You are an accountant in the budgetary, projections, and special projects department of Fernetti Conductor, Inc., a large manufacturing company. The president, Richard Brown, asks you on very short notice to prepare some sales and income projections covering the next 2 years of the company’s much heralded new product lines. He wants these projections for a series of speeches he is making while on a 2-week trip to eight East Coast brokerage firms. The president hopes to bolster Fernetti’s stock sales and price. You work 23 hours in 2 days to compile the projections, hand-deliver them to the president, and are swiftly but graciously thanked as he departs. A week later, you find time to go over some of your computations and discover a miscalculation that makes the projections grossly overstated. You quickly inquire about the president’s itinerary and learn that he has made half of his speeches and has half yet to make. You are in a quandary as to what to do. Instructions: (a) What are the consequences of telling the president of your gross miscalculations? (b) What are the consequences of not telling the president of your gross miscalculations? (c) What are the ethical considerations to you and the president in this situation?
> Klean Fiber Company is the creator of Y-Go, a technology that weaves silver into its fabrics to kill bacteria and odor on clothing while managing heat. Y-Go has become very popular as an undergarment for sports activities. Operating at capacity, the comp
> Leno Company manufactures toasters. For the first 8 months of 2014, the company reported the following operating results while operating at 75% of plant capacity: Sales (350,000 units) ……………………………………..$4,375,000 Cost of goods sold …………………………………………...2,6
> Chudrick Inc. makes unfinished bookcases that it sells for $62. Production costs are $36 variable and $10 fixed. Because it has unused capacity, Chudrick is considering finishing the bookcases and selling them for $70. Variable finishing costs are expect
> Gruden Company produces golf discs which it normally sells to retailers for $7 each. The cost of manufacturing 20,000 golf discs is: Materials ……………………………………$ 10,000 Labor ……………………………………………30,000 Variable overhead ……………………….... 20,000 Fixed overhead ………
> Ortega has prepared the following list of statements about decision-making and incremental analysis. 1. The first step in management’s decision-making process is, “Determine and evaluate possible courses of action.” 2. The final step in management’s deci
> Brady Service Center just purchased an automobile hoist for $35,000. The hoist has an 8-year life and an estimated salvage value of $3,000. Installation costs and freight charges were $3,300 and $700, respectively. Brady uses straight-line depreciation.
> Ueker Company is considering three capital expenditure projects. Relevant data for the projects are as follows. Annual income is constant over the life of the project. Each project is expected to have zero salvage value at the end of the project. Ueker
> BSU Inc. wants to purchase a new machine for $29,300, excluding $1,500 of installation costs. The old machine was bought five years ago and had an expected economic life of 10 years without salvage value. This old machine now has a book value of $2,000,
> Eisler Corporation is involved in the business of injection molding of plastics. It is considering the purchase of a new computer-aided design and manufacturing machine for $430,000. The company believes that with this new machine it will improve product
> Hiland Inc. manufactures snowsuits. Hiland is considering purchasing a new sewing machine at a cost of $2.45 million. Its existing machine was purchased five years ago at a price of $1.8 million; six months ago, Hiland spent $55,000 to keep it operationa
> BAP Corporation is reviewing an investment proposal. The initial cost and estimates of the book value of the investment at the end of each year, the net cash flows for each year, and the net income for each year are presented in the schedule below. All c
> Palo Alto Corporation is considering purchasing a new delivery truck. The truck has many advantages over the company’s current truck (not the least of which is that it runs). The new truck would cost $56,000. Because of the increased capacity, reduced ma
> You have been given the following information about the production of Horatio Co., and are asked to provide the plant manager with information for a meeting with the vice president of operations. Standard Cost Card Direct materials (5 pounds at $4 per p
> Perine Company has 2,000 pounds of raw materials in its December 31, 2013, ending inventory. Required production for January and February of 2014 are 4,000 and 5,000 units, respectively. Two pounds of raw materials are needed for each unit, and the estim
> The following direct materials and direct labor data pertain to the operations of Laurel Company for the month of August. Instructions: (a) Compute the total, price, and quantity variances for materials and labor. (b) Provide two possible explanations
> Lewis Company’s standard labor cost of producing one unit of Product DD is 4 hours at the rate of $12.00 per hour. During August, 40,600 hours of labor are incurred at a cost of $12.15 per hour to produce 10,000 units of Product DD. Instructions: (a) Co
> Monte Services, Inc. is trying to establish the standard labor cost of a typical oil change. The following data have been collected from time and motion studies conducted over the past month. Actual time spent on the oil change ……………………………..1.0 hour Hou
