Question: Anu’s Amusement Center has collected the

> What are the advantages and disadvantages of hiring a lawyer to draft or review a contract?

> Blair Co.’s top officers approached an investment bank to find a buyer for the company. The Bank sent an engagement letter to Blair with the following language: ‘If, within 24 months after the termination of this agreement, Blair is bought by anyone with

> What are the penalties if Artist breaches the movie contract? Are these reasonable? Too heavy? Too light?

> The United Kingdom has not signed the CISG. Until recently, major world traders like Japan and Brazil had refused to sign. Imagine that you are a legislator from one of these countries. What might your objections be to ratifying a treaty on sales law?

> List three types of contracts that should definitely be in writing, and one that probably does not need to be.

> List three provisions in a contract that would be material, and three that would not be.

> Chip bought an insurance policy on his house from Insurance Co. The policy covered damage from fire but explicitly excluded coverage for harm caused “by or through an earthquake.” When an earthquake struck, Chip’s house suffered no fire damage but the ea

> Slimline and Distributor signed a contract which provided that Distributor would use reasonable efforts to promote and sell Slimline’s diet drink. Slimline was already being sold in Warehouse Club. After the contract was signed, Distributor stopped condu

> Walgreens operated a pharmacy in the Sara Creek mall. As part of this long-term lease, Sara Creek agreed not to lease mall space to another pharmacy. During an economic recession, Sara Creek’s largest tenant left and the landlord informed Walgreens tha

> PepsiCo entered into a contract to sell its corporate jet to Klein for $4.6 million. Before the deal closed, the plane was sent to pick up PepsiCo’s chairman of the board, who was stranded at Dulles airport. The chairman then decided that the company s

> John and Susan Verba sold a Vermont lakeshore lot to Shane and Deborah Rancourt for $115,000. The Rancourts intended to build a house on the property, but after preparing the land for construction, they learned that a wetland protection law prevented bu

> Parkinson was injured in an auto accident by a driver who had no insurance. Parkinson filed a claim with her insurer, Liberty Mutual, for $2,000 under her “uninsured motorist” coverage. Liberty Mutual told her that if she sought that money, her premium

> Racicky was in the process of buying 320 acres of ranch land. While that sale was being negotiated, Racicky signed a contract to sell the land to Simon. Simon paid $144,000, the full price of the land. But Racicky then went bankrupt, before he could c

> Lewis signed a contract for the rights to all timber located on Nine Mile Mine. He agreed to pay $70 per thousand board feet ($70/mbf). As he began work, Nine Mile became convinced that Lewis lacked sufficient equipment to do the job well and forbade h

> Many European nations fear the effects of genetically modified foods, so they choose to restrict their importation. The EU banned the entry of these foods and subjected them to strict labeling requirements. Does this policy contravene the principles of

> While waiting in line in a supermarket, you observe a woman trying to pay with food stamps. Under the law, food stamps cannot be used to pay for prepared items so the register would not accept the stamps in payment for a $6 container of chicken noodle s

> Mega Contractors sells to government agencies using a cost-plus contract and to private firms using fixed price contracts. What choices does Mega have in the design of its job costing system that affect the cost of the government jobs?

> When preparing cost estimates for account analysis purposes, should the costs be extracted from the historical accounting records?

> The following costs are labeled fixed or variable according to a typical designation in accounting. Under which circumstances would any of these costs behave in a manner opposite to that listed? a. Direct labor—variable. b. Equipment depreciation—fixed.

> When using cost estimation methods based on past data, what are the trade-offs between gathering more data and gathering less?

> Why is it important to incorporate learning into cost estimates?

> If one wishes simply to prepare a cost estimate using regression analysis and enters data into a program to compute regression estimates, what problems might be encountered?

> Under what conditions is the engineering estimates technique preferred to other estimation techniques?

> Luke Corporation produces a variety of products, each within their own division. Last year, the managers at Luke developed and began marketing a new chewing gum, Bubbs, to sell in vending machines. The product, which sells for $5.25 per case, has not had

> Action Games has developed a new computer game that it plans to sell for $32. The variable costs associated with each game (for materials, shipping, and packaging) amount to $7. The fixed costs associated with the game amount to $75,000 per year. Requir

> Why does it matter what allocation base is used to determine the predetermined rate?

