Question:

> Harpers Ltd. is a UK manufacturer of casual shoes for men and women. It has sustained strong growth in the UK market in recent years due to its close attention to fashion trends. Harpers’s shoes also have a good reputation for quality a

> Scott Power produces batteries. Scott has determined its contribution margin to be $8 per battery and their contribution margin ratio to be 0.4. What is the effect on operating profit from the sale of one additional battery? One additional dollar of sale

> Brief Exercises 7-11 through 7-14 involve departmental cost allocation with two service departments and two production departments. Use the following information for these four exercises: What is the amount of service department cost allocated to P1 an

> Caldwell Supply, a wholesaler, has determined that its operations have three primary activities: purchasing, warehousing, and distributing. The firm reports the following operating data for the year just completed: Caldwell buys 100,000 units at an ave

> VIP-MD is a health maintenance organization (HMO) located in North Carolina. Unlike the traditional fee-for-service model that determines the payment according to the actual services used or costs incurred, VIP-MD receives a fixed, prepaid amount from su

> Chapter 11 Morrow Company is a large manufacturer of auto parts for automakers and parts distributors. Although Morrow has plants throughout the world, most are in North America. Morrow is known for the quality of its parts and for the reliability of its

> UR Safe Systems installs home security systems. Two of its systems, the ICU 100 and the ICU 900, have these characteristics: The ICU 100 sells for $810 installed, and the ICU 900 sells for $1,520 installed. Required: 1. What are the current gross prof

> Estimated cash-flow data for each of two projects, A and B, and the discount rate, r, to be used for the analysis of capital investment projects are given below: Discount rate, r = 10.0%. Required: 1. In a capital budgeting context, explain the differ

> A proposed investment has the following projected after-tax cash flows over its 3-year life: Initial outlay (time 0) = ($1,000) End of year 1 = $2,000 End of year 2 = $2,000 End of year 3 = ($3,700) Required: 1. In a capital budgeting context, explain t

> Myers Manufacturing Inc. wants to build a booth for painting the boxes it makes for small transformers used to power neon signs. The company can choose either a solvent-based or a powder-based paint process. The following table summarizes the costs and i

> You and your spouse have recently inherited money from a distant relative and are considering a number of investment opportunities, one of which would involve residential real estate. Specifically, you have an opportunity to purchase an apartment complex

> Because of increased consumer demand for fuel-efficient, alternative-energy automobiles, Global Auto Company is considering investing in a new hybrid crossover vehicle. Development costs each year for a 2-year period for this new vehicle are estimated as

> The Mendoza Company discussed in the chapter is now considering replacing a piece of equipment that the company uses to monitor the integrity of metal pipes used for deep-sea drilling purposes. The company’s pretax WACC (discount rate)

> Williams & Williams Co. produces plastic spray bottles and wants to earn a profit of $200,000 next quarter. Variable cost is $0.50 per bottle, fixed costs of $400,000, and sell the bottles for $1.00 each. How many bottles must they sell to meet the profi

> Rob Roy Corporation has been using its present facilities at its annual full capacity of 10,000 units for the last 3 years. Still, the company is unable to keep pace with continuing demand for the product that is estimated to be 25,000 units annually. Th

> Use the information in Problem 12-55 to answer the following questions (for calculations below, do NOT round data to 000s—use raw data). Required: 1. What would the maximum machine annual operating cost of the overhauled AccuDril need to be (before tax)

> The management of Devine Instrument Company is considering the purchase of a new drilling machine, model RoboDril 1010K. According to the specifications and testing results, RoboDril will substantially increase productivity over AccuDril X10, the machine

> You and several of your classmates have just graduated from college and are evaluating various investment opportunities, including a startup company that would produce high-quality jackets embroidered with a college logo. If demand for this customized pr

> Refer to the XYZ Company example in the chapter and the results in Panels A and B of Exhibit 12.7. On the basis of this information, management of the company has decided to delay the implementation of the project for 1 year. Those managers are now inter

> This problem pertains to the XYZ Company example in the body of the chapter and the associated discussion of real options. Required: 1. Define the term real option. Provide an example of each of the four common types of real options. 2. Define the terms