> Kimm Company has gathered the following information about its product. Direct materials. Each unit of product contains 4.5 pounds of materials. The average waste and spoilage per unit produced under normal conditions is 0.5 pounds. Materials cost $5 per
> Alona Company’s overhead rate was based on estimates of $200,000 for overhead costs and 20,000 direct labor hours. Alona’s standards allow 2 hours of direct labor per unit produced. Production in May was 900 units, and actual overhead incurred in May was
> The loan department of Calgary Bank uses standard costs to determine the overhead cost of processing loan applications. During the current month, a fire occurred, and the accounting records for the department were mostly destroyed. The data shown below w
> The information shown below was taken from the annual manufacturing overhead cost budget of Samantha Company. Variable manufacturing overhead costs ………………………………..$34,650 Fixed manufacturing overhead costs ……………………………………$19,800 Normal production level in
> Data for Nona Inc. are given in E23-7. Data given in E23-7: Nona Inc., which produces a single product, has prepared the following standard cost sheet for one unit of the product. Direct materials (8 pounds at $2.50 per pound) ……………..20 Direct labor (3
> Stiller Company uses a standard cost accounting system. Some of the ledger accounts have been destroyed in a fire. The controller asks your help in reconstructing some missing entries and balances. Instructions: Answer the following questions. (a) Mater
> Vista Company installed a standard cost system on January 1. Selected transactions for the month of January are as follows. 1. Purchased 18,000 units of raw materials on account at a cost of $4.50 per unit. Standard cost was $4.40 per unit. 2. Issued 18,
> At Jaymes Company, it costs $30 per unit ($20 variable and $10 fixed) to make a product at full capacity that normally sells for $45. A foreign wholesaler offers to buy 3,000 units at $25 each. Jaymes will incur special shipping costs of $2 per unit. Ass
> The following is a list of terms related to performance evaluation. 1. Balanced scorecard 5. Customer perspective 2. Variance 6. Internal process perspective 3. Learning and growth perspective 7. Ideal standards 4. Nonfinancial measures
> Wallowa Company is considering a long-term investment project called ZIP. ZIP will require an investment of $120,000. It will have a useful life of 4 years and no salvage value. Annual revenues would increase by $80,000, and annual expenses (excluding de
> Wallowa Company is considering a long-term investment project called ZIP. ZIP will require an investment of $120,000. It will have a useful life of 4 years and no salvage value. Annual cash inflows would increase by $80,000, and annual cash outflows woul
> Wallowa Company is considering a long-term investment project called ZIP. ZIP will require an investment of $120,000. It will have a useful life of 4 years and no salvage value. Annual cash inflows would increase by $80,000, and annual cash outflows woul
> The standard cost of product 5252 includes 1.9 hours of direct labor at $14.00 per hour. The predetermined overhead rate is $22.00 per direct labor hour. During July, the company incurred 4,100 hours of direct labor at an average rate of $14.30 per hour
> The service division of Raney Industries reported the following results for 2013. Sales ………………………………………………………$500,000 Variable costs ……………………………………………300,000 Controllable fixed costs ………………………………. 75,000 Average operating assets …………………………..625,000 Man
> Mussatto Company expects to produce 50,000 units of product IOA during the current year. Budgeted variable manufacturing costs per unit are direct materials $7, direct labor $13, and overhead $18. Annual budgeted fixed manufacturing overhead costs are $9
> Ash Creek Company is preparing its budgeted income statement for 2014. Relevant data pertaining to its sales, production, and direct materials budgets can be found in Do it! 21-3. In addition, Ash Creek budgets 0.3 hours of direct labor per unit, labor
> Ash Creek Company is preparing its master budget for 2014. Relevant data pertaining to its sales, production, and direct materials budgets are as follows. Sales. Sales for the year are expected to total 1,000,000 units. Quarterly sales are 20%, 20%, 30%,
> Zeller Company estimates that 2014 unit sales will be 20,000 in quarter 1, 24,000 in quarter 2, and 29,000 in quarter 3, at a unit selling price of $20. Management desires to have ending finished goods inventory equal to 10% of the next quarter’s expecte
> Blake Romney became Chief Executive Officer of Peters Inc. two years ago. At the time, the company was reporting lagging profits, and Blake was brought in to “stir things up.” The company has three divisions, electronics, fiber optics, and plumbing suppl
> Batista Company management wants to maintain a minimum monthly cash balance of $20,000. At the beginning of April, the cash balance is $25,000, expected cash receipts for April are $245,000, and cash disbursements are expected to be $255,000. How much ca
> Gator Corporation manufactures several types of accessories. For the year, the gloves and mittens line had sales of $500,000, variable expenses of $370,000, and fixed expenses of $150,000. Therefore, the gloves and mittens line had a net loss of $20,000.
