AccuSound Corporation manufactures printed circuits for stereo amplifiers. A common product defect is a “drift” caused by failure to maintain precise heat levels during the production process. Rejects from the 100 percent testing program can be reworked to acceptable levels if the defect is drift. However, in a recent analysis of customer complaints, Marie Allen, the assistant controller, and the quality control engineer determined that normal rework does not bring the circuits up to standard. Sampling showed that about half of the reworked circuits will fail after extended amplifier operation. The incidence of failure in the reworked circuits is projected to be about 10 percent over five years. Unfortunately, there is no way to determine which reworked circuits will fail, because testing will not detect the problem. The rework process could be changed to correct the problem, but the cost–benefit analysis for the suggested change indicates that it is not economically feasible. AccuSound’s marketing analyst has indicated that this problem will have a significant impact on the company’s reputation and customer satisfaction. Consequently, the board of directors would interpret this problem as having serious negative implications for the company’s profitability. Allen included the circuit failure and rework problem in her report prepared for the upcoming quarterly meeting of the board of directors. Due to the potential adverse economic impact, Allen followed a long-standing practice of highlighting this information. After reviewing the reports to be presented, the plant manager and his staff complained to the controller that he should control his people better. “We can’t upset the board with this kind of material. Tell Allen to tone that down. Maybe we can get it by the board in this meeting and have some time to work on it. People who buy those cheap systems and play them that loud shouldn’t expect them to last forever.” The controller called Allen into his office and said, “Marie, you’ll have to bury this one. The probable failure of reworks can be mentioned briefly in the oral presentation, but it should not be mentioned or highlighted in the advance material mailed to the board.” Allen feels strongly that the board will be misinformed on a potentially serious loss of income if she follows the controller’s orders. Allen discussed the problem with the quality control engineer, who simply remarked, “That’s your problem, Marie.” Required: 1. Discuss the ethical considerations that Marie Allen should recognize in deciding how to proceed. 2. Explain what ethical responsibilities should be accepted by (a) the controller, (b) the quality control engineer, and (c) the plant manager. 3. What should Marie Allen do? Explain your answer.
> Refer to the original data in the problem 6-41 for Martha’s Vineyard Marine Supply. Required: 1. Build a spreadsheet: Construct an Excel spreadsheet and use the Excel commands to perform a least-squares regression. Estimate the variabl
> Martha’s Vineyard Marine Supply is a wholesaler for a large variety of boating and fishing equipment. The company’s controller, Mathew Knight, has recently completed a cost study of the firm’s materia
> Rolling Hills Golf Association is a non-profit, private organization that operates three 18-hole golf courses north of Philadelphia. The organization’s financial director has just analyzed the course maintenance costs incurred by the go
> Vancouver Shakespearean Theater’s board of directors is considering the replacement of the theater’s lighting system. The old system requires two people to operate it, but the new system would require only a single ope
> The Allegheny School of Music has hired you as a consultant to help in analyzing the behaviour of the school’s costs. Use the account-classification method of cost estimation to classify each of the following costs as variable, fixed, or semi variable. B
> Antioch Extraction, which mines ore in Montana, uses a calendar year for both financial-reporting and tax purposes. The following selected costs were incurred in December, the low point of activity, when 1,500 tons of ore were extracted: Peak activity of
> Northwest Aircraft Industries (NAI) was founded 45 years ago by Jay Preston as a small machine shop producing machined parts for the aircraft industry, which is prominent in the Seattle/Tacoma area of Washington. By the end of its first decade, NAIâ
> Knickknack, Inc., manufactures two products: Odds and Ends. The firm uses a single, plant wide overhead rate based on direct-labor hours. Production and product-costing data are as follows: Knickknack, Inc., prices its products at 120 percent of cost, wh
> Manchester Technology, Inc., manufactures several different types of printed circuit boards; however, two of the boards account for the majority of the company’s sales. The first of these boards, a television circuit board, has been a s
> Montreal Electronics Company manufactures two large-screen television models: The Nova, which has been produced for 10 years and sells for $900, and the Royal, a new model introduced in early 20x0, which sells for $1,140. Based on the following income st
> Refer to the information given in the problem 5-65 for Fresno Fibre Optics and two of its customers, Trace Telecom and Caltex Computer. Additional information for six of Fresno’s other customers for the most recent year follows: Requir
> Grady and Associates performs a variety of activities related to information systems and e-commerce consulting in Toronto, Canada. The firm, which bills $125 per hour for services performed, is in a very tight local labor market and is having difficulty
