Question: PostNews.com offers its subscribers several
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 are as follows:
The following decisions were made from June through October 2020:
a. June 2020: Raised subscription fee to $25.50 per month from July 2020 onward. The budgeted number of subscribers for this monthly fee is shown in the following table.
b. June 2020: Informed existing subscribers that from July onward, monthly fee would be $25.50.
c. July 2020: Offered e-mail service to subscribers and upgraded other online services.
d. October 2020: Dismissed the vice president of marketing after significant slowdown in subscribers and subscription revenues, based on July through September 2020 data in the following table.
e. October 2020: Reduced subscription fee to $22.50 per month from November 2020 onward. Results for July–September 2020 are as follows:
Required
1. Classify each of the decisions (a–e) as a planning or a control decision.
2. Give two examples of other planning decisions and two examples of other control decisions that may be made at PostNews.com.
> List the key questions that a manager must consider when developing a successful strategy.
> What are the advantages of a budget?
> Define a master budget and explain its purpose. Describe its components.
> Explain why cash budgets are important.
> What are some additional considerations when budgeting in multinational companies?
> What is the key emphasis in Kaizen budgeting?
> The cost of cost objects under simple costing systems and under activity-based costing are never the same.” Do you agree? Explain.
> What are some behavioral issues that managers must be sensitive to when implementing ABC systems?
> Outline the steps involved in a simple costing system using a single indirect-cost pool.
> Plunge Manufacturing produces outdoor wading and slide pools. The company uses a normal-costing system and allocates manufacturing overhead based on direct manufacturing labor-hours. Most of the company’s production and sales occur in t
> Which levels of cost hierarchy (under activity-based costing) are not used in simple costing systems and why are they important?
> How can a cost hierarchy lead to a more accurate costing system?
> What are the fundamental cost objects in activity-based costing? How does activity-based costing work?
> The total annual production cost of a manufacturing company that produces three different USB devices is $10,000,000. The manager of the company states that the contribution margins of all three products guarantee and justify their productions and, there
> What are the main factors determining the number of indirect-cost pools in a costing system, to increase the accuracy of product or service costs? Explain.
> Activity-based costing is providing more accurate and detailed information and should replace simple costing.” Do you agree? Explain.
> Explain why ABC is equally important for both manufacturing and service companies.
> Describe the main limitations of ABC systems.
> Describe normal costing and actual costing systems.
> Seasonal patterns and fluctuating levels of monthly outputs are the two main factors for most organizations to use an annual period rather than a weekly or a monthly period to compute budgeted indirect-cost rates. Explain how annual indirect rates allevi
> Global Enterprize, a management consulting firm, has the following condensed budget for 2021: Required Global Enterprize has a single direct-cost category (professional labor) and a single indirect-cost pool (client support). Indirect costs are allocate
> Explain the role of information technology in job costing.
> Describe a key feature of job costing and process costing.
> Explain how the cost of a cost object/job is determined under a job-costing system.
> Why do managers have to make adjustments for under- or over-allocated indirect costs?
> Describe the flow of costs in a normal job-costing system.
> Comment on the following statement: There is no difference between “actual costing” and “nor- mal costing” systems because both systems use the product’s actual direct-cost rates and actual quantities of direct-cost inputs.
> Explain how job-costing information may be used for decision making.
> Explain what are the main limitations of CVP analysis for decision making? Explain.
> What is breakeven point (BEP)?
> Differentiate between contribution margin and contribution margin ratio.
> The Lynn Company uses a normal job-costing system at its Minneapolis plant. The plant has a machining department and an assembly department. Its job-costing system has two direct-cost categories (direct materials and direct manufacturing labor) and two m
> What is the main difference between gross margin and contribution margin? Which one is the focus of CVP analysis? Explain briefly.
> What are some of the assumptions underlying breakeven analysis in a multiple products environment?
> CVP analysis assumes that costs can be accurately divided into fixed and variable categories. Do you agree? Explain.
