Question: Refer to Exhibit 1.6, which shows
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 August that appear in Exhibit 1.6. Then, management considers what the differences in costs will be between August and December. Management expects revenue to be 100 percent greater in December than in August because of the holiday season. Management expects that all food costs (e.g., flour, butter, and so on) will be 120 percent higher in December than in August because of the increase in sales and because prices for ingredients are generally higher in the high-demand holiday months. Management expects “other†labor costs to be 130 percent higher in December than in August, partly because more labor will be required in December and partly because employees will get a pay raise. The manager will get a pay raise that will increase his salary from $4,500 in August to $5,000 in December. Utilities will be 15 percent higher in December than in August. Rent and marketing will be the same in December as in August. Now, move ahead to January of the following year and assume the following actual results occurred in December. Required a. Prepare a statement like the one in Exhibit 1.6 that compares the budgeted and actual costs. b. Suppose that you have limited time to determine why actual costs are not the same as budgeted costs. Which three cost items would you investigate to see why actual and budgeted costs are different? Why would you choose those three costs? 
> 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
> 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
> 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. 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
> Refer to the information in Problem 6-67. Required Prepare a report for the managers at Hall, Inc. explaining the differences in the estimated product costs under the current cost system and the system proposed by the analyst. Include cost flow diagrams
> Hall, Inc. manufactures two components, Standard and Ultra, that are designed for the same function, but are made of different metals for operational performance reasons. The metal used in Standard is easy to work with and there are few quality issues or
> Refer to the data in Exercise 6-44 and Problems 6-64 and 6-65. Required The chief marketing officer (CMO) of Kilbourne Appliances, who uses product cost analyses to make decisions about pricing and promotion, would like an explanation about how it is pos
> Refer to the data in Exercise 6-44. Required a. Compute the individual product costs per unit assuming that Kilbourne Appliances uses direct labor-hours to allocate overhead to the products. b. Compute the individual product costs per unit assuming that
> Refer to the data in Exercise 6-44. Required a. Compute the individual product costs per unit assuming that Kilbourne Appliances uses the number of units to allocate overhead to the products. b. Compute the individual product costs per unit assuming that
> Refer to the data in Exercise 6-38 and the results in Problems 6-61 and 6-62. Required The CEO of Redfern Audio is confused by the number of different possible unit costs and how it is possible that “reasonable” accoun
> Refer to the data in Exercise 6-38. Required a. Compute the individual product costs per unit assuming that Redfern Audio uses direct labor costs to allocate overhead to the products. b. Compute the individual product costs per unit assuming that Redfern
> Refer to the data in Exercise 6-38. Required a. Compute the individual product costs per unit assuming that Redfern Audio uses the number of units to allocate overhead to the products. b. Compute the individual product costs per unit assuming that Redfer
> Sunnyside Systems, Inc. is in an industry with rapidly evolving technology. With every change in production processes, Sunnyside has to build new design and measurement monitors. Sunnyside uses five of these monitors for production. Engineers at the comp
> Prest Metal Products manufactures and sells various products. The products are manufactured at one of a few plants (depending on the product) and then shipped to a distribution center for eventual delivery to customers. The Auburn Distribution Center (AD
> What are some complications that can arise when collecting data for cost estimation?
> Recall the analysis for Mendota Foods in Problem 5-67. During a discussion of those results, one of the cost analysts suggests that length of the calls (total hours) is probably a better driver of call center costs. The managers asked the analyst to coll
> Refer to the information in Problem 5-74. Required a. Estimate the labor costs assuming 700 clients for the month using the results of a simple regression based on the 30 months of available data. b. How confident are you in the estimate using the regres
> Genesee Fishing Tours (GFT) offers small group fishing expeditions off the local coast. The managers of the company are considering expanding the business to another city and want to put together a financial plan. As a part of that effort, the financial
> The Cary Plant produces a part for agricultural equipment. The plant produces to demand rather than maintaining significant inventories, so there can be significant fluctuation in monthly output. One of the significant cost items is maintenance and repai
> Aurora Town Museum is a small town historical and cultural museum specializing in artifacts from early settlers and local residents. The town council is interested in understanding the costs of the museum given the other demands on the limited funds. Aft
> The Hereford Plant produces a single part used in airplane hydraulic systems. The plant manager has asked the plant controller to determine the monthly volume that would result in the plant meeting its monthly operating profit goal. Operating profits at
> Jordan’s Gym is located in a popular vacation spot with much higher demand in the summer than in the winter. The gym has both annual memberships and individual visit prices, which makes it a popular alternative for seasonal visitors. Th
> Bradford Fabric Shops is a chain of retail stores offering fabrics, accessories, and machines for sewing, knitting, and so on. The company’s 13 retail stores are managed by employees, most of whom started working on the sales floor and
> Goulburn, Inc. produces parts for heavy equipment used in mining and construction. The plant that produces one part common to many vehicles is highly automated, so all labor is considered part of factory overhead. The plant manager, who has just been pro
> Mendota Foods sells a variety of food products around the world. The company engages directly with individuals with an interest in cooking by offering ideas and recipes in various staff blogs and podcasts. The management team at Mendota believes this dri
> Consider the Business Application item “Outsourcing and the Effect of Corporate Culture.” Would the impact on company culture show up in a differential cost analysis? If so, how? If not, should we ignore it?
