Question: Yummy Candy Company is considering purchasing a

> Letang Company has three divisions (R, S, and T), organized as decentralized profit centers. Division R produces the basic chemical Ranbax, in multiples of 1,000 pounds, and transfers it to divisions S and T. Division S processes Ranbax into the final pr

> The Croydon division of CC Industries supplies the Hauser division with 100,000 units per month of an infrared LED that Hauser uses in a remote control device it sells. The transfer price of the LED is $8, which is the market price. However, Croydon does

> Cocoa Mill Chocolates manufactures specialty chocolates and sells them to fine candy stores. The company operates two divisions, cocoa and candy, as decentralized entities. The cocoa division purchases raw cacao beans and processes them into cocoa powder

> Beacon, a division of Libra Corporation, is located in the United States. Its effective income tax rate is 30%. Another division of Libra, Falcon, is located in Canada, where the income tax rate is 40%. Falcon manufactures, among other things, an interme

> Newbury Printers operates a printing press with a monthly capacity of 3,200 machine-hours. Newbury has two main customers: Wallace Corporation and Kimberly Corporation. Data on each customer for January are: Kimberly Corporation indicates that it wants

> Ballantine Corp. produces and sells lead crystal glassware. The firm consists of two divisions, Commercial and Specialty. The Commercial division manufactures 300,000 glasses per year. It incurs variable manufacturing costs of $8 per unit and annual fixe

> Express Grow Inc., based in Ankeny, Iowa, sells high-end fertilizers. Express Grow has two divisions: â–  North Italy mining division, which mines potash in northern Italy â–  U.S. processing division, which uses potash

> Assume that Pat Borges, CEO of Cran Health, had mandated a transfer price equal to 225% of full cost. Now he decides to decentralize some management decisions and sends around a memo that states the following: “Effective immediately, ea

> Cran Health Products is a cranberry cooperative that operates two divisions, a harvesting division and a processing division. Currently, all of harvesting’s output is converted into cranberry juice by the processing division, and the ju

> Mountaineer, Inc., has two divisions, A and B, that manufacture expensive bicycles. Division A produces the bicycle frame, and division B assembles the rest of the bicycle onto the frame. There is a market for both the subassembly and the final product.

> The Slate Company manufactures and sells television sets. Its assembly division (AD) buys television screens from the screen division (SD) and assembles the TV sets. The SD, which is operating at capacity, incurs an incremental manufacturing cost of $65

> Saina Supplies leases and sells materials, tools, and equipment and also provides add-on services such as ground maintenance and waterproofing to construction and mining sites. The company has grown rapidly over the past few years. The owner, Saina Torra

> Doorchime Company makes doorbells. It has a weighted-average cost of capital of 6% and total assets of $5,690,000. Doorchime has current liabilities of $550,000. Its operating income for the year was $630,000. Doorchime does not have to pay any income ta

> Wonkies, Inc. is a large company that owns fast-food restaurants, has a soft drink division, and a snack division. Wonkies, Inc. corporate management gives its division managers considerable operating and investment autonomy in running their divisions. W

> Cora Manufacturing makes fashion products and competes on the basis of quality and leading-edge designs. The company has two divisions, clothing and cosmetics. Cora has $5,000,000 invested in assets in its clothing division. After-tax operating income fr

> Sanchez Corporation runs two convenience stores, one in Connecticut and one in Rhode Island. Operating income for each store in 2017 is as follows: The equipment has a zero disposal value. In a senior management meeting, Maria Lopez, the management acco

> The Seaside Corporation manufactures similar products in the United States and Norway. The U.S. and Norwegian operations are organized as decentralized divisions. The following information is available for 2017; ROI is calculated as operating income divi

> Ryan Alcoa, a new associate at Jonas Partners, has compiled the following data for a potential investment for the firm: Investment: $300,000 Annual sales revenues = $180,000 Annual cash costs = $80,000 4-year useful life, no salvage value Jonas Partner

> Performance Auto Company operates a new car division (that sells high- performance sports cars) and a performance parts division (that sells performance-improvement parts for family cars). Some division financial measures for 2017 are as follows: Require

