Question: Chocolaterie de Geneve, SA, is located in

> Chuck Wagon Grills, Inc., makes a single product—a handmade specialty barbecue grill that it sells for $210. Data for last year’s operations follow: Required: 1. Assume that the company uses variable costing. Compute

> Whitman Company has just completed its first year of operations. The company’s absorption costing income statement for the year appears below: The company’s selling and administrative expenses consist of $210,000 per

> Lynch Company manufactures and sells a single product. The following costs were incurred during the company’s first year of operations: During the year, the company produced 25,000 units and sold 20,000 units. The selling price of the

> “These statements can’t be right,” said Ben Yoder, president of Rayco, Inc. “Our sales in the second quarter were up by 25% over the first quarter, yet these income statements show a

> Explain how a shift in the sales mix could result in both a higher break-even point and a lower net income.

> Neptune Company produces toys and other items for use in beach and resort areas. A small, inflatable toy has come onto the market that the company is anxious to produce and sell. The new toy will sell for $3 per unit. Enough capacity exists in the compan

> The Shirt Works sells a large variety of tee shirts and sweatshirts. Steve Hooper, the owner, is thinking of expanding his sales by hiring local high school students, on a commission basis, to sell sweatshirts bearing the name and mascot of the local hig

> Morton Company’s contribution format income statement for last month is given below: The industry in which Morton Company operates is quite sensitive to cyclical movements in the economy. Thus, profits vary considerably from year to ye

> Angie Silva has recently opened The Sandal Shop in Brisbane, Australia, a store that specializes in fashionable sandals. Angie has just received a degree in business and she is anxious to apply the principles she has learned to her business. In time, she

> A CVP graph such as the one shown below is a useful technique for showing relationships among an organization’s costs, volume, and profits. Required: 1. Identify the numbered components in the CVP graph. 2. State the effect of each of

> The questions in this exercise are based on the Benetton Group, a company headquartered in Italy and known in the United States primarily for one of its brands of fashion apparel—United Colors of Benetton. To answer the questions, you will need to downlo

> The questions below pertain to two different scenarios involving a manufacturing company. In each scenario, the cost structure of the company is constant from year to year. Selling prices, unit variable costs, and total fixed costs are the same in every

> What is meant by a product’s contribution margin ratio? How is this ratio useful in planning business operations?

> The Fashion Shoe Company operates a chain of women’s shoe shops around the country. The shops carry many styles of shoes that are all sold at the same price. Sales personnel in the shops are paid a substantial commission on each pair of

> Gold Star Rice, Ltd., of Thailand exports Thai rice throughout Asia. The company grows three varieties of rice—Fragrant, White, and Loonzain. (The currency in Thailand is the baht, which is denoted by B.) Budgeted sales by product and i

> Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $20 per unit. Variable costs are $8 per unit, and fixed costs total $180,000 per year. Required: Answer the following independent questions: 1. What is the productâ&#

> This makes no sense at all,” said Bill Sharp, president of Essex Company. “We sold the same number of units this year as we did last year, yet our profits have more than doubled. Who made the goofâ

> Explain how fixed manufacturing overhead costs are shifted from one period to another under absorption costing.

> What is the basic difference between absorption costing and variable costing?

> Northwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the ball is manufactured in a small plant that relies heavily on direct labor workers. Thus, variable costs are high, totalling $15 per ball, of which 60%

> How does Lean Production reduce or eliminate the difference in reported net operating income between absorption and variable costing?

> Under absorption costing, how is it possible to increase net operating income without increasing sales?

> Jorgansen Lighting, Inc., manufactures heavy-duty street lighting systems for municipalities. The company uses variable costing for internal management reports and absorption costing for external reports to shareholders, creditors, and the government. Th

> If the units produced exceed unit sales, which method would you expect to show the higher net operating income, variable costing or absorption costing? Why?

> What are the arguments in favour of treating fixed manufacturing overhead costs as period costs?

> What are the arguments in favour of treating fixed manufacturing overhead costs as product costs?

