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> Veriplex manufactures process control equipment. This 100-year-old German company has recently acquired another firm that has a design for a new proprietary process control system. A key component of the new system to be manufactured by Veriplex is calle

> Joan Chris is the Denver district manager of Stale-Mart, an old established chain of more than 100 department stores. Her district contains eight stores in the Denver metropolitan area. One of her stores, the Broadway store, is over 30 years old. Chris b

> The demand for DVD players is expanding rapidly, but the industry is highly competitive. A plant to make DVD players costs $40 million, has an annual capacity of 100,000 units, and has an indefinite physical life. The variable production cost per unit is

> For each of the following questions draw a graph that depicts how costs vary with volume. Completely label each graph and axis. a. Plant XXX works a 40-hour week. Management can vary the number of employees. Currently, 200 employees are being paid $10 pe

> Using the data from Table 10–6, recast the analysis with one change of assumption: Instead of assuming that an additional $17,000 of overhead was incurred in both years, assume that overhead was lower each year by $10,000. How do incent

> Media Designs is a marketing firm that designs and prints customized marketing brochures. The design department designs the brochure and the printing department prints and binds it. Each department has separate overhead rates. The following estimates for

> Alexander Products manufactures dental equipment and uses a standard cost system. A new product (HV65) that is being introduced requires a particular type of stainless steel. Alexander purchased a quantity of this stainless steel (in meters). The followi

> The empirical evidence reveals that very few firms change their standard prices and standard quantities during the fiscal year. Most firms have the following policy, “We set our standards before the fiscal year begins and we NEVER, NEVER change them duri

> Premier Brands buys and manages consumer personal products brands such as cosmetics, hair care, and personal hygiene. Premier management purchases underperforming brands and redesigns their marketing strategy and brand equity positioning, and then promot

> Innovative Sports sells a patented golf trainer called the Puttmaster. This device, which sells for $69.95, consists of a metal strip on the floor that is attached to the golfer’s putter with elastic bands. By taking practice strokes with the putter atta

> One of the main tenets of economic analysis is that people act in their narrow self-interest. Why then do people leave tips in restaurants? If a study were to compare the size of tips earned by servers in restaurants on interstate highways with those in

> Suppose that a mining operation has spent $8 million developing an ore deposit in South America. Current expectations are that the deposit will require two years of development and will result in a realizable cash flow of $10 million at that time. The co

> With gasoline prices at $3.00 per gallon, consumers are flocking to purchase hybrid vehicles (combination of gasoline and electric motors) that get 50 miles per gallon of gasoline. The monthly payment on a three-year lease of a hybrid is $499 compared to

> Artco manufactures fiberglass home and office planters in a variety of decorator colors. These planters, in three sizes, are used to hold indoor plants. Overhead is allocated based on the standard pounds of fiberglass per planter. Here are standards for

> Software Associates (SA) is a computer software consulting firm that specializes in designing and implementing integrated marketing database warehousing programs. Humphrey Catalog is a client. In preparing its bid for Humphrey, SA estimates its total lab

> A plant manufactures two products, Hi-V and Lo-V. Hi-V is the high-volume product that represents most of the plant’s revenue. It is produced 10 times per year, inventoried, and shipped to customers twice a month. Lo-V is a specialty pr

> To generate needed foreign exchange, the Cuban government entered into a joint venture with Domingo Cigars of Spain. The joint venture manufactures Domingo Cigars in Cuba using Cuban tobacco and employees. Domingo and the Cuban government split all profi

> Pebble Beach Sandals has designed and patented a luxury golf sandal for both men and women. The unique handmade designs include spikes and cleats to prevent the golfer from slipping during the swing. The sandal is made from sheepskin creating comfortable

> Ab Landlord owns a dilapidated 30-year-old apartment building in Los Angeles. The net cash flow from renting the apartments last year was $200,000. She expects that inflation will cause the net cash flows from renting the apartments to increase at a rate

> IVAX manufactures commercial brushes in two operating divisions (O1 and O2) and has two service departments (Human Resources and Janitorial/Maintenance). The two service departments’ costs are allocated to the two operating departments.

