Question: An investment banker is analyzing two companies

> Muscles-Are-You Inc. a bodybuilding spa targeted primarily toward male bodybuilders, refused to hire a woman for the position of executive director. The spa’s management stated that the executive director must have a “macho” image to relate well with the

> (a) What are the names given to the three parties typically involved in an agency relationship? (b) Describe the general purpose of the agency relationship.

> (a) What is the “specific” sense of corporate governance? (b) Why might some managers try to artificially raise or “puff up” the market price of their stocks? Describe several ways they could do this.

> The Smelting Department of Mathews Company has the following production and cost data for November. Production: Beginning work in process 2,000 units that are 100% complete as to materials and 20% complete as to conversion costs; units transferred out 8,

> Data for Cascio Company are given in BE16-7. Production records indicate that 18,000 units were transferred out, and 2,000 units in ending work in process were 50% complete as to conversion cost and 100% complete as to materials. Prepare a cost reconcili

> Production costs chargeable to the Finishing Department in June in Cascio Company are materials $16,000, labor $29,500, overhead $18,000. Equivalent units of production are materials 20,000 and conversion costs 19,000. Compute the unit costs for material

> Trek Company has the following production data for April: units transferred out 40,000, and ending work in process 5,000 units that are 100% complete for materials and 40% complete for conversion costs. If unit materials cost is $4 and unit conversion co

> Westerville Company accumulates the following data concerning a mixed cost, using units produced as the activity level. (a) Compute the variable- and fixed-cost elements using the high-low method. (b) Estimate the total cost if the company produces 9,2

> Goode Company has the following production data for selected months. Compute equivalent units of production for materials and conversion costs, assuming materials are entered at the beginning of the process. Ending Work in Process % Complete as to

> Factory labor data for Weber Company are given in BE16-2. Manufacturing overhead is assigned to departments on the basis of 200% of labor costs. Journalize the assignment of overhead to the Assembly and Finishing Departments.

> Data for Weber Company are given in BE16-1. Supporting records show that (a) the Assembly Department used $24,000 of raw materials and $35,000 of the factory labor, and (b) the Finishing Department used the remainder. Journalize the assignment of the c

> Hindi Co. started 3,000 units during the period. Its beginning inventory is 500 units one-fourth complete as to conversion costs and 100% complete as to materials costs. Its ending inventory is 300 units one-fifth complete as to conversion costs and 100%

> Sanchez Co. has zero units of beginning work in process. During the period, 12,000 units were completed, and there were 500 units of ending work in process one-fifth complete as to conversion cost and 100% complete as to materials cost. What were the equ

> At Ely Company, overhead is assigned to production departments at the rate of $5 per machine hour. In July, machine hours were 3,000 in the Machining Department and 2,400 in the Assembly Department. Prepare the entry to assign overhead to production.

> Larissa Company has a unit selling price of $250, variable costs per unit of $170, and fixed costs of $140,000. Compute the break-even point in units using (a) the mathematical equation and (b) contribution margin per unit.

> Weber Company purchases $45,000 of raw materials on account, and it incurs $60,000 of factory labor costs. Journalize the two transactions on March 31 assuming the labor costs are not paid until April.

> Overton Company has gathered the following information. Units in beginning work in process ……………………………………20,000 Units started into production …………………………………………..164,000 Units in ending work in process ………………………………………..24,000 Percent

> The Welding Department of Majestic Company has the following production and manufacturing cost data for February 2014. All materials are added at the beginning of the process. Majestic uses the FIFO method to compute equivalent units. Instructions: Pre

> The ledger of Hannon Company has the following work in process account. Production records show that there were 800 units in the beginning inventory, 30% complete, 1,200 units started, and 1,500 units transferred out. The units in ending inventory were

> The Smelting Department of Polzin Company has the following production and cost data for September. Production: Beginning work in process 2,000 units that are 100% complete as to materials and 20% complete as to conversion costs; units started and finish

> The Cutting Department of Keigi Company has the following production and\ cost data for August. Materials are entered at the beginning of the process. Conversion costs are incurred uniformly during the process. Keigi Company uses the FIFO method to com