> Tami Tyler opened Tami’s Creations, Inc., a small manufacturing company, at the beginning of the year. Getting the company through its first quarter of operations placed a considerable strain on Ms. Tyler’s personal fi

> During Heaton Company’s first two years of operations, the company reported absorption costing net operating income as follows: The company’s $18 unit product cost is computed as follows: Forty percent of fixed manuf

> Carlos Cavalas, the manager of Echo Products’ Brazilian Division, is trying to set the production schedule for the last quarter of the year. The Brazilian Division had planned to sell 3,600 units during the year, but by September 30 onl

> Starfax, Inc., manufactures a small part that is widely used in various electronic products such as home computers. Operating results for the first three years of activity were as follows (absorption costing basis): In the latter part of Year 2, a compe

> Far North Telecom, Ltd., of Ontario, has organized a new division to manufacture and sell specialty cellular telephones. The division’s monthly costs are shown below: Far North Telecom regards all of its workers as full-time employees

> In response to a request from your immediate supervisor, you have prepared a CVP graph portraying the cost and revenue characteristics of your company’s product and operations. Explain how the lines on the graph and the break-even point would change if

> Denton Company manufactures and sells a single product. Cost data for the product are given below: The product sells for $60 per unit. Production and sales data for July and August, the first two months of operations, follow: The companyâ€&#

> Guochang Li was hired as chief executive officer (CEO) in late November by the board of directors of ContactGlobal, a company that produces an advanced global positioning system (GPS) device. The previous CEO had been fired by the board of directors due

> Carbex, Inc., produces cutlery sets out of high-quality wood and steel. The company makes a standard cutlery set and a deluxe set and sells them to retail department stores throughout the country. The standard set sells for $60, and the deluxe set sells

> The Ferre Publishing Company has three service departments and two operating departments. Selected data from a recent period on the five departments follow: The company allocates service department costs by the step-down method in the following order: A

> Madison Park Co-op, a whole foods grocery and gift shop, has provided the following data to be used in its service department cost allocations: Required: Using the step-down method, allocate the costs of the service departments to the two operating depa

> “This is really an odd situation,” said Jim Carter, general manager of Highland Publishing Company. “We get most of the jobs we bid on that require a lot of press time in the Printing Department, yet

> Selzik Company makes super-premium cake mixes that go through two processing departments, Blending and Packaging. The following activity was recorded in the Blending Department during July: All materials are added at the beginning of work in the Blendin

> Refer to the data for the Blending Department of Sunspots Beverages, Ltd., in Problem 4–13. Assume that the company uses the FIFO method rather than the weighted-average method in its process costing system. Required: 1. Determine the equivalent units fo

> Data concerning a recent period’s activity in the Assembly Department, the first processing department in a company that uses process costing, appear below: A total of 26,000 units were completed and transferred to the next processing

> Superior Micro Products uses the FIFO method in its process costing system. Data for the Assembly Department for May appear below: Required: Compute the cost per equivalent unit for materials, labour, overhead, and in total. Materials Labor Overhead

> Whirly Corporation’s most recent income statement is shown below: Required: Prepare a new contribution format income statement under each of the following conditions (consider each case independently): 1. The sales volume increases by

> Scribners Corporation produces fi ne papers in three production departments—Pulping, Drying, and Finishing. In the Pulping Department, raw materials such as wood fiber and rag cotton are mechanically and chemically treated to separate t

> Lucido Products markets two computer games: Claim jumper and Makeover. A contribution format income statement for a recent month for the two games appears on the following page: Required: 1. Compute the overall contribution margin (CM) ratio for the com

> Helix Corporation produces prefabricated flooring in a series of steps carried out in production departments. All of the material that is used in the first production department is added at the beginning of processing in that department. Data for May for

> Pureform, Inc., manufactures a product that passes through two departments. Data for a recent month for the first department follow: The beginning work in process inventory was 80% complete with respect to materials and 60% complete with respect to labo

> Olongapo Sports Corporation is the distributor in the Philippines of two premium golf balls—the Flight Dynamic and the Sure Shot. Monthly sales, expressed in pesos (P), and the contribution margin ratios for the two products follow: Fi

> Hielta Oy, a Finnish company, processes wood pulp for various manufacturers of paper products. Data relating to tons of pulp processed during June are provided below: Required: 1. Compute the number of tons of pulp completed and transferred out during J

> Maria Am Corporation uses a process costing system. The Baking Department is one of the processing departments in its strudel manufacturing facility. In June in the Baking Department, the cost of beginning work in process inventory was $3,570, the cost o

> Gary Stevens and Mary James are production managers in the Consumer Electronics Division of General Electronics Company, which has several dozen plants scattered in locations throughout the world. Mary manages the plant located in Des Moines, Iowa, while