> Use the data in Problem 12-50 for Bob Jensen Inc. and MACRS. The asset qualifies as a 5-year property. Required: Compute the following for the proposed investment: 1. Its payback period (in years) under the assumption that the cash inflows occur evenly

> Use the same information for this problem as you did for Problem 12-49, except that the discount rate is 10% (not 12%), the investment is subject to taxes, and the projected pretax operating cash inflows are as follows: Jensen has been paying 25% for c

> Bob Jensen Inc. purchased a $650,000 machine to manufacture specialty taps for electrical equipment. Jensen expects to sell all it can manufacture in the next 10 years. To encourage capital investments, the government has exempted taxes on profits from n

> Home Service Company offers monthly service plans to provide prepared meals that are delivered to customers’ homes and need only be heated in a microwave or conventional oven. Home Service offers two monthly plans, premier cuisine and h

> Oxicon, Inc. manufactures several different types of candy for various retail stores. The accounting manager has requested that you determine the sales dollars required to break even for next quarter based on past financial data. Your research tells you

> “I’m not looking forward to breaking the news,” groaned Charlie Wettle, the controller of Meyer Paint Company. He and Don Smith, state liaison for the firm, were returning from a meeting with represen

> High Point Furniture Company (HPF) manufactures very high-quality furniture for sale directly to exclusive hotels, interior designers, and select retail outlets throughout the world. HPF’s products include upholstered furniture, dining

> Humbolt Electric manufactures electronic subcomponents that be sold at the end of Process #1 or processed further, in Process #2, and then sold. Currently, the entire output of Process #1 can be sold at a price of $2.00 per unit. The output of Process #2

> GianAuto Corporation manufactures parts and components for manufacturers and suppliers of parts for automobiles, vans, and trucks. Sales have increased each year based, in part, on the company’s excellent record of customer service and

> Let us revisit the Windbreakers Inc. situation from the chapter. Information from Exhibit 11.16B is reproduced below and shows the results after Gale was dropped and the avoidable marketing expenses were also removed. We will now assume that the produc

> If not assigned previously, Problem 9-50 and 9-51 (CVP Analysis; Sustainability; Uncertainty; Decision Tables) can be assigned here. Problem 9-51: Required: 1. The information in Problem 9-50 presents a decision problem similar to the choice of cost str

> Creighton Corporation produces a variety of consumer electronic products. Unit selling prices and costs for three models of one of its product lines are as follows: Variable overhead is charged to products on the basis of direct labor dollars; fixed ov

> RayLok Incorporated has invented a secret process to improve light intensity and, as a result, manufactures a variety of products related to this process. Each product is independent of the others and is treated as a separate profit/loss division. Produc

> Hillside Furniture Company makes outdoor furniture from recycled products, including plastics and wood by-products. Its three furniture products are gliders, chairs with footstools, and tables. The products appeal primarily to cost-conscious consumers an

> Merchants’ Bank (MB) is a large regional bank operating in 634 locations in the southeastern United States. Until 2014, the bank operated a call center for customer inquiries out of a single location in Atlanta, Georgia. MB understood the importance of t

> The Cobb Clinic treats walk in patients for various illnesses. The accounting manager has estimated they have $5,000 in monthly fixed costs in addition to a $20 cost per patient. If the charge is $30 per visit, how many visits per month does the clinic n

> The Midwest Division of the Paibec Corporation manufactures subassemblies used in Paibec’s final products. Lynn Hardt of Midwest’s profit planning department has been assigned the task of determining whether Midwest should continue to manufacture a subas

> Martens Inc. manufactures a variety of electronic products. It specializes in commercial and residential products with moderate-to-large electric motors such as pumps and fans. Martens is now looking closely at its production of attic fans, which include

> Williams Company, located in southern Wisconsin, manufactures a variety of industrial valves and pipe fittings that are sold to customers in nearby states. Currently, the company is operating at about 70 percent capacity and is earning a satisfactory ret

> Assume the same information as for Problem 11-33, except that the $12.00 fixed manufacturing overhead cost per unit consists of facility-level costs ($9.00/unit at the 20,000-unit output level), with the remainder being setup-related (i.e., batch-level)