> Using the data in E16-15, assume Royale Mortgage Company uses the FIFO method. Also assume that the applications in process on September 1 were 100% complete as to materials (forms) and 40% complete as to conversion costs. Data in E16-15: Royale Mortgag

> Royale Mortgage Company uses a process cost system to accumulate costs in its loan application department. When an application is completed, it is forwarded to the loan department for final processing. The following processing and cost data pertain to Se

> Remington Shipping, Inc. is contemplating the use of process costing to track the costs of its operations. The operation consists of three segments (departments): receiving, shipping, and delivery. Containers are received at Remington’s

> The Welding Department of Thorpe Company has the following production and manufacturing cost data for February 2014. All materials are added at the beginning of the process. Instructions: Prepare a production cost report for the Welding Department for

> Don Lieberman and Associates, a CPA firm, uses job order costing to capture the costs of its audit jobs. There were no audit jobs in process at the beginning of November. Listed below are data concerning the three audit jobs conducted during November.

> Mary Willis is the advertising manager for Bargain Shoe Store. She is currently working on a major promotional campaign. Her ideas include the installation of a new lighting system and increased display space that will add $24,000 in fixed costs to the $

> Shown below are the job cost related accounts for the law firm of Jack, Bob, and Will and their manufacturing equivalents: Law Firm Accounts …………………………………… Manufacturing Firm Accounts Supplies …………………………………………………… Raw Materials Salaries and Wages Pay

> Tierney Company begins operations on April 1. Information from job cost sheets shows the following. Job 12 was completed in April. Job 10 was completed in May. Jobs 11 and 13 were completed in June. Each job was sold for 25% above its cost in the month

> At May 31, 2014, the accounts of Mantle Company show the following. 1. May 1 inventories—finished goods $12,600, work in process $14,700, and raw materials $8,200. 2. May 31 inventories—finished goods $9,500, work in process $17,900, and raw materials $7

> Enos Printing Corp. uses a job order cost system. The following data summarize the operations related to the first quarter’s production. 1. Materials purchased on account $192,000, and factory wages incurred $87,300. 2. Materials requis

> Torre Corporation incurred the following transactions. 1. Purchased raw materials on account $46,300. 2. Raw materials of $36,000 were requisitioned to the factory. An analysis of the materials requisition slips indicated that $6,800 was classified as in

> A job cost sheet of Sandoval Company is given below. Instructions: (a) Answer the following questions. (1) What are the source documents for direct materials, direct labor, and manufacturing overhead costs assigned to this job? (2) What is the predeter

> In Wayne Company, materials are entered at the beginning of each process. Work in process inventories, with the percentage of work done on conversion costs, and production data for its Sterilizing Department in selected months during 2014 are as follows.

> Manufacturing cost data for Orlando Company, which uses a job order cost system, are presented below. Instructions: Indicate the missing amount for each letter. Assume that in all cases manufacturing overhead is applied on the basis of direct labor cos

> A job order cost sheet for Lowry Company is shown below. Instructions: (a) On the basis of the foregoing data, answer the following questions. (1) What was the balance in Work in Process Inventory on January 1 if this was the only unfinished job? (2) I

> Stine Company uses a job order cost system. On May 1, the company has a balance in Work in Process Inventory of $3,500 and two jobs in process: Job No. 429 $2,000, and Job No. 430 $1,500. During May, a summary of source documents reveals the following.

> Monthly production costs in Pesavento Company for two levels of production are as follows. Indicate which costs are variable, fixed, and mixed, and give the reason for each answer. Cost 2,000 Units 4,000 Units Indirect labor $10,000 5,000 4,000 $20

> Robert Mallory has prepared the following list of statements about process cost accounting. 1. Process cost systems are used to apply costs to similar products that are mass produced in a continuous fashion. 2. A process cost system is used when each fin

> Palmer Golf Accessories sells golf shoes, gloves, and a laser-guided range-finder that measures distance. Shown below are unit cost and sales data. Fixed costs are $630,000 Instructions: (a) Compute the break-even point in units for the company. (b) D

