An activity analysis at Sky High Pie Company found the following activities for its pie makers: 25 percent of time, adding ingredients; 50 percent of time, mixing and kneading pie dough; 7 percent of time, shaping into pans; and 18 percent of time, cleaning up. The total salary and benefits cost pool for pie makers is $850,000 per year. Sky High Pie is considering buying new equipment that would reduce the time required to mix and knead by 50 percent. What is the potential savings to Sky High Pie per year if it acquires the new equipment? What other value chain and quality issues, besides cost savings, should be considered?
> Vermont Treats makes blueberry jam and blueberry syrup. Both products come out of a joint process costing $60,000 per year. The sales value of the blueberry jam is $20,000 per year. The sales value of the blueberry syrup is $80,000 per year. Use the rela
> Yi Corporation produces a large number of fishing products. The costs per unit of a particular fishing reel are as follows. The company recently decided to buy 8,000 fishing reels from another manufacturer for $28 per unit because “it
> A company regularly sells 100,000 washing machines at an average price of $250. The average cost of producing these machines is $180. Under what circumstances might the company accept especial order for 20,000 washing machines at $175 per machine?
> Explain how the high-low method determines a. The variable portion of a semi variable cost. b. The fixed portion of a semi variable cost.
> Vickery Machining Company is nearly finished constructing a specially designed piece of machining equipment when the customer declares bankruptcy and cannot pay for the equipment. Vickeryestimates that the cost associated with making the uncompleted equi
> A variety of products—chicken wings, drumsticks, thighs, and so on—are the result of a joint production process of butchering a chicken that costs $0.25 per pound. The wings can be sold at the split-off point for $0.35 per pound, or they can be processed
> Match the following decisions in column 1 (a through e) to all relevant costs or revenue in column 2 (1 through 5):
> A local gym has 20 stationary bicycles that are available for classes a combined total of 840 hours per week. The bicycles are used in two different exercise programs. A cycling class lasts one hour and earns a contribution margin of $18 per customer. A
> During the current year, Rothschild, Inc., purchased two assets that are described as follows. Rothschild depreciates heavy equipment by the declining-balance method at 150 percent of the straight-line rate. It amortizes intangible assets by the straigh
> An analysis of the annual financial statements of O’Connell Corporation reveals the following. a. The company had a $5 million loss from a fire that destroyed an uninsured factory building. b. Depreciation for the year amounted to $9 million. c. During t
> Which of the following are sunk, out-of-pocket, or opportunity costs? a. The amount you will pay to go to the movies next week. b. The insurance payment on your car last year. c. The amount of rent you could receive if you were to sublet your apartment a
> Patterson Company reported net income for the current year of $722,000. During the year the company’s accounts receivable increased by $50,000, inventory decreased by $23,000, accounts payable decreased by $55,000, and accrued expenses payable increased
> Mississippi Products Co. had the following positive cash flows during the current year: received cash from customers of $750,000; received bank loans of $35,000; and received cash from the sale of common stock of $145,000. During the same year, cash was
> Garagiola Company had net income in the current year of $470,000. Depreciation expense for the year totaled $67,000. During the year the company experienced an increase in accounts receivable (all from sales to customers) of $35,000 and an increase in ac
> Presley, Inc., had the following positive and negative cash flows during the current year. Determine the amount of cash provided by or used for operating activities by the direct method.
> Many managers complain about the budgeting process. They claim it takes too long, requires too much management time, encourages managers to “pad the budget” because of uncertainties, and creates unnecessary tension among managers. As a result of these ch
> Distinguish between value-added and non–value-added activities and provide an example of each.
> Does a statement of cash flows or an income statement best measure the profitability of a financially sound business? Explain.
