Torrance Technology Company (TTC) is developing a new touch-screen smartphone to compete in the cellular phone industry. The company will sell the phones at wholesale prices to cell phone companies, which will in turn sell them in retail stores to the final customer. TTC has undertaken the following activities in its value chain to bring its product to market: A. Perform market research on competing brands B. Design a prototype of the TTC smartphone C. Market the new design to cell phone companies D. Manufacture the TTC smartphone E. Process orders from cell phone companies F. Deliver the TTC smartphones to the cell phone companies G. Provide online assistance to cell phone users for use of the TTC smartphone H. Make design changes to the smartphone based on customer feedback During the process of product development, production, marketing, distribution, and customer service, TTC has kept track of the following cost drivers: Number of smartphones shipped by TTC Number of design changes Number of deliveries made to cell phone companies Engineering hours spent on initial product design Hours spent researching competing market brands Customer-service hours Number of smartphone orders processed Machine hours required to run the production equipment Required: 1. Identify each value-chain activity listed at the beginning of the exercise with one of the following value-chain categories: a. Design of products and processes b. Production c. Marketing d. Distribution e. Customer service 2. Use the list of preceding cost drivers to find one or more reasonable cost drivers for each of the activities in TTC’s value chain.
> Basix Inc. calculates direct manufacturing labor variances and has the following information: Actual hours worked……………….200 Standard hours……………………...250 Actual rate per hour…………………$12 Standard rate per hour……………$10 Given the information above, which of
> Atlantic Company has a manufacturing facility in Brooklyn that manufactures robotic equipment for the auto industry. For Year 1, Atlantic collected the following information from its main production line: Actual quantity purchased…………200 units Actual qua
> Amalgamated Manipulation Manufacturing’s (AMM) standards anticipate that there will be 3 pounds of raw material used for every unit of finished goods produced. AMM began the month of May with 5,000 pounds of raw material, purchased 15,000 pounds for $19,
> All of the following statements regarding standards are accurate except: a. Standards allow management to budget at a per-unit level. b. Ideal standards account for a minimal amount of normal spoilage. c. Participative standards usually take longer to im
> How can management accountants help improve quality and achieve timely product deliveries?
> Metal Shelf Company’s standard cost for raw materials is $4.00 per pound and it is expected that each metal shelf uses two pounds of material. During October Year 2, 25,000 pounds of materials are purchased from a new supplier for $97,000 and 13,000 shel
> Mary Jacobs, the controller of the Jenks Company is working on Jenks’ cash budget for year 2. She has information on each of the following items: I. Wages due to workers accrued as of December 31, year 1. II. Limits on a line of credit that may be used t
> Elmhurst Corporation is considering changes to its responsibility accounting system. Which of the following statements is/are correct for a responsibility accounting system. I. In a cost center, managers are responsible for controlling costs but not reve
> Superior Industries sales budget shows quarterly sales for the next year as follows: Quarter 1–10,000; Quarter 2–8,000; Quarter 3–12,000; Quarter 4–14,000. Company policy is to have a target finished-goods inventory at the end of each quarter equal to 20
> Which of the following statements is correct regarding the drivers of operating and financial budgets? a. The sales budget will drive the cost of goods sold budget. b. The cost of goods sold budget will drive the units of production budget. c. The produc
> Which of the following statements is correct regarding the components of the master budget? a. The cash budget is used to create the capital budget. b. Operating budgets are used to create cash budgets. c. The manufacturing overhead budget is used to cre
> Nobis Company uses an ABC system. Which of the following statements is/are correct with respect to ABC? I. Departmental costing systems are a refinement of ABC systems. II. ABC systems are useful in manufacturing, but not in merchandising or service indu
> Conroe Company is reviewing the data provided by its management accounting system. Which of the following statements is/are correct? I. A cost driver is a causal factor that increases the total cost of a cost object. II. Cost drivers may be volume based
> Under Stanford Corporation’s job costing system, manufacturing overhead is applied to work in process using a predetermined annual overhead rate. During November, Year 1, Stanford’s transactions included the following: Direct materials issued to producti
> ABC Company uses job-order costing and has assembled the following cost data for the production and assembly of item X: Direct manufacturing labor wages…………….$35,000 Direct material used…………………………………..70,000 Indirect manufacturing labor……………………….4,000 Ut
> Management accounting deals only with costs.” Do you agree? Explain.
