Management accounting deals only with costs.” Do you agree? Explain.
> Gregor Company makes and sells brooms and mops. It takes the following actions, not necessarily in the order given. For each action (a–e), state whether it is a planning decision or a control decision. a. Gregor asks its advertising team to deve
> Vargas Construction Company provides construction services for major projects. Managers at the company believe that construction is a people-management business, and they list the following as factors critical to their success: a. Increase spending on
> Dominion Consulting has issued a report recommending changes for its newest manufacturing client, Gibson Engine Works. Gibson currently manufactures a single product, which is sold and distributed nationally. The report contains the following suggestio
> Burger King, a hamburger fast-food restaurant, incurs the following costs: a. Cost of oil for the deep fryer b. Wages of the counter help who give customers the food they order c. Cost of the costume for the King on the Burger King television commer
> Johnson & Johnson, a health care company, incurs the following costs: a. Payment of booth registration fee at a medical conference to promote new products to physicians b. Cost of redesigning an artificial knee to make it easier to implant in pat
> Dell Computer incurs the following costs: a. Utility costs for the plant assembling the Latitude computer line of products b. Distribution costs for shipping the Latitude line of products to a retail chain c. Payment to David Newbury Designs for design o
> Megaphone Corporation produces a molded plastic casing, M&M101, for many cell phones currently on the market. Summary data from its 2017 income statement are as follows: Revenues………………….$5,000,000 Variable costs……………….3,250,000 Fixed costs………………….1,890,0
> Spotted Turtle provides daycare for children Mondays through Fridays. Its monthly variable costs per child are as follows: Lunch and snacks……………………………………………$130 Educational supplies…………………………………………...75 Other supplies (paper products, toiletries, etc.)……
> Lifetime Escapes generates average revenue of $7,500 per person on its 5-day package tours to wildlife parks in Kenya. The variable costs per person are as follows: Airfare……………………………$1,600 Hotel accommodations……..3,100 Meals…………………………………600 Ground trans
> Consider the following account balances (in thousands) for the Peterson Company: Required: 1. Prepare a schedule for the cost of goods manufactured for 2017. 2. Revenues for 2017 were $310 million. Prepare the income statement for 2017. Beginning o
> Renka’s Heaters selected data for October 2017 are presented here (in millions): Direct materials inventory 10/1/2017………………………………$ 105 Direct materials purchased………………………………………………365 Direct materials used………………………………………………………385 Total manufacturing overh
> The following data are for Arizona Retail Outlet Stores. The account balances (in thousands) are for 2017. Marketing and advertising costs……………………..$ 55,200 Merchandise inventory, January 1, 2017…………….103,500 Shipping of merchandise to customers…………………4,
> The following data are for Marvin Department Store. The account balances (in thousands) are for 2017. Marketing, distribution, and customer-service costs………..$ 37,000 Merchandise inventory, January 1, 2017……………………………..27,000 Utilities…………………………………………………
> An auditor for the Internal Revenue Service is trying to reconstruct some partially destroyed records of two taxpayers. For each of the cases in the accompanying list, find the unknowns designated by the letters A and B for Case 1 and C and D for Case 2.
> Paul Howard, the new plant manager of Garden Scapes Manufacturing Plant Number 7, has just reviewed a draft of his year-end financial statements. Howard receives a year-end bonus of 11.5% of the plant’s operating income before tax. The year-end income st
> There are at least 3 different purposes for which we measure product costs. They are (1) pricing and product mix decisions, (2) determining the appropriate charge for a government contract, and (3) for preparing financial statements for external reportin
> Distinguish planning decisions from control decisions.
