Question: Syd Young, the production manager at Fuchow

> The following costs pertain to job 923 at Becker Auto Shop. Determine the total cost for job 923. QUANITITY PRICE Direct materials: Engine oil 11 ounces $2 per ounce Lubricant 3 per ounce 15 per hour 2 ounces Direct labor 3 hours Overhead costs (ba

> Ernie’s Electronics, Inc., delivered 1,000 custom-designed computer monitors to its customer, Video Shack. The following cost information was compiled in connection with this order: Direct Materials Used Part A327: 1 unit costing $60 per monitor Part B1

> Famous Flange Company manufactures a variety of special flanges for numerous customers. Annual capacity-related (manufacturing overhead) costs are $4,000,000 and the practical capacity level of machine hours is 120,000. The company uses planned machine h

> Ming Company has two service departments (S1 and S2) and two production departments (P1 and P2). Last year, directly identified overhead costs were $300,000 for S1 and $300,000 for S2. Information on the consumption of their services follows: Required (

> Carleton Company has two service departments and two production departments. Information on annual manufacturing overhead costs and cost drivers follows: The company allocates service department costs using the sequential method. First, S1 costs are all

> San Rafael Company has two production departments, assembly and finishing, and two service departments, machine setup and inspection. Machine setup costs are allocated on the basis of number of setups, whereas inspection costs are allocated on the basis

> Pitman Chemical Company manufactures and sells Goody, a product that sells for $10 per pound. The manufacturing process also yields 1 pound of a waste product, called Baddy, in the production of every 10 pounds of Goody. Disposal of the waste product cos

> Fancy Foods Company produces and sells canned vegetable juice. The ingredients are first combined in the blending department and then packed in gallon cans in the canning department. The following information pertains to the blending department for Janua

> Morrison Company carefully records its costs because it bases prices on the cost of the goods it manufactures. Morrison also carefully records its machine usage and other operational information. Manufacturing costs are computed monthly, and prices for t

> Eastern Wood Products has two production departments: cutting and assembly. The company has been using a plantwide cost driver rate computed by dividing plantwide overhead costs by total plantwide direct labor hours. The estimates for overhead costs and

> A credit card company has classified its customers into the following types for customer profitability analysis: 1. Applies for credit card in response to a low introductory interest rate; transfers balance to new account, but when the low introductory

> The Brinker Company uses a job order costing system at its local plant. The plant has a machining department and a finishing department. The company uses machine hours to allocate machining department overhead costs to jobs and uses direct labor cost to

> Youngsborough Products, a supplier to the automotive industry, had seen its operating margins shrink below 20% as its customers put continued pressure on pricing. Youngsborough produced four products in its plant and decided to eliminate products that no

> Over the past 15 years, Anthony’s Auto Shop has developed a reputation for reliable repairs and has grown from a one-person operation to a nineperson operation, including one manager and eight skilled auto mechanics. In recent years, ho

> What are sunk costs? Explain whether they are relevant costs.

> What does the term breakeven point mean?

> What are the three components of a linear program?

> “When production capacity is constrained, determine what products to make by ranking them in order of their contribution per unit.” Do you agree with this statement? Explain.

> What is an opportunity cost that is relevant in a make-or-buy decision?

> Are avoidable costs relevant? Explain.

> What is an opportunity cost?

> Julie Martinez, manager of the new retail outlet of Super Printing, is pondering the management challenges in her new position. Super Printing is a long-established printing company in a major metropolitan area. The new Super outlet, located at the edge

> How are mixed costs and step variable costs similar and different?

> Explain the difference between the contribution margin ratio and contribution margin per unit.

> What does the term contribution margin per unit mean? How is the contribution margin used in cost analysis to support managerial decisions?

> Explain the difference between variable costs and fixed costs.

> What are some different managerial uses of cost information?

> “When production capacity is limited and it is possible to obtain additional customer orders, a firm must consider its opportunity costs to evaluate the profitability of these new orders.” Do you agree with this statement? If so, what are the opportunity

> “Prices must cover both variable and fixed costs of production.” Do you agree with this statement? Explain.