> Comfy Corporation manufactures furniture in several divisions, including the patio furniture division. The manager of the patio furniture division plans to retire in two years. The manager receives a bonus based on the division’s ROI, which is currently

> Hamilton Corp. is a reinsurance and financial services company. Hamilton strongly believes in evaluating the performance of its stand-alone divisions using financial metrics such as ROI and residual income. For the year ended December 31, 2017, Hamilton’

> Excellent Motor Company makes electric cars and has two products, the Simplegreen and the Excellentgreen. To produce the Simplegreen, Excellent Motor employed assets of $10,500,000 at the beginning of 2017 and $14,450,000 of assets at the end of 2017. Ot

> The Sports Equipment Company produces a wide variety of sports equipment. Its newest division, Golf Technology, manufactures and sells a single product— AccuDriver, a golf club that uses global positioning satellite technology to improve the accuracy of

> Performance Aid, Inc. has two divisions: Test Preparation and Language Arts. Results (in millions) for the past three years are partially displayed here: Required: 1. Complete the table by filling in the blanks. 2. Use the DuPont method of profitabilit

> Return on investment (ROI) is often expressed as follows: Required: 1. What advantages are there in the breakdown of the computation into two separate components? 2. Fill in the blanks for the following table: After filling in the blanks, comment on t

> Refer to Exercise 22-24. Assume that division A can sell the 1,900 units to other customers at $137 per unit, with variable marketing cost of $2 per unit. Required: Determine whether Kelly-Elias will benefit if division C purchases the 1,900 units from

> The Denver Corporation manufactures filing cabinets in two operations: machining and finishing. It provides the following information: Each cabinet sells for $75 and has direct material costs of $35 incurred at the start of the machining operation. Denv

> The Kelly-Elias Corporation, manufacturer of tractors and other heavy farm equipment, is organized along decentralized product lines, with each manufacturing division operating as a separate profit center. Each division manager has been delegated full au

> Suppose that the U.S. division could sell as many chainsaws as it makes at $225 per unit in the U.S. market, net of all marketing and distribution costs. Required: 1. From the viewpoint of the Burton Company as a whole, would after-tax operating income

> The Burton Company manufactures chainsaws at its plant in Sandusky, Ohio. The company has marketing divisions throughout the world. A Burton marketing division in Lille, France, imports 200,000 chainsaws annually from the United States. The following inf

> Quest Motors, Inc., operates as a decentralized multidivision company. The Vivo division of Quest Motors purchases most of its airbags from the airbag division. The airbag division’s incremental cost for manufacturing the airbags is $90 per unit. The air

> Tech Friendly Computer, Inc., with headquarters in San Francisco, manufactures and sells a desktop computer. Tech Friendly has three divisions, each of which is located in a different country: a. China division—manufactures memory devi

> Calgary Lumber has a raw lumber division and a finished lumber division. The variable costs are as follows: ■ Raw lumber division: $125 per 100 board-feet of raw lumber ■ Finished lumber division: $145 per 100 board-feet of finished lumber Assume that

> Host Hotels, a small chain of business hotels in the MidAtlantic region, is interested in gaining access to the boutique lodging market by acquiring a hotel group in that sector. Host Hotels intends to operate the newly acquired hotels independently from

> Fenster Corporation manufactures windows with wood and metal frames. Fenster has three departments: glass, wood, and metal. The glass department makes the window glass and sends it to either the wood or metal department where the glass is framed. The win

> Quick Stop operates 1,000 convenience stores throughout the United States. The company’s slogan is “Best Stop of the Day,” and its mission is to make every customer a return customer. Quick Stop’s corporate strategy supports this mission by stressing the

> The Cook Company is a national portable building manufacturer. Its Benton plant will become idle on December 31, 2017. Mary Carter, the corporate controller, has been asked to look at three options regarding the plant: ■ Option 1: The plant, which has b

> Body Image, Inc., produces two basic types of weight-lifting equipment, Model 9 and Model 14. Pertinent data are as follows: The weight-lifting craze suggests that Body Image can sell enough of either Model 9 or Model 14 to keep the plant operating at f

> Ortel Telecom sells telecommunication products and services to a variety of small businesses. Two of Ortel’s key clients are Square and Cloudburst, both fast-growing technology start-ups located in New York City. Ortel has compiled info