> Midwest Home Furnishings Corporation (MHFC) manufactures a variety of housewares for the consumer market in the Midwest. The company’s three major product lines are cooking utensils, tableware, and flatware. MHFC implemented activity-based costing four y
> Better Bagels, Inc., manufactures a variety of bagels, which are frozen and sold in grocery stores. The production process consists of the following steps. 1. Ingredients, such as flour and raisins, are received and inspected. Then they are stored until
> Use the Internet to access the website for one of the following companies, or any other company of your choosing. Required: Find the management discussion and analysis portion of the firm’s most recent online annual report. Then briefly
> Refer to the product costs developed in requirement 5 of Problem 5–60. Prepare a table showing how Gigabyte’s traditional, volume-based product-costing system distorts the product costs of Gismos, Thingamajigs, and Wha
> Refer to the new target prices for Gigabyte’s three products, based on the new activity-based costing system calculated in the problem 5-60. Required: Write a memo to the company president commenting on the situation Gigabyte Inc. has
> Borealis Manufacturing has just completed a major change in its quality control (QC) process. Previously, products had been reviewed by QC inspectors at the end of each major process, and the company’s 10 QC inspectors were charged as d
> Marconi Manufacturing produces two items in its Trumbull Plant: Tuff Stuff and Ruff Stuff. Since inception, Marconi has used only one manufacturing-overhead cost pool to accumulate costs. Overhead has been allocated to products based on direct-labor hour
> Hoboken Industries currently manufactures 30,000 units of part MR24 each month for use in production of several of its products. The facilities now used to produce part MR24 have a fixed monthly cost of $150,000 and a capacity to produce 84,000 units per
> The controller for Canandaigua Vineyards, Inc., has predicted the following costs at various levels of wine output. The company’s marketing manager has predicted the following prices for the firm’s fine wines at variou
> World Gourmet Coffee Company (WGCC) is a distributor and processor of different blends of coffee. The company buys coffee beans from around the world and roasts, blends, and packages them for resale. WGCC currently has 15 different coffees that it offers
> Roberta Coy makes custom mooring covers for boats. Each mooring cover is hand sewn to fit a particular boat. If covers are made for two or more identical boats, each successive cover generally requires less time to make. Coy has been approached by a loca
> Refer to Exhibit 2–3, and answer the following questions. Required: 1. List the major differences between the income statements shown for The Procter & Gamble Company, Walmart Stores, Inc., and Southwest Airlines Company. 2. Explai
> Several costs incurred by Bayview Hotel and Restaurant are given in the following list. For each cost, indicate which of the following classifications best describe the cost. More than one classification may apply to the same cost item. Cost Classificati
> The following data are the actual results for Marvelous Marshmallow Company for October. Standard cost and budget information for Marvelous Marshmallow Company follows: Required: 1. Use any of the methods explained in the chapter to compute the followin
> The following terms are used to describe various economic characteristics of costs. a. Opportunity cost b. Out-of-pocket cost c. Sunk cost d. Differential cost e. Marginal cost f. Average cost Required: Choose one of the terms listed above to characteri
> Water Technology, Inc., incurred the following costs during 20x1. The company sold all of its products manufactured during the year. During 20x1, the company operated at about half of its capacity, due to a slowdown in the economy. Prospects for 20x2 are
> Indicate for each of the following costs whether it is a product cost or a period cost. 1. Wages of aircraft mechanics employed by an airline. 2. Wages of drill-press operators in a manufacturing plant. 3. Cost of food in a microwavable dinner. 4. Cost i
> Maxey & Sons manufactures two types of storage cabinets—Type A and Type B—and applies manufacturing overhead to all units at the rate of $80 per machine hour. Production information follows. The controller, who is
> Hightide Upholstery Company manufactures a special fabric used to upholster the seats in power boats. The company’s annual fixed production cost is $100,000. Required: 1. Draw a graph of the company’s fixed production cost showing the total cost at the
> San Diego Sheet Metal, Inc., incurs a variable cost of $40 per pound for raw material to produce a special alloy used in manufacturing aircraft. Required: 1. Draw a graph of the firm’s raw material cost, showing the total cost at the following productio
> Heartland Airways operates commuter flights in three Midwestern states. Due to a political convention held in Topeka, the airline added several extra flights during a two-week period. Additional cabin crews were hired on a temporary basis. However, rathe
> Cape Cod Shirt Shop Manufactures T-shirts and decorates them with custom designs for retail sale on the premises. Several costs incurred by the company are listed below. For each cost, indicate which of the following classifications best describe the cos
> Highlander Cutlery manufactures kitchen knives. One of the employees, whose job is to cut out wooden knife handles, worked 48 hours during a week in January. The employee earns $12 per hour for a 40-hour week, and overtime is paid after 40 hours. For add
