per pound. The vit
> Incline Electronics produces three different products in a plant that is open 40 hours per week. Each product requires the following processing times (in hours) on each of three machines.Each machine must be run by one of 19 cross-trained workers who are
> The Beef-Up Ranch feeds cattle for mid-western farmers and delivers them to processing plants in Topeka, Kansas and Tulsa, Oklahoma. The ranch must determine the amounts of cattle feed to buy so that various nutritional requirements are met while minimiz
> Bearland Manufacturing produces 4 different types of wood paneling. Each type of paneling is made by gluing and pressing together a different mixture of pine and oak chips. The following table summarizes the required amount of gluing, pressing, and mixtu
> A furniture manufacturer produces two types of tables (country and contemporary) using three types of machines. The time required to produce the tables on each machine is given in the following table.Country tables sell for $350 and contemporary tables s
> Refer to question 25 at the end of Chapter 2. Implement a spreadsheet model for this problem and solve it using Solver.In Question 25 at the end of Chapter 2Sanderson Manufacturing produces ornate, decorative wood frame doors and windows. Each item produ
> The standards for one case of liquid weed killer are:Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 lbs. @ $ 6.00/lb.Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
> Shown here is an income statement in the traditional format for a firm with a sales volume of 20,000 units:Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $160,000Cost of goods sold ($1
> Presented here are the comparative balance sheets of Hames, Inc., at December 31, 2011 and 2010. Sales for the year ended December 31, 2011, totaled $580,000.Required:a. Calculate ROI for 2011. Round your percentage answer to two decimal places.b. Calcul
> The following data have been extracted from the records of Riddle Co.:Required:a. Calculate the missing costs.b. Calculate the cost formula for mixed cost using the high–low method.c. Calculate the total cost that would be incurred for
> For several years Orbon, Inc. has followed a policy of paying a cash dividend of $1.20 per share and having a 10% stock dividend. In the 2011 annual report, Orbon reported restated earnings per share for 2009 of $2.70.Required:a. Calculate the originally
> Enter the following column headings across the top of a sheet of paper:Enter the transaction / situation letter in the first column and show the effect, if any, of the transaction entry or adjustment on the appropriate balance sheet category or on the in
> During the year ended December 31, 2011, Gluco, Inc., split its stock on a 3-for-1 basis. In its annual report for 2010, the firm reported net income of $3,703,920 for 2010, with an average 268,400 shares of common stock outstanding for that year. There
> Following are condensed income statements for Uncle Bill’s Home Improvement Center for the years ended December 31, 2011, and 2010:Uncle Bill was concerned about the operating results for 2011 and asked his recently hired accountant, &a
> The inventory records of Cushing, Inc., reflected the following information for the year ended December 31, 2010:Required:a. Assume that Cushing, Inc., uses a periodic inventory system. Calculate cost of goods sold and ending inventory under FIFO and LIF
> Following are comparative balance sheets for Millco, Inc., at January 31 and February 28, 2011:Required:Prepare a statement of cash flows that explains the change that occurred in cash during the month. You may assume that the change in each balance shee
> Bacon, Inc., has the following owners’ equity section in its May 31, 2010, comparative balance sheets:Required:a. Calculate the amount that should be shown on the balance sheet for common stock at May 31, 2010.b. The only transaction af
> Using a present value table, your calculator, or a computer program present value function, answer the following questions:Required:a. What is the present value of nine annual cash payments of $4,000, to be paid at the end of each year using an interest
> Top Cap Co. is evaluating the purchase of another sewing machine that will be used to manufacture sport caps. The invoice price of the machine is $208,000. In addition, delivery and installation costs will total $10,000. The machine has the capacity to p
> Following is a partially completed balance sheet for Hoe man, Inc., at December 31, 2011, together with comparative data for the year ended December 31, 2010. From the statement of cash flows for the year ended December 31, 2011, you determine the follow
> Big Blue Rental Corp. provides rental agent services to apartment building owners. Big Blue Rental Corp.’s preliminary income statement for August 2010, and its August 31, 2010, preliminary balance sheet, did not reflect the following:a
> You have accumulated $8,000 and are looking for the best rate of return that can be earned over the next year. A bank savings account will pay 6%. A one-year bank certificate of deposit will pay 8%, but the minimum investment is $10,000. Account will pay
> The financial statements of Pouchie Co. included the following information for the year endedDecember 31, 2010 (amounts in millions):Depreciation and amortization expense . . . . . . . . . . . . . . . . . . . . . . $ 520Cash dividends declared and paid .
> Big Thunder Co. incurred the following costs during April:Raw materials purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 99,225Direct labor ($15 per hour) . . . . . . . . . . . . . . . . . . . . . . . . . . . 123,750Manufacturing overhea
> Branson Co. received its bank statement for the month ending May 31, 2010, and reconciled the statement balance to the May 31, 2010, balance in the Cash account. The reconciled balance was determined to be $18,600. The reconciliation recognized the follo
> Gravois, Inc. incurred the following costs during June:Selling expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $158,375Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 283,140
> On April 8, 2010, a flood destroyed the warehouse of Stuco Distributing Co. From the waterlogged records of the company, management was able to determine that the firm’s gross profit ratio had averaged 35% for the past several years and that the inventor
> Rolen, Inc. is in the process of preparing the fourth quarter budget for 2010, and the following data have been assembled:• The company sells a single product at a price of $25 per unit. The estimated sales volume for the next six months is as follows:Se
> Presented here are the original overhead budget and the actual costs incurred during July for Rembrant, Inc. Rembrant’s managers relate overhead to direct labor hours for planning, control, and product costing purposes. The original bud
> Charlie’s Furniture Store has been in business for several years. The firm’s owners have described the store as a “high-price, high service” operation that provides lots of assistance to its customers. Margin has averaged a relatively high 32% per year f
> Following are the budgeted income statements for the second quarter of 2010 for Marine Tech, Inc.:The company expects about 40% of sales to be cash transactions. Of sales on account, 65% are expected to be collected in the first month after the sale is m
> The following information was obtained from the records of Shae, Inc.:Merchandise inventory . . . . . . . . . . . . . . . . . . . . . . . . . $264,000Notes payable (long-term) . . . . . . . . . . . . . . . .. . . . . . . . 300,000Sales . . . . . . . . .
