Darcy Roofing is faced with a decision. The company relies very heavily on the use of its 60-foot extension lift for work on large homes and commercial properties. Last year, Darcy Roofing spent $60,000 refurbishing the lift. It has just determined that another $40,000 of repair work is required. Alternatively, it has found a newer used lift that is for sale for $170,000. The company estimates that both lifts would have useful lives of 6 years. The new lift is more efficient and thus would reduce operating expenses by about $20,000 per year. Darcy Roofing could also rent out the new lift for about $10,000 per year. The old lift is not suitable for rental. The old lift could currently be sold for $25,000 if the new lift is purchased. Prepare an incremental analysis showing whether the company should repair or replace the equipment.
> The standard cost of Product B manufactured by Pharrell Company includes three units of direct materials at $5.00 per unit. During June, 29,000 units of direct materials are purchased at a cost of $4.70 per unit, and 29,000 units of direct materials are
> Stefani Company has gathered the following information about its product. Direct materials. Each unit of product contains 4.5 pounds of materials. The average waste and spoilage per unit produced under normal conditions is 0.5 pounds. Materials cost $5
> Manufacturing overhead data for the production of Product H by Shakira Company, assuming the company uses a standard cost system, are as follows. Overhead incurred for 52,000 actual direct labor hours worked ……………………….. $263,000 Overhead rate (variable
> Parsons Company is planning to produce 2,000 units of product in 2020. Each unit requires 3 pounds of materials at $5 per pound and a half-hour of labor at $16 per hour. The overhead rate is 70% of direct labor. Instructions a. Compute the budgeted amou
> As sales manager, Joe Batista was given the following static budget report for selling expenses in the Clothing Department of Soria Company for the month of October. As a result of this budget report, Joe was called into the president’
> Appliance Possible Inc. (AP) is a manufacturer of toaster ovens. To improve control over operations, the president of AP wants to begin using a flexible budgeting system, rather than use only the current master budget. The following data are available fo
> Fallon Company uses flexible budgets to control its selling expenses. Monthly sales are expected to range from $170,000 to $200,000. Variable costs and their percentage relationship to sales are sales commissions 6%, advertising 4%, travel 3%, and delive
> Myers Company uses a flexible budget for manufacturing overhead based on direct labor hours. Variable manufacturing overhead costs per direct labor hour are as follows. Indirect labor ……………………………….. $1.00 Indirect materials …………………………… 0.70 Utilities ……
> Presented below is selected financial information for two divisions of Samberg Brewing. Instructions Supply the missing information for the lettered items. Lager Lite Lager Contribution margin Controllable margin Average operating assets $ 300,000
> The Dinkle and Frizell Dental Clinic provides both preventive and orthodontic dental services. The two owners, Reese Dinkle and Anita Frizell, operate the clinic as two separate investment centers: Preventive Services and Orthodontic Services. Each of th
> The Sports Equipment Division of Harrington Company is operated as a profit center. Sales for the division were budgeted for 2020 at $900,000. The only variable costs budgeted for the division were cost of goods sold ($440,000) and selling and administra
> Horatio Inc. has three divisions which are operated as profit centers. Actual operating data for the divisions listed alphabetically are as follows. Instructions a. Compute the missing amounts. Show computations. b. Prepare a responsibility report for
> Fey Company’s organization chart includes the president; the vice president of production; three assembly plants—Dallas, Atlanta, and Tucson; and two departments within each plant— Machining and Finishing. Budget and actual manufacturing cost data for Ju
> UrLink Company is a newly formed company specializing in high-speed Internet service for home and business. The owner, Lenny Kirkland, had divided the company into two segments: Home Internet Service and Business Internet Service. Each segment is run by
> Chubbs Inc.’s manufacturing overhead budget for the first quarter of 2020 contained the following data. Actual variable costs were indirect materials $13,500, indirect labor $9,500, utilities $8,700, and maintenance $5,000. Actual fix
> Connie Rice has prepared the following list of statements about budgetary control. 1. Budget reports compare actual results with planned objectives. 2. All budget reports are prepared on a weekly basis. 3. Management uses budget reports to analyze differ