> Last month, Hildebrand Corporation generated sales of $800,000 and incurred selling and administrative expenses of $320,000, of which half were variable. This month, the company estimates that it will generate sales of $900,000. Management does not antic
> Flag stags Brewery’s flexible budget estimates are $74,000, $77,000, and $80,000 to manufacture04,000, 4,500, and 5,000 gallons of beer, respectively, next quarter. What are the variable and fixed manufacturing costs in the flexible budget for Flag stags
> Indicate how you would expect the following strategies to affect the company’s net cash flows from operating activities (1) in the near future and (2) in later periods (after the strategy’s long-term effects have “taken hold”). Explain your reasoning. a.
> Haxtun, Inc., purchased a truck to use for deliveries and is attempting to determine how much depreciation expense would be recognized under three different methods. The truck cost $20,000and is expected to have a value of $4,000 at the end of its 5-year
> Identify the budgets in Column B from which dollar amounts are transferred directly in constructing the budgets listed in Column A.
> Cheri Standish, the controller at Harmonics International, overheard the following conversation among two of her product line department heads, Bob, manager of Pianos and Keyboards, and Fran, manager of Horns and Stringed Instruments. What comments shou
> On January 1, Howard Corporation determined that its direct materials inventory needs to contain 4,000 pounds of materials by March 31. To achieve this goal, Howard will have to use three pounds of direct materials for every pound that it purchases durin
> Expected quarterly unit sales of cured hams at Rod’s Meat World are 1,200, 2,000, 1,400, and 1,000 for the next 2 years. At the start of the current year, cured ham inventory on hand is 120 units. Rod’s has a desired ending inventory of 15 percent of the
> Body Builders Corporation is opening a chain of five health clubs in the Minneapolis area. Body Builders’ marketing manager has suggested a marketing plan designed to generate new memberships. The plan would allow new members to delay payment for the fir
> Harry Blackmun, manager of the Dry Goods Department at Good right’s Grocery, has a budget of $6,000 per month for the current year. This budget includes the allocation of $500 of storewide Common costs based on the square feet occupied by Dry Goods. Rece
> Renaldo’s Boutiques, Inc., has 14 stores located in a Midwestern part of the United States. Renaldo, the president of the company, has set budgets for each store that do not allow for lost, stolen, or misplaced merchandise (inventory shrinkage). Research
> You have been hired as a consultant to assist the following companies with cost-volume-profit analysis. Freeman’s Retail Floral Shop Susquehanna Trails Bus Service Wilson Pump Manufacturers McCauley & Pratt, Attorneys-at-Law suggest an appropriate activ
> Define the relevant range of activity.
> The accounting staff of Wyoming Outfitters, Inc., has assembled the following information for the current year ended December 31. Using this information, prepare a statement of cash flows. Include a proper heading for the financial statement, and classi
> Chaps & Saddles, a retailer of tack and Western apparel, earns an average contribution margin of 30 percent on its sales volume. Recently, the advertising manager of a local country radio station offered to run numerous radio advertisements for Chaps & S
> Kiwi Service Stations is considering expanding its operations to include the greater Dubuque area. Rather than build new service stations in the Dubuque area, management plans to acquire existing service stations and convert them into Kiwi outlets. Kiwi
> Ferrule Furriers has a contribution margin ratio of 80 percent and must sell 12,000 stoles at a unit price of $400 to break even. a. Compute total fixed costs. b. Compute variable cost per unit. c. Develop the company’s cost formula.
