Louise McDermott, controller for the Galvin plant of Veromar Inc., wanted to determine the cost behavior of moving materials throughout the plant. She accumulated the following data on the number of moves (from 100 to 800 in increments of 100) and the total cost of moving materials at those levels of moves: Number of Moves …………………….Total Cost 100 …………………………………………………$ 3,000 200 ……………………………………………………4,650 300 ……………………………………………………3,400 400 …………………………………………………….8,500 500 …………………………………………………..10,000 600 …………………………………………………..12,600 700 ……………………………………………………13,600 800…………………………………………………… 14,560 Required: 1. Prepare a scattergraph based on these data. Use cost for the vertical axis and number of moves for the horizontal axis. Based on an examination of the scattergraph, does there appear to be a linear relationship between the total cost of moving materials and the number of moves? 2. Compute the cost formula for moving materials by using the high-low method. Calculate the predicted cost for a month with 550 moves by using the high-low formula. (Note: Round the answer for the variable rate to three decimal places and the answer for total fixed cost and total cost to the nearest dollar.) 3. Compute the cost formula for moving materials using the method of least squares. (Note: For the method of least squares, round the variable rate to two decimal places and total fixed cost and total cost to the nearest dollar.) Using the regression cost formula, what is the predicted cost for a month with 550 moves? What does the coefficient of determination tell you about the cost formula computed by regression? 4. Evaluate the cost formula using the least squares coefficients. Could it be improved? Try dropping the third data point (300, $3,400), and rerun the regression.
> Sleepeze Company produces mattresses for 20 retail outlets. Of the 20 retail outlets, 19 are small, separately owned furniture stores and one is a retail chain. The retail chain buys 60% of the mattresses produced. The 19 smaller customers purchase mattr
> Snow Inc. has just completed development of a new cell phone. The new product is expected to produce annual revenues of $1,400,000. Producing the cell phone requires an investment in new equipment, costing $1,500,000. The cell phone has a projected life
> Perkins National Bank has collected the following information for four activities and two types of credit cards: There are 7,500 holders of Classic cards and 30,000 holders of Gold cards. Required: Calculate the unit cost (rounded to the nearest cent)
> Gardner Company produces 18-ounce boxes of a wheat cereal in three departments: mixing, cooking, and packaging. During August, Gardner produced 250,000 boxes with the following costs: Required: 1. Calculate the costs transferred out of each department.
> Refer to the information for Zapato Company given above. Required: 1. Calculate the consumption ratios for the four drivers (round to two decimal places). 2. Is there evidence of product diversity? Explain. Data for Exercise 21: Zapato Company produce
> Cooper Movie Studio Corp. makes movies and is interested in lowering its operating costs for the following year, while maintaining the high quality and appeal of its movies. Cooper’s management is concerned about the additional costs th
> A fire insurance policy on a manufacturing plant is an example of a risk reduction alternative that would reduce which component of the inherent risk of a plant fire? a. Likelihood only b. Impact only c. Both likelihood and impact d. Neither likelihood n
> Select the graph (A through L) that best matches the numbered (1 through 7) italicized descriptions of various cost behavior. For each graph, the vertical (y) axis represents total dollars of cost, and the horizontal (x) axis represents output units duri
> The percentage of accounts receivable that is uncollectible can be ignored for cash budgeting because a. no cash is received from an account that defaults. b. it is included in cash sales. c. it appears on the budgeted income statement. d. for most compa
> Define the fraud triangle.
> Refer to the information for Hickory Company above. Hickory’s management is deciding whether to keep or drop the parquet product line. Hickory’s parquet flooring product line has a contribution margin of $50,000 (sales
> Define forensic accounting.
> Jack Man Company produces die-cast metal bulldozers for toy shops. Jack Man estimated the following average costs per bulldozer: Direct materials …………………………………………..$8.65 Direct labor …………………………………………………….1.10 Manufacturing overhead ………………………………..0.95 P
> An advantage of the scattergraph method is that it a. is objective. b. is easier to use than the high-low method. c. is the most accurate method. d. removes outliers. e. is descriptive
> Why are units shipped used to calculate the value-stream cost?