> Express Delivery is a rapidly growing delivery service. Last year, 80% of its revenue came from the delivery of mailing “pouches” and small, standardized delivery boxes (which provides a 20% contribution margin). The other 20% of its revenue came from de

> Qwik Repairs has over 200 auto-maintenance service outlets nationwide. It provides primarily two lines of service: oil changes and brake repair. Oil change–related services represent 70% of its sales and provide a contribution margin ratio of 20%. Brake

> Yard Tools manufactures lawnmowers, weed-trimmers, and chainsaws. Its sales mix and contribution margin per unit are as follows. Yard Tools has fixed costs of $4,200,000. Instructions: Compute the number of units of each product that Yard Tools must s

> Hall Company had sales in 2014 of $1,560,000 on 60,000 units. Variable costs totaled $720,000, and fixed costs totaled $500,000. A new raw material is available that will decrease the variable costs per unit by 25% (or $3.00). However, to process the new

> Comfi Airways, Inc., a small two-plane passenger airline, has asked for your assistance in some basic analysis of its operations. Both planes seat 10 passengers each, and they fly commuters from Comfi’s base airport to the major city in

> In the month of June, Jose Hebert’s Beauty Salon gave 4,000 haircuts, shampoos, and permanents at an average price of $30. During the month, fixed costs were $16,800 and variable costs were 75% of sales. Instructions: (a) Determine the contribution marg

> Creative Crates Co. produces wooden crates used for shipping products by oceanliner. In 2014, Creative incurred the following costs. Wood used in crate production ……………………………………………………. $54,000 Nails (considered insignificant and a variable expense) …………

> Langdon Company produced 9,000 units during the past year, but only 8,200 of the units were sold. The following additional information is also available. Direct materials used ……………………………………………………. $79,000 Direct labor incurred ………………………………………………………$30,

> Finney Inc. has conducted an analysis of overhead costs related to one of its product lines using a traditional costing system (volume-based) and an activity-based costing system. Here are its results. Explain how a difference in the overhead costs bet

> Arquitectos Interiores of Juarez, Mexico, is contemplating a major change in its cost structure. Currently, all of its drafting work is performed by skilled draftsmen. Alfonso Jiminez, Arquitectos’ owner, is considering replacing the dr

> The CVP income statements shown below are available for Armstrong Company and Contador Company. Instructions: (a) Compute the degree of operating leverage for each company and interpret your results. (b) Assuming that sales revenue increases by 10%, pr

> Billings Company manufactures and sells two products. Relevant per unit data concerning each product follow. Instructions: (a) Compute the contribution margin per machine hour for each product. (b) If 1,000 additional machine hours are available, which

> Dalton Inc. produces and sells three products. Unit data concerning each product is shown below. The company has 2,000 hours of labor available to build inventory in anticipation of the company’s peak season. Management is trying to d

> Spencer Company manufactures and sells three products. Relevant per unit data concerning each product are given below. Instructions: (a) Compute the contribution margin per unit of the limited resource (machine hours) for each product. (b) Assuming 1,5

> Personal Electronix sells iPads and iPods. The business is divided into two divisions along product lines. CVP income statements for a recent quarter’s activity are presented below. Instructions: (a) Determine sales mix percentage and

> All That Blooms provides environmentally friendly lawn services for homeowners. Its operating costs are as follows. Depreciation ………………………………..$1,400 per month Advertising ……………………………………. $200 per month Insurance …………………………………..$2,000 per month Weed and

> Jim Taylor wants Taylor Company to use CVP analysis to study the effects of changes in costs and volume on the company. Taylor has heard that certain assumptions must be valid in order for CVP analysis to be useful. Instructions:Prepare a memo to Jim T

> PCB Corporation manufactures a single product. Monthly production costs incurred in the manufacturing process are shown below for the production of 3,000 units. The utilities and maintenance costs are mixed costs. The fixed portions of these costs are $3

> Kinnard Electronics manufactures two home theater systems: the Elite which sells for $1,400, and a new model, the Preferred, which sells for $1,100. The production cost computed per unit under traditional costing for each model in 2014 was as follows.