> Rodriguez, Inc., is preparing its direct labor budget for 2020 from the following production budget based on a calendar year. Each unit requires 1.5 hours of direct labor. Instructions Prepare a direct labor budget for 2020. Wage rates are expected to
> Rensing Ltd. estimates sales for the second quarter of 2020 will be as follows. Month ………………………. Units April ………………………… 2,550 May …………………………. 2,675 June ……………………….. 2,390 The target ending inventory of finished products is as follows. March 31 …………………
> On January 1, 2020, the Hardin Company budget committee has reached agreement on the following data for the 6 months ending June 30, 2020. Sales units: First quarter 5,000; second quarter 6,000; third quarter 7,000. Ending raw materials inventory: 40% of
> DeWitt Industries has adopted the following production budget for the first 4 months of 2020. Each unit requires 2 pounds of raw materials costing $3 per pound. On December 31, 2019, the ending raw materials inventory was 4,000 pounds. Management wants
> Turney Company produces and sells automobile batteries, the heavy-duty HD-240. The 2020 sales forecast is as follows. Quarter ……………………………. HD-240 1 ………………………………………………….. 5,000 2 ………………………………………………….. 7,000 3 ………………………………………………….. 8,000 4 ………………………………………
> Thome and Crede, CPAs, are preparing their service revenue (sales) budget for the coming year (2020). The practice is divided into three departments: auditing, tax, and consulting. Billable hours for each department, by quarter, are provided below. Ave
> Emeric and Ellie’s Painting Service estimates that it will paint 10 small homes, 5 medium homes, and 2 large homes during the month of June 2020. The company estimates its direct labor needs as 40 hours per small home, 70 hours for a medium home, and 120
> Edington Electronics Inc. produces and sells two models of calculators, XQ-103 and XQ-104. The calculators sell for $15 and $25, respectively. Because of the intense competition Edington faces, management budgets sales semiannually. Its projections for t
> Pletcher Dental Clinic is a medium-sized dental service specializing in family dental care. The clinic is currently preparing the master budget for the first 2 quarters of 2020. All that remains in this process is the cash budget. The following informati
> Green Landscaping Inc. is preparing its budget for the first quarter of 2020. The next step in the budgeting process is to prepare a cash receipts schedule and a cash payments schedule. To that end the following information has been collected. Clients us
> Nieto Company’s budgeted sales and direct materials purchases are as follows. Nieto’s sales are 30% cash and 70% credit. Credit sales are collected 10% in the month of sale, 50% in the month following sale, and 36% i
> The controller of Trenshaw Company wants to improve the company’s control system by preparing a month-by-month cash budget. The following information is for the month ending July 31, 2020. June 30, 2020, cash balance …………………………………………………………. $45,000 Divi
> Deitz Corporation is projecting a cash balance of $30,000 in its December 31, 2019, balance sheet. Deitz’s schedule of expected collections from customers for the first quarter of 2020 shows total collections of $185,000. The schedule of expected payment
> Danner Company expects to have a cash balance of $45,000 on January 1, 2020. Relevant monthly budget data for the first 2 months of 2020 are as follows. Collections from customers: January $85,000, February $150,000. Payments for direct materials: Januar
> Fultz Company has accumulated the following budget data for the year 2020. 1. Sales: 30,000 units, unit selling price $85. 2. Cost of one unit of finished goods: direct materials 1 pound at $5 per pound, direct labor 3 hours at $15 per hour, and manufact
> Atlanta Company is preparing its manufacturing overhead budget for 2020. Relevant data consist of the following. Units to be produced (by quarters): 10,000, 12,000, 14,000, 16,000. Direct labor: time is 1.5 hours per unit. Variable overhead costs per dir
> Lowell Company makes and sells artistic frames for pictures. The controller is responsible for preparing the master budget and has accumulated the following information for 2020. Lowell has a labor contract that calls for a wage increase to $9.00 per h
> Trusler Company has always done some planning for the future, but the company has never prepared a formal budget. Now that the company is growing larger, it is considering preparing a budget. Instructions Write a memo to Jim Dixon, the president of Trus