> Willis Cosmetics produces a variety of cosmetics and hair care products. One popular shampoo is produced at the company’s Genoa Street Plant (GSP). The financial staff are in the process of revising the estimates for overhead and are lo
> Fordson Bank operates a branch in a relatively small rural community. Fordson has a strong customer service focus and knows that branch visits can be important in fostering a reputation for good customer service. However, as Internet banking increases in
> Belden Frozen Foods packages a variety of frozen meals and vegetables. In its Saratoga Street plant, the company packages frozen corn only. The cost analyst at the Saratoga plant has conducted an analysis of the plant overhead cost accounts. Partial info
> The Customer Support Department at Wadsworth Supply is analyzing the costs of its services. A cost analyst has collected monthly data on the three main functions of the department and the total costs for the last year, which follow. The cost analyst also
> Refer to the information in Problem 4-77. Required a. A local engineering firm claims it can revise the production process such that the Gamma product only requires 20 machine minutes on the shared machine. How much would Oxley be willing to pay per peri
> Oxley, Inc. manufactures three products (Alpha, Beta, and Gamma) utilizing, in one of the processes, a single machine for all products. Data on the individual products follow: The single machine used for all three products has a maximum capacity of 480,0
> Pierson Products manufactures furniture, primarily for institutional use, such as for furniture rental companies, college dorm rooms, and budget hotel and motel chains. The company’s Verne Valley plant manufactures one of the desk produ
> You were appointed the manager of Storage Solutions Section (S3) at Milbank Technologies, a manufacturer of mobile computing parts and accessories, late last year. S3 manufactures a drive assembly for the company’s most popular product.
> Ferry Electronics produces a wide variety of video and audio systems for home entertainment. One of the Ferry plants (Lakeview) produces home theatre systems. The plant produces three models, Silver, Gold, and Platinum, which differ in the quality of the
> Pilgrim Fitness makes various devices for personal fitness tracking. One of its well-established products is a low-cost band, the PF-24, meant to compete with more sophisticated smart watches and other expensive devices. The PF-24 has been on the market
> Hostess Brands makes a variety of baked goods just like The AM Bakery. In what ways are the cost accounting issues the same? In what ways are they different?
> For each of the following statements, indicate whether it is true, false, or uncertain. Explain why. Give examples in your answer. a. Cost accountants should be concerned with both product and period costs. b. Opportunity costs tend to be easier to ident
> John Deere Company manufactures farm equipment. Managers at assembly plants must make many decisions, and for this, they use cost accounting information. Required For each of the following managers, identify a decision that they might make for which cost
> Belleterre Tiles makes tiles for flooring and other applications. The CFO of the company provides you with the following information for the period October through December, the company’s third quarter: Required a. What is the average s
> Rowe Tool and Die (RTD) produces metal fittings as a supplier to various manufacturing firms in the area. The following is the forecasted income statement for the next quarter, which is the typical planning horizon used at RTD. RTD expects to sell 45,000
> Fill in the missing items for the following inventories:
> One of the major activities of the City Art Museum (CAM) is a Neighborhood Outreach Program, which was developed both as a public service and to market the museum and its other programs. One of the Outreach offerings, which is popular with both city and
> Swain Athletic Gear (SAG) operates six retail outlets in a large Midwest city. One is in center city on Cornwall Street and the others are scattered around the perimeter of the city. Management at SAG is concerned about declining sales and profitability
> Lessing Toy and Hobby (LTH) is a chain of hobby and craft stores in the Southeast. LTH operates multiple stores and is organized into two divisions: Northern and Southern. Individual stores are placed in one or the other division based on geography. Rece
> Westover Travel offers travel packages using both air and ocean travel. Westover offers two packages, Tourist and Premier, that differ in the accommodations, class of travel, and so on. Westover has a call center, which handles customer queries and compl