> In analyzing whether to drop a product or department, what are two difficulties that arise related to the impact on costs or revenues?

> What qualitative considerations are relevant in a make-or-buy decision?

> Provide an example of a fixed cost that would be relevant to a make-or-buy decision, and an example of a fixed cost that would not be relevant to such a decision.

> What is a cost center?

> Are fixed costs always irrelevant?

> What behavioral factors may influence some managers to consider sunk costs as being relevant in their decisions?

> Why should decision makers focus only on the relevant costs for decision making?

> What does the term incremental cost mean?

> How do step variable costs differ from fixed costs?

> Santos Company is considering introducing a new compact disc player model at a price of $105 per unit. Santos’s controller has compiled the following incremental cost information based on an estimate of 120,000 units of sales annually for the new product

> Walt’s Woodwork Company makes and sells wooden shelves. Walt’s carpenters make the shelves in the company’s rented building. Walt has a separate office at another location that also includes a showroom where customers can view sample shelves and ask ques

> Spencer Grant, a financial planner, contacts and meets with local individuals to assist with financial planning and investments in Spencer’s employer’s investment services company. Spencer receives no fee for financial

> Xu Company makes two types of wood doors: standard and deluxe. The doors are manufactured in a plant consisting of three departments: cutting, assembly, and finishing. Both labor and machine time are spent on the two products as they are worked on in eac

> Hudson Hydronics, Inc., is a corporation based in Troy, New York, that sells high-quality hydronic control devices. It manufactures two products, HCD1 and HCD2, for which the following information is available: The average wage rate including fringe ben

> What is a responsibility center?

> Excel Corporation manufactures three products at its plant. The plant capacity is limited to 120,000 machine hours per year on a single-shift basis. Direct material and direct labor costs are variable. The following data are available for planning purpos

> Perform an Internet or electronic library search on “close underperforming departments,” “unprofitable products,” or a similar phrase to locate an example of a company that has closed unprofitable stores or dropped unprofitable products or services. Desc

> Merchant Company manufactures and sells three models of electronic printers. Ken Gail, president of the company, is considering dropping model JT484 from its product line because the company has experienced losses for this product during the past three q

> Hollenberry, Inc., is a successful mail-order catalog business with customers worldwide. The company’s headquarters is in a small town some distance from any major metropolitan area. Sales have grown steadily over the years, and the call center facilitie

> Beau’s Bistro has a reputation for providing good value for its menu prices. The desserts, developed by the pastry chef, are one of the distinctive features of the menu. The pastry chef has just given notice that he will relocate to another city in a mon

> Genis Battery Company is considering accepting a special order for 50,000 batteries that it received from a discount retail store. The order specified a price of $4 per unit, which reflects a discount of $0.50 per unit relative to the companyâ&#128

> Anderson Department Stores is considering the replacement of the existing elevator system at its downtown store. A new system has been proposed that runs faster than the existing system, experiences few breakdowns, and as a result promises considerable s

> Wedmark Corporation’s Cupertino, California, plant manufactures chips used in personal computers. Its practical capacity is 2,000 chips per week, and fixed costs are $75,000 per week. The selling price is $500 per chip. Production this quarter is 1,600 c

> Dawson Company produces and sells 80,000 boxes of specialty foods each year. Each box contains the same assortment of food. The company has computed the following annual costs: Dawson normally charges $25 per box. A new distributor has offered to purcha

> What does control mean in a decentralized organization?

> Capilano Containers Company specializes in making high-quality customized containers to order. Its agreement with the labor union ensures employment for all its employees and a fixed payroll of $80,000 per month, including fringe benefits. This payroll m

> Last month, Capetini Capacitor Company sold capacitors to its distributors for $250 per capacitor. The sales level of 3,000 capacitors per month was less than the single-shift capacity of 4,400 capacitors at its plant located in San Diego. Variable produ

> Johnson Company and Smith Company are competing firms that offer limousine service from the Charlesburg airport. While Johnson pays most of its employees on a per-ride basis, Smith prefers to pay its employees fixed salaries. Information about the sellin

> Shannon O’Reilly is trying to decide whether to continue to take public transportation to work or to purchase a car. Before making her decision, she would like to compare the cost of using public transportation and the cost of driving a car. Required (a

> Classify each of the following as a variable or fixed cost with respect to a unit of production: a. Salaries of production supervisors. b. Steel used in automobile production. c. Wood used in furniture production. d. Salaries for factory custodial staff.