> You are evaluating ways to expand an optometry practice and its earnings capacity. Optometrists perform eye exams, prescribe corrective lenses (eyeglasses and contact lenses), and sell corrective lenses. One way to expand the practice is to hire an addit

> The following data summarize the operating performance of your company’s wholly owned Canadian subsidiary for 2009 to 2011. The cost of capital for this subsidiary is 10 percent. Required: Critically evaluate the performance of this sub

> Lys Wheels manufactures high-performance mountain bikes. Lys uses a predetermined overhead rate based on direct labor hours to absorb overhead to mountain bikes. For the last fiscal year, the firm had the following operating data: Actual direct labor hou

> Magic Floor produces and sells a complete line of floor care products: wax strippers, floor soaps, and floor waxes. All of these products are packaged on a new high-speed bottling fill line. Empty bottles (pints, quarts, half gallons, or gallons) are aut

> Sue Young sells fax machines for Fast Fax. There are two fax machines: model 700 and model 800. At the beginning of the month, Sue’s sales budget is as follows: At the end of the month, the number of units sold and the actual contributi

> Janitorial services is one of five service departments in a firm that allocates service department costs using the step-down allocation method. Janitorial services is currently the third service department (S3) in the step-down process. The following tab

> The sales department of a cellular phone company pays its salespeople $1,500 per month plus 25 percent of each new subscriber’s first month’s billings. A new subscriber’s first-month bill averages $80. Salespeople work 160 hours a month (four weeks at 40

> A firm that purchases electric power from the local utility is considering the alternative of generating its own electricity. The current cost of obtaining the firm’s electricity from its local utility is $42,000 per year. The cost of a steam generator (

> Mastich Counters manufactures a material used to fabricate kitchen counters. It is a very durable, high-fashion, and expensive product that is installed in luxury homes. The manufacturing process is complicated and requires highly skilled employees, supe

> Pyramid Products manufactures a large number of home and commercial cleaning products at its plant in Oshkosh, Wisconsin. This plant, which employs about 450 people, produces floor waxes, cleaners, bathroom and kitchen cleaners, aerosol air fresheners, d

> Specialized Surgical Instruments (SSI) manufactures four surgical implants. SSI uses an absorption costing system to allocate manufacturing overhead to its four products. Direct labor hours are used as the allocation base. The annual budgeted overhead ra

> Barry’s Fashions operates a Downtown Store and a Mall Store. Both department stores use three centralized, corporate service departments (human resources, maintenance, and information management). The following table summarizes the allo

> Adrian and Pells (AP) is an advertising agency that uses flexible budgeting for both planning and control. One of its clients, Troika Toys, asked AP to prepare an ad campaign for a new toy. AP’s contract with Troika calls for paying AP

> Serviflow manufactures products that move and measure various fluids, ranging from water to high viscosity polymers, corrosive or abrasive chemicals, toxic substances, and other difficult pump in media. The Supply Division, a profit center, manufactures

> Suppose you are the manager of a mortgage department at a savings bank. Under the state usury law, the maximum interest rate allowed for mortgages is 10 percent compounded annually. Required: a. If you granted a $50,000 mortgage at the maximum rate for 3

> Talor Chemical Company is a highly diversified chemical processing company. The company manufactures swimming pool chemicals, chemicals for metal processing companies, specialized chemical compounds for other companies, and a full line of pesticides and

> Toby Manufacturing produces three different products in the same plant and uses a job order costing system to estimate product costs. A flexible budget is used to forecast overhead costs. Total budgeted fixed factory overhead is $450,000 and variable ove

> The telecom division of Kothari Inc. produces and sells 100,000 line modulators. Half of the modulators are sold externally at $150 per unit, and the other half are sold internally at variable manufacturing costs plus 10 percent. Kothari uses variable co

> It is frequently argued that for empowerment to work, managers must “let go of control” and learn to live with decisions that are made by their subordinates. Evaluate this argument.