> Klein Dermatology is contemplating purchasing new laser therapy equipment. This new equipment would cost $300,000 to purchase and $20,000 for installation. Klein estimates that this new equipment would yield incremental margins of $98,000 annually due to

> Walker Inc. is considering the purchase of new equipment that will automate production and thus reduce labor costs. Walker made the following estimates related to the new machinery: Cost of the equipment……………..$120,000 Reduced annual labor costs……...$40,

> Ella’s Bakery plans to purchase a new oven for its store. The oven has an estimated useful life of 4 years. The estimated pretax cash flows for the oven are as shown in the table that follows, with no anticipated change in working capit

> Laverty Clinic plans to purchase a new centrifuge machine for its New York facility. The machine costs $94,000 and is expected to have a useful life of 6 years, with a terminal disposal value of $9,000. Savings in cash operating costs are expected to be

> Andrews Construction is analyzing its capital expenditure proposals for the purchase of equipment in the coming year. The capital budget is limited to $5,000,000 for the year. Lori Bart, staff analyst at Andrews, is preparing an analysis of the three pro

> New Pharm Corporation is a rapidly growing biotech company that has a required rate of return of 14%. It plans to build a new facility in Santa Clara County. The building will take 2 years to complete. The building contractor offered New Pharm a choice o

> America Cola is considering the purchase of a special-purpose bottling machine for $65,000. It is expected to have a useful life of 4 years with no terminal disposal value. The plant manager estimates the following savings in cash operating costs: Ameri

> Assume the same facts as in Exercise 21-23 except that City Hospital is a taxpaying entity. The income tax rate is 30% for all transactions that affect income taxes. Required: 1. Do requirement 1 of Exercise 21-23. 2. How would your computations in re

> City Hospital, a nonprofit organization, estimates that it can save $28,000 a year in cash operating costs for the next 10 years if it buys a special-purpose eye testing machine at a cost of $110,000. No terminal disposal value is expected. City Hospital

> The Beach Comber is a take-out food store at a popular beach resort. Sara Miller, owner of the Beach Comber, is deciding how much refrigerator space to devote to four different drinks. Pertinent data on these four drinks are as follows: Miller has a max

> Assume the same facts as in Exercise 20-27, except now Grand Devices uses only two trigger points for making entries in the accounting system: â–  Completion of good finished units of product â–  Sale of finished goods Th

> Assume the same facts as in Exercise 20-27, except that Grand Devices now uses a backflush costing system with the following two trigger points for making entries in the accounting system: â–  Purchase of direct materials â–&

> Grand Devices Corporation assembles handheld computers that have scaled-down capabilities of laptop computers. Each handheld computer takes 6 hours to assemble. Grand Devices uses a JIT production system and a backflush costing system with three trigger

> The Knot manufactures men’s neckwear at its Spartanburg plant. The Knot is considering implementing a JIT production system. The following are the estimated costs and benefits of JIT production: a. Annual additional tooling costs $250,000 annually. b.

> Alpha Company’s annual demand for its only product, XT-590, is 10,000 units. Alpha is currently analyzing possible combinations of relevant carrying cost per unit per year and relevant ordering cost per purchase order, depending on the company’s choice o

> Sk8 Company produces skateboards and purchases 20,000 units of a wheel bearing each year at a cost of $1 per unit. Sk8 requires a 15% annual rate of return on investment. In addition, the relevant carrying cost (for insurance, materials handling, breakag

> The Fabric World sells fabrics to a wide range of industrial and consumer users. One of the products it carries is denim cloth, used in the manufacture of jeans and carrying bags. The supplier for the denim cloth pays all incoming freight. No incoming in

> Sportsman Textiles (ST) manufactures the Galaxy jerseys that Wonder Line (WL) sells to its customers. ST has recently installed computer software that enables its customers to conduct “one-stop” purchasing using state-of-the-art Web site technology. WL’s

> Wonder Line (WL) operates a megastore featuring sports merchandise. It uses an EOQ decision model to make inventory decisions. It is now considering inventory decisions for its Los Angeles Galaxy soccer jerseys product line. This is a highly popular item