> Shortly after being hired as an analyst with Global American Airlines, Kim Williams was asked to prepare a report that focused on passenger ticketing cost. The airline writes most of its own tickets (largely through reservations personnel), makes little
> Tampa Instrument Company manufactures gauges for construction machinery. The company has two production departments: Machining and Assembly. There are three service departments: Maintenance, Human Resources (HR), and Computer Aided Design (CAD). The usag
> The following cost data for the year just ended pertain to Sentiments, Inc., a greeting card manufacturer: Required: 1. Compute each of the following costs for the year just ended: (a) total prime costs, (b) total manufacturing overhead costs, (c) total
> Determine the missing amounts in each of the following independent cases. Case A Case B Case C Beginning inventory, raw material ……………â€&brv
> Mason Corporation began operations at the beginning of the current year. One of the company’s products, a refrigeration element, sells for $185 per unit. Information related to the current year’s activities follows. Ma
> On April 12, after the close of business, Singh & Sons had a devastating fire that destroyed the company’s work-in-process and finished-goods inventories. Fortunately, all raw materials escaped damage because materials owned by the
> Nation’s Capital Fitness, Inc., operates a chain of fitness centres in the Washington, D.C., area. The firm’s controller is accumulating data to be used in preparing its annual profit plan for the coming year. The cost
> Consider the following cost items: 1. Salaries of players on the Boston Red Sox. 2. Year-end completed goods of Levi Strauss jeans. 3. Executive compensation costs at Home Depot. 4. Advertising costs for Sony. 5. Costs incurred during the period to insur
> The following selected data were taken from the accounting records of Metcalf Manufacturing. The company uses direct-labour hours as its cost driver for overhead costs. March’s costs consisted of machine supplies ($102,000), depreciatio
> For each of the cost items described below, choose the graph that best represents it. 1. The salary costs of the shift supervisors at a truck depot. Each shift is eight hours. The depot operates with one, two, or three shifts at various times of the year
> Outback Corporation manufactures tactical LED flashlights in Brisbane, Australia. The firm uses an absorption costing system for internal reporting purposes; however, the company is considering using variable costing. Data regarding Outbackâ€&
> Yellowstone Company began operations on January 1 to produce a single product. It used an absorption costing system with a planned production volume of 100,000 units. During its first year of operations, the planned production volume was achieved, and th
> Coyote Loco, Inc., a distributor of salsa, has the following historical collection pattern for its credit sales. 70 percent collected in the month of sale. 15 percent collected in the first month after sale. 10 percent collected in the second month after
> Urban Elite Apparel designs women’s apparel and sells it through retail outlets across the country. All of the company’s clothing lines are manufactured by contract manufacturers around the world. A division manager is responsible for each of the company
> Susan Lopez, a consultant with Deloitte & Young, has just begun an engagement at Four Corners Airlines, which is based in Santa Fe, New Mexico. The company has fallen on hard times of late despite record profits for the rest of the airline industry. Mana
> Dave Nelson recently retired at age 48, courtesy of the numerous stock options he had been granted while president of WowzaShops.com, an Internet start-up company. He soon moved to Montana to follow his dream of living in the mountains and Big Sky Countr
> Due to evaporation during production, Plano Plastics Company requires 8 pounds of material input for every 7 pounds of good plastic sheets manufactured. During May, the company produced 4,200 pounds of good sheets. Required: Compute the total standard a
> The director of cost management for Odessa Company uses a statistical control chart to help management determine when to investigate variances. The critical value is 1 standard deviation. The company incurred the following direct-labor efficiency varianc
> Refer to the data in the exercise 10-26. Draw diagrams depicting the direct-material and direct-labor variances similar to the diagrams in Exhibits 10–2, 10–3, and 10–4. Data from Exercise 10-26: Dur
> During June, Danby Company’s material purchases amounted to 6,000 pounds at a price of $7.30 per pound. Actual costs incurred in the production of 2,000 units were as follows: Direct labor: $116,745 ($18.10 per hour) Direct material: $
> Cayuga Hardwoods produces handcrafted jewellery boxes. A standard-size box requires 8 board feet of hardwood in the finished product. In addition, 2 board feet of scrap lumber are normally left from the production of one box. Hardwood costs $4.00 per boa
> Choose one of the following manufacturers (or any manufacturer of your choosing), and use the Internet to gather information about any new products the company has recently introduced or plans to introduce. Required: Discuss the steps you think the comp
> The behaviour of the annual maintenance and repair cost in the Bus Transportation Department of the Summerset Public School District is shown by the solid line in the following graph. The dashed line depicts a semi variable-cost approximation of the depa
> Refer to the data in the preceding exercise. Use diagrams similar to those in Exhibits 10-2, 10–3, and 10–4 to determine the direct-material and direct-labour variances. Indicate whether each variance is favourable or