> Dominic’s Deli recently calculated its annual break-even sales revenue to be $210,000. For each dollar of sales revenue, $0.30 goes to cover variable costs. Compute the following. a. The contribution margin ratio. b. Total fixed costs. c. The sales reven
> New Berlin Corporation has annual fixed costs of $800,000, variable costs of $48 per unit, and a contribution margin ratio of 40 percent. Compute the following. a. Unit sales price and unit contribution margin for the given product. b. The sales volume
> Applying the high-low method, Bemidji Wilderness Resort estimates the total costs of providing guide services to be $9,000 per month, plus 25 percent of guide service revenue. a. What is the contribution margin ratio of the resort’s guide service operati
> Wadena Search and Rescue estimates the monthly cost of responding to emergency calls to be $90,000, plus $450 per call. a. In a month in which the company responds to 90 emergency calls, determine the estimated 1. Total cost of responding to emergency ca
> Explain whether you regard each of the following costs or categories of costs as fixed, variable, or semi variable with respect to net sales. Briefly explain your reasoning. If you do not believe that a cost fits into any of these classifications, explai
> Glow Worm Corporation makes flashlights and batteries. Its monthly fixed costs average $1,690,000. The company has provided the following information about its two product lines. a. Determine the company’s monthly break-even point in s
> Explain the effects of an increase in the volume of activity on the following costs. (Assume volume remains within the relevant range.) a. Total variable costs. b. Variable cost per unit. c. Total fixed cost. d. Fixed cost per unit. e. Total semi variabl
> During the current year, Maine Salvage Company took out new loans of $17 million. In addition, the company repaid $2 million of prior loans and paid $1.5 million of interest expense. Explain how these cash flows will appear in the company’s statement of
> Using the information presented in Problem 13.4B, prepare a partial statement of cash flows for the current year, showing the computation of net cash flows from operating activities using the indirect method. Explain why the increase in accounts receivab
> Acme International hired a consulting firm to determine if it had any quality-related problems. The consulting firm spent two months reviewing all production processes at Acme and suggested that Acme buy new equipment to reduce throughput time. Then the
> What activities would make up the marketing and distribution component of the value chain of a local fire department?
> During the current year, Riddick Corporation incurred the following expenditures, which must be recorded either as operating expenses or as intangible assets. a. Expenditures were made for the training of new employees. The average employee remains with
> Mark each of the following as true or false. a. Total quality costs are covered by external failure and appraisal costs. b. Traditional job order costing systems identify and account for quality costs. c. A rise in internal failures means higher appraisa
> Assume you’ve just started a new business to manufacture Fry-Plate, a new solar-powered cooking pan for camping. Your business analyst tells you that in the long run Fry-Plate will sell for $32.50 because, after a few years pass, similar products will be
> Hall’s, a maker of handheld video games, recently analyzed its manufacturing process to identify value-added and non–value-added activities. Hall’s found that the total non–value-added manufacturing time associated with producing the average game was 0.0
> Identify a non–value-added activity at a grocery store, a bank, and a hotel. Explain how each organization might be able to eliminate the non–value-added activity identified.
> Identify a restaurant where you have dined. Identify some of the types of costs that the restaurant incurs in each of the four cost-of-quality categories. Consider how those costs are related to each other.
> Assume Gamma’s, a retail establishment, wants to capture a 20 percent share of its local evening gown market. In order to capture that share, it has determined that the average selling price of an evening gown should be no more than $520. Gamma’s current
> The general ledger of AXM, Inc., provides the following information relating to purchases of merchandise. The company’s cost of goods sold during the year was $2,882,000. Compute the amount of cash payments made during the year to supp
> Team members involved in the target costing process should consider the current and future effects of their proposed solutions to arrive at the proposed target cost. Assume in the Boards & More example illustrated in Exhibit 19–8 that one proposed soluti
> Sail Right Boat Company builds and sells small sailboats. Identify at least four specific components of Sail Right’s value chain. For each component describe what activities might take place in that part of the value chain.
> Mains, Inc., had a cash balance at the beginning of the year of $72,000. During the year, the following cash flows occurred. Prepare an abbreviated statement of cash flows, including a reconciliation of the beginning and mending cash balances for the ye
> During the current year, Hitchcock Developers disposed of plant assets in the following transactions. Instructions: a. Prepare journal entries to record each of the disposal transactions. Assume that depreciation expense on each asset has been recorded
> The simplifying assumption that costs and volume vary in straight-line relationships makes the analysis of cost behavior much easier. What factors make this a reasonable and useful assumption in many cases?