> Hill Street Electronics has provided the following information for last year: Sales revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,000,000 Store rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

> Krylon Company purchases eight special tools annually from CO., Inc. The price of these tools has increased each year, reaching $100,000 per unit last year. Because the purchase price has increased significantly, Krylon management has asked for a cost es

> Pick a unit of a hospital (for example, intensive care or maternity). Name one example of a direct materials cost, one example of a direct labor cost, and one example of an indirect cost.

> Refer to the example in Appendix B. Assume that the company now finds that the learning rate is 90 percent, instead of 80 percent. The 90 percent learning rate coefficient is −0.152004; that is b = −0.152004 in the for

> How is job costing in service organizations (for example, consulting firms) different from job costing in manufacturing organizations?

> The following information on maintenance and repair costs and revenues for the last two years is available from the accounting records at Arnie’s Arcade & Video Palace. Arnie has asked you to help him understand the relation between

> Lerner, Inc., is accumulating data to prepare its annual profit plan for the coming year. The behavior pattern of the maintenance costs must be determined. The accounting staff has suggested using regression to derive an equation in the form of y = a + b

> Your company provides a variety of delivery services. Management wants to know the volume of a particular delivery that would generate $10,000 per month in operating profits before taxes. The company charges $20 per delivery. The controllerâ€&

> The Business School at Eastern College is collecting data as a first step in the preparation of next year’s budget. One cost that is being looked at closely is administrative staff as a function of student credit hours. Data on administ

> Why are accurate cost estimates important?

> Your company is preparing an estimate of its production costs for the coming period. The controller estimates that direct materials costs are $45 per unit and that direct labor costs are $21 per hour. Estimating overhead, which is applied on the basis of

> Provide a business example illustrating opportunity costs.

> Cost allocation bases are ideally based on a cause-and-effect basis, but they are used to allocate fixed overhead. Is this inconsistent?

> Brodie Company’s advertising manager wants to know whether the company’s advertising program is successful. The manager used a spreadsheet program to estimate the relation between advertising expenditures (the independent variable) and sales dollars. Mon

> LM Enterprises produces a single part for sale. The part sells for $12 per unit. Fixed costs are $1,700,000 annually. Production and sales of 540,000 units annually results in profit before taxes of $1,000,000. Required What is the unit variable cost?

> Refer to the data for Balance, Inc., in Exercise 3-27. Assume that the company plans to sell 600,000 units per month. Consider requirements (b), (c), and (d) independently of each other. In Exercise 3-27 Balance, Inc., is considering the introduction of

> Balance, Inc., is considering the introduction of a new energy snack with the following price and cost characteristics: Sales price . . . . . . . . . . . . . . . $ 1.00 per unit Variable costs . . . . . . . . . . . . . . 0.20 per unit Fixed costs . . . .

> Refer to the data for Cambridge, Inc. in Exercise 3-25. Assume that the projected number of units sold for the year is 7,000. Consider requirements (b ), (c) , and (d ) independently of each other. In Exercise 3-25 Cambridge, Inc., is considering the in

> Oak Island Amusements Center provides the following data on the costs of maintenance and the number of visitors for the last three years: Number of Visitors _____________Maintenance per Year: (thousands) ___________Costs ($000) 1,825 . . . . . . . . . .

> Cambridge, Inc., is considering the introduction of a new calculator with the following price and cost characteristics: Sales price . . . . . . . . . . . . . . . . . . . . $ 27 per unit Variable costs . . . . . . . . . . . . . . . . . . . 15 per unit Fix

> Mark Ting desperately wants his proposed new product, DNA-diamond, to be accepted by top management. DNA-diamond is a piece of jewelry that contains the DNA of a boy or girl friend, spouse, or other loved one. Top management will not approve this product

> The manager of Kima’s Food Mart estimates operating costs for the year will include $900,000 in fixed costs. Required a. Find the break-even point in sales dollars with a contribution margin ratio of 40 percent. b. Find the break-even point in sales dol

> The cost accountant for Angie’s Apparel has compiled the following information for last month’s operations: Administrative costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,000 Merchandise inventory, July 1 . . . . . . . . . . . .

> Assume that you have been asked to paint the inside walls of an apartment. State specifically how you would estimate the cost of that job. Include payment for your own labor.