> What is a segment?
> The use and importance of managerial accounting is growing in each of the following areas except for a. enterprise risk management. b. nanotechnology advancements. c. corporate sustainability reporting. d. quality accounting. e. lean accounting.
> What is overapplied overhead? When Cost of Goods Sold is adjusted for overapplied overhead, will the cost increase or decrease? Why?
> What is underapplied overhead? When Cost of Goods Sold is adjusted for underapplied overhead, will the cost increase or decrease? Why?
> Lean manufacturing seeks to achieve all of the following except for a. zero defects. b. maximizing customer value. c. zero inventories. d. waiting. When materials costs differ significantly among products in a value stream, the value stream product cost
> What is product diversity?
> Describe the two-stage process associated with plantwide overhead rates.
> The use and importance of managerial accounting is growing in each of the following areas except for a. enterprise risk management. b. nanotechnology advancements. c. corporate sustainability reporting. d. quality accounting. e. lean accounting.
> What is the difference between inherent risk and residual risk?
> Knitpix Products is a division of Parker Textiles Inc. During the coming year, it expects to earn income of $310,000 based on sales of $3.45 million. Without any new investments, the division will have average operating assets of $3 million. The division
> Leslie Blandings, division manager of Audiotech Inc., was debating the merits of a new product—a weather radio that would put out a warning if the county in which the listener lived were under a severe thunderstorm or tornado alert. The budgeted income o
> Refer to the information for Kepler Company on the previous page. Also, assume that for last year and for the current year, the market price per share of common stock is $2.98. In addition, for last year, assets and equity were the same at the beginning
> Refer to the information for Kepler Company above. Required: Note: Round all percentages to one decimal place. 1. Compute the percentage change for each item in the balance sheet and income statement. 2. Comment on any significant trends. Data for Prob
> Grammatico Company has just completed its third year of operations. The income statement is as follows: Selected information from the balance sheet is as follows: Required: Note: Round answers to two decimal places. 1. Compute the times-interest-earn
> The following balance sheets are taken from the records of Golding Company (numbers are expressed in thousands): Additional information is as follows: (a) equipment costing $10,000,000 was purchased at yearend; no equipment was sold; and (b) net income
> Refer to the information for Booth Manufacturing above. Required: 1. Calculate the cash flows from operations using the indirect method. 2. Prepare a statement of cash flows. 3. Search the Internet to find a statement of cash flows. Which method was use
> You have just opened your own printing business. A large sports franchise is beginning an important advertising campaign in order to attract more fans to the sport. The purchasing officer of the company calls and asks you to make a bid on printing 5,000
> When a company participates in a stock buyback program, it means that the company is buying shares of its own stock and taking them off the market. With this simple definition in mind, how would a company’s stock buyback program affect its Earnings per S
> Custom Shutters, Inc., manufactures plantation shutters according to customer order. The company has a reputation for producing excellent quality shutters that fit virtually any size or shape of window. Sales are made in all 50 states. On July 1, Custom
> Paladin Company manufactures plain paper fax machines in a small factory in Minnesota. Sales have increased by 50% in each of the past 3 years, as Paladin has expanded its market from the United States to Canada and Mexico. As a result, the Minnesota fac
> Merkley Company, a manufacturer of machine parts, implemented lean manufacturing at the end of 20X1. Three value streams were established: one for new product development and two order fulfillment value streams. One of the value streams set a goal to inc
> Brasher Company is transitioning to a lean manufacturing system and has just finalized two order fulfillment value streams. One of the value streams has two products, and the other has four products. The two-product value stream produces precision machin
> In 20X1, Don Blackburn, president of Price Electronics, received a report indicating that quality costs were 31% of sales. Faced with increasing pressures from imported goods, Don resolved to take measures to improve the overall quality of the company&ac
> In 20X2, Clarkson Inc. initiated a full-scale, quality improvement program. At the end of the year, Tony Ming, the president, noted with some satisfaction that the defects per unit of product had dropped significantly compared to the prior year. He was a
> Danna Wise, president of Tidwell Company, recently returned from a conference on quality and productivity. At the conference, she was told that many American firms have quality costs totaling 20 to 30% of sales. The quality experts at the conference conv