> As noted in the chapter, some individuals allege that the practice of tying managerial rewards to budgeted performance has dysfunctional consequences, including (but not limited to) gaming behavior. Search the Internet and pertinen literature (e.g., Mich

> Norton Company, a manufacturer of infant furniture and carriages, is in the initial stages of preparing the annual budget for the coming year. Scott Ford recently joined Norton’s accounting staff and is interested in learning as much as possible about th

> Triple-F Health Club (Family, Fitness, and Fun) is a not-for-profit family-oriented health club. The club's board of directors is developing plans to acquire more equipment and to expand club facilities. The board plans to purchase about $25,000 new equi

> National Auto Insurance company underwrites automobile coverage for the consumer market. As part of the annual planning process, National requires monthly estimates for number of policies in force and the amount of premium revenue associated with this vo

> National Insurance Company underwrites property insurance for homeowners. You have been charged with the responsibility of developing a portion of the monthly budget for the coming 12-month period for the company. You have collected the following driver

> As a newly hired management accountant, you have been asked to prepare a profit plan for the company for which you work. As part of this task, you’ve been asked to do some what-if analyses. Following is the budgeted information regarding the coming year:

> Ford Tops manufactures hats for baseball teams. Ford has fixed costs of $175,000 per quarter and each hat sells for $20. If the variable cost per hat is $10, how many hats must Ford sell each quarter to break even?

> CompUSA Inc. sells computer hardware. It also markets related software and software-support services. The company prepares annual forecasts for sales, which are given below. In a typical month, total sales are broken down as follows: cash sales, 30%; VIS

> (Use information in Problem 10-50 for Spring Manufacturing Company.) Spring Manufacturing Company has had a continuous-improvement (kaizen) program for the last two years. According to the kaizen program, the firm is expected to manufacture C12 and D57 w

> Spring Manufacturing Company makes two components identified as C12 and D57. Selected budgetary data for 2022 follow: The firm expects the average wage rate to be $25 per hour in 2022. Spring Manufacturing uses direct labor hours to apply overhead. Ea

> Goldberg Company is a retail sporting goods store that uses an accrual accounting system. Facts regarding its operations follow: ∙ Sales are budgeted at $250,000 for December and $225,000 for January, terms 1/eom, n/60. âˆ&#1

> Required: 1. The information in Problem 9-50 presents a decision problem similar to the choice of cost structure (variable vs. fixed) discussed in the chapter. Here, the issue is whether to pay an upfront premium (extra fixed cost) for the hybrid model i

> With gasoline prices increasing rapidly in recent years, consumers have moved to high miles-per-gallon (mpg) vehicles, in particular hybrid vehicles that rely on a battery as well as a gasoline engine for even greater mpg. The new vehicles save money on

> SolarFlex is a small but very innovative manufacturer of cutting-edge solar panels. A significant portion of the company’s success is due to technologically superior product design. SolarFlex has invented a flexible photovoltaic panel t

> Hartford Publishing Company (HPC) specializes in international business news publications. Its principal product is HPC-Monthly, which is mailed to subscribers the first week of each month. A weekly version, called HPC-Weekly, is also available to subscr

> Using the information in Problem 9-46, complete the following: Required: 1. Compute the breakeven point in units for both the current and the proposed manufacturing plans, assuming that total setup costs vary with the number of batches and that the batc

> Felton Paper produces paper for textbooks. Felton plans to produce 500,000 cases of paper next quarter to sell at a price of $100 per case. The variable cost per case, including both manufacturing and selling costs, is $80. What is the total contribution

> Computer Graphics (CG) is a small manufacturer of electronic products for computers with graphics capabilities. The company has succeeded by being very innovative in product design. As a spin-off of a large electronics manufacturer (ElecTech), CG managem

> Garner Strategy Institute (GSI) presents executive level training seminars nationally. Eastern University (EU) has approached GSI to present 40 oneweek seminars during 2022. This activity level represents the maximum number of seminars that GSI is capabl

> Don Carson and two colleagues are considering the opening of a law office in a large metropolitan area to make inexpensive legal services available to people who cannot otherwise afford these services. They intend to provide easy access for their clients