> William Company owns and operates a nationwide chain of movie theaters. The 500 properties in the William chain vary from low-volume, small-town, single-screen theaters to high-volume, big-city, multiscreen theaters. The management is considering install

> Amalfi Texts specializes in printing textbooks for high school science classes. Publishing companies like McGraw-Hill contract with authors to prepare the manuscript, which is then copyedited and typeset. Amalfi receives the typeset manuscript electronic

> Ferguson Metals is a decentralized mining, smelting, and metals company with three divisions: mining, lead, and copper. The mining division owns the ore mine that produces the lead and copper that occur in the vein. Mining removes the ore, crushes it, an

> Grove City Broadcasting owns and operates a radio station and a television station in Grove City. Both stations are located in the same building and are operated as separate profit centers with separate managers, who are evaluated based on station profit

> BFR is a ship-building firm that has just won a government contract to build 10 high-speed patrol boats for the Coast Guard for drug interdiction and surveillance. Besides building ships for the government, BFR has a commercial vessel division that desig

> Old Rosebud is a Kentucky horse farm that specializes in boarding thoroughbred breeding mares and their foals. Customers bring their breeding mares to Old Rosebud for delivery of their foals and after-birth care of the mare and foal. Recent changes in th

> Wujo is a Shanghai company that designs high-end software to enhance and edit digital images. Its software, EzPhoto, is more powerful and easier to use than Adobe Photoshop, but sells at a much lower price. Currently, EzPhoto is written in Chinese for th

> A home identical to yours in your neighborhood sold last week for $150,000. Your home has a $120,000 assumable, 8 percent mortgage (compounded annually) with 30 years remaining. An assumable mortgage is one that the new buyer can assume at the old terms,

> Eastern University faces a shortage of parking spaces and charges for parking. For nearby parking (e.g., behind the business school), faculty and staff pay $180 per year. Parking in lots Z and B, which are north and south of the campus and involve about

> Mutual Fund Company (MFC) is considering centralizing its overnight mail function. Five departments within MFC use overnight mail service: trades processing, trades verifications, securities processing, accounts control, and customer service. Although th

> Hallsite Imaging produces hardware and software for imaging the structures of the human eye and the optic nerve. Hallsite systems are in most major medical centers and leading ophthalmology clinics. Hallsite has three divisions: Hardware, Software, and M

> Aurora Medical Center (AMC), located outside Phoenix, has an inpatient hospital and outpatient clinic. Because it is located in a retirement area, a substantial fraction of its patients are elderly, and hence their medical insurance is provided through t

> You are manager of a painting department of a large office complex. The painting department is responsible for painting the buildings’ exteriors and interiors. Your performance is judged in part on minimizing your department’s operating costs, which cons

> Christian Children’s Fund, Inc. (CCF), established in 1938, is an international, nonsectarian, nonprofit organization dedicated to assisting children. With program offices around the world, it provides health and educational assistance

> The Liu Trust is short of cash. It is required to distribute $100,000 to Yang every year, and that payment is due in six weeks. In its asset corpus, Liu holds a number of investments that are valued at $100,000. One of them is a plot of land with a tax b

> Compute the Federal income tax liability for the Valerio Trust. The entity reports the following transactions for the 2017 tax year. The trustee accumulates all accounting income for the year. Operating income from a business…………………………..…..$ 500,000 Div

> The Hosta Trust reports gross rent income of $72,000, expenses attributable to the rents of $55,000, and tax-exempt interest from state bonds of $18,000. Under the trust agreement, the trustee is to pay 20% of the annual trust accounting income to the Am

> The Biltmore Trust is a simple trust. Crawford is its sole beneficiary. In the current year, the trust earns $3,200 in taxable interest and $8,000 in tax exempt interest. In addition, the trust recognizes a $2,500 long-term capital gain. The trustee asse

> For 2017, the Guess Trust retains all of its income items, which include only $100,000 of net investment income and $40,000 of profits from an active business operation. Guess incurs an additional tax on net investment income (NIIT) of: a. $5,320. b. $3,

> For 2017, the Wes Trust reports $100,000 of AMT income before the annual exemption. The AMT for the year is: a. $19,734. b. $21,308. c. $26,000. d. $28,000.

