Maryland Manufacturing (M2) produces a part using an expensive proprietary machine that can only be leased. The leasing company offers two contracts. The first (unit-rate lease) is one where M2 would pay $20 per unit produced, regardless of the number of units. The second lease option (flat-rate lease) is one where M2 would pay $432,000 annually, regardless of the number produced. The lease will run one year and the lease option chosen cannot be changed during the lease. All other lease terms are the same. M2 sells the part for $200 per unit and unit variable costs (excluding any machine lease costs) are $100. Annual fixed costs (excluding any machine lease costs) are $1,440,000. Required a. What is the annual break-even level assuming 1. The unit-rate lease? 2. The flat-rate lease? b. At what annual volume would the operating profit be the same regardless of the royalty option chosen? c. Suppose M2 is unsure of the pricing and costs for the part (other than the costs of the lease under the two payment options). At what annual volume would the operating profit be the same regardless of the lease payment option chosen? If you do not have enough information to answer the question, list the additional information you would need to get from M2. d. Assume an annual volume of 30,000 parts. What is the operating leverage assuming 1. The unit-rate lease? 2. The flat-rate lease? e. Assume an annual volume of 30,000 parts. What is the margin of safety assuming 1. The unit-rate lease? 2. The flat-rate lease?
> Skywest Airlines is a regional airline operating in the Western U.S. Several large airlines (Alaska Airlines, for example) outsource some lower-volume routes to Skywest. Skywest flies planes painted with the Alaska colors and logo and uses the Alaska-bra
> Marquette Company manufactures and sells kits that homeowners can buy and assemble into office and home furniture. Marquette and one of its customers, Goulburn Furnishings, have a dispute about inventory. Goulburn orders 100,000 units annually of one of
> Value Chain and Classification of Costs Tesla, Inc., incurs many types of costs in its automobile operations. Required For each cost in the following table, identify the stage in the value chain where this cost is incurred.
> Value Chain and Classification of Costs Pfizer Inc., a pharmaceutical firm, incurs many types of costs in its operations. Required For each cost in the following table, identify the stage in the value chain where this cost is incurred.
> Consider again the Business Application “Components of Cost of Goods Sold for a Retailer.” Some of the costs associated with opening during the COVID-19 pandemic were outlay costs and some were opportunity costs. Give one example of each for a retail sto
> The following events occurred at Moore’s Hobbies and Crafts store during the most recent fiscal year: 1. Purchased merchandise costing $99,000. 2. Had sales revenue for the year totaling $145,000; the merchandise sold was purchased for $85,000. 3. Paid $
> The friend in question 2-19 decides that she does not want to go to Oklahoma after all. How will the costs of your trip change? Was your choice of allocation in question 2-19 incorrect? Why?
> Why is a value income statement useful to managers?
> How does cost accounting help determine an organization’s strategy? What problems might arise from a faulty cost accounting system?
> B-You is a consulting firm that works with managers to improve their interpersonal skills. Recently, a representative of a high-tech research firm approached B-You’s owner with an offer to contract for one year with B-You to improve the
> Kendall & Floyd provides landscaping services in Eastvale. Sara Kendall, the owner, is concerned about the recent losses the company has incurred and is considering dropping its yard cleanup services, which she feels are marginal to the companyâ
> Consider the Business Application “Operating Leverage as a Framework to Describe a Business Model.” From the description of the company in the text (and perhaps based on your experience), would you say food delivery services have high or low operating le
> Bates Courier Services provides delivery services in and around Butte City. Its profits have been declining, and management is planning to add an express service that is expected to increase revenue by $62,500 per year. The total cost to lease the necess
> Durham Parts (DP) makes a variety of products. It is organized in two divisions, Eastern and Western. The managers for each division are paid, in part, based on the financial performance of their divisions. The Western Division normally sells to outside