> Dorsey Scott MU Company manufactures and bottles a collection of health-oriented fruity beverages. Dorsey’s CFO, Rozella, recently signed a series of new contracts with several dozen large universities to serve as the sole external beverage supplier on t
> Stylz Company, a recent start-up fashion retailer based in the United States, is deciding between opening its first sales presence in either Italy’s Tuscany Region or Spain’s Matarrana Region. Stylz’s financial group surveyed potential customers in both
> Rocket Motors manufactures stern drive engines for pleasure craft boats. Rocket’s management is concerned about increasing competition in its industry, resulting from a very large international boat motor manufacturer that appears to be
> Fresh Foods, a large restaurant chain, needs to determine if it would be cheaper to produce 5,000 units of its main food ingredient for use in its restaurants or to purchase them from an outside supplier for $12 each. Cost information on internal product
> Botella Company produces plastic bottles. The unit for costing purposes is a case of 18 bottles. The following standards for producing one case of bottles have been established: Direct materials (4 lbs. @ $0.95) …………………..$ 3.80 Direct labor (1.25 hrs. @
> Phono Company manufactures a plastic toy cell phone. The following standards have been established for the toy’s materials and labor inputs: During the first week of July, the company had the following results: Units produced â
> The maternity wing of the city hospital has two types of patients: normal and cesarean. The standard quantities of labor and materials per delivery for 20X1 are: The standard price paid per pound of direct materials is $10.00. The standard rate for lab
> AudioMart is a retailer of radios, stereos, and televisions. The store carries two portable sound systems that have radios, tape players, and speakers. System A, of slightly higher quality than System B, costs $20 more. With rare exceptions, the store al
> Zanda Drug Corporation buys three chemicals that are processed to produce two types of analgesics used as ingredients for popular over-the-counter drugs. The purchased chemicals are blended for 2 to 3 hours and then heated for 15 minutes. The results of
> Refer to Problem 6-65. Required: 1. Using the FIFO method, prepare the following for Department A: (a) a physical flow schedule, (b) an equivalent unit calculation, (c) calculation of unit costs (Note: Round to three decimal places.), (d) cost of EWIP a
> Refer to the information for Farnsworth Company (p. 139) for the first 10 months of data on receiving orders and receiving cost. Now suppose that Tracy has gathered 2 more months of data: Note: For the following requirements, round the intercept terms
> Borques Company produces and sells wooden pallets that are used for moving and stacking materials. The operating costs for the past year were as follows: Variable costs per unit: Direct materials ……………………………………..$ 2.85 Direct labor ……………………………………………..$
> Seacrest Company uses a process-costing system. The company manufactures a product that is processed in two departments: A and B. As work is completed, it is transferred out. All inputs are added uniformly in Department A. The following summarizes the pr
> Define outsourcing, and discuss why companies may outsource various functions.
> Suppose that Kicker had the following sales and cost experience (in thousands of dollars) for May of the current year and for May of the prior year: In May of the prior year, Kicker started an intensive quality program designed to enable it to build
> FunTime Company produces three lines of greeting cards: scented, musical, and regular. Segmented income statements for the past year are as follows: Kathy Bunker, president of FunTime, is concerned about the financial performance of her firm and is s
> Candyland Inc. produces a particularly rich praline fudge. Each 10-ounce box sells for $5.60. Variable unit costs are as follows: Pecans ………………………………………..$0.70 Sugar ……………………………………………0.35 Butter ……………………………………………1.85 Other ingredients ………………………….0.34 Bo
> Alard Company produces blenders and coffee makers. During the past year, the company produced and sold 65,000 blenders and 75,000 coffee makers. Fixed costs for Alard totaled $340,000, of which $184,000 can be avoided if the blenders are not produced and
> Refer to the information for Farnsworth Company on the previous page. Required: 1. Prepare a scattergraph based on the 10 months of data. Does the relationship appear to be linear? 2. Using the high-low method, prepare a cost formula for the receiving a
> Basu Company produces two types of sleds for playing in the snow: basic sled and aerosled. The projected income for the coming year, segmented by product line, follows: The selling prices are $30 for the basic sled and $60 for the aerosled. (Round brea
> Willow Company produces lawnmowers. One of its plants produces two versions of mowers: a basic model and a deluxe model. The deluxe model has a sturdier frame, a higher horsepower engine, a wider blade, and mulching capability. At the beginning of the ye
> Ramsey Company produces speakers (Model A and Model B). Both products pass through two producing departments. Model A’s production is much more labor-intensive than that of Model B. Model B is also the more popular of the two speakers.