> Zephyr Company reported net income for the year of $68,000. Depreciation expense for the year was $15,000. During the year, accounts receivable increased by $4,000, inventory decreased by $6,000, accounts payable increased by $3,000, and accrued expenses
> Tyler, Inc.’s cash balance at December 31 of the current year, the end of its financial reporting year, was $155,000. During the year, cash provided by operations was $145,000, cash used in investing activities was $67,000, and cash provided by financing
> Sphinx, Inc., reported cost of goods sold of $100,800 during the current year. Following are the beginning and ending balances of merchandise inventory and accounts payable for the year. Determine the amount of cash payments for purchases during the yea
> New Mexico, Inc., sold common stock for $560,000 and preferred stock for $56,000 during the current year. In addition, the company purchased treasury stock for $47,000 and declared dividends on common and preferred stock for $36,000, of which $12,000 was
> Old South Company purchased investments for $55,000 and plant assets for $147,000 during the current year, during which it also sold plant assets for $66,000, at a gain of $6,000. The company also purchased treasury stock for $78,000 and sold a new issue
> During the current year, Taconic, Inc., made cash sales of $289,000 and credit sales of $472,000. During the year, accounts receivable decreased by $32,000. a. Compute for the current year the amounts of 1. Net sales reported as revenue in the income sta
> Record the following selected transactions in general journal form for the Weston Gastroenterology Clinic. Include a brief explanation of the transaction as part of each journal entry May 1 The clinic issued 1,000 additional shares of capital stock to Do
> On November 1, Petree Corporation purchased a six-month insurance policy from The Avenson Agency for $5,400. a. Prepare the necessary adjusting entry for Petree Corporation on November 30, assuming it recorded the November 1 expenditure as Unexpired Ins
> The Cook County Authority is considering the purchase of a small plane to transport government officials. It is hoped that the plane will save money on travel costs for government employees. Assume the county requires a 8 percent rate of return. If the p
> Ron Jasper manages a factory for Barth Corporation. A salesperson for new factory equipment has persuaded Ron that the new equipment offered by her company would be less dangerous for the employees and lower the sound level in the factory significantly.
> Dr. Schechter, DVM, opened a veterinary clinic on May 1, current year. The business transactions for May are shown as follows A partial list of account titles used by Dr. Schekter includes the following Instructions: a. Analyze the effects that each o
> Best Buy is a leading provider of technology products, services, and solutions. The following selected information is adapted from the company’s January 28, 2017, annual report. (Dollar amounts are stated in millions.) The company has
> Assume that the required rate of return for capital investments at Knorr Foods is 12 percent. The Produce Department has proposed an investment in refrigeration equipment with a 10-year life. The present value of its expected annual cash flows is $84,000
> Suppose you are interested in opening up a new restaurant in your area. What specific activities would you undertake in the research and development and design stage of the value chain for the restaurant?
> Some types of capital investments have associated cash flows that are very difficult to estimate, while other types of capital investments have associated cash flows that are very easy to estimate. Name two capital investments, one that has associated ca
> Pete Nunn is trying to decide whether to go ahead with an investment opportunity that costs $60,000. The expected incremental cash inflows are $32,000, while the expected incremental cash outflows are $17,000. What is the payback period?
> An analysis of the Marketable Securities control account of Fancier Products, Inc., shows the following entries during the year. In addition, the company’s income statement includes a $25,000 loss on sales of marketable securities. Non
> Hawkins Poultry Farms is considering the purchase of feeding equipment that costs $139,000 and will produce annual cash flows of approximately $36,000 for five years. The equipment is expected to be sold at the end of five years for $40,000. What is the
> Rommel Fabrics is considering an investment proposal with a negative net present value of $50 when a discount rate of 9 percent is used. The same proposal has a positive net present value of $400 when a discount rate of 8 percent is used. What conclusion
> Bramblett Recording Studio is considering two investment proposals (1 and 2). Data for the two proposals are presented here. Calculate the return on average investment for both proposals.