> Haverhill Electronics (HE) has offered to supply the county government with one model of its security screening device at “cost plus 20 percent.” HE operates a manufacturing plant that can produce 22,000 devices per ye
> Talbot Industries manufactures two models of wireless headset: TI-12 and TI-28. Each model requires time on a single machine. The machine has a monthly capacity of 540 hours. Total market demand for the two models is limited to 2,000 units of TI-12 and 1
> Conservatory Lumber sells rough and finished lumber for building products. At one of the company mills in the Northwest, it processes only one type of wood into two products: rough-cut lumber (sold for further processing) and dimensional lumber (for pane
> Williams Gear makes and sells three types of computer laptop sleeves: leather, fabric, and plastic. Management is trying to determine the most profitable mix. Sales prices, demand, and use of manufacturing inputs follow: Williams has two production limit
> Senator Pet Foods makes a variety of canned and dried food for pets. The Center Street Manufacturing Campus is the site of the original Senator plant and is used solely for the production of its original variety of canned food for dogs. The production of
> Ontario Audio makes a popular satellite radio receiver for over-the-road trucks and other professional uses. The two major parts of the radio are the electronics (receiver, speaker, and so on) and the metal case housing the radio. The electronics are man
> Refer to the information in Problem 4-69 for Parkway Health System. Regardless of your recommendation, the PHS administrators did not change operations (they chose the first alternative described in Problem 4-69). For this problem, assume that the expans
> Parkway Health System (PHS) has two divisions that are part of PHS but are located in separate buildings. The Extended Care Division performs typical hospital service including emergency care, surgeries, and surgical recovery. The Out-Patient Care Divisi
> If value income statements are useful for decision making, why are value income statements not used in financial reporting?
> Wexford Manufacturing and Mining (WMM) operates several factories in three western states: Arizona, Montana, and Utah. WMM’s home office is located in Idaho. All three factories produce the same product, and Wexford’s
> Sparta Fashions owns four clothing stores, where it sells a wide range of women’s fashions, from casual attire to formal wear. In addition, it rents formal wear and gowns for special occasions. At the end of last year, the financial sta
> Greenview Dairies produces a line of organic yogurts for sale at supermarkets and specialty markets in the Southeast. Economic conditions and changing tastes have resulted in slowing demand growth. After recently expanding capacity, the company is now op
> Hazlett & Family is organized into two geographic markets: Northern and Southern. The company makes an off-road vehicle for recreation and agricultural use. The vehicle is sold in three models, depending on the power and options. The three models, fr
> Refer to the details in Problem 4-63. Required What are the issues, ethical and otherwise, that arise with the product manager’s suggestion? Problem 4-63:
> Lakeside Accessories manufactures computer backpacks, messenger bags, and other items for carrying electronics, documents, and so on. In developing a new bag for the newest release of laptops, the design group has estimated the following unit costs: Dire
> Mcquade Equipment is considering a new product for the road construction industry. The analyst has collected some information about the product design, summarized as follows: Required a. Will Mcquade achieve its target operating profit based on these pro
> Nagle Devices produces medical instruments, primarily for hospital and medical office use. A new design for its best-selling hospital thermometer has the marketing team considering possibly entering the home market. This would be new for Nagle because it
> King Bathroom Fixtures (KBF) makes faucets, basins, and so on primarily for home use and sold through major retail chains. The design team at KBF has been working on a unique design to provide reasonable pressure while still conserving water. The market
> Florida Kitchens produces high-end cooking ranges. The costs to manufacture and market the ranges at the company’s volume of 3,000 units per quarter are shown in the following table: The company has the capacity to produce 3,000 units p
> A technology company called Luxe allows customers, through its app, to have valets who will meet the customer, take their car, and park it. Curtis Lee, the founder, was quoted as saying about a leased parking space, “If we turn it over X amount of times,
> What are the four questions of the critical thinking framework?