> Xania Inc. uses a normal job-order costing system. Currently, a plantwide overhead rate based on machine hours is used. Xania’s plant manager has heard that departmental overhead rates can offer significantly better cost assignments tha
> Hayward Company, a manufacturing firm, has supplied the following information from its accounting records for the month of May: Required: 1. Prepare a statement of cost of goods manufactured. 2. Prepare a statement of cost of goods sold. Direct l
> What is a foreign trade zone, and what advantages does it offer U.S. companies?
> Laworld Inc. manufactures small camping tents. Last year, 200,000 tents were made and sold for $60 each. Each tent includes the following costs: Direct materials ………………………………………………$18 Direct labor ………………………………………………………12 Manufacturing overhead ……………………
> Heurion Company is a job-order costing firm that uses a plantwide overhead rate based on direct labor hours. Estimated information for the year is as follows: Overhead …………&
> Newmarge Products Inc. is evaluating a new design for one of its manufacturing processes. The new design will eliminate the production of a toxic solid residue. The initial cost of the system is estimated at $860,000 and includes computerized equipment,
> Pop’s Drive-Thru Burger Heaven produces and sells quarter-pound hamburgers. Each burger is wrapped and put in a “burger bag,” which also includes a serving of fries and a soft drink. The price for the
> I know that it’s the thing to do,” insisted Pamela Kincaid, vice president of finance for Colgate Manufacturing. “If we are going to be competitive, we need to build this completely automated plant.” “I’m not so sure,” replied Bill Thomas, CEO of Colgate
> Leakam Company’s product engineering department has developed a new product that has a 3-year life cycle. Production of the product requires development of a new process that requires a current $100,000 capital outlay. The $100,000 will be raised by issu
> Foster Company wants to buy a numerically controlled (NC) machine to be used in producing specially machined parts for manufacturers of trenching machines (to replace an existing manual system). The outlay required is $3,500,000. The NC equipment will la
> Ondi Airlines is interested in acquiring a new aircraft to service a new route. The route will be from Tulsa to Denver. The aircraft will fly one round-trip daily except for scheduled maintenance days. There are 15 maintenance days scheduled each year. T
> Techno Inc. has two divisions: Auxiliary Components and Audio Systems. Divisional managers are encouraged to maximize ROI and EVA. Managers are essentially free to determine whether goods will be transferred internally and what the internal transfer pric
> Dr. Whitley Avard, a plastic surgeon, had just returned from a conference in which she learned of a new surgical procedure for removing wrinkles around eyes, reducing the time to perform the normal procedure by 50%. Given her patient-load pressures, Dr.