> Grace Lang was employed as a waitress at the Pancake House in Grand Bay, Alabama. While working the morning shift on March 7, 2009, one of Grace’s customers left her a Florida lottery ticket as a tip. When Grace discovered that she had won part of the Fl

> Before her death, Lucy entered into the following transactions. a. Lucy borrowed $600,000 from her brother, Irwin, so that Lucy could start a business. The loan was on open account, and no interest or due date was provided for. Under applicable state law

> In May 2017, Dudley and Eva enter into a property settlement preparatory to the dissolution of their marriage. Under the agreement, Dudley is to pay Eva $6 million in satisfaction of her marital rights. Of this amount, Dudley pays $2.5 million immediatel

> Using property she inherited, Myrna makes a 2017 gift of $6.2 million to her adult daughter, Doris. Neither Myrna nor her husband, Greg, has made any prior taxable gifts. Determine the gift tax liability if: a. The election to split gifts is not made. b.

> Indicate whether each of the following statements is true or false. a. The government never pays a taxpayer interest on an overpayment of tax. b. The IRS can compromise on the amount of tax liability if there is doubt as to the taxpayer’s ability to pay.

> Jesse dies intestate (i.e., without a will) in May 2017. Jesse’s major asset is a tract of land. Under applicable state law, Jesse’s property will pass to Lorena, who is his only child. In December 2017, Lorena disclaims one-half of the property. In June

> Carl made the following transfers during the current year. What are Carl’s taxable gifts for the current year? • Transferred $900,000 in cash and securities to a revocable trust, life estate to himself and remainder interest to his three adult children b

> In each of the following independent situations, indicate whether the alternate valuation date can be elected. Explain why or why not. Value of Gross Estate Estate Tax Liability Date of Six Months Date of Six Months Decedent Death Later Death Later

> Under Rowena’s will, Mandy (Rowena’s sister) inherits her property. One year later, Mandy dies. Based on the following independent assumptions, what is Mandy’s credit for the tax on prior transfers? a. The estate tax attributable to the inclusion of the

> Roy dies and is survived by his wife, Marge. Under Roy’s will, all of his otherwise uncommitted assets pass to Marge. Based on the following property interests, determine the marital deduction allowed to Roy’s estate. a. Timberland worth $1.2 million own

> While vacationing in Florida in November, Sally was seriously injured in an automobile accident. Sally died several days later. How are the following transactions handled for tax purposes? a. Bruce, Sally’s son and executor, incurred $6,200 in travel exp

> In each of the independent situations below, determine the transfer tax (i.e., estate and gift) consequences of what has occurred. (In all cases, assume that Gene and Mary are married and that Ashley is their daughter.) a. Mary purchases an insurance pol

> Assume the same facts as in Problem 42, except that Gordon and Fawn are husband and wife (not brother and sister). a. What are the gift tax consequences in 2012? b. What are the estate tax consequences in 2018? c. Under part (b), would your answer change

> In 2012, Gordon purchased real estate for $900,000 and listed title to the property as “Gordon and Fawn, joint tenants with right of survivorship.” Gordon predeceases Fawn in 2018 when the real estate is worth $2.9 million. Gordon and Fawn are brother an

> At the time of his death on July 9, Aiden was involved in the following real estate. Fair Market Value

> Which of the valuation penalties is likely to arise when an aggressive taxpayer reports: a. A charitable contribution? b. A business deduction? c. A decedent’s taxable estate?

> At the time of Matthew’s death, he was involved in the following transactions. • Matthew was a participant in his employer’s contributory qualified pension plan. The plan balance of $2 million is paid to Olivia, Matthew’s daughter and beneficiary. The di

> Assume the same facts as in Problem 38 with the following modifications. What amount is included in Alicia’s gross estate? • Mitch is killed in a rock slide while mountain climbing in November, and the insurer pays Alicia’s estate $400,000 before the end

> At the time of her death on September 4, Alicia held the following assets.