> Is it possible to calculate the breakeven point for a company that produces and sells more than one type of product? Explain.
> Is CVP analysis more focused on the short or the long term? Explain.
> Explain three common features of cost accounting and cost management and their applications.
> Inventoriable costs are usually associated with the manufacturing firms whilst period costs are mainly for trading firms. Discuss.
> Explain the impact of having weak ethics on suppliers, customers, and the market. Provide an example to illustrate your answer.
> Due to the significance of the information they’re trusted with, management accountants are expected to observe well-defined professional ethical standards. Professional management accountant organizations around the world have developed professional eth
> Explain how overtime premium and idle time affect labor costs.
> Gammaro Manufacturer uses normal costing. It allocates manufacturing overhead costs using a budgeted rate per machine-hour. The following data are available for 2020: Required 1. Calculate the budgeted manufacturing overhead rate. 2. Calculate the manuf
> As the new controller, reply to the following comment made by your plant manager: “When I install a proper accounting software, which can process all my daily accounting records and provide me with all necessary reports and analyses, I am not sure what a
> Technical and basic analytical competence are necessary but not sufficient conditions to becoming a successful management accountant.” Do you agree? Why?
> Give an example for each of the following: A cost that is variable and direct, a cost that is variable and indirect, a cost that is fixed and direct, and a cost that is fixed and indirect.
> Explain whether a business department can be a cost object.
> Why and when is it essential to calculate a unit cost?
> What is a cost driver? Give one example.
> Tiffany Cosmetics manufactures and sells a variety of makeup and beauty products. The company has come up with its own patented formula for a new anti-aging cream. The company president wants to make sure the product is priced competitively because its p
> The new chief executive officer (CEO) of Richard Manufacturing has asked for a variety of information about the operations of the firm from last year. The CEO is given the following information, but with some data missing: Required 1. Find (a) total sa
> News Report Group has two major divisions: print and Internet. Summary financial data (in millions) for 2019 and 2020 are as follows: The two division managers’ annual bonuses are based on division ROI (defined as operating income divid
> Caldwell Toys produces toys mainly for the domestic market. The company uses a job-costing system under which materials and labors used in the manufacturing process are directly allocated to different jobs. Whereas costs incurred in the manufacturing sup
> Newmann, Inc. has divisions in the United States, France, and Australia. The U.S. division is the oldest and most established of the three and has a cost of capital of 6%. The French division was started 4 years ago when the exchange rate for the euro wa
> Natural Bounty Corporation operates three divisions that process and bottle natural fruit juices. The historical-cost accounting system reports the following information for 2020: Natural Bounty estimates the useful life of each plant to be 12 years, wit
> Blue Fish owns and operates coffee shops in three large cities on the West Coast: Seattle, San Francisco, and Los Angeles. The three geographic areas are considered separate divisions. Each division owns the buildings of the coffee shops, which are consi
> Doorharmony Company makes doorbells. It has a weighted-average cost of capital of 7% and total assets of $5,630,000. Doorharmony has current liabilities of $750,000. Its operating income for the year was $620,000. Doorharmony does not have to pay any inc
> Rapid Grow Inc., based in Des Moines, Iowa, sells high-end fertilizers. Rapid Grow has two divisions: â– North Italy mining division, which mines potash in northern Italy â– U.S. processing division, which uses potash in
> Refer to Problem 23-28. Assume that Pat Borges, CEO of Cranfuel, had mandated a transfer price equal to 175% of full cost. Now he decides to decentralize some management decisions and sends around a memo that states: “Effective immediately, each division
> Cranfuel Products is a cranberry cooperative that operates two divisions, a harvesting division and a processing division. Currently, all of harvesting’s output is converted into cranberry juice by the processing division, and the juice
> Chicago, Inc., has two divisions, A and B, that manufacture expensive bicycles. Division A produces the bicycle frame, and division B assembles the rest of the bicycle onto the frame. There is a market for both the subassembly and the final product. Each