> Platt Instruments produces and sells medical devices for both home and professional use. One line of products that has been consistently profitable for Platt is its range of sphygmomanometers (blood pressure monitors). Platt sells professional models to
> Spinnaker Museum of Sailing (SMS) is a popular tourist site in a coastal town. The museum boasts a large collection of both current sailing exhibits and historical displays focused on ocean exploration and maritime adventures. SMS, like many museums, is
> Medbury Communications Systems (MCS) produces mobile radios for arctic and other harsh environments. The costs to manufacture and market the radios at the company’s normal quarterly volume of 12,000 units are shown in the following tabl
> Miles Audio produces and sells car audio systems. It specializes in receivers and currently offers two models. The Growler is a high quality but affordable unit that the company produces for sale in auto parts and electronics stores. The Maniac is sold a
> Oakland Precision Products (OPP) manufactures and sells a variety of scales for the kitchen and office. OPP sells primarily to kitchenware stores, discount stores, and so on. Two of the scales it produces for kitchen use are the Cook and Baker. The Cook
> As discussed in the text, you can analyze CVP relations even when prices and unit variable costs are not constant for all volumes. Sometimes the analysis is more complicated, but as long as you can express the relation among costs, volumes, and profits,
> Barlum Motors produces and sells a small engine used in lawn tractors. Each engine is priced at $850 and the variable cost for each engine is $725. The annual fixed cost is $1,687,500. Barlum Motors operates in a jurisdiction with a graduated tax structu
> Franklin Prepared Foods (FPF) sells three varieties of microwaveable meals with the following prices and costs: The sales mix (in cases) is 50 percent Meat, 35 percent Fish, and 15 percent Vegetarian. Required a. At what sales revenue per month does the
> Philadelphia Sunglasses sells two models of glasses at its single retail location—The Shore and The Poconos. The Shore model sells for $180 a pair and The Poconos model sells for $400 a pair. The variable cost of The Shore model is $120 and that of The P
> Orion Languages, Inc. (OLI) offers conversational instruction in several languages. Customers can choose from three approaches: Group, Individual, or Intense. Group customers meet as a part of a class at scheduled times. Individual customers receive one-
> The chapter describes how to incorporate income taxes into CVP analysis. Why are other taxes not discussed? Is CVP analysis unable to analyze other taxes, such as property taxes, carbon taxes, sales taxes, and so on? Explain.
> Rossiter Fittings produces two models of pipe fittings for underwater lines. The two models (RF-12 and RF-25) have the following characteristics, as developed by a product cost analyst: The total fixed costs per year for the company are $1,056,480. Requi
> Woodland Wearables produces two models of a smart watch, the Basic and the Flash. The watches have the following characteristics: The total fixed costs per year for the company are $1,440,000. Required a. What is the anticipated level of profits for the
> Southfield Stylers, with three chairs, offers a no-frills hair style service at a single price. The price of $25 and the variable cost of $5 per customer remain constant regardless of volume. The owner can handle additional volume by hiring on-call styli
> Miami Training Support (MTS) produces materials for companies to use for training new hires as well as advanced training for employees who have been promoted to new positions. Most of the material has been created and produced by Miami employees. There i
> Yacama Shades supplies sun-blocking shades to home remodeling supply stores such as Home Depot and Lowes as well as discounters such as Walmart. The CFO is worried about inflation and the effect on Yacama Shades’ financial results. The variable productio
> Chalmers Corporation operates in multiple areas of the globe, and relatively large price changes are common. Presently, the company sells 105,600 units for $50 per unit. The variable production costs are $20, and fixed costs amount to $2,079,000. Product
> Guilford Boards started operations on March 3. There were no direct materials in inventory as of March 2. Data for the month of March include the following: Required Complete the table.
> Conner’s Fixtures produces and sells a single product, a specialized plumbing fixture. The business began operations on January 1 this year, and its costs incurred during the year include the following: At the end of the first year (Dec
> Kessler Brothers produces products for farms and ranches. The administrative and manufacturing operations occupy the same 240,000-square-foot building. The manufacturing plant uses 180,000 square feet. Depreciation is assigned based on building use. Indi
> Consider the Business Application “Break-Even Analysis Used by Big Oil.” In a part of the article not quoted in the text, one definition of the break-even measure that some firms use is “the oil price that a company needs to generate enough cash so it ca
> Omira Cycle Parts manufactures components for motorcycles and off-road vehicles. The company’s administrative and manufacturing operations share the company’s only building. Eighty percent of the building is used for m
> Melville Manufacturing produces metal components for automotive suppliers. Financial records for September show the following: Required Prepare a cost of goods manufactured and sold statement and an income statement.