> Berry Company produces and sells 30,000 cases of fruit preserves each year. The following information reflects a breakdown of its costs: Berry marks up its prices 40% over full costs. It has surplus capacity to produce 15,000 more cases. A French superm

> Gilmark Company has 10,000 obsolete lamps carried in inventory at a cost of $12 each. They can be sold as they are for $4 each. They can be reworked, however, at a total cost of $55,000 and sold for $10 each. Required Determine whether it is worthwhile

> Florida Favorites Company produces toy alligators and toy dolphins. Fixed costs are $1,290,000 per year. Sales revenue and variable costs per unit are as follow: Required (a) Suppose the company currently sells 140,000 alligators per year and 60,000 dol

> A&Z Company sells products both domestically and internationally. Fixed costs totaled $5,000,000 last year. In an effort to increase its total sales volume, A&Z plans to spend an additional $1,280,000 in advertising next year. Expected average pr

> What is decentralization?

> Last year, Able Co. recorded sales revenues of $1,260,000, variable costs of $570,000, and fixed costs of $480,500. Required (a) At what sales dollar level will Able earn a before-tax target profit of $250,000? (b) At what sales dollar level will Able b

> Patterson Parkas Company’s sales revenue is $30 per unit, variable costs are $19.50 per unit, and fixed costs are $147,000. Required (a) Compute Patterson’s contribution margin per unit and contribution margin ratio. (b) Determine the number of units Pa

> Morton Medical Institute operates a 300-bed hospital and offers a number of specialized medical services. Morton’s hospital facility and equipment are leased on a long-term basis. The hospital charges $2,000 per patient day. On the basis of past cost dat

> Klear Camera Company is considering introducing a new video camera. Its selling price is projected to be $1,000 per unit. Variable manufacturing costs are estimated to be $500 per unit. Variable selling costs are 10% of sales dollars. The company expects

> Percy’s is a small hamburger shop catering mainly to students at a nearby university. It sells hamburgers and vegetarian burgers and is open for business from 11:00 A.M. until 11:00 P.M., Monday through Friday. The owner, Percy Luk, employs two cooks, on

> Classify each of the following as a variable or fixed cost with respect to a unit of product that is sold: a. Commissions paid to sales personnel. b. Advertising expenses. c. Salaries of staff processing orders. d. Salary of the chief executive officer.

> Boyd Wood Company makes a regular and a deluxe grade of wood floors. Regular grade is sold at $16 per square yard, and the deluxe grade is sold at $25 per square yard. The variable cost of making the regular grade is $10 per square yard. It costs an extr

> Superstore is a large discount supermarket. Profits have declined, so the manager has collected data on revenues and costs for different food categories. The following data pertain to some of the frozen foods that Superstore sells. To facilitate comparis

> The manufacturing capacity of Ritter Rotator Company’s plant facility is 60,000 rotators per quarter. Operating results for the first quarter of this year are as follows. Sales (36,000 units at $10) $360,000 Variable manufacturing and selling costs

> Shorewood Shoes Company makes and sells a variety of leather shoes for children. For its current mix of different models and sizes, the average selling price and costs per pair of shoes are as follows: Shoes are manufactured in batch sizes of 100 pairs.

> How does productivity (the ratio of sales to investment) affect return on investment?