> The Aqua Company manufactures and sells television sets. Its assembly division (AD) buys television screens from the screen division (SD) and assembles the TV sets. The SD, which is operating at capacity, incurs an incremental manufacturing cost of $60 p
> Shalie Manufacturing makes several thousand different metal products, including building materials, tools, and furniture parts. The manager of the furniture parts division has proposed that his division expand into bicycle parts. The furniture parts divi
> Carolin Chemicals pro- duces a range of chemical products for industries on getting bulk orders. It uses a job-costing system to calculate the cost of a particular job. Materials and labors used in the manufacturing process are direct in nature, but manu
> TriMart is considering replacing 20 of their checkout registers with new self-checkout equipment. The equipment currently being used is fully depreciated and has no disposal value. The new equipment will cost a total of $220,000. Because the new equipmen
> Johnny Buster owns Entertainment World, a place that combines fast food, innovative beverages, and arcade games. Worried about the shift- ing tastes of younger audiences, Johnny contemplates bringing in new simulators and virtual reality games to maintai
> The Kuhl Brothers own a frozen custard ice cream shop. The brothers currently are using a machine that has been in use for the last 4 years. On January 1, 2020, the Kuhl Brothers are considering buying a new machine to make their frozen custard. The Kuhl
> Bobwhite Laundromat is trying to enhance the services it provides to customers, mostly college students. It is looking into the purchase of new high- efficiency washing machines that will allow for the laundry’s status to be checked via
> Paulina Jones, a manager for the Carpenter Manufacturing Company, has the opportunity to upgrade the equipment in the Midwest division by replacing and upgrading some of its machinery. The cost of the upgraded machinery will be $840,000 and will be depre
> Jeong Natural Snacks is contemplating an expansion. The finance manager is looking at buying a second machine that would cost $62,000 and last for 10 years, with no disposal value at the end of that time. Jeong expects the increase in cash revenues from
> Assume the same facts as in Problem 22-34, except that the plant is located in Buffalo, New York. Dublin Chips has no special waiver on income taxes. It pays a 35% tax rate on all income. Proceeds from sales of equipment above book value are taxed at the
> Dublin Chips is a manufacturer of prototype chips based in Dublin, Ireland. Next year, in 2021, Dublin Chips expects to deliver 615 prototype chips at an average price of $95,000. Dublin Chips’ marketing vice president forecasts growth
> Perez Containers Corporation is considering implementing a JIT production system. The new system would reduce current average inventory levels of $4,000,000 by 75%, but it would require a much greater dependency on the company’s core sup- pliers for on-t
> Steadfast Security Devices (SSD) has introduced a just-in-time production process and is considering the adoption of lean accounting principles to support its new production philosophy. The company has two product lines: Mechanical Devices and Electronic
> For each of the following, state whether job costing or process costing would be most appropriate.
> Assume the same facts for the Grand Meter Corporation as in Problem 21-37, except that now assume there are only two trigger points for making entries in the accounting system: ■ Completion of good finished units of product ■ Sale of finished goods The i
> Assume the same facts for the Grand Meter Corporation as in Problem 21-37, except that now assume the second trigger point for it is the sale, rather than the completion of finished goods: ■ Purchase of direct materials and incurring of conversion costs
> The Grand Meter Corporation manufactures electrical meters. For August, there were no beginning inventories of direct materials and no beginning or ending work in process. Grand Meter uses a JIT production system and backflush costing with three trigger
> Smart Jeans Ltd. orders high-quality denim fabric from two different suppliers: Shine Fabrics and Soft Cotton. Smart would like to use only one of the suppliers in the future. Due to variations in quality, Smart would need to inspect 15% of Shine Fabrics
> ClearPic Television Co. outsources the production of picture-tubes for the televisions it manufactures. It is currently deciding whether to use sup- plier X or supplier Y. Due to differences in the product failure rates in the two companies, 7.5% of pict