> Anna Garden recently opened her own basketweaving studio. She sells finished baskets in addition to selling the raw materials needed by customers to weave baskets of their own. Unfortunately, owing to space limitations, Anna is unable to carry all variet
> Gwynn Incorporated had the following transactions involving current assets and current liabilities during February 2020. Feb. 3 Collected accounts receivable of $15,000. 7 Purchased equipment for $23,000 cash. 11 Paid $3,000 for a 1-year insurance policy
> Riggs Company purchases sails and produces sailboats. It currently produces 1,200 sailboats per year, operating at normal capacity, which is about 80% of full capacity. Riggs purchases sails at $250 each, but the company is considering using the excess c
> Here are the comparative income statements of Delaney Corporation. Instructions a. Prepare a horizontal analysis of the income statement data for Delaney Corporation, using 2019 as a base. (Show the amounts of increase or decrease.) b. Prepare a vertic
> Pottery Ranch Inc. has been manufacturing its own finials for its curtain rods. The company is currently operating at 100% of capacity, and variable manufacturing overhead is charged to production at the rate of 70% of direct labor cost. The direct mater
> Operating data for Joshua Corporation are presented below. Instructions Prepare a schedule showing a vertical analysis for 2020 and 2019. 2020 2019 Sales revenue $800,000 $600,000 Cost of goods sold Selling expenses Administrative expenses 520,000
> Moonbeam Company manufactures toasters. For the first 8 months of 2020, the company reported the following operating results while operating at 75% of plant capacity: Sales (350,000 units) ………………………….. $4,375,000 Cost of goods sold ……………………………….. 2,600,
> The adjusted trial balance for Karr Farm Corporation at the end of the current year contained the following accounts. Interest Payable ……………………………………………… $ 9,000 Lease Liability …………………………………………………. 89,500 Bonds Payable, due 2025 ……………………………….. 180,000
> Dreiling Company borrowed $300,000 on January 1, 2020, by issuing a $300,000, 8% mortgage note payable. The terms call for annual installment payments of $40,000 on December 31. Instructions a. Prepare the journal entries to record the mortgage loan and
> Trayer Corporation has income from continuing operations of $290,000 for the year ended December 31, 2020. It also has the following items (before considering income taxes). 1. An unrealized loss of $80,000 on available-for-sale securities. 2. A gain of
> The ledger of Hasgrove Company has the following work in process account. Production records show that there were 800 units in the beginning inventory, 30% complete, 1,100 units started, and 1,500 units transferred out. The units in ending inventory we
> The controller of Standard Industries has collected the following monthly expense data for analyzing the cost behavior of electricity costs. Instructions a. Determine the fixed- and variable-cost components using regression analysis b. Prepare a scatte
> Tharp Company operates a small factory in which it manufactures two products: C and D. Production and sales results for last year were as follows. For purposes of simplicity, the firm averages total fixed costs over the total number of units of C and D
> Using the data in E21.15, assume Santana Mortgage Company uses the FIFO method. Also, assume that the applications in process on September 1 were 100% complete as to materials (application forms) and 40% complete as to conversion costs. Assume overhead c
> Veronica Mars, a recent graduate of Bell’s accounting program, evaluated the operating performance of Dunn Company’s six divisions. Veronica made the following presentation to Dunn’s board of director
> Naylor Company had $210,000 of net income in 2019 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 2020. The pr
> On January 2, 2019, Twilight Hospital purchased a $100,000 special radiology scanner from Bella Inc. The scanner had a useful life of 4 years and was estimated to have no disposal value at the end of its useful life. The straight-line method of depreciat
> In 2019, 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 2020, the selling price and the variable costs per unit did not change, but the break-even point increased to $420,000. I
> Kirk Minerals processes materials extracted from mines. The most common raw mterial that it processes results in three joint products: Spock, Uhura, and Sulu. Each of these products can be sold as is, or each can be processed further and sold for a highe
> Suppose selected comparative statement data for the giant bookseller Barnes & Noble are presented here. All balance sheet data are as of the end of the fiscal year (in millions). Instructions Compute the following ratios for 2020. a. Profit margin.