> Saskatewan Can Company manufactures recyclable soft-drink cans. A unit of production is a case of 12 dozen cans. The following standards have been set by the production-engineering staff and the controller. Actual material purchases amounted to 240,000 k
> Handy Hardware is a retail hardware store. Information about the store’s operations follows. November 20x1 sales amounted to $200,000. Sales are budgeted at $220,000 for December 20x1 and $200,000 for January 20x2. Collections are expec
> Sound Investments, Inc., is a large retailer of stereo equipment. The controller is about to prepare the budget for the first quarter of 20x2. Past experience has indicated that 75 percent of the store’s sales are cash sales. The collec
> Tanya Williams is the new accounts manager at East Bank of Mississippi. She has just been asked to project how many new bank accounts she will generate during 20x2. The economy of the county in which the bank operates has been growing, and the bank has e
> The following information is from Tejas Window Tint’s financial records. Month Sales Purchase April …………………………………. $72,000…………………………… $42,000 May ………………………………….. 66,000 ……………………………. 48,000 June …………………………………. 60,000 ……………………………. 36,000
> Greener Grass Fertilizer Company plans to sell 200,000 units of finished product in July and anticipates a growth rate in sales of 5 percent per month. The desired monthly ending inventory in units of finished product is 80 percent of the next month’s es
> Bodin Company budgets on an annual basis. The following beginning and ending inventory levels (in units) are planned for the year 20x1. Two units of raw material are required to produce each unit of finished product. Required: 1. If Bodin Company plans
> Choose a city or state in the United States (or a Canadian city or province), and use the Internet to explore the annual budget of the governmental unit you selected. For example, you could check out the budget for Houston, Texas, at www.houstontx.gov/bu
> Fill in the missing amounts in the following schedules.
> Draw a graph of the cost behaviour for each of the following costs incurred by the Mountain Summit Hospital. The hospital measures monthly activity in patient days. Label both axes and the cost line in each graph. 1. The cost of food varies in proportion
> Search the internet to find two companies other than those referenced in the chapter that report sustainability/ESG results using either the ISO or GRI models. Evaluate their reporting. Is one report better than the other?
> San Mateo Circuitry manufactures electrical instruments for a variety of purposes. The following costs related to maintaining product quality were incurred in May. Required: Prepare a quality-cost report similar to the report shown in Exhibit 8â&#
> The following costs were incurred by Osaka Metals Company to maintain the quality of its products. (The yen is the national currency of Japan.) 1. Operating an X-ray machine to detect faulty welds, 110,000 yen 2. Repairs of products sold last year, 116,0
> Information taken from Allied Pipe Company’s records for the most recent year is as follows: Required: 1. Assuming Allied Pipe Company uses absorption costing, compute the inventoriable costs for the year. 2. Compute the yearâ
> Refer to the data given in the exercise 8-24 for Bianca Bicycle Company. Required: 1. Prepare a cost-volume-profit graph for the company. (Scale the vertical axis in millions of dollars.) 2. Calculate Bianca Bicycle Company’s break-even point in units,
> Bianca Bicycle Company manufactures mountain bikes with a variable cost of $200. The bicycles sell for $350 each. Budgeted fixed manufacturing overhead for the most recent year was $2,200,000. Planned and actual production for the year were the same. Re
> Pandora Pillow Company’s planned production for the year just ended was 10,000 units. This production level was achieved, but only 9,000 units were sold. Other data follow: The cost per unit remained the same in the current year as in t
> Easton Pump Company’s planned production for the year just ended was 20,000 units. This production level was achieved, and 21,000 units were sold. Other data follow: The cost per unit remained the same in the current year as in the prev
> Hydro Systems Engineering Associates, Inc., provides consulting services to city water authorities. The consulting firm’s contribution-margin ratio is 20 percent, and its annual fixed expenses are $120,000. The firm’s income-tax rate is 25 percent. Requ
> Refer to the income statement given in the exercise 7-31. Prepare a new contribution income statement for the Nantucket Inn in each of the following independent situations. (Ignore income taxes.) 1. The hotel’s volume of activity increa
> Information taken from Tuscarora Paper Company’s records for the most recent year is as follows: Required: 1. Assuming Tuscarora Paper Company uses variable costing, compute the inventoriable costs for the year. 2. Compute the year&aci
> A contribution income statement for the Nantucket Inn is shown below. (Ignore income taxes.) Required: 1. Show the hotel’s cost structure by indicating the percentage of the hotel’s revenue represented by each item on
> Use the Internet to access the website of one of these airlines, or a different airline of your choosing. Required: Find the company’s most recent annual report. Does the management discussion in the report disclose the airlineâ&#
> Tim’s Bicycle Shop sells 21-speed bicycles. For purposes of a cost-volume-profit analysis, the shop owner has divided sales into two categories, as follows: Three-quarters of the shop’s sales are medium-quality bikes.