> Identify the letter of each profit equation component on the graph that follows. Line d Area e g Area f Volume %24

> Lomas Electronics manufactures a portable testing device for use in oil exploration. The product’s price and cost characteristics are: Selling price per unit . . . . . . . . . . . . . . $ 260 Variable cost per unit . . . . . . . . . . . . . . . 140 Fixed

> A local restaurant, Fred’s Fish Fry, is estimating nonfood kitchen costs (labor, supervision, utilities, etc.) based on food cost. Data were gathered for the past 24 months and analyzed using a spreadsheet program. The following output was generated: Equ

> Identify each of the following profit equation components on the graph presented below: a. The total cost line. b. The total revenue line. c. The total variable costs area. d. Variable cost per unit. e. The fixed costs area. f. The break-even point. g.

> What is the difference between gross margin and contribution margin.

> A January 1, 2009, news report on msn.com included the following sentence: “A report put out by brokerage house CLSA about Jet Airways said that the fall in ATF [fuel] prices has brought down the load factors (flight occupancy) required for the airline t

> A manager of a retailing firm says that he can lower his operating leverage by renting his stores rather than buying. Would you recommend this? Explain.

> How does the accountant know what to record for direct materials for a job or a client? For direct labor cost?

> Accounting records for NIC Enterprises (NICE) for September show the following (each entry is the total of the actual entries for the account for the month): Note a: This entry does not include any over- or underapplied overhead. Over- or underapplied

> Frightproof Commuter Airlines is considering adding a new flight to its current schedule from Metro to Hicksville. This route has the following prices and costs: Selling price per passenger per flight . . . . . . . . . . . . . $ 80 Variable cost per pass

> Odd Wallow Drinks is considering adding a new line of fruit juices to its merchandise products. This line of juices has the following prices and costs: Selling price per case (24 bottles) of juice . . . . . . . . . . . . . . . . . . . $ 75 Variable cost

> A consulting firm’s accounting records show the following costs for year 1: Direct materials supplies . . . . . . . . . . . . . . $ 540,000 Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . 3,870,000 Total overhead . . . . . . . . . . . . .

> What are the similarities between the Direct Materials Inventory account of the manufacturer and the Merchandise Inventory account of the merchandiser? Are there any differences between the two accounts? If so, what are they?

> Cesar’s Bottlers bottles soft drinks in a factory that can operate either one shift, two shifts, or three shifts per day. Each shift is eight hours long. The factory is closed on weekends. The sales price of $2 per case bottled and the

> Sam’s Sushi serves only a fixed-price lunch. The price of $10 and the variable cost of $4 per meal remain constant regardless of volume. Sam can increase lunch volume by opening and staffing additional check-out lanes. Sam has three cho

> Suburban Bus Lines operates as a not-for-profit organization providing local transit service. As a not-for-profit, it refers to an excess of revenues over costs as a “surplus” and an excess of costs over revenues as a “deficit.” Suburban charges $1.00 pe

> Consider a class in a business school where volume is measured by the number of students in the class. Would you say the operating leverage is high or low? Why?

> Durant Manufacturers has performed extensive studies on its costs and production and estimates the following annual costs based on 150,000 units (produced and sold): _________________________Total Annual Costs __________________________(150,000 units) D

> Scholes Systems supplies a particular type of office chair to large retailers such as Target, Costco, and Office Max. Scholes is concerned about the possible effects of inflation on its operations. Presently, the company sells 80,000 units for $60 per un

> The following data refers to one month. Fill in the blanks. A C 1 Direct materials inventory, March 1 2 Direct materials inventory, March 31 3 Work-in-process inventory, March 1 4 Work-in-process inventory, March 31 5 Finished goods inventory, March

> BS&T Partners has developed a new hubcap with the model name Spinnin’ Wheel. Production and sales started August 3. As of August 2, there were no direct materials in inventory. Data for the month of August include the following: Direct labor cost per uni

> Cortez Company is planning to introduce a new product that will sell for $96 a unit. The following manufacturing cost estimates have been made on 20,000 units to be produced the first year: Direct materials . . . . . . . . . . . . . . . . . . . . . . . .

> Global Partners is a manufacturing company that produces parts both for inventory and to custom specifications. Parts produced for inventory are sold at prices determined in the market. Custom parts are sold at a price equal to production cost plus a pro

> What criteria are important in determining the choice of an allocation base?

> Mary’s Mugs produces and sells various types of ceramic mugs. The business began operations on January 1, year 1, and its costs incurred during the year include these: Variable costs (based on mugs produced): Direct materials cost . . . . . . . . . . . .