> Atlanta Office Equipment manufactures and sells metal shelving. It began operations on January 1, 2017. Costs incurred for 2017 are as follows (V stands for variable; F stands for fixed): Direct materials used……&ac
> Ron Howard recently took over as the controller of Johnson Brothers Manufacturing. Last month, the previous controller left the company with little notice and left the accounting records in disarray. Ron needs the ending inventory balances to report firs
> David Letterman works in the production department of Northeast Plastics (NEP) as a machine operator. David, a long-time employee of NEP, is paid on an hourly basis at a rate of $24 per hour. David works five 8-hour shifts per week Mondayâ€
> Required: 1. Calculate total prime costs and total conversion costs. 2. Calculate total inventoriable costs and period costs. 3. Design costs and R&D costs are not considered product costs for financial statement purposes. When might some of these
> The following items (in millions) pertain to Schaeffer Corporation: Schaeffer’s manufacturing costing system uses a three-part classification of direct materials, direct manufacturing labor, and manufacturing overhead costs. Required:
> Required: 1. How would the answer to Problem 2-39 be modified if you were asked for a schedule of cost of goods manufactured and sold instead of a schedule of cost of goods manufactured? Be specific. 2. Would the sales manager’s salary
> The Howell Corporation has the following account balances (in millions): Required: Prepare an income statement and a supporting schedule of cost of goods manufactured for the year ended December 31, 2017. (For additional questions regarding these facts,
> Consider the following account balances (in thousands) for the Carolina Corporation: Required: 1. Prepare a schedule for the cost of goods manufactured for 2017. 2. Revenues (in thousands) for 2017 were $1,300,000. Prepare the income statement for 2017
> Contemporary Interiors (CI) manufactures high-quality furniture in factories in North Carolina for sale to top American retailers. In 1995, CI purchased a lumber operation in Indonesia, and shifted from using American hardwoods to Indonesian ramin in its
> Phoenix Press produces consumer magazines. The house and home division, which sells home-improvement and home-decorating magazines, has seen a 20% reduction in operating income over the past 9 months, primarily due to an economic recession and a depresse
> Explain why unit costs must often be interpreted with caution.
> Linda Butler is the new division controller of the snack-foods division of Daniel Foods. Daniel Foods has reported a minimum 15% growth in annual earnings for each of the past 5 years. The snack-foods division has reported annual earnings growth of more
> Chris Jackson was recently promoted to Controller of Research and Development (R&D) for BrisCor, a Fortune 500 pharmaceutical company that manufactures prescription drugs and nutritional supplements. The company’s total R&D cost for 2017 was expected (bu
> George Jimenez is the controller at Balkin Electronics, a manufacturer of devices for the computer industry. The company may promote him to chief financial officer. Required: 1. In this table, indicate which executive is primarily responsible for each a
> Consider the following series of independent situations in which a firm is about to make a strategic decision. Decisions a. A running shoe manufacturer is weighing whether to purchase leather from a cheaper supplier in order to compete with lower priced
> Consider the following series of independent situations in which a firm is about to make a strategic decision. Decisions a. Julian Phones is about to decide whether to launch production and sale of a cell phone with standard features. b. Flint Computers
> PostNews.com offers its subscribers several services, such as an annotated TV guide and local-area information on weather, restaurants, and movie theaters. Its main revenue sources are fees for banner advertisements and fees from subscribers. Recent data
> Basix Inc. calculates direct manufacturing labor variances and has the following information: Actual hours worked……………….200 Standard hours……………………...250 Actual rate per hour…………………$12 Standard rate per hour……………$10 Given the information above, which of
> Atlantic Company has a manufacturing facility in Brooklyn that manufactures robotic equipment for the auto industry. For Year 1, Atlantic collected the following information from its main production line: Actual quantity purchased…………200 units Actual qua
> Amalgamated Manipulation Manufacturing’s (AMM) standards anticipate that there will be 3 pounds of raw material used for every unit of finished goods produced. AMM began the month of May with 5,000 pounds of raw material, purchased 15,000 pounds for $19,
> All of the following statements regarding standards are accurate except: a. Standards allow management to budget at a per-unit level. b. Ideal standards account for a minimal amount of normal spoilage. c. Participative standards usually take longer to im
> How can management accountants help improve quality and achieve timely product deliveries?