> The KateSteel Corporation is an automotive supplier that uses automatic turning machines to manufacture precision parts from steel bars. KateSteel’s inventory of raw steel averages $400,000. Keith Abbott, president of KateSteel, and Sha
> CompTech Solution purchases one model of computer at a wholesale cost of $400 per unit and resells it to end consumers. The annual demand for the company’s product is 500,000 units. Ordering costs are $1,000 per order and carrying costs are $80 per compu
> Gadgets Galore Corp. produces J-Pods, music players that can download thousands of songs. Gadgets Galore forecasts that demand in 2020 will be 22,800 J-Pods. The variable production cost of each J-Pod is $52. In its MRP system, due to the large $19,000 c
> Phillips Corporation is a major manufacturer of food processors. It purchases motors from Viking Corporation. Annual demand is 52,000 motors per year or 1,000 motors per week. The ordering cost is $360 per order. The annual carrying cost is $6.50 per mot
> FootLove Shoe Co. produces and sells excellent quality walking shoes. After production, these shoes are distributed to 30 warehouses around the country. Each warehouse services approximately 120 stores in its region. FootLove uses an EOQ model to determi
> The Belkin Company has three product lines of coffee mugs—A, B, and C—with contribution margins of $7, $5, and $4, respectively. The president foresees sales of 240,000 units in the coming period, consisting of 40,000 units of A, 120,000 units of B, and
> Outmark Corporation manufactures computer processors for leading com- puter makers. Joe Agent is the management accountant for one of Outmark’s largest manufacturing plants. His bonus is based on the plant’s revenues.
> American Electronics manufactures 200,000 55-inch 4K TVs each year. The variable and fixed costs of rework and repair for the TVs are as follows: American Electronics’ 55-inch 4K TVs have a quality problem that causes shadows in the pic
> IVplast is still de- bating whether it should introduce Y28. The following table provides information on selling prices, variable costs, and inventory carrying costs for Z39 and Y28: Required Using the average manufacturing cycle times calculated in Pro
> The IVplast Corporation uses an injection molding ma- chine to make a plastic product, Z39, after receiving firm orders from its customers. IVplast estimates that it will receive 40 orders for Z39 during the coming year. Each order of Z39 will take 120 h
> The Brightlight Corporation uses multicolored molding to make plastic lamps. The molding operation has a capacity of 150,000 units per year. The demand for lamps is very strong. Brightlight will be able to sell whatever output quantities it can produce a
> The Brady Corporation sells 375,000 V262 valves to the automobile and truck industry. Brady has a capacity of 210,000 machine-hours and can produce two valves per machine-hour. V262’s contribution margin per unit is $9. Brady sells only 375,000 valves be
> Pauli’s Pizza has recently begun collecting data on the quality of its customer order processing and delivery. Pauli’s made 1,800 deliveries during the first quarter of 2020. The following quality data pertain to first
> Chunky Meatbots produces a wide variety of unorthodox bread sauces. The company’s three best-selling variants are The BLT Apprentice, The Submachine Bun, and Game of Scones. Each bottle containing these sauces is required to meet predet
> The Horsheim Company manufactures furniture in two departments: molding and finishing. The company uses the weighted- average method of process costing. August data for the finishing department are as follows: Conversion costs are added evenly during the
> Superb Furniture manufactures plastic lawn furniture in a continuous process. The company pours molten plastic into molds and then cools the plastic. Materials are added at the beginning of the process, and conversion is considered uniform through the pe
> 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
> Which of the following statements regarding department costing and ABC is/are correct? I. Department costing systems always properly recognize the drivers of costs within departments. II. Emphasizing activities leads to more focused and homogenous costs
> Textual Brilliance is a manufacturer of writing products for aspiring indie authors. Winston Smith, the plant manager of Textual Brilliance, obtains the following information for Job #10 in August 2020. A total of 46 units were started, and 6 spoiled uni
> Jiminy Jacks produces jacks that are used in many types of automobiles. In the assembly department, materials are added at the beginning of the process and conversion costs are added evenly during the process. At the start of April 2020, Jiminy Jacks ass