> “I think we goofed when we hired that new assistant controller,” said Ruth Scarpino, president of Provost Industries. “Just look at this report that he prepared for last month for the Finishing Depart

> Woodbury Hospital has three service departments and three operating departments. Estimated cost and operating data for all departments in the hospital for the forthcoming quarter are presented in the table below: The costs of the service departments are

> Karlik Enterprises distributes a single product whose selling price is $24 and whose variable expense is $18 per unit. The company’s monthly fixed expense is $24,000. Required: 1. Prepare a cost-volume-profit graph for the company up to a sales level of

> The Sendai Co., Ltd., of Japan has budgeted costs in its various departments as follows for the coming year: The Japanese currency is the yen, denoted by ¥. The company allocates service department costs to other departments in the order list

> Seattle Western University has provided the following data to be used in its service department cost allocations: Required: Using the direct method, allocate the costs of the service departments to the two operating departments. Allocate the costs of Ad

> Engberg Company installs lawn sod in home yards. The company’s most recent monthly contribution format income statement follows: Required: 1. Compute the company’s degree of operating leverage. 2. Using the degree of

> Refer to the data for Clonex Labs, Inc., in Exercise 4–2. Required: Compute the equivalent units of production for October assuming that the company uses the FIFO method of accounting for units and costs.

> Refer to the data for Alaskan Fisheries, Inc., in Exercise 4–12. Data from Exercise 4–12 Required: Compute the equivalent units for July for the Cleaning Department assuming that the company uses the FIFO method of acc

> Jarvene Corporation uses the FIFO method in its process costing system. The following data are for the most recent month of operations in one of the company’s processing departments: The cost of beginning inventory according to the co

> Molander Corporation is a distributor of a sun umbrella used at resort hotels. Data concerning the next month’s budget appear below: Required: 1. Compute the company’s margin of safety. 2. Compute the companyâ&#

> Refer to the data for Hielta Oy in Exercise 4–7. Assume that the company uses the FIFO method in its process costing system. Data from Exercise 4–7 Required: 1. Compute the number of tons of pulp completed and transfer

> Refer to the data for Pureform, Inc., in Exercise 4–8. Data from Exercise 4–8. Jarvene Corporation uses the FIFO method in its process costing system. The following data are for the most recent month of operations in o

> MediSecure, Inc., produces clear plastic containers for pharmacies in a process that starts in the Molding Department. Data concerning that department’s operations in the most recent period appear below: Required: MediSecure uses the F

> Schroeder Baking Corporation uses a process costing system in its large-scale baking operations. The Mixing Department is one of the company’s processing departments. In the Mixing Department in July, the cost of beginning work in process inventory was $

> Refer to the data for Provost Industries in Case 4–19. Assume that the company uses the FIFO method in its process costing system. Required: 1. Prepare a report for the Finishing Department for April showing how much cost should have been assigned to the

> The questions in this exercise are based on Dell, Inc. To answer the questions, you will need to download Dell’s 2005 Form 10-K by going to www.sec.gov/edgar/searchedgar/companysearch.html. Input CIK code 826083 and hit enter. In the gray box on the righ

> The Hartford Symphony Guild is planning its annual dinner-dance. The dinner-dance committee has assembled the following expected costs for the event: The committee members would like to charge $35 per person for the evening’s activities

> Define the following: (a) Direct materials, (b) Indirect materials, (c) Direct labour, (d) Indirect labour, and (e) Manufacturing overhead.

> What are the major differences between financial and managerial accounting?

> Describe the three major activities of a manager.

> Define the following terms: differential cost, opportunity cost, and sunk cost.

> Mauro Products distributes a single product, a woven basket whose selling price is $15 and whose variable expense is $12 per unit. The company’s monthly fixed expense is $4,200. Required: 1. Solve for the company’s break-even point in unit sales using th

> Is it possible for costs such as salaries or depreciation to end up as assets on the balance sheet? Explain.

> Why are product costs sometimes called inventoriable costs? Describe the flow of such costs in a manufacturing company from the point of incurrence until they finally become expenses on the income statement.

> Describe the schedule of cost of goods manufactured. How does it tie into the income statement?

> Describe how the income statement of a manufacturing company differs from the income statement of a merchandising company.

> Explain the difference between a product cost and a period cost.