> Alpine Township contracts with Dragoon Environmental Services (DES) to provide solid waste collection to households and businesses. Until recently, DES had an exclusive franchise to provide this service in Alpine, which meant that other waste collection
> Elliott Trophies makes three types of awards for organizations to give employees or team members. The following are its prices and costs: costs of administration. Elliott Trophies is subject to a 21 percent tax rate on income. Required a. Given this info
> Maxwell Professional Coaching (MPC) offers three coaching services for individuals at different career stages. Its prices and costs follow: Variable costs include the labor costs of the coaches who work as contract employees. Fixed costs of $700,000 per
> Refer to the information in Problem 2-75. The CEO has asked for a briefing on the projections before the next analyst call. You have also been asked to provide some accompanying visuals to help clarify any remarks. Required Prepare a presentation explain
> Cheyenne Contractors makes fixtures for aircraft fueling and hydraulic systems. As a supplier to the aircraft industry, the annual volumes can vary greatly depending on both civilian and military activity. Managers at Cheyenne have developed certain proc
> Refer to the information in Problem 2-73. Stacey Choo would like you to prepare a presentation for the CFO and Controller at Salvay discussing the estimated gross margins. They are especially interested in the effect of the individual cost items on the g
> Salvay Company is a small manufacturer that produces and sells one product for use in medical instruments. Demand is erratic and can vary widely from year to year. The financial managers at Salvay are planning for the coming year and have asked for your
> Refer to the information in Problem 2-71. Consider the Business Application “Indirect Costs and Allocating Costs to Contracts.” Required a. How should Woodrow Economic Advisors (WEA) allocate indirect costs to units? W
> Many companies, especially in the travel industry (airlines, hotels, and so on), have socalled loyalty programs offering members benefits that depend on the frequency of purchases, miles traveled, or amount of money spent, among other measures. One examp
> Davis Devices makes an electronic bathroom scale that can connect to a smartphone and automatically record various measurements for tracking progress. Davis has experienced reasonable growth in the three years it has been selling the scale, where adverti
> The Norfolk School of Commerce (NSC) operates a Career Counseling Center (CCC) to advise students and help with job placement. The CCC is available for both undergraduate and graduate degree students. The CFO at NSC wants better cost information about th
> Littlefield Partners produce a part sold to agricultural equipment suppliers. For the last year (Year 1), the price, costs, and volume of the part were as follows: Managers at Littlefield believe that next year (Year 2), conditions in the industry will r
> Muncey Fishing Charters consists of one boat with a capacity of 15 passengers, not including the crew. Muncey offers only one charter package: a one-half day fishing trip off the coast. Because of weather, crew availability, and so on, Muncey operates an
> Ford Legal Services (FLS) is considering adding a new line of simplified wills and estate plans to its current family law practice. This new service will target individuals who are currently not clients and whose legal needs are modest but who prefer to
> Refer to the information and data in Problem 3-65 (Sawyer’s Lubricants). The CFO would like to discuss the results of your analysis in Problem 3-65 with the rest of the management team. The corporate culture at Sawyer’s encourages visual presentations of
> Sawyer’s Lubricants produces a specialty oil for machine lubrication. The production facility can operate one shift, two shifts, or three shifts. The shift decision is made on a weekly basis because of labor agreements. Each shift is ei
> Loretto Audio produced and sold 750 units of the company’s signature (and only) product in November. You have collected the following information from the accounting records: Required a. Compute: 1. Variable manufacturing cost per unit.