> Best Trim, a manufacturer of lawn mowers, predicts that it will purchase 204,000 spark plugs next year. Best Trim estimates that 17,000 spark plugs will be required each month. A supplier quotes a price of $9 per spark plug. The supplier also offers a sp

> Turnkey Manufacturing evaluates the performance of its production managers based on a variety of factors, including cost, quality, and cycle time. The following are nonfinancial measures for quality and time for 2016 and 2017 for its only product: The f

> For the past two years, Worldwide Cell Phones (WCP) has been working to improve the quality of its phones. Data for 2016 and 2017 follows (in thousands of phones): Required: 1. For each year, 2016 and 2017, calculate the following: a. Percentage of def

> Refer to the information presented in Exercise 19-25. The head of the registration advisors at SMU has decided that the advisors must finish their advising in 2 weeks (10 working days) and therefore must advise 420 students a day. However, the average wa

> The registration advisors at a small Midwestern university (SMU) help 4,200 students develop their class schedules and register for classes each semester. Each advisor works for 10 hours a day during the registration period. SMU currently has 10 advisors

> It’s a Dog’s World (IDW) makes toys for big breed puppies. IDW’s managers have recently learned that they can calculate the average waiting time for an order from the time an order is received till the time manufacturing starts. They have asked for your

> TidyCar washes vehicles using a nohands approach. Business is good but Jonathan, the manager, has noticed that customers complain because there are streaks on their vehicles at pickup. TidyCar warrants that each vehicle will sparkle at delivery and charg

> SpeedPrint manufactures and sells 18,000 high-technology printing presses each year. The variable and fixed costs of rework and repair are as follows: SpeedPrint’s current presses have a quality problem that causes variations in the sh

> iCover produces bags for carrying laptop computers. iCover sells 1,000,000 units each year at a price of $20 per unit and a contribution margin of 40%. To respond to customer complaints, iCover’s mangers want to modify the production processes to produce

> Safe Travel produces car seats for children from newborn to 2 years old. Safe Travel’s only problem with its car seats was stitching in the straps. The problem can usually be detected and repaired during an internal inspection. Inspection costs $5.00 per

> Adirondack Company makes chairs for outside living spaces. The company has been working on improving quality over the last year and wants to evaluate how well it has done on costs-of-quality (COQ) measures. Here are the results: Required: 1. Identify th

> The Svenson Corporation manufactures cellular modems. It manufactures its own cellular modem circuit boards (CMCB), an important part of the cellular modem. It reports the following cost information about the costs of making CMCBs in 2017 and the expecte

> The Cincinnati power plant that services all manufacturing departments of Eastern Mountain Engineering has a budget for the coming year. This budget has been expressed in the following monthly terms: The expected monthly costs for operating the power pl

> Locate the most recent annual report of Carrefour Group, the French retail company and the second largest retailer in the world, on the company’s website: www.carrefour.com. You will find an electronic copy of the annual report in the “Finance: Publicati

> Locate the most recent annual report of Toshiba Corporation, the large Japanese electronics company, on the company’s website: www.toshiba.co.jp. You will find an electronic copy of the annual report in the “Investor Relations” section of the website. Re

> Friedman’s Inc. is a leading fine jewelry retailer. In November 2004, the company said that it might default on certain of the financial covenants contained in one of the company loan agreements. Here is an excerpt from the company’s press release: In pa

> The IASB and its predecessor organization have as a stated objective to narrow worldwide differences in accounting practices and the presentation of financial information. In February 2006 at a ceremony in Beijing, People’s Republic of China, the Chinese

> The New York Stock Exchange (NYSE) and the National Association of Securities Dealers (NASD) require that listed firms have audit committees of independent (that is, outside) company directors. Audit committees review the firm’s audited financial stateme

> “It’s time for the government to stop enabling accounting fraud. The Internal Revenue Service and the SEC let companies keep two sets of books, one for tax reporting and the other for financial reporting. There should be no difference in the figures corp

> In the early 1990s, the FASB issued new rules that dramatically altered the way in which many companies recorded their obligations for postretirement health care benefits. The Board found that most companies used “cash basis” accounting and waited until

> Provide a two- or three-sentence response that argues for or against (indicate which) each of these statements: 1. Accounting is an exact science. 2. Managers choose accounting procedures that produce the most accurate picture of the company’s operating