> The controller of Dousmann Industries has collected the following monthly expense data for use in analyzing the cost behavior of maintenance costs. Instructions: (a) Determine the fixed- and variable-cost components using the high-low method. (b) Prepa

> Family Furniture Corporation incurred the following costs. 1. Wood used in the production of furniture. 2. Fuel used in delivery trucks. 3. Straight-line depreciation on factory building. 4. Screws used in the production of furniture. 5. Sales staff sala

> The controller of Furgee Industries has collected the following monthly expense data for use in analyzing the cost behavior of maintenance costs. Instructions: (a) Determine the fixed- and variable-cost components using the high-low method. (b) Prepare

> Shingle Enterprises is considering manufacturing a new product. It projects the cost of direct materials and rent for a range of output as shown below Instructions: (a) Diagram the behavior of each cost for output ranging from 1,000 to 11,000 units. (b

> Oak Bucket Co., a manufacturer of wood buckets, had the following data for 2013: Sales …………………………………..2,600 units Sales price …………………………$40 per unit Variable costs …………………….$16 per unit Fixed costs ……………………………..$19,500 Instructions: (a) What is the con

> Glacial Company estimates that variable costs will be 62.5% of sales, and fixed costs will total $600,000. The selling price of the product is $4. Instructions: (a) Prepare a CVP graph, assuming maximum sales of $3,200,000. (Note: Use $400,000 increment

> Cottonwood Company reports the following operating results for the month of August: sales $400,000 (units 5,000); variable costs $210,000; and fixed costs $90,000. Management is considering the following independent courses of action to increase net inco

> Naylor Company had $210,000 of net income in 2013 when the selling price per unit was $150, the variable costs per unit were $90, and the fixed costs were $570,000. Management expects per unit data and total fixed costs to remain the same in 2014. The pr

> Cannes Company has the following information available for September 2014. Unit selling price of video game consoles ……………………………$ 400 Unit variable costs ……………………………………………………………..$ 275 Total fixed costs ……………………………………………………………. $52,000 Units sold ………………

> In 2013, Manhoff Company had a break-even point of $350,000 based on a selling price of $5 per unit and fixed costs of $112,000. In 2014, the selling price and the variable costs per unit did not change, but the break-even point increased to $420,000. I

> Warner Inc. sells a high-speed retrieval system for mining information. It provides the following information for the year. Overhead is applied on the basis of direct labor hours. (a) Compute the predetermined overhead rate. (b) Determine the amount of

> Kare Kars provides shuttle service between four hotels near a medical center and an international airport. Kare Kars uses two 10-passenger vans to offer 12 round trips per day. A recent month’s activity in the form of a cost-volume-prof

> In the month of March, Style Salon services 560 clients at an average price of $120. During the month, fixed costs were $21,024 and variable costs were 60% of sales. Instructions: (a) Determine the contribution margin in dollars, per unit, and as a rati

> Turgro Company manufactures a single product. Annual production costs incurred in the manufacturing process are shown below for two levels of production. Instructions: (a) Define the terms variable costs, fixed costs, and mixed costs. (b) Classify each

> Danny Baden’s Verde Vineyards in Oakville, California, produces three varieties of wine: Merlot, Viognier, and Pinot Noir. His winemaster, Russel Hansen, has identified the following activities as cost pools for accumulating overhead and assigning it to

> Santana Corporation manufactures snowmobiles in its Blue Mountain, Wisconsin, plant. The following costs are budgeted for the first quarter’s operations. Machine setup, indirect materials …………………………………..$ 4,000 Inspections ……………………………………………………………………..16

> Quik Prints Company is a small printing and copying firm with three high-speed offset printing presses, five copiers (two color and three black-and-white), one collator, one cutting and folding machine, and one fax machine. To improve its pricing practic

> Perdon Corporation manufactures safes—large mobile safes, and large walk-in stationary bank safes. As part of its annual budgeting process, Perdon is analyzing the profitability of its two products. Part of this analysis involves estima