> For which of the following industries would job-order costing most likely not be appropriate? a. Small business printing. b. Cereal production. c. Home construction. d. Aircraft assembly.
> Sturdy Manufacturing Co. assembled the following cost data for job order #23: Direct manufacturing labor………………………..$80,000 Indirect manufacturing labor……………………….12,000 Equipment depreciation………………………………..1,000 Other indirect manufacturing costs………………..1,
> Which of the following does not accurately describe the application of job-order costing? a. Finished goods that are purchased by customers will directly impact cost of goods sold. b. Indirect manufacturing labor and indirect materials are part of the ac
> Once a company exceeds its breakeven level, operating income can be calculated by multiplying: a. The sales price by unit sales in excess of breakeven units. b. Unit sales by the difference between the sales price and fixed cost per unit. c. The contribu
> A company needs to sell 10,000 units of its only product in order to break even. Fixed costs are $110,000, and the per unit selling price and variable costs are $20 and $9, respectively. If total sales are $220,000, the company’s margin of safety will be
> Under the contribution income statement, a company’s contribution margin will be: a. Higher if fixed SG&A costs decrease. b. Higher if variable SG&A costs increase. c. Lower if fixed manufacturing overhead costs decrease. d. Lower if variable manufacturi
> During the current year, XYZ Company increased its variable SG&A expenses while keeping fixed SG&A expenses the same. As a result, XYZ’s: a. Contribution margin and gross margin will be lower. b. Contribution margin will be higher, while its gross margin
> Jack’s Jax has total fixed costs of $25,000. If the company’s contribution margin is 60%, the income tax rate is 25% and the selling price of a box of Jax is $20, how many boxes of Jax would the company need to sell to produce a net income of $15,000? a.
> Applewhite Corporation, a manufacturing company, is analyzing its cost structure in a project to achieve some cost savings. Which of the following statements is/are correct? I. The cost of the direct materials in Applewhite’s products is considered a var
> Welch Men’s Clothing’s revenues and cost data for 2017 are as follows: Mr. Welch, the owner of the store, is unhappy with the operating results. An analysis of other operating costs reveals that it includes $30,000 va
> Explain the term supply chain and its importance to cost management.
> Genesee Music Society is a not-for-profit organization that brings guest artists to the community’s greater metropolitan area. The music society just bought a small concert hall in the center of town to house its performances. The lease payments on the c
> The Kenosha Company has three product lines of beer mugs—A, B, and C—with contribution margins of $5, $4, and $3, respectively. The president foresees sales of 175,000 units in the coming period, consisting of 25,000 units of A, 100,000 units of B, and 5
> 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
> Braided Rugs, Inc., is considering three possible countries for the sole manufacturing site of its newest area rug: Italy, Portugal, and Thailand. All area rugs are to be sold to retail outlets in the United States for $250 per unit. These retail outlets
> Cover Rugs is holding a 2-week carpet sale at Josh’s Club, a local warehouse store. Cover Rugs plans to sell carpets for $950 each. The company will purchase the carpets from a local distributor for $760 each, with the privilege of returning any unsold u
> Suppose Morrison Corp.’s breakeven point is revenues of $1,100,000. Fixed costs are $660,000. Required: 1. Compute the contribution margin percentage. 2. Compute the selling price if variable costs are $16 per unit. 3. Suppose 75,000 units are sold. Com
> Perfect Fit Jeans Co. sells blue jeans wholesale to major retailers across the country. Each pair of jeans has a selling price of $50 with $35 in variable costs of goods sold. The company has fixed manufacturing costs of $2,250,000 and fixed marketing co
> The Home Style Eats has two restaurants that are open 24 hours a day. Fixed costs for the two restaurants together total $430,500 per year. Service varies from a cup of coffee to full meals. The average sales check per customer is $8.75. The average cost
> CVP exercises. The Doral Company manufactures and sells pens. Currently, 5,000,000 units are sold per year at $0.50 per unit. Fixed costs are $900,000 per year. Variable costs are $0.30 per unit. Consider each case separately: Required: 1.a. What is the
> The Deli-Sub Shop owns and operates six stores in and around Minneapolis. You are given the following corporate budget data for next year: Revenues…………………..$11,000,000 Fixed costs…………………$ 3,000,000 Variable costs…………….$ 7,500,000 Variable costs change b
> Describe the business functions in the value chain.