> Suppose your company purchased land and a warehouse for $5 million. The price was steep, but you were told that a new interstate highway was going to be built nearby. Two months later, the highway project is canceled and your property is now worth only $

> Farmers State Bank is considering a $500,000 loan to Willard Manufacturing. Three items appearing on Willard’s balance sheet are: a. Cash on hand and in the bank, $20,000. b. Accounts receivable of $60,000, less an allowance for uncollectibles of $15,000

> You have decided to buy a new automobile and have been gathering information about the purchase price. The manufacturer’s website shows a “list price” of $24,500, which includes your preferred options: leather trim and digital audio player. You have also

> A friend of yours sent an e-mail asking about generally accepted accounting principles (GAAP). It seems your friend was browsing through Whirlpool Corporation’s recent annual report and she spotted the following statement: The financial statements have b

> Allocating resources in the most efficient manner maximizes the wealth of any country. It is generally acknowledged that financial information plays an important role in efficient resource allocation. Required: Given that both of the preceding statements

> 1. Define each of the following disclosure costs associated with financial accounting information, and provide an example of each cost: a. Information collection, processing, dissemination costs. b. Competitive disadvantage costs. c. Litigation costs. d.

> 1. Describe how the following market forces influence the supply of financial accounting information: a. Debt and equity financial markets. b. Managerial labor markets. c. The market for corporate control (for example, mergers, takeovers, and divestiture

> 1. Explain why each of the following groups might want financial accounting information. What type of financial information would each group find most useful? a. The company’s existing shareholders. b. Prospective investors. c. Financial analysts who fol

> You have been asked to attend a hastily called meeting of Landfil’s senior executives. The meeting was called to formulate a strategy for responding to questions from shareholders, analysts, and the media about Landfil’s accounting for site development c

> It is often alleged that the value of financial statement information is compromised by the latitude that GAAP gives to management. Companies can use different accounting methods to summarize and report the outcome of otherwise similar transactions. Inve

> The following excerpt is from Fortress International Group’s 2012 10-K report filed with the SEC and is a required disclosure: [W]e earned approximately 46% of our total revenue from two customers for the year ended December 31, 2012, and 43% from three

> As your first week at Henley Manufacturing Inc. draws to a close, you find a memorandum on your desk from the company’s CEO. The memo outlines sales and earnings goals for next year: Sales are expected to increase 15% with net income growing by 20%. The

> Novartis AG is a Swiss company that develops, manufactures, and markets pharmaceuticals and vaccines. As of January 2005, European firms, including Novartis, were required to compile their financial reports in accordance with International Financial Repo

> The vice president of operations of Free Ride Bike Company is evaluating the performance of two divisions organized as investment centers. Invested assets and condensed income statement data for the past year for each division are as follows: Instruction

> A condensed income statement for the Electronics Division of Gihbli Industries Inc. for the year ended December 31 is as follows: Assume that the Electronics Division received no charges from service departments. The president of Gihbli Industries Inc. h

> E.F. Lynch Company is a diversified investment company with three operating divisions organized as investment centers. Condensed data taken from the records of the three divisions for the year ended June 30, 20Y8, are as follows: The management of E.F. L

> Last Resort Industries Inc. is a privately held diversified company with five separate divisions organized as investment centers. A condensed income statement for the Specialty Products Division for the past year, assuming no service department charges,

> The three divisions of Yummy Foods are Snack Goods, Cereal, and Frozen Foods. The divisions are structured as investment centers. The following responsibility reports were prepared for the three divisions for the prior year: 1. Which division is making t

> The Customer Service Department of Door Industries Inc. asked the Publications Department to prepare a brochure for its training program. The Publications Department delivered the brochures and charged the Customer Service Department a rate that was25% h

> The Norsk Division of Gridiron Concepts Inc. has been experiencing revenue and profit growth during the years 20Y6–20Y8. The divisional income statements follow: There are no service department charges, and the division operates as an i

> In teams, visit the website of a company that uses the balanced scorecard to evaluate its performance. Identify the performance measures used by the company on its balanced corecard. For each measure, identify whether the measure best fits the innovation