> San Ysidro Company manufactures hiking equipment. The company’s administrative and manufacturing operations share the company’s one building. Eighty percent of the building is used for manufacturing and the remainder i

> The City of Imperial Falls contracts with Evergreen Waste Collection to provide solid waste collection to households and businesses. Until recently, Evergreen had an exclusive franchise to provide this service in Imperial Falls, which meant that other wa

> Just before class starts, you realize that you have mistakenly recycled the second page of your cost accounting homework assignment. Fortunately, you still have the first page of the printout from your spreadsheet (shown below) and you remember that you

> Is “cost-of-goods” a product cost or a period cost?

> “I am going to work for a hospital, which is a not-for-profi t organization. Because there are no profits, I will not be able to apply any CVP analysis in my work.” Do you agree with this statement? Why or why not?

> Mission Foods produces two flavors of tacos, chicken and fish, with the following characteristics: Required The total fixed costs for the company are $117,000. a. What is the anticipated level of profits for the expected sales volumes? b. Assuming that

> After a computer failure, you are trying to reconstruct some financial results for the year just ended. While you know that backups are available, it will take too long to get the information you want. You have been able to collect the following informat

> The library at Pacific Business School (PBS) serves both undergraduate and graduate programs. The dean of PBS is interested in evaluating the profitability of the degree programs and has asked the head of the library, Rex Gilmore, to allocate the annual

> Wayne Casting, Inc., produces a product made from a metal alloy. Wayne buys the alloy from two different suppliers, Chillicothe Metals and Ames Supply, in approximately equal amounts because of supply constraints at both vendors. The material from Chilli

> Coastal Computer operates two retail outlets in Oakview, one on Main Street and the other in Lakeland Mall. The stores share the use of a central accounting department. The cost of the accounting department for last year was $180,000. Following are the o

> The business school dean has asked the accounting club to help with a product costing analysis for the school. How would we define the products? What questions would we ask the dean before we accept the task?

> The administrative offices and manufacturing plant of Oakdale Tool & Die share the same building. The following information (in $000s) appears in the accounting records for last year: Administrative costs . . . . . . . . . . . . . . . . . . . . . . . .

> Chuck Moore supervises two consulting jobs for the firm of Price and Waters, LLP, which is a consulting firm that helps organizations become more efficient. One of the consulting jobs is for the U.S. Department of Defense and the other is for General Mot

> Multiple regression results from the data of Adriana Corporation (Exercise 5-30) are as follows: Equation: Overhead = $124,570 + ($31.93 × Labor-hours) + ($41.10 × Machine-hours) Statistical data Correlation coefficient . . . . . . . . . . . . . . . . .

> Butte Components produces a variety of hardware products, primarily for the do-it-yourself (DIY) market. As part of your job interview as a summer intern at Butte, the cost accountant provides you with the following (fictitious) data for the year: Requ

> Pioneer Parts, a manufacturer of windows for commercial buildings, reports the following account information for last year (all costs are in thousands of dollars): Information on January 1 (Beginning): Direct materials inventory . . . . . . . . . . . . .

> Why does the accountant use a linear representation of cost and revenue behavior in CVP analysis? How is this justified?

> Sell Block prepares three types of simple tax returns: individual, partnerships, and (small) corporations. The tax returns have the following characteristics: The total fixed costs per year for the company are $3,690,000. Required a. What is the antic

> “The assumptions of CVP analysis are so simplistic that no firm would make a decision based on CVP alone. Therefore, there is no reason to learn CVP analysis.” Comment.

> The controller at Emporia Precision Parts asks for your help in sorting out some cost information. She is called to a meeting, but hands you the following information for June: Prime costs, June . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

> Argentina Partners is concerned about the possible effects of inflation on its operations. Presently, the company sells 60,000 units for $30 per unit. The variable production costs are $15, and fixed costs amount to $700,000. Production engineers have ad

> Is “cost-of-goods sold” an expense?

> Three entrepreneurs were looking to start a new brewpub near Sacramento, California, called Roseville Brewing Company (RBC). Brewpubs provide two products to customers—food from the restaurant segment and freshly brewed beer from the be

> Simple regression results from the data of Adriana Corporation are as follows: Equation: Overhead = $206,469 + ($45.83 × Machine-hours) Statistical data Correlation coefficient . . . . . . . . . . . . . . . . . . . . . . . . . .962 R2 . . . . . . . . .

> The following balances are from the accounts of Todd Machining Company: Direct materials purchased during the year amount to $598,000, and the cost of goods sold for the year was $2,172,400. Required Reconstruct a cost of goods sold statement and fill