> The controller at Bethune Chemicals asks for your help in sorting out some cost information. You receive the following sheet for the most recent year: Required Compute: a. Direct materials used. b. Direct materials inventory, January 1. c. Conversion cos
> The accountant at Roland Industries provides you with the following information for the first quarter: Required Compute for the first quarter: a. Total prime costs. b. Total conversion costs. c. Total manufacturing costs. d. Cost of goods manufactured. e
> Consider the Business Application “Components of Cost of Goods Sold for a Retailer.” During the COVID-19 pandemic, Target continued operations at its retail stores, after taking steps to ensure the health and safety of its employees and customers. These
> Conrad Coding Institute (CCI) offers online courses in coding. One of CCI’s most popular courses is the introductory course that teaches basic coding skills. CCI prices this course aggressively because of the potential for creating dema
> Refer to the information in Problem 3-59 for Lappin Community Transit (LCT). The director of LCT recently attended a seminar on financial analysis for nonfinancial managers, which covered CVP among other topics. The director is interested in growing LCT
> Lappin Community Transit (LCT) is a not-for-profit mostly volunteer organization that provides transportation to seniors. As a not-for-profit, it refers to an excess of revenues over costs as a “surplus” and an excess of costs over revenues as a “deficit
> Clarendon Instruments produces a patented testing device, which it sells for $3,000 per unit. As a financial analyst that reports on the company, you learn that there is a good chance that the variable cost per unit will increase by 20 percent because of
> Chandler Packaged Treats (CPT) sells a specialty pet food to pet stores. CPT management prides itself on its scientific management methods. Applying those methods, the controller estimates the following monthly costs based on 6,000 units (produced and so
> Refer to the information in Problem 1-55. Prepare a report to communicate your findings. Emily tells you that Adam Mercer, the president, prefers graphics that help him understand the analysis. Required Prepare appropriate graphics to communicate the con
> Emily Cho, the consultant for The AM Bakery shows you the following table with district profitability and asks for a report on which district is most profitable, along with a brief explanation. Required Write a short report with your conclusions. Be sure
> Henderson Designs provides basic interior design services in a small town in the Rocky Mountain area. Lately, the growth in the business has slowed considerably and the managers have been looking at new services that might improve their prospects. The sa
> Pierson Landscape Architects (PLA) develops and sells plans for various types of gardens and outdoor spaces. Customers buy the plans and then install the garden, the water feature, or other installation by themselves or by hiring a contractor who will ta
> Frederick’s Motivational Workshops (FMW) offers hands-on workshops by noted experts on various business and life-skill topics, such as sales techniques, negotiation, and leadership. FMW works exclusively with corporate clients, so that
> An online news report stated that a fall in airline fuel prices brought down the load factors necessary for one particular airline to break even from 78 percent to 63 percent. What important assumptions and limitations should be considered when using thi
> Luce Original Baking Supplies (LOBS) sells equipment to homes and small businesses for baking. There are two distribution channels. Customers can shop and purchase at a retail outlet located near the company warehouse. Alternatively, they can order onlin
> Refer to Exhibit 1.6, which shows budgeted versus actual costs. Assume that The AM Bakery is preparing a budget for the month ending December 31. Management prepares the budget for the month ending December 31 by starting with the actual results for Augu
> Refer to Exhibit 1.6. Assume that The AM Bakery is preparing a budget for the month ending November 30. Management prepares the budget by starting with the actual results for August that appear in Exhibit 1.6. Then, management considers what the differen
> Holborn Appliance Shop is a small business located on the coast. It specializes in appliance repair and is known in the area for fast, reliable, and friendly service. Katie Holborn, the owner and primary repair specialist, has been working with appliance
> Langholm Bistro is a popular restaurant in a small, coastal village. Brian Langholm, who opened the restaurant five years ago, has seen it grow steadily. Currently, Langholm’s is only open for dinner, but many of the regular customers h
> Forman’s Services is a small accounting firm that offers payroll and bookkeeping services to small businesses and individuals. A local merchant has approached Will Forman, the owner, about taking over his payroll disbursements but is co
> Lindsay Mobility manufactures two versions of e-scooters: L-4 and L-36. Both models go through the same assembly process and are produced in the same plant. The difference between the models is in quality and cost of the parts (direct materials). The fol
> Larned Recreational builds two models of dune buggies: Sport and Custom. Both models require the same assembly and finishing process and are assembled in the same factory. They differ in the quality and detail of the materials. The following data reflect
> Refer to the information in Exercise 6-46 and Problem 6-69. An accounting student from the local college, working on a related project at HRS as a part of a course, suggested a further revision after an analysis of the general operating accounts. Specifi
> Refer to the information in Exercise 6-46 for Harmon Recycling Services (HRS). The company is considering using a two-stage cost allocation system and wants to assess the effects on reported product profits. More detailed financial information for HRS fo
> Refer to the Business Application discussion of accounting choices. In the case of Tesco, managers made choices about the timing of revenues and expenses that led to fraud charges. In order to avoid that, perhaps accountants should always assume the wors