> Sunset Travel Agency specializes in flights between Toronto and Jamaica. It books passengers on Hamilton Air. Sunset’s fixed costs are $23,500 per month. Hamilton Air charges passengers $1,500 per round-trip ticket. Calculate the number of tickets Sunset
> Garrett Manufacturing sold 410,000 units of its product for $68 per unit in 2017. Variable cost per unit is $60, and total fixed costs are $1,640,000. Required: 1. Calculate (a) contribution margin and (b) operating income. 2. Garrett’s current manufact
> Kindmart is an international retail store. Kindmart’s managers are considering implementing a new business-to-business (B2B) information system for processing merchandise orders. The current system costs Kindmart $2,000,000 per month and $55 per order. K
> Juicy Beauty manufactures and sells a face cream to small specialty stores in the greater Los Angeles area. It presents the monthly operating income statement shown here to George Lopez, a potential investor in the business. Help Mr. Lopez understand Jui
> Consolidated Motors specializes in producing one specialty vehicle. It is called Surfer and is styled to easily fit multiple surfboards in its back area and top-mounted storage racks. Consolidated has the following manufacturing costs: Plant management
> Bridget Ashton is getting ready to open a small restaurant. She is on a tight budget and must choose between the following long-distance phone plans: Plan A: Pay 10 cents per minute of long-distance calling. Plan B: Pay a fixed monthly fee of $15 for up
> Each of the following cost items pertains to one of these companies: Best Buy (a merchandising-sector company), KitchenAid (a manufacturing-sector company), and HughesNet (a service-sector company): a. Cost of phones and computers available for sale in B
> Gayle’s Glassworks makes glass flanges for scientific use. Materials cost $1 per flange, and the glass blowers are paid a wage rate of $28 per hour. A glass blower blows 10 flanges per hour. Fixed manufacturing costs for flanges are $28,000 per period. P
> National Training recently started a business providing training events for corporations. In order to better understand the profitability of the business, the owners asked you for an analysis of costs—what costs are fixed, what costs are variable, and so
> The representative cost drivers in the right column of this table are randomized so they do not match the list of functions in the left column. Function………………………………………..Representative Cost Driver 1. Accounts payable………………………..A. Number of invoices sent
> How can a management accountant help formulate strategy?
> Gummy Land Candies manufactures jaw-breaker candies in a fully automated process. The machine that produces candies was purchased recently and can make 5,000 per month. The machine costs $6,500 and is depreciated using straight-line depreciation over 10
> Hannah Gilpin is the controller of Blakemore Auto Glass, a division of Eastern Glass and Window. Blakemore replaces and installs windshields. Her division has been under pressure to improve its divisional operating income. Currently, divisions of Eastern
> Maria Mendez is division controller and James Dalton is division manager of the Hestor Shoe Company. Mendez has line responsibility to Dalton, but she also has staff responsibility to the company controller. Dalton is under severe pressure to achieve the
> The Cooper Furniture Company of Potomac, Maryland, assembles two types of chairs (Recliners and Rockers). Separate assembly lines are used for each type of chair. Required: Classify each cost item (A–I) as follows: a. Direct or indirect (D or I) cost fo
> Band Box Entertainment (BBE) operates a large store in Atlanta, Georgia. The store has both a movie (DVD) section and a music (CD) section. BBE reports revenues for the movie section separately from the music section. Required: Classify each cost item (
> Market Focus is a marketing research firm that organizes focus groups for consumer-product companies. Each focus group has eight individuals who are paid $60 per session to provide comments on new products. These focus groups meet in hotels and are led b
> California Tires manufactures two types of tires that it sells as wholesale products to various specialty retail auto supply stores. Each tire requires a three-step process. The first step is mixing. The mixing department combines some of the necessary d
> Minnesota Office Products (MOP) produces three different paper products at its Vaasa lumber plant: Supreme, Deluxe, and Regular. Each product has its own dedicated production line at the plant. It currently uses the following three-part classification fo
> What is the relationship between management by exception and variance analysis?