> Explain what a post audit is and how it can provide useful input for future capital
> GreenWorld Inc. is a nursery products firm. It has three divisions that grow and sell plants: the Western Division, the Southern Division, and the Canadian Division. Recently, the Southern Division of GreenWorld acquired a plastics factory that manufactu
> Suppose that Larimer Company sells a product for $24. Unit costs are as follows: Direct materials …………………………………………………………$4.98 Direct labor …………………………………………………………………..2.10 Variable factory overhead ……………………………………………..1.00 Variable selling and administrat
> Saludable Company produces two types of get-well cards: scented and regular. Drivers for the four activities are as follows: The following activity data have been collected: Inspecting products ……â€&b
> Crazy Fan Guard Company provides security services to popular live sporting event venues. Crazy Fan management has identified one of its top risks as the possibility that restrictions on premium close seating options will severely decrease its sales reve
> Each of the following scenarios is independent. Assume that all cash flows are after-tax cash flows. a. Campbell Manufacturing is considering the purchase of a new welding system. The cash benefits will be $480,000 per year. The system costs $2,700,000 a
> Each of the following scenarios is independent. Assume that all cash flows are after-tax cash flows. a. Cobre Company is considering the purchase of new equipment that will speed up the process for extracting copper. The equipment will cost $3,600,000 an
> Bryce Company manufactures pet supplies. However, Bryce’s electronic accounting system recently crashed and, unfortunately, only a partial recovery of the company’s year-end accounting records (which included several profitability ratios) was possible. A
> Refer to the information for Oliver Company above and on the previous page. Required: Prepare a schedule that provides operating cash flows for the year 20X2 using the direct method. Data for Exercise 40: Oliver Company provided the following informat
> Refer to the information for Oliver Company above and on the previous page. Required: 1. Calculate the change in cash flows that serves as the control figure for the statement of cash flows. 2. Prepare a schedule that provides operating cash flows for t
> During 20X1, Craig Company had the following transactions: a. Purchased $300,000 of 10-year bonds issued by Makenzie Inc. b. Acquired land valued at $105,000 in exchange for machinery. c. Sold equipment with original cost of $810,000 for $495,000; accumu
> What are the advantages of the scattergraph method over the high-low method? The high-low method over the scattergraph method?
> Consider each of the following situations. Is there a potential problem? Which part of the fraud triangle is involved, if any? A. Susan is an accounts payable clerk. She sets up creditors in a financial database and pays invoices as they come in. Last ye
> A Box Scorecard was prepared for a value stream: Required: 1. How many nonfinancial measures are used to evaluate performance? Why are nonfinancial measures used? 2. Classify the operational measures as time-based, quality-based, or efficiency-based. D
> A value stream has three activities and two products. The units produced and shipped per week are 50 of the limited model (Model K), characterized by special additional features, and 150 of the regular model (Model R), with only basic features. The conve
> Erba Inc. has the following departmental layout for producing an herbal supplement: After a detailed study, the head of the plant’s industrial engineering department recommended that the following cellular manufacturing layout replace
> The controller of Emery, Inc. has computed quality costs as a percentage of sales for the past 5 years (20X1 was the first year the company implemented a quality improvement program). This information is as follows: Required: 1. Prepare a trend graph f
> Bradshaw Company reported sales of $5,000,000 in 20X1. At the end of the fiscal year (June 30, 20X1), the following quality costs were reported: Vendor certification ……………………………..$ 43,500 Warranty ……………………………………………….100,000 Rework ………………………………………………….1
> Classify the following quality costs as prevention costs, appraisal costs, internal failure costs, or external failure costs: 1. Scrap (created by defective units) 2. Certifying a vendor to ensure that quality parts are provided 3. Stopping work to contr
> Budgeted amounts for the year: Materials ……………………2 leather strips @ $7.00 Labor …………………………………….1.5 hr. @ $18.00 VOH ……………………………………….1.5 hr. @ $1.20 FOH ……………………………………………………$6,800 Required: 1. Prepare a flexible budget for 3,500, 4,000, and 4,500 unit
> Princeville Paradise Ice Cream Shoppe manufactures and sells premium ice cream in a unique Hawaiian environment. Princeville Paradise’s management performed a stakeholder engagement exercise to identify its most important stakeholders, given its strategy
> Apple Inc. is a multinational technology company that designs, develops, manufactures, and sells innovative consumer electronics products and services around the globe. Its products include laptop (e.g., MacBook) and desktop (e.g., iMac) computers, mobil
> How do international issues affect the role of the management accountant?
> Jack’s Apps Company researches, develops, and sells traditional applications (i.e., apps) for middle-aged mobile phone device users. In an attempt to tap into the large young adult app market to boost sales and advertising revenues, Jack’s CFO, Daniel, i
> At the beginning of the year, Craig Company had the following standard cost sheet for one of its plastic products: Direct materials (5 lbs. @ $4.00) …………………$20.00 Direct labor (2 hrs. @ $15.00) ………………………..30.00 Standard prime cost per unit …………………………$50