> As a study aid, your classmate Pascal Adams has prepared the following list of statements about decision-making and incremental analysis. 1. The first step in management’s decision-making process is, “Determine and evaluate possible courses of action.” 2
> The Palmer Acres Inn is trying to determine its break-even point during its off -peak season. The inn has 50 rooms that it rents at $60 a night. Operating costs are as follows . Salaries ……………………………………………………. $5,900 per month Utilities ………………………………………………
> Marty Moser wants Moser Company to use CVP analysis to study the effects of changes in costs and volume on the company. Marty has heard that certain assumptions must be valid in order for CVP analysis to be useful. Instructions Prepare a memo to Marty M
> The controller of Hall 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 a gr
> The controller of Norton 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 a
> Kansas Company uses a standard cost accounting system. In 2020, the company produced 28,000 units. Each unit took several pounds of direct materials and 1.6 standard hours of direct labor at a standard hourly rate of $12.00. Normal capacity was 50,000 di
> Felde Bucket Co., a manufacturer of rain barrels, had the following data for 2019: Sales …………………………… 2,500 units Sales price ………………… $40 per unit Variable costs ……………. $24 per unit Fixed costs ………………………. $19,500 Instructions a. What is the contribution
> Yams Company reports the following operating results for the month of August: sales $400,000 (units 5,000), variable costs $240,000, and fixed costs $90,000. Management is considering the following independent courses of action to increase net income. 1.
> Billings Company has the following information available for September 2020. Unit selling price of video game consoles ………………………………………… $ 400 Unit variable costs …………………………………………………………………………. $ 280 Total fixed costs ………………………………………………………………………. $54,000
> Spencer Kars provides shuttle service between four hotels near a medical center and an international airport. Spencer Kars uses two 10-passenger vans to offer 12 round trips per day. A recent month’s activity in the form of a cost-volum
> Bonita 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 co
> Baden Company has gathered the following information. Units in beginning work in process …………………………………………… –0– Units started into production ……………………………………………… 36,000 Units in ending work in process …………………………………………… 6,000 Percent complete in ending wor
> The Sanding Department of Quik Furniture Company has the following production and manufacturing cost data for March 2020, the first month of operation. Production: 7,000 units finished and transferred out; 3,000 units started that are 100% complete as to
> In Shady 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 2020 are as follows.
> The ledger of American Company has the following work in process account. Production records show that there were 400 units in the beginning inventory, 30% complete, 1,600 units started, and 1,700 units transferred out. The beginning work in process ha
> LRNA Company issued $380,000, 7%, 10-year bonds on January 1, 2020, for $407,968. This price resulted in an effective-interest rate of 6% on the bonds. Interest is payable annually on January 1. LRNA uses the effective-interest method to amortize bond pr
> Mesa Verde manufactures unpainted furniture for the do-it-yourself (DIY) market. It currently sells a table for $75. Production costs per unit are $40 variable and $10 fixed. Mesa Verde is considering staining and sealing the table to sell it for $100. V
> The Cutting Department of Lasso 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. Lasso Company uses the FIFO method to comp
> Santana Mortgage Company uses a process cost system to accumulate costs in its 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 Septem
> Remington 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 docks and sorted according
> The Welding Department of Healthy Company has the following production and manufacturing cost data for February 2020. All materials are added at the beginning of the process. Instructions Prepare a production cost report for the Welding Department for
> Cepeda Corporation has the following cost records for June 2020. Instructions a. Prepare a cost of goods manufactured schedule for June 2020. b. Prepare an income statement through gross profit for June 2020 assuming sales revenue is $92,100. $ 4,5
> The Polishing Department of Major Company has the following production and manufacturing cost data for September. Materials are entered at the beginning of the process. Production: Beginning inventory 1,600 units that are 100% complete as to materials a
> Robert Wilkins 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
> At May 31, 2020, the accounts of Lopez 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 $15,900, and raw materials $7,