> Metal Shelf Company’s standard cost for raw materials is $4.00 per pound and it is expected that each metal shelf uses two pounds of material. During October Year 2, 25,000 pounds of materials are purchased from a new supplier for $97,000 and 13,000 shel
> Mary Jacobs, the controller of the Jenks Company is working on Jenks’ cash budget for year 2. She has information on each of the following items: I. Wages due to workers accrued as of December 31, year 1. II. Limits on a line of credit that may be used t
> Elmhurst Corporation is considering changes to its responsibility accounting system. Which of the following statements is/are correct for a responsibility accounting system. I. In a cost center, managers are responsible for controlling costs but not reve
> Superior Industries sales budget shows quarterly sales for the next year as follows: Quarter 1–10,000; Quarter 2–8,000; Quarter 3–12,000; Quarter 4–14,000. Company policy is to have a target finished-goods inventory at the end of each quarter equal to 20
> Which of the following statements is correct regarding the drivers of operating and financial budgets? a. The sales budget will drive the cost of goods sold budget. b. The cost of goods sold budget will drive the units of production budget. c. The produc
> Which of the following statements is correct regarding the components of the master budget? a. The cash budget is used to create the capital budget. b. Operating budgets are used to create cash budgets. c. The manufacturing overhead budget is used to cre
> Nobis Company uses an ABC system. Which of the following statements is/are correct with respect to ABC? I. Departmental costing systems are a refinement of ABC systems. II. ABC systems are useful in manufacturing, but not in merchandising or service indu
> Conroe Company is reviewing the data provided by its management accounting system. Which of the following statements is/are correct? I. A cost driver is a causal factor that increases the total cost of a cost object. II. Cost drivers may be volume based
> Under Stanford Corporation’s job costing system, manufacturing overhead is applied to work in process using a predetermined annual overhead rate. During November, Year 1, Stanford’s transactions included the following: Direct materials issued to producti
> ABC Company uses job-order costing and has assembled the following cost data for the production and assembly of item X: Direct manufacturing labor wages…………….$35,000 Direct material used…………………………………..70,000 Indirect manufacturing labor……………………….4,000 Ut
> For which of the following industries would job-order costing most likely not be appropriate? a. Small business printing. b. Cereal production. c. Home construction. d. Aircraft assembly.
> Sturdy Manufacturing Co. assembled the following cost data for job order #23: Direct manufacturing labor………………………..$80,000 Indirect manufacturing labor……………………….12,000 Equipment depreciation………………………………..1,000 Other indirect manufacturing costs………………..1,
> Which of the following does not accurately describe the application of job-order costing? a. Finished goods that are purchased by customers will directly impact cost of goods sold. b. Indirect manufacturing labor and indirect materials are part of the ac
> Once a company exceeds its breakeven level, operating income can be calculated by multiplying: a. The sales price by unit sales in excess of breakeven units. b. Unit sales by the difference between the sales price and fixed cost per unit. c. The contribu
> A company needs to sell 10,000 units of its only product in order to break even. Fixed costs are $110,000, and the per unit selling price and variable costs are $20 and $9, respectively. If total sales are $220,000, the company’s margin of safety will be
> Under the contribution income statement, a company’s contribution margin will be: a. Higher if fixed SG&A costs decrease. b. Higher if variable SG&A costs increase. c. Lower if fixed manufacturing overhead costs decrease. d. Lower if variable manufacturi
> During the current year, XYZ Company increased its variable SG&A expenses while keeping fixed SG&A expenses the same. As a result, XYZ’s: a. Contribution margin and gross margin will be lower. b. Contribution margin will be higher, while its gross margin
> Jack’s Jax has total fixed costs of $25,000. If the company’s contribution margin is 60%, the income tax rate is 25% and the selling price of a box of Jax is $20, how many boxes of Jax would the company need to sell to produce a net income of $15,000? a.