> Shady Lady sells window coverings (shades, blinds, and awnings) to both commercial and residential customers. The following information relates to its budgeted operations for the current year. The controller, Peggy Kingman, is concerned about the resid

> American Fabrics has budgeted overhead costs of $990,000. It has allocated overhead on a plantwide basis to its two products (wool and cotton) using direct labor hours which are estimated to be 450,000 for the current year. The company has decided to exp

> Ayala Inc. has conducted the following analysis related to its product lines, using a traditional costing system (volume-based) and an activity-based costing system. Both the traditional and the activity-based costing systems include direct materials and

>     Knox Company begins operations on January 1. Because all work is done to customer specifications, the company decides to use a job order cost system. Prepare a flowchart of a typical job order system with arrows showing the flow of co

> Lasso and Markowitz is a law firm that is initiating an activity-based costing system. Sam Lasso, the senior partner and strong supporter of ABC, has prepared the following list of activities performed by a typical attorney in a day at the firm. Activit

> Healthy Products, Inc., uses a traditional product costing system to assign overhead costs uniformly to all products. To meet Food and Drug Administration requirements and to assure its customers of safe, sanitary, and nutritious food, Healthy engages in

> Many of you will someday own your own business. One rapidly growing opportunity is no-frills workout centers. Such centers attract customers who want to take advantage of state-ofthe-art fitness equipment but do not need the other amenities of full-servi

> Brett Stern was hired during January 2014 to manage the home products division of Hi-Tech Products. As part of his employment contract, he was told that he would get $5,000 of additional bonus for every 1% increase that the division’s p

> Cost-volume-profit analysis can also be used in making personal financial decisions. For example, the purchase of a new car is one of your biggest personal expenditures. It is important that you carefully analyze your options. Suppose that you are consid

> Helena Company reports the following total costs at two levels of production. Classify each cost as variable, fixed, or mixed. 5,000 Units 10,000 Units Indirect labor $ 3,000 $ 6,000 Property taxes Direct labor 7,000 28,000 7,000 56,000 Direct mate

> Adamson Company manufactures four lines of garden tools. As a result of an activity analysis, the accounting department has identified eight activity cost pools. Each of the product lines is produced in large batches, with the whole plant devoted to one

> For Eckstein Company, the predetermined overhead rate is 130% of direct labor cost. During the month, Eckstein incurred $100,000 of factory labor costs, of which $85,000 is direct labor and $15,000 is indirect labor. Actual overhead incurred was $115,000

> Classify each of the following activities within a tax-preparation business as value-added (VA) or non–value-added (NVA). (a) Advertising. (b) Completing tax returns. (c) Billing clients. (d) Answering client questions. (e) Accompanying clients to audit

> Indicate whether the following statements are true or false. (a) The reasoning behind ABC cost allocation is that products consume activities and activities consume resources. (b) Activity-based costing is an approach for allocating direct labor to produ

> Indicate whether each of the following statements is true or false. 1. Many hospitals use job order costing for small, routine medical procedures. 2. A manufacturer of computer flash drives would use a job order cost system. 3. A process cost system uses

> Stan Kaiser is confused about the source documents used in assigning materials and labor costs. Identify the documents and give the entry for each document.

> “Entries to Manufacturing Overhead normally are only made daily.” Do you agree? Explain.

> What source documents are used in accumulating direct labor costs?

> Scott Bestor is an accountant for Westfield Company. Early this year, Scott made a highly favorable projection of sales and profits over the next 3 years for Westfield’s hot-selling computer PLEX. As a result of the projections Scott presented to senior

> There are three inventory control accounts in a job order system. Identify the control accounts and their subsidiary ledgers.

> Your roommate asks your help in understanding the major steps in the flow of costs in a job order cost system. Identify the steps for your roommate.

> Total fixed costs are $26,000 for Daz Inc. It has a contribution margin per unit of $15, and a contribution margin ratio of 25%. Compute the break-even sales in dollars.

> “Break-even analysis is of limited use to management because a company cannot survive by just breaking even.” Do you agree? Explain.