> Sam’s Gardening Centers has multiple stores in the northeastern United States. Sam’s is considering investing in an online store. In addition to the identifiable cash flows such as increased sales and the initial costs to invest in software and personnel
> Rico Petricelli Industries invests $960,000 in plant assets with an estimated 10-year service life and no salvage value. These assets contribute $64,000 to annual net income when depreciation is computed on a straight-line basis. Compute the payback peri
> Compensation for top executives (e.g., CEOs and CFOs) has become more variable over time. For example, recent data show that in large corporations only 20 percent of CFO pay is fixed and 80 percent is variable, based on companywide performance. Explain w
> In June, current year, Wendy Winger organized a corporation to provide aerial photography services. The company, called Aerial Views, began operations immediately. Transactions during the month of June were as follows. The account titles used by Aerial
> The weighted-average cost of capital of Eagle Ridge is 8 percent. Last year, one of Eagle Ridge’s divisions generated an EVA of $3,200,000, while the division’s assets less its current liabilities were $24, 00,000. How much after-tax operating income did
> Welling house Industries has established a 10 percent target ROI for its divisions. The following data have been gathered for the Ionia Division’s operations for the previous year: Revenues = $30,000,000; Expenses = $28,000,000; Invested capital = $11,20
> What is the effect of an increase in activity on the following items? a. Total variable costs. b. Variable costs per unit of activity. c. Total fixed costs. d. Fixed costs per unit of activity.
> Auto Supply Company’s 2021 statement of cash flows appears in Exhibit 13–8. Study the statement and respond to the following questions. a. What was the company’s free cash flow in 2021? b. What were
> Consider the information in Brief Exercise 25.5. Assume that the manager of division 2 has the opportunity to purchase a new piece of equipment for $3,000,000 that would increase earnings by $300,000 per year. Show the impact of this purchase on division
> Saxwell Corporation has many divisions and evaluates them using ROI. The corporation’s expected ROI for each division is 14 percent or above. Compute the ROI for divisions 1 and 2. Are the divisions meeting the expected ROI? What other
> Ricoh Company Ltd., a leading supplier of office automation equipment and electronics, has implemented a balanced scorecard. Match each of the performance indicators from their scorecard that follows to the four balanced scorecard perspectives (Financial
> Use the information in Brief Exercise 25.2 to compute the ROI for the Pennsylvania facility using total assets and assets net of depreciation. Now find residual income if the company expects a 30 percent return on total assets. Is the Pennsylvania facili
> Proctor Corporation has multiple facilities across the United States. Management evaluates each facility based on the capital turnover ratio using the DuPont system. The following information pertains to the facility in Pennsylvania for the past year. C
> Boris Jasper is the manager of an auto parts division for a large auto parts supplier. The division makes dampers and oil pumps. Identify three things Boris could do to increase the division’s ROI in the coming year.
> Marsha’s Pet Store employs six employees. Their duties are to sell pets, replenish the stock, keep the pets’ cages clean, feed the pets, and maintain good records. Marsha pays a fixed hourly rate and a commission on sales of pets. Lately, Marsha has been
> Weed Surveying, Inc., provides land surveying services. During September, its transactions included the following. Instructions: a. Analyze the effects that each of these transactions will have on the following six components of the companyâ€
> See Brief Exercise 24.8. Provide the journal entry for direct materials usage in the month of November for Hearts & Flowers Data from Brief Exercise 24.8: One of the products of Hearts & Flowers is a one-pound box of chocolate candy, packaged in a box b
> One of the products of Hearts & Flowers is a one-pound box of chocolate candy, packaged in a box bearing the customer’s logo (minimum order, 100 boxes). The standard cost of the chocolate candy used is $2 per pound. During November, 20,000 of these one-p
> Statements of cash flow for Home Depot, Inc., for fiscal years 2018, 2017, and 2016 are included in Appendix A of this text. a. Focus on the information for 2018 (year ending February 3, 2019). How does net earnings compare with net cash provided by or u
> See Brief Exercise 24.6. Provide the journal entry for direct labor usage for the month of September for Party-On!. Data from Brief Exercise 24.6: A popular product manufactured by Party-On! is a festively decorated punch bowl. The company’s standard co
> What are the four components of target costing? Why are each of these components important for target costing?