> Applewhite Corporation, a manufacturing company, is analyzing its cost structure in a project to achieve some cost savings. Which of the following statements is/are correct? I. The cost of the direct materials in Applewhite’s products is considered a var
> Welch Men’s Clothing’s revenues and cost data for 2017 are as follows: Mr. Welch, the owner of the store, is unhappy with the operating results. An analysis of other operating costs reveals that it includes $30,000 va
> Explain the term supply chain and its importance to cost management.
> Genesee Music Society is a not-for-profit organization that brings guest artists to the community’s greater metropolitan area. The music society just bought a small concert hall in the center of town to house its performances. The lease payments on the c
> The Kenosha Company has three product lines of beer mugs—A, B, and C—with contribution margins of $5, $4, and $3, respectively. The president foresees sales of 175,000 units in the coming period, consisting of 25,000 units of A, 100,000 units of B, and 5
> Chartz 1-2-3 is a top-selling electronic spreadsheet product. Chartz is about to release version 5.0. It divides its customers into two groups: new customers and upgrade customers (those who previously purchased Chartz 1-2-3 4.0 or earlier versions). Alt
> Braided Rugs, Inc., is considering three possible countries for the sole manufacturing site of its newest area rug: Italy, Portugal, and Thailand. All area rugs are to be sold to retail outlets in the United States for $250 per unit. These retail outlets
> Cover Rugs is holding a 2-week carpet sale at Josh’s Club, a local warehouse store. Cover Rugs plans to sell carpets for $950 each. The company will purchase the carpets from a local distributor for $760 each, with the privilege of returning any unsold u
> Suppose Morrison Corp.’s breakeven point is revenues of $1,100,000. Fixed costs are $660,000. Required: 1. Compute the contribution margin percentage. 2. Compute the selling price if variable costs are $16 per unit. 3. Suppose 75,000 units are sold. Com
> Perfect Fit Jeans Co. sells blue jeans wholesale to major retailers across the country. Each pair of jeans has a selling price of $50 with $35 in variable costs of goods sold. The company has fixed manufacturing costs of $2,250,000 and fixed marketing co
> The Home Style Eats has two restaurants that are open 24 hours a day. Fixed costs for the two restaurants together total $430,500 per year. Service varies from a cup of coffee to full meals. The average sales check per customer is $8.75. The average cost
> CVP exercises. The Doral Company manufactures and sells pens. Currently, 5,000,000 units are sold per year at $0.50 per unit. Fixed costs are $900,000 per year. Variable costs are $0.30 per unit. Consider each case separately: Required: 1.a. What is the
> The Deli-Sub Shop owns and operates six stores in and around Minneapolis. You are given the following corporate budget data for next year: Revenues…………………..$11,000,000 Fixed costs…………………$ 3,000,000 Variable costs…………….$ 7,500,000 Variable costs change b
> Describe the business functions in the value chain.