> Lionel Corporation manufactures pharmaceutical products sold through a network of sales agents in the United States and Canada. The agents are currently paid an 18 percent commission on sales; that percentage was used when Lionel prepared the following b

> GoGo Juice is a combination gas station and convenience store located at a busy intersection. Recently a national chain opened a similar store only a block away; consequently sales have decreased for GoGo. In an effort to reclaim lost sales, GoGo has imp

> Leary and O’Donnell, a local CPA firm, has been asked to bid on a contract to perform audits for three counties in its home state. Because existing staff are fully scheduled, if the firm is awarded the contract, it must hire one new staff member at a sal

> General Hospital’s Cardiac Diagnostic Screening Center (CDSC) is contemplating purchasing a blood gas analysis machine at a cost of $960,000. Useful life for this machine is 10 years. The screening center currently serves 3,000 patients per year, 40 perc

> Horton Manufacturing Inc (HMI) is suffering from the effects of increased local and global competition for its main product, a lawn mower that is sold in discount stores throughout the United States. The following table shows the results of HMI’s operati

> Most businesses sell several products at varying prices. The products often have different unit variable costs. Thus, the total profit and the breakeven point depend on the proportions in which the products are sold. Sales mix is the relative contributio

> Bubba’s Western Wear is a western hat retailer in Lubbock, Texas. Although the store carries numerous styles of western hats, each hat has approximately the same price and invoice (purchase) cost, as shown in the following table. Sales

> Doughton Bearings produces ball bearings for industrial equipment. In evaluating their financial data from the previous year, the accounting manager has determined that their unit sales price is $25 per bearing and their unit variable cost is $18 per bea

> Companies that do business with the U.S. Defense Department (e.g., The Boeing Company, Lockheed Martin Corporation, General Electric, Northrop Grumman, and General Dynamics) typically develop large multiyear proposals for large-scale defense-related proj

> Regression analysis is commonly used to estimate costs. However, the usefulness of the results depends upon the quality of the data. Fletcher Inc., is a local delivery company. The employees handle deliveries for a variety of companies that have develop

> Electric IQ is a software company that develops systems for managing electricity use. The company has been successful, reaching $25 million in sales after its fourth year of operations. Now the company is considering a new product line that would focus o

> WasteTec is a large construction company that specializes in the construction of large waste water treatment plants and recycling plants. A major cost driver in either type of facility is the capacity of the plant. For example, the capacity of a recyclin

> Plantcity is a large nursery and retail store specializing in house and garden plants and supplies. Jean Raouth, the assistant manager, is in the process of budgeting monthly supplies expense for 2022. She assumes that in some way supplies expense is rel

> Fortune magazine prepares an annual report of Best Companies (http://fortune.com/best-companies/) that ranks companies for workplace environment. The top 15 companies that provided selected data in the 2019 ranking are shown below, together with some bas

> Bloomberg Businessweek magazine periodically publishes a ranking of the Top Companies: Best Places to Work. The ranking gives employers, employees, and potential employees a snapshot of the overall achievements these companies have made in creating a pro

> Ellington Company manufactures a line of motorbikes and dirt bikes under the trade name CrossCountry. The company has been in business for almost 20 years and has maintained a profitable share of the recreational vehicle market due to its reputation for

> Hat Tricks Company (HTC) is a Buffalo New York manufacturer of hats and gloves. Recently, the company purchased a new machine to aid in producing the hat product lines. Production efficiency on the new machine increases with the workforce experience. It

> The Air Force Museum Foundation has commissioned the purchase of 16 Four F Sixes, pre–World War II aircraft. They will be built completely from scratch to the exact specifications used for the originals. As further authentication, the aircraft will be ma

> Recently WalMart has offered a cellphone contract based on band-width used, with a minimum charge of $45 for up to 4 gigabytes (GB) of use, and an additional GB can be purchased at the following rates: $12 for an additional 1GB, $30 for an additional 3GB

> Business schools have commonly observed that when job opportunities are down, those interested in business seek to enter MBA programs. To test this hypothesis, we decided to look at the number of applicants for MBA programs and to compare that to the une