> Mesa Verde manufactures unpainted furniture for the do-it-yourself (DIY) market. It currently sells a table for $75. Production costs are $40 variable and $10 fixed. Mesa Verde is considering staining and sealing the table to sell it for $100. Variable c
> Rubble Company must decide whether to make or buy some of its components. The costs of producing 60,000 switches for its generators are as follows. Instead of making the switches at an average cost of $2.95 ($177,000 4 60,000), the company has an oppor
> The March 31, 2011, edition of the Wall Street Journal includes an article by Russell Gold entitled “Solar Gains Traction—Thanks to Subsidies.” Instructions: Read the article and answer the following questions. (a) What was the total cost of the solar p
> Refer back to E24-9 to address the following. Data in E24-9: Brady Service Center just purchased an automobile hoist for $35,000. The hoist has an 8-year life and an estimated salvage value of $3,000. Installation costs and freight charges were $3,300 a
> Do you think that standard costs are used only in making products like wheel bearings and hamburgers? Think again. Standards influence virtually every aspect of our lives. For example, the next time you call to schedule an appointment with your doctor, a
> From the time you first entered school many years ago, instructors have been measuring and evaluating you by imposing standards. In addition, many of you will pursue professions that administer professional examinations to attain recognized certification
> At Symond Company, production workers in the Painting Department are paid on the basis of productivity. The labor time standard for a unit of production is established through periodic time studies conducted by Douglas Management Consultants. In a time s
> The setting of standards is critical to the effective use of standards in evaluating performance. Instructions: Explain the following in a memo to your instructor. (a) The comparative advantages and disadvantages of ideal versus normal standards. (b) Th
> Chicksaw Company uses the following budgets: Balance Sheet, Capital Expenditure, Cash, Direct Labor, Direct Materials, Income Statement, Manufacturing Overhead, Production, Sales, and Selling and Administrative. Prepare a diagram of the interrelationship
> You might hear people say that they “need to learn to live within a budget.” The funny thing is that most people who say this haven’t actually prepared a personal budget, nor do they intend to. Instead, what they are referring to is a vaguely defined, po
> In order to get your personal finances under control, you need to prepare a personal budget. Assume that you have compiled the following information regarding your expected cash flows for a typical month. Instructions: Using the information above, prep
> In order to better serve their rural patients, Drs. Joe and Rick Parcells (brothers) began giving safety seminars. Especially popular were their “emergency-preparedness” talks given to farmers. Many people asked whether the “kit&rdquo
> You might hear people say that they “need to learn to live within a budget.” The funny thing is that most people who say this haven’t actually prepared a personal budget, nor do they intend to. Instead, what they are referring to is a vaguely defined, po
> In order to get your personal finances under control, you need to prepare a personal budget. Assume that you have compiled the following information regarding your expected cash flows for a typical month. Instructions: Using the information above, prep
> What are joint products? What accounting issue results from the production process that creates joint products?
> You are an accountant in the budgetary, projections, and special projects department of Fernetti Conductor, Inc., a large manufacturing company. The president, Richard Brown, asks you on very short notice to prepare some sales and income projections cove
> What is the decision rule in deciding whether to sell a product or process it further?
> Define the term “opportunity cost.” How may this cost be relevant in a make-or-buy decision?
> Emil Corporation has an opportunity to buy parts at $9 each that currently cost $12 to make. What manufacturing costs are relevant to this make-or-buy decision?
> What data are relevant in deciding whether to accept an order at a special price?
> Sydney Greene asks for your help concerning the relevance of variable and fixed costs in incremental analysis. Help Sydney with her problem.
> How do responsibility reports differ from budget reports?
> Distinguish between controllable and non-controllable costs.
> What is management by exception? What criteria may be used in identifying exceptions?
> The flexible budget formula is fixed costs $50,000 plus variable costs of $4 per direct labor hour. What is the total budgeted cost at (a) 9,000 hours and (b) 12,345 hours?