> The sales forecast is the cornerstone for budgeting.” Why?
> Describe four decisions for which ABC information is useful.
> What is the advantage of using computerized source documents to prepare job-cost records?
> List four reasons for using standard costs.
> Why might managers find a flexible-budget analysis more informative than a static-budget analysis?
> Distinguish between a favorable variance and an unfavorable variance.
> What are two possible sources of information a company might use to compute the budgeted amount in variance analysis?
> The following information was extracted from the accounting records of Roosevelt Manufacturing Company: Direct materials purchased 80,000 Direct materials used 76,000 Direct manufacturing labor costs 10,000 Indirect manufacturing labor costs
> Management accounting should not fit the straitjacket of financial accounting.” Explain and give an example.
> For each of the following items, identify which of the management accounting guidelines applies: cost–benefit approach, behavioral and technical considerations, or different costs for different purposes. 1. Analyzing whether to produce a component needed
> For each of the following items, identify which of the management accounting guidelines applies: cost–benefit approach, behavioral and technical considerations, or different costs for different purposes. 1. Analyzing whether to keep the billing function
> Budgets meet the cost–benefit test. They force managers to act differently.” Do you agree? Explain.
> Budgeted performance is a better criterion than past performance for judging managers.” Do you agree? Explain.
> Define master budget.
> Define Kaizen budgeting.
> Westover Motors is a small car dealership. On average, it sells a car for $32,000, which it purchases from the manufacturer for $28,000. Each month, Westover Motors pays $53,700 in rent and utilities and $69,000 for salespeople’s salaries. In addition to
> What is an activity-based approach to designing a costing system?
> Why should managers worry about product overcosting or undercosting?
> Activity-based costing is the wave of the present and the future. All companies should adopt it.” Do you agree? Explain.
> Year 1 financial data for the ABC Company is as follows: Sales $5,000,000 Direct materials 850,000 Direct manufacturing labor 1,700,000 Variable manufacturing overhead 400,000 Fixed manufacturing overhead 750,000 Variable SG&A 150,0
> ABC systems only apply to manufacturing companies.” Do you agree? Explain.
> Fill in the blanks for each of the following independent cases. Variable Operating Costs Fixed Costs Total Costs Income Margin Percentage $1,600 $ 00 Contribution Case Revenues $600 $ 800 a. $2,500 $ 500 $1,200 b. $200 $300 $ 500 C. d. $200 25%
> Describe briefly why Electronic Data Interchange (EDI) is helpful to managers.
> When might a company use budgeted costs rather than actual costs to compute direct-labor rates?
> Describe two ways in which a house-construction company may use job-cost information.
> In CVP analysis, gross margin is a less-useful concept than contribution margin.” Do you agree? Explain briefly.
> How can a company with multiple products compute its breakeven point?
> What are three common features of cost accounting and cost management?
> Define product cost. Describe three different purposes for computing product costs.
> Where does the management accounting function fit into an organization’s structure?
> Frisco Corporation is analyzing its fixed and variable costs within its current relevant range. As its cost driver activity changes within the relevant range, which of the following statements is/are correct? I. As the cost driver level increases, total
> What is operating leverage? How is knowing the degree of operating leverage helpful to managers?
> Knowledge of technical issues such as computer technology is a necessary but not sufficient condition to becoming a successful management accountant.” Do you agree? Why?
> What three guidelines help management accountants provide the most value to managers?
> How does an increase in the income tax rate affect the breakeven point?
> Describe the five-step decision-making process.
> What is the relevant range? What role does the relevant-range concept play in explaining how costs behave?
> Give examples of two cost objects in companies using job costing.
> Define contribution margin, contribution margin per unit, and contribution margin percentage.
> Name three factors that will affect the classification of a cost as direct or indirect.
> How does a job-costing system differ from a process-costing system?
> Comprehensive Care Nursing Home is required by statute and regulation to maintain a minimum 3 to 1 ratio of direct service staff to residents to maintain the licensure associated with the Nursing Home beds. The salary expense associated with direct servi