> Lexcon, Inc is a large manufacturer of affordable DVD players. Management recently became aware of rising expenses resulting from returns of malfunctioning products. As a starting point for further analysis, Paige Jennings, the controller, wants to test

> United States Motors Inc. (USMI) manufactures automobiles and light trucks and distributes them for sale to consumers through franchised retail outlets. As part of the franchise agreement, dealerships must provide monthly financial statements following t

> Packaging Products International (PPI) is a large manufacturer of packaging materials for supermarkets and other retail applications; the packages are used by customers to carry away their purchases. PPI has succeeded for many years by providing a high q

> The Maple Creek Ampitheatre is an outdoor pavilion that presents musical performers throughout a 6 month season, from late spring to early fall. Maple Creek presents a diverse venue of artists in a set of approximately 40 events each season. In order to

> Pilot Shop is a catalog business providing a wide variety of aviation products to pilots throughout the world. Maynard Shephard, the recently hired assistant controller, has been asked to develop a cost function to forecast shipping costs. The previous a

> Horizon BP in Antelope Park, Alaska, has noticed that utility bills are substantially higher the colder the average monthly temperature is. The only thing in the shop that uses natural gas is the furnace. Because of prevailing low temperatures, the furna

> Hardison Company manufactures glass for office buildings in Arizona and Southern California. As a result of age and wear, a critical machine in the production process has begun to produce quality defects. Hardison is considering replacing the old machine

> The Mac Davis Company specializes in the purchase, renovation, and resale of older homes. Jess employs several carpenters and painters to do the work for him. It is essential for him to have accurate cost estimates so he can determine total renovation co

> Cameron Manufacturing produces auto parts for auto manufacturers and parts wholesalers. The business is very competitive, and productivity measures are used throughout its eight manufacturing plants. Jill Owens, the manufacturing vice president, explains

> Sanders Bears produces stuffed animals. Sanders is in the process of implementing a cost forecasting system using the High-Low method. The variable cost per animal is $2.00 and the high and low costs used were $80,000 for 30,000 animals and $40,000 for 1

> Yonica Petroleum is a global manufacturer of specialty chemicals which are made from the waste products of the petroleum industry. Yonica in effect recycles a good portion of the waste from the refineries used by the large oil companies. The specialty ch

> The Marshall Company has a joint production process that produces two joint products and a by-product. The joint products are Ying and Yang, and the by-product is Bit. Marshall accounts for the costs of its products using the net realizable value method.

> Quality Chemicals manufactures three chemicals for industrial and retail customers. The largest volume product, S-210, is a sweetener used in the preparation of processed foods. The second, H-35, is used in the manufacture of commercial and household cle

> Multiproduct Corporation is a chemical manufacturer that produces two main products (Pepco-1 and Repke-3) and a by-product (SE-5) from a joint process. If Multiproduct had the proper facilities, it could process SE-5 further into a main product. The rati

> Johnston Adhesives Company makes three widely used industrial adhesives: A101, A204, and B216. See sales and production information for a gallon of each of the three adhesives in the following table. Most of Johnston’s customers ask for

> The Bean Company provides fresh coffee beans for restaurants, hotels and other food service companies. The Bean offers three types of coffee beans: Premium, Gourmet, and Quality. Each of the three coffees is produced in a joint process in which beans are

> Northwest Building Products (NBP) manufactures two lumber products from a joint milling process: residential building lumber (RBL) and commercial building lumber (CBL). A standard production run incurs joint costs of $450,000 and results in 80,000 units

> Choi Company manufactures two skin care lotions, Smooth Skin and Silken Skin, from a joint process. The joint costs incurred are $420,000 for a standard production run that generates 180,000 pints of Smooth Skin and 120,000 pints of Silken Skin. Smooth S

> Comprehensive Insurance Company has two product lines, health insurance and auto insurance. The two product lines are served by three operating departments which are necessary for providing the two types of services: claims processing, administration, an

> The Fleming Foundation is a charitable organization founded by Gaylord Fleming and Sandy Fleming. The Flemings intended for the charity to provide programs in health care for the elderly, particularly those in poverty. The two main program divisions of t