> McGee Corporation’s Olympia plant produces a module used in automobile manufacturing. The company’s practical capacity is 4,000 modules per week. The selling price is $900 per module. Production this quarter is 3,000 modules per week, and all of the modu

> George’s Grill analyzes profitability of three operating units: restaurant, bar, and billiards room. Revenues, variable costs, and attributable fixed costs (which can be avoided if the unit is eliminated) for each unit are as follows:

> Fab Motors has manufactured compressor parts at its plant in Pitcairn, Indiana, for the past 25 years. An outside supplier, Superior Compressor Company, has offered to supply compressor model C38 at a price of $200 per unit. Current unit manufacturing co

> Premier Company manufactures gear model G37, which is used in several of its farm-equipment products. Annual production volume of G37 is 20,000 units. Unit costs for G37 are as follow: Direct materials costs………………………………………….$55 Direct labor costs ……………

> Kane Company is considering outsourcing a key component. A reliable supplier has quoted a price of $64.50 per unit. The following costs of the component when manufactured in-house are expressed on a per unit basis: Direct materials……………………$23.40 Direct l

> The assembly division of Davenport, Inc., is bidding on an order of 50,000 smart phones. The division is eager to get this order because it has a substantial amount of unused plant capacity. The variable cost for each smart phone is $140 in addition to t

> Joyce Printers, Inc., is considering replacing its current printing machines with newer, faster, and more efficient printing technology. The following data have been compiled: The existing machines can be disposed of now for $40,000. Keeping them will c

> McKinnon Company’s plant manager is considering buying a new grinding machine to replace an old grinding machine or overhauling the old one to ensure compliance with the plant’s high-quality standards. The following da

> Don Baxter’s 6-year-old Impala requires repairs estimated at $5,400 to make it roadworthy again. His friend Aaron Bloom suggested that he buy a 6-year-old Ford Escort instead for $5,400 cash. Aaron estimated the following costs for the

> Healthy Hearth specializes in lunches for health-conscious people. The company produces a small selection of lunch offerings each day. The menu selections may vary from day to day, but Healthy Hearth charges the same price per menu selection because it a

> How does efficiency (the ratio of income to sales) affect return on investment?

> What is the assigned responsibility in a revenue center?

> Joel purchased 100 shares of stock for $20 per share. During the year, he received dividend checks amounting to $150. Joel recently sold the stock for $32 per share. What was Joel’s return on the stock?

> Jenna purchased a 5-acre parcel of land for $28,000 and sold it two years later for $41,000. What was her return on that investment?

> Peter is married and has two children. He wants to be sure that he has sufficient life insurance to take care of his family if he dies. Peter’s wife is a homemaker but attends college part-time pursuing a law degree. It will cost approximately $40,000 fo

> Shortly after Steve graduated from college, he considered a whole life insurance policy that would provide $10,000 in life insurance protection and accumulate a cash value of twice his current annual income by age 65. Two years later, after Steve’s marri

> Bart is a college student. Because his plan is to get a job immediately after graduation, he determines that he will need about $250,000 in life insurance to provide for his future wife and children (Bart is not married yet and does not have any children

> Considering the information in the previous problem, how much life insurance should they purchase for Mary?

> Marty and Mary have jobs and contribute to the household expenses according to their income. Marty contributes 75% of the expenses, and Mary contributes 25%. Currently, their household expenses are $30,000 annually. Marty and Mary have three children. Th

> Brad tells you about his plans to upgrade his auto insurance. Specifically, he would like to add several types of coverage to his policy, such as uninsured motorist coverage and rental car coverage. Recall that Brad is 30 years old. He also has a driving

> Brad tells you about his plans to upgrade his auto insurance. Specifically, he would like to add several types of coverage to his policy, such as uninsured motorist coverage and rental car coverage. Recall that Brad is 30 years old. He also has a driving

> Brad tells you about his plans to upgrade his auto insurance. Specifically, he would like to add several types of coverage to his policy, such as uninsured motorist coverage and rental car coverage. Recall that Brad is 30 years old. He also has a driving

> Recall that the Sampsons have a goal of saving about $300 per month ($3,600 per year) for their children’s college education. They want to estimate how this money would grow over time if they invest it in stock. Dave and Sharon have never owned stock bef

> Brad Brooks listened to your advice about reducing the use of his smartphone (which saves him $250 per month) and reducing his entertainment expenses by $200 per month. He still rents the condo for $1,000 per month. However, now Brad has the urge to upgr

> What is an amortization table? What does each mortgage payment represent?