> Crawford 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
> Ikerd Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are estimated to total $300,000 for the year, and machine usage is estimated at 125,000 hours. For the year, $322,000 of overhead costs are incurred a
> Financial Statement Identify where each of the following items would be reported in the financial statements. 1. Loss on sale of investments in stock. 2. Unrealized gain or loss—equity. 3. Fair value adjustment—trading
> Trak Corporation incurred the following costs while manufacturing its bicycles. Instructions a. Identify each of the above costs as direct materials, direct labor, manufacturing overhead, or period costs. b. Explain the basic difference in accounting f
> Nick Bosch has prepared the following list of statements about bonds. 1. Bonds are a form of interest-bearing notes payable. 2. Secured bonds have specific assets of the issuer pledged as collateral for the bonds. 3. Secured bonds are also known as deben
> McQueen Motor Company manufactures automobiles. During September 2020, the company purchased 5,000 head lamps at a cost of $15 per lamp. Fifty of these lamps were used to replace the head lamps in autos used by traveling sales staff, and 4,600 lamps were
> An analysis of the accounts of Roberts Company reveals the following manufacturing cost data for the month ended June 30, 2020. Costs incurred: raw materials purchases $54,000, direct labor $47,000, manufacturing overhead $19,900. The specific overhead
> University Company produces collegiate apparel. From its accounting records, it prepares the following schedule and financial statements on a yearly basis. a. Cost of goods manufactured schedule. b. Income statement. c. Balance sheet. The following items
> The following information is available for Aikman Company. Instructions a. Compute cost of goods manufactured. b. Prepare an income statement through gross profit. c. Show the presentation of the ending inventories on the December 31, 2020, balance she
> Tombert Decorating uses a job order cost system to collect the costs of its interior decorating business. Each client’s consultation is treated as a separate job. Overhead is applied to each job based on the number of decorator hours incurred. Listed bel
> The following are the job cost related accounts for the law firm of Colaw Associates and their manufacturing equivalents: Cost data for the month of March follow. 1. Purchased supplies on account $1,800. 2. Issued supplies $1,200 (60% direct and 40% in
> Hart Labs, Inc. provides mad cow disease testing for both state and federal governmental agricultural agencies. Because the company’s customers are governmental agencies, prices are strictly regulated. Therefore, Hart Labs must constantly monitor and con
> Rudd Clothiers is a small company that manufactures tall-men’s suits. The company has used a standard cost accounting system. In May 2020, 11,250 suits were produced. The following standard and actual cost data applied to the month of M
> Some of Tollakson Corporation’s investments in debt securities are classified as trading securities and some are classifi ed as available-for-sale. The cost and fair value of each category at December 31, 2020, were as follows. At Dec
> Part I Debby Kauff man and her two colleagues, Jamie Hiatt and Ella Rincon, are personal trainers at an upscale health spa/resort in Tampa, Florida. They want to start a health club that specializes in health plans for people in the 50+ age range. The gr
> “The added-worker effect can be explained in terms of the income effect, while the discouraged-worker effect is based on the substitution effect.” Do you agree?
> Assume that labor productivity is rising by 6 percent in the economy as a whole but by only 1 percent in industry X. Also assume that nominal wages for all industries rise in accordance with the economy’s overall rate of productivity increase. Labor cost
> Explain the relationship between changes in (a) nominal wage rates, (b) Productivity, (c) Unit labor costs, and (d) Product price. What does this relationship suggest about the expected impact of productivity growth on employment in a particular ind
> Suppose in a given year a firm’s productivity increases by 2 percent and its nominal wages rise by 5 percent. What would you expect to happen to the firm’s unit labor costs and product price?
> Speculate about how successful attempts by government to tighten the distribution of family income through transfers might inadvertently make the distribution of annual earnings more unequal.
> Suppose that in an economy 100 worker-hours produce 160 units of output in year 1. In years 2 and 3, worker-hours are 120 and 130 and units of output are 216 and 260, respectively. Using year 2 as the base year, calculate (a) The productivity index for