> Sunset Travel Agency specializes in flights between Toronto and Jamaica. It books passengers on Hamilton Air. Sunset’s fixed costs are $23,500 per month. Hamilton Air charges passengers $1,500 per round-trip ticket. Calculate the number of tickets Sunset
> Garrett Manufacturing sold 410,000 units of its product for $68 per unit in 2017. Variable cost per unit is $60, and total fixed costs are $1,640,000. Required: 1. Calculate (a) contribution margin and (b) operating income. 2. Garrett’s current manufact
> Kindmart is an international retail store. Kindmart’s managers are considering implementing a new business-to-business (B2B) information system for processing merchandise orders. The current system costs Kindmart $2,000,000 per month and $55 per order. K
> Juicy Beauty manufactures and sells a face cream to small specialty stores in the greater Los Angeles area. It presents the monthly operating income statement shown here to George Lopez, a potential investor in the business. Help Mr. Lopez understand Jui
> Consolidated Motors specializes in producing one specialty vehicle. It is called Surfer and is styled to easily fit multiple surfboards in its back area and top-mounted storage racks. Consolidated has the following manufacturing costs: Plant management
> Bridget Ashton is getting ready to open a small restaurant. She is on a tight budget and must choose between the following long-distance phone plans: Plan A: Pay 10 cents per minute of long-distance calling. Plan B: Pay a fixed monthly fee of $15 for up
> Each of the following cost items pertains to one of these companies: Best Buy (a merchandising-sector company), KitchenAid (a manufacturing-sector company), and HughesNet (a service-sector company): a. Cost of phones and computers available for sale in B
> Gayle’s Glassworks makes glass flanges for scientific use. Materials cost $1 per flange, and the glass blowers are paid a wage rate of $28 per hour. A glass blower blows 10 flanges per hour. Fixed manufacturing costs for flanges are $28,000 per period. P
> National Training recently started a business providing training events for corporations. In order to better understand the profitability of the business, the owners asked you for an analysis of costs—what costs are fixed, what costs are variable, and so
> The representative cost drivers in the right column of this table are randomized so they do not match the list of functions in the left column. Function………………………………………..Representative Cost Driver 1. Accounts payable………………………..A. Number of invoices sent
> How can a management accountant help formulate strategy?
> Torrance Technology Company (TTC) is developing a new touch-screen smartphone to compete in the cellular phone industry. The company will sell the phones at wholesale prices to cell phone companies, which will in turn sell them in retail stores to the fi
> Gummy Land Candies manufactures jaw-breaker candies in a fully automated process. The machine that produces candies was purchased recently and can make 5,000 per month. The machine costs $6,500 and is depreciated using straight-line depreciation over 10
> Hannah Gilpin is the controller of Blakemore Auto Glass, a division of Eastern Glass and Window. Blakemore replaces and installs windshields. Her division has been under pressure to improve its divisional operating income. Currently, divisions of Eastern
> Maria Mendez is division controller and James Dalton is division manager of the Hestor Shoe Company. Mendez has line responsibility to Dalton, but she also has staff responsibility to the company controller. Dalton is under severe pressure to achieve the
> The Cooper Furniture Company of Potomac, Maryland, assembles two types of chairs (Recliners and Rockers). Separate assembly lines are used for each type of chair. Required: Classify each cost item (A–I) as follows: a. Direct or indirect (D or I) cost fo
> Band Box Entertainment (BBE) operates a large store in Atlanta, Georgia. The store has both a movie (DVD) section and a music (CD) section. BBE reports revenues for the movie section separately from the music section. Required: Classify each cost item (
> Market Focus is a marketing research firm that organizes focus groups for consumer-product companies. Each focus group has eight individuals who are paid $60 per session to provide comments on new products. These focus groups meet in hotels and are led b
> California Tires manufactures two types of tires that it sells as wholesale products to various specialty retail auto supply stores. Each tire requires a three-step process. The first step is mixing. The mixing department combines some of the necessary d
> Minnesota Office Products (MOP) produces three different paper products at its Vaasa lumber plant: Supreme, Deluxe, and Regular. Each product has its own dedicated production line at the plant. It currently uses the following three-part classification fo
> What is the relationship between management by exception and variance analysis?
> The sales forecast is the cornerstone for budgeting.” Why?
> Describe four decisions for which ABC information is useful.
> What is the advantage of using computerized source documents to prepare job-cost records?
> List four reasons for using standard costs.
> Why might managers find a flexible-budget analysis more informative than a static-budget analysis?
> Distinguish between a favorable variance and an unfavorable variance.
> What are two possible sources of information a company might use to compute the budgeted amount in variance analysis?
> The following information was extracted from the accounting records of Roosevelt Manufacturing Company: Direct materials purchased 80,000 Direct materials used 76,000 Direct manufacturing labor costs 10,000 Indirect manufacturing labor costs