> Outback Outfitters sells recreational equipment. One of the company’s products, a small camp stove, sells for $50 per unit. Variable expenses are $32 per stove, and fixed expenses associated with the stove total $108,000 per month. Required: 1. Compute t

> You have just been hired by Ogden Company to fill a new position that was created in response to rapid growth in sales. It is your responsibility to coordinate shipments of finished goods from the factory to distribution warehouses located in various par

> Swift Company was organized on March 1 of the current year. After five months of start-up losses, management had expected to earn a profit during August. Management was disappointed, however, when the income statement for August also showed a loss. Augus

> Various costs associated with the operation of factories are given below: 1. Electricity to run production equipment. 2. Rent on a factory building. 3. Cloth used to make drapes. 4. Production superintendent’s salary. 5. Wages of labour

> Wollogong Group Ltd. of New South Wales, Australia, acquired its factory building about 10 years ago. For several years, the company has rented out a small annex attached to the rear of the building. The company has received a rental income of $30,000 pe

> Listed below are costs found in various organizations. 1. Property taxes, factory. 2. Boxes used for packaging detergent produced by the company. 3. Salespersons’ commissions. 4. Supervisor’s salary, factory. 5. Deprec

> Lin Corporation has a single product whose selling price is $120 and whose variable expense is $80 per unit. The company’s monthly fixed expense is $50,000. Required: 1. Using the equation method, solve for the unit sales that are required to earn a targ

> Supply the missing data in the following cases. Each case is independent of the others. Case 1 3 Schedule of Cost of Goods Manufactured Direct materials $4,500 $6.000 $5,000 $3,000 $4,000 Direct labor. Manufacturing overhead Total manufacturing costs

> Visic Corporation, a manufacturing company, produces a single product. The following information has been taken from the company’s production, sales, and cost records for the just completed year. The finished goods inventory is being

> M. K. Gallant is president of Kranbrack Corporation, a company whose stock is traded on a national exchange. In a meeting with investment analysts at the beginning of the year, Gallant had predicted that the company’s earnings would grow by 20% this year

> Selected account balances for the year ended December 31 are provided below for Superior Company: Inventory balances at the beginning and end of the year were as follows: The total manufacturing costs for the year were $683,000; the goods available for

> Magic Realm, Inc., has developed a new fantasy board game. The company sold 15,000 games last year at a selling price of $20 per game. Fixed costs associated with the game total $182,000 per year, and variable costs are $6 per game. Production of the gam

> Staci Valek began dabbling in pottery several years ago as a hobby. Her work is quite creative, and it has been so popular with friends and others that she has decided to quit her job with an aerospace company and manufacture pottery full time. The salar

> The Dorilane Company specializes in producing a set of wood patio furniture consisting of a table and four chairs. The set enjoys great popularity, and the company has ample orders to keep production going at its full capacity of 2,000 sets per year. Ann

> Various cost and sales data for Meriwell Company for the just completed year appear in the worksheet below: Of the $105,000 of manufacturing overhead, $15,000 is variable and $90,000 is fixed. Required: 1. Prepare a schedule of cost of goods manufacture

> Northwest Hospital is a full-service hospital that provides everything from major surgery and emergency room care to outpatient clinics. Required: For each cost incurred at Northwest Hospital, indicate whether it would most likely be a direct cost or an

> Suppose that you have been given a summer job as an intern at Issac Aircams, a company that manufactures sophisticated spy cameras for remote-controlled military reconnaissance aircraft. The company, which is privately owned, has approached a bank for a

> The Devon Motor Company produces motorcycles. During April, the company purchased 8,000 batteries at a cost of $10 per battery. Devon withdrew 7,600 batteries from the storeroom during the month. Of these, 100 were used to replace batteries in motorcycle

> Data for Hermann Corporation are shown below: Fixed expenses are $30,000 per month and the company is selling 2,000 units per month. Required: 1. The marketing manager argues that a $5,000 increase in the monthly advertising budget would increase monthl

> The following cost and inventory data are taken from the accounting records of Mason Company for the year just completed: Required: 1. Prepare a schedule of cost of goods manufactured. 2. Prepare the cost of goods sold section of Mason Companyâ&#1

> The PC Works assembles custom computers from components supplied by various manufacturers. The company is very small and its assembly shop and retail sales store are housed in a single facility in a Redmond, Washington, industrial park. Listed below are

> “I was sure that when our battery hit the market it would be an instant success,” said Roger Strong, founder and president of Solar Technology, Inc. “But just look at the gusher of red ink for the fir