> At the time of his death this year on September 4, Kenneth owned the following assets. Fair Market Value City of Boston bonds…………………………………………………..$2,500,

> Kim, a wealthy Korean national, is advised by his physicians to have an operation performed at the Mayo Clinic. Kim is hesitant to come to the United States because of the possible tax consequences. If the procedure is not successful, Kim does not want h

> Bernice dies and, under a will, passes real estate to her surviving husband. The real estate is subject to a mortgage. For estate tax purposes, how is any marital deduction determined? Can Bernice’s estate deduct the mortgage in computing the taxable est

> Regarding the formula for the Federal gift tax (see Concept Summary 27.1), comment on the following observations. a. The annual exclusion is adjusted each year for inflation. b. The charitable and marital deductions play an important role. c. Some gratui

> In no more than three PowerPoint slides, indicate how the time value of money affects the application of the Federal unified transfer taxes. Prepare your slides for a 45-minute presentation at your school’s homecoming seminar, attended by wealthy alumni.

> Felipe will incur a $1 million Federal transfer tax when he passes a plot of land to Barbara, an unrelated friend. Felipe’s after-tax rate of return on his real estate investments is 3%. Compute the present value of the transfer tax if: a. Felipe transf

> An excise tax is a tax on the transfer of property. In the case of the Federal unified transfer tax, the excise tax imposes a tax when assets pass to another individual through lifetime gifts or amounts passing at death. Unlike the income tax, therefore,

> You overhear Matheus say, “I am so glad to be divorced from my cheating wife Larissa. She keeps two sets of books in her design business, and I wish the IRS would find out about it.” Is Matheus a candidate for the informant award program that is operated

> Three unmarried and childless sisters live together. All are of advanced age and in poor health, and each owns a significant amount of wealth. Each has a will that passes her property to her surviving sister(s) or, if no survivor, to their church. Within

> With regard to “life insurance” in the context of the Federal estate tax, comment on the following. a. What the term includes (i.e., types of policies). b. The meaning of “incidents of ownership.” c. When a gift occurs upon maturity of the policy. d. The

> At the time of Emile’s death, he was a joint tenant with Colette in a parcel of real estate. With regard to the inclusion of the realty in Emile’s gross estate, comment on the following independent assumptions: a. Emile and Colette received the property

> In each of the following independent situations, indicate whether the transfer is subject to the Federal gift tax. a. Asa contributes to his mayor’s reelection campaign fund. The mayor has promised to try to get some of Asa’s property rezoned from reside

> In connection with the filing of a Federal gift tax return, comment on the following. a. No Federal gift tax is due. b. The gift is between spouses. c. The donor obtained from the IRS an extension of time for filing his or her Federal income tax return.

> Regarding the gift-splitting election, comment on the following. a. What it is designed to accomplish. b. How the election is made.

> Qualified tuition programs under § 529 enjoy significant tax advantages. Describe these advantages with regard to the Federal: a. Income tax. b. Gift tax. c. Estate tax.

> Derek dies intestate (i.e., without a will) and is survived by a daughter, Ruth, and a grandson, Ted (Ruth’s son). Derek’s assets include a large portfolio of stocks and bonds and a beach house. Ruth has considerable wealth of her own, while Ted has just

> At a local bank, Jack purchases for $100,000 a five-year CD listing title as follows: “Meredith, payable on death to Briana.” Four years later, Meredith dies. Briana, Meredith’s daughter, then redeems the CD when it matures. Discuss the transfer tax cons

> Gus (age 84) and Belle (age 18) are married early in the year. Late in the same year, Belle confronts Gus about his failure to transfer to her the considerable amount of property he previously promised. Gus reassures Belle that she will receive the prope

> On June 10, Ming states, “I filed my Form 1040 on April 5 and haven’t heard from the IRS since then, so I know I will not be audited!” Evaluate Ming’s assumption.

> As to the alternate valuation date for asset transfers at death, comment on the following. a. The justification for the election. b. The main heir prefers the date of death value. c. An estate asset is sold seven months after the decedent’s death. d. Eff

> Regarding the formula for the Federal estate tax comment on the following. a. The gross estate includes only property interests owned by the decedent at the time of death. b. The gross estate is not the same as the probate estate. c. Taxable estate Appli

> Included in Mary’s gross estate are the following assets: a. How much is included in her gross estate if the alternate valuation date is elected? b. Suppose all of Mary’s assets pass to her surviving husband? Fai