> Cali Company has prepared a graph of flexible budget data. At zero direct labor hours, the total budgeted cost line intersects the vertical axis at $20,000. At 10,000 direct labor hours, the line drawn from the total budgeted cost line intersects the ver
> In order to better serve their rural patients, Drs. Joe and Rick Parcells (brothers) began giving safety seminars. Especially popular were their “emergency-preparedness” talks given to farmers. Many people asked whether the “kit&rdquo
> (a) What is budgetary control? (b) Fred Barone is describing budgetary control. What steps should be included in Fred’s description?
> “Incremental analysis involves the accumulation of information concerning a single course of action.” Do you agree? Why?
> Distinguish between a master budget and a sales forecast.
> Lori Wilkins maintains that the only difference between budgeting and long-range planning is time. Do you agree? Why or why not?
> What criteria are helpful in determining the length of the budget period? What is the most common budget period?
> Jane Gilligan asks your help in understanding the essentials of effective budgeting. Identify the essentials for Jane.
> Alou Company has 20,000 beginning finished goods units. Budgeted sales units are 160,000. If management desires 15,000 ending finished goods units, what are the required units of production?
> “The production budget shows both unit production data and unit cost data.” Is this true? Explain.
> What budget is the starting point in preparing the master budget? What may result if this budget is inaccurate?
> How may expected revenues in a service company be computed?
> School costs money. Is this an expenditure that you should have avoided? A year of tuition at a public four-year college costs about $8,655, and a year of tuition at a public two-year college costs about $1,359. If you did not go to college, you might av
> What is the formula for determining required merchandise purchases for a merchandiser?
> Noterman Company has credit sales of $600,000 in January. Past experience suggests that 40% is collected in the month of sale, 50% in the month following the sale, and 10% in the second month following the sale. Compute the cash collections from January
> Your roommate, Anna Polis, contends that accounting contributes to most of the steps in management’s decision-making process. Is your roommate correct? Explain.
> Identify the three sections of a cash budget. What balances are also shown in this budget?
> Indicate the supporting schedules used in preparing a budgeted income statement through gross profit for a manufacturer.
> For Goody Company, the budgeted cost for one unit of product is direct materials $10, direct labor $20, and manufacturing overhead 80% of direct labor cost. If 25,000 units are expected to be sold at $65 each, what is the budgeted gross profit?
> Everly Company’s variable selling and administrative expenses are 12% of net sales. Fixed expenses are $50,000 per quarter. The sales budget shows expected sales of $200,000 and $240,000 in the first and second quarters, respectively. What are the total
> Ortiz Company’s manufacturing overhead budget shows total variable costs of $198,000 and total fixed costs of $162,000. Total production in units is expected to be 150,000. It takes 20 minutes to make one unit, and the direct labor rate is $15 per hour.
> The production budget of Justus Company calls for 80,000 units to be produced. If it takes 45 minutes to make one unit and the direct labor rate is $16 per hour, what is the total budgeted direct labor cost?
> In preparing the direct materials budget for Quan Company, management concludes that required purchases are 64,000 units. If 52,000 direct materials units are required in production and there are 9,000 units of beginning direct materials, what is the des
> Managerial accounting techniques can be used in a wide variety of settings. As we have frequently pointed out, you can use them in many personal situations. They also can be useful in trying to find solutions for societal issues that appear to be hard to
> The executive team at Current Designs has gathered to evaluate the company’s operations for the last month. One of the topics on the agenda is the special order from Huegel Hollow, which was presented in BYP2-1. Recall that Current Designs had a special
> Huang Inc. has one product line that is unprofitable. What circumstances may cause overall company net income to be lower if the unprofitable product line is eliminated?
> Your roommate, Gale Dunham, is confused about sunk costs. Explain to your roommate the meaning of sunk costs and their relevance to a decision to retain or replace equipment.
> How are allocated joint costs treated when making a sell-or-process-further decision?
> What steps are frequently involved in management’s decision-making process?
> What simplifying assumptions were made in the chapter regarding calculation of net present value?
> What is the decision rule under the net present value method?
> Tom Wells claims the formula for the cash payback technique is the same as the formula for the annual rate of return technique. Is Tom correct? What is the formula for the cash payback technique?
> What are the advantages and disadvantages of the cash payback technique?
> Your classmate, Mike Dawson, is confused about the factors that are included in the annual rate of return technique. What is the formula for this technique?
> What advantages does the profitability index provide over direct comparison of net present value when comparing two projects?
> Hank Jewell is a production manager at a metal fabricating plant. Last night, he read an article about a new piece of equipment that would dramatically reduce his division’s costs. Hank was very excited about the prospect, and the first thing he did this
> How is the predetermined overhead rate determined when standard costs are used?