> Europa Publications, Inc., specializes in reference books that keep abreast of the rapidly changing political and economic issues in Europe. The results of the company’s operations during the prior year are given in the following table.
> Refer to the data given in the exercise 7-26. Required: 1. Prepare a fully labelled profit-volume graph for the Houston Armadillos. 2. What is the safety margin for the baseball franchise if the team plays a 12-game season and the team owner expects the
> The Houston Armadillos, a minor-league baseball team, play their weekly games in a small stadium just outside Houston. The stadium holds 10,000 people and tickets sell for $10 each. The franchise owner estimates that the team’s annual fixed expenses are
> Rosario Company, which is located in Buenos Aires, Argentina, manufactures a component used in farm machinery. The firm’s fixed costs are 4,000,000 p per year. The variable cost of each component is 2,000 p, and the components are sold for 3,000 p each.
> College Pizza delivers pizzas to the dormitories and apartments near a major state university. The company’s annual fixed expenses are $40,000. The sales price of a pizza is $10, and it costs the company $5 to make and deliver each pizza. (In the followi
> Fill in the missing data for each of the following independent cases. (Ignore income taxes.)
> Gator Beach Marts, a chain of convenience grocery stores in the Fort Lauderdale area, has store hours that fluctuate from month to month as the tourist trade in the community varies. The utility costs for one of the company’s stores are
> Manta Ray Company manufactures diving masks with a variable cost of $25. The masks sell for $34. Budgeted fixed manufacturing overhead for the most recent year was $792,000. Actual production was equal to planned production. Required: Under each of the
> Explain the nature and importance of internal controls over financial reporting.
> Recent monthly costs of providing on-board flight service incurred by Great Plains Airlines are shown in the following table. Required: 1. Build a spreadsheet: Construct an Excel spreadsheet and use the Excel commands to perform a least-squares regressi
> Weathereye Inc. manufactures weather satellites. The final assembly and testing of the satellites is a largely manual operation involving dozens of highly trained electronics technicians. The following learning curve has been estimated for the firmâ
> The State Department of Taxation processes and audits income-tax returns for state residents. The state tax commissioner has recently begun a program of work measurement to help in estimating the costs of running the department. The independent variable
> Chillicothe Meat Company produces one of the best sausage products in southern Ohio. The company’s controller used the account-classification method to compile the following information. a. Depreciation schedules revealed that monthly depreciation on bui
> The Iowa City Veterinary Laboratory performs a variety of diagnostic tests on commercial and domestic animals. The lab has incurred the following costs over the past year. Required: 1. Plot the data above in a scatter diagram. Assign cost to the vertica
> Hold a classroom discussion (or debate) arguing the following two viewpoints, A: Sound data analytics is the key to using data for decision making. This is where the story embedded in the data is unlocked. Data visualization is all fluff—just a bunch of
> Refer to the data in the exercise 6-25. 1. Draw a scatter diagram and graph the company’s energy cost behaviour using the visual-fit method. 2. Predict the energy cost for a month in which 26,000 pints of applesauce are produced. 3. Wha
> Jonathan Macintosh is a highly successful Pennsylvania orchard man who has formed his own company to produce and package applesauce. Apples can be stored for several months in cold storage, so applesauce production is relatively uniform throughout the ye
