Distinguish between out-of-pocket costs and opportunity costs.
> Refer to the income statement given in the preceding exercise. Prepare a new contribution income statement for the La Jolla Inn in each of the following independent situations. (Ignore income taxes.) 1. The hotel’s volume of activity increases by 25 per
> A contribution income statement for the La Jolla Inn is shown below. (Ignore income taxes.) Revenue................................................................................... $1,500,000 Less: Variable Expenses ....................................
> Brad’s Bicycle Shop sells 21-speed bicycles. For purposes of a cost-volume-profit analysis, t he shop owner has divided sales into two categories, as follows: Seventy percent of the shop’s sales are medium-quality bike
> Pacific Rim Publications, Inc., specializes in reference books that keep abreast of political and economic issues in the Pacific Rim countries. The results of the company’s operations during the prior year are given in the following table. All units prod
> Rosario Company, which is located in Buenos Aires, Argentina, manufactures a component used in farm machinery. The firm’s fixed costs are 2,000,000 p per year. The variable cost of each component is 1,000 p, and the components are sold for 1,500 p each.
> Refer to the data given in the preceding exercise. (Ignore income taxes.) Data from preceding exercise: The Dallas Armadillos, a minor-league baseball team, play their weekly games in a small stadium just outside Dallas. The stadium holds 6,000 people,
> Consider the following cost items: 1. Current year’s depreciation on a ship owned by a cruise line. 2. The cost of chemicals and paper used during the period by a producer of film products. 3. Assembly-line wage cost incurred by a bicycle manufacturer. 4
> Explain the impact of an increase in the level of activity (or cost driver) on (a) total fixed cost and (b) fixed cost per unit of activity.
> An art museum covers its operating expenses by charging a small admission fee. The objective of the nonprofit organization is to break even. A local arts enthusiast has just pledged an annual donation of $10,000 to the museum. How will the donation affec
> The Dallas Armadillos, a minor-league baseball team, play their weekly games in a small stadium just outside Dallas. The stadium holds 6,000 people, and tickets sell for $20 each. The franchise owner estimates that the team’s annual fixed expenses are $3
> Fill in the missing data for each of the following independent cases. (Ignore income taxes.) Sales Variable Total Fixed Net Break-Even Revenue Expenses Contribution Margin Expenses Income Sales Revenue 1. ? $120,000 $240,000 ? $150,000 ? 2. $ 55,000
> University Pizza delivers pizzas to the dormitories and apartments near a major state university. The company’s annual fixed expenses are $54,000. The sales price of a pizza is $10, and it costs the company $6 to make and deliver each pizza. (In the foll
> Use an equation to express a least-squares regression line. Interpret each term in the equation.
> What is the chief drawback of the high-low method of cost estimation? What problem could an outlier cause if the high-low method were used?
> Describe the visual-fit method of cost estimation. What are the main strengths and weaknesses of this method?
> Explain the cost estimation problem caused by allocated and discretionary costs.
> What is an outlier? List some possible causes of outliers. How should outliers be handled in cost estimation?
> Suggest an appropriate independent variable to use in predicting the costs of the following tasks. a. Handling materials at a loading dock. b. Registering vehicles at a county motor vehicle office. c. Picking oranges. d. Inspecting computer components in
> (Note: Instructors who wish to cover all three cost-estimation methods with the same data set may assign this problem in conjunction with the next one.) Nantucket Marine Supply is a wholesaler for a large variety of boating and fishing equipment. The com
> What is meant by a learning curve? Explain its role in cost estimation.
> List and define the four basic management activities.
> A cost analyst showed the company president a graph that portrayed the firm’s utility cost as semivariable. The president criticized the graph by saying, “This fixed-cost component doesn’t look right to me. If we shut down the plant for six months, we wo
> Indicate which of the following descriptions is most likely to describe each cost listed below. Description …….………………………………..………Costs Engineered cost…………… Annual cost of maintaining an interstate highway Committed cost …………... Cost of ingredie
> Using graphs, show how a semivariable (or mixed) cost behavior pattern can be used to approximate (a) a stepvariable cost and (b) a curvilinear cost.
> Cherry Hill Glass Company employs a normal-costing system. The following information pertains to the year just ended. • Total manufacturing costs were $1,250,000. • Cost of goods manufactured was $1,212,500. • Applied manufacturing overhead was 30 percen
> The following data refer to Mister Munchie, Inc. for the year 20x4. Required: 1. Prepare Mister Munchie’s schedule of cost of goods manufactured for 20x4. 2. Prepare the company’s schedule of cost of goods sold for 20
> Shawn Toy Company incurred the following costs to produce job number TB78, which consisted of 1,000 teddy bears that can walk, talk, and play cards. Direct material: 8/11/x0 Requisition number 201: 500 yards of fabric at $.90 per yard 8/12/x0 Requisition
> Opticom, Inc. a manufacturer of fiber optic communications equipment, uses a j ob-order costing system. Since the production process is heavily automated, manufacturing overhead is applied on the basis of machine hours using a predetermined overhead rate
> Explain why a manufacturer’s cost of supervising production might be a step-fixed cost.
> Rexford Company manufactures finger splints for kids who get tendonitis from playing video games. The firm had the following inventories at the beginning and end of the month of January. The following additional manufacturing data pertains to January op
> List and explain four purposes of product costing.
> Liliana Richmond started KidCo, Inc. in Albuquerque, New Mexico to produce affordable children’s furnishings. The company uses a job-order costing system. KidCo’s work-in-process inventory at the end of November consis
> Define the term strategic cost management.
> Name several activities in the value chain of a. A manufacturer of cotton shirts b. An airline.
> Indicate whether each of the following costs is a direct cost or an indirect cost of the restaurant in a hotel. a. Cost of food served. b. Chef’s salary and fringe benefits. c. Part of the cost of maintaining the grounds around the hotel, which is alloca
> How can a hotel’s management use cost-volume-profit analysis to help in deciding on room rates?
> What do you think it means to be a professional? In your view, are managerial accountants professionals?
> Two years ago the manager of a large department store purchased new bar code scanners costing $39,000. A salesperson recently tried to sell the manager a new computer-integrated checkout system for the store. The new system would save the store a substan
> The controller for Oneida Vineyards, Inc. has predicted the following costs at various levels of wine output. The company’s marketing manager has predicted the following prices for the firm’s fine wines at various lev
> Draw a simple graph of each of the following types of cost behavior patterns: (a) variable, (b) step-variable, (c) fixed, (d) step-fixed, (e) semivariable, and (f) curvilinear.
> A large manufacturer of electronic machinery stated the following as one of its goals: “The company should become the low-cost producer in its industry.” How can managerial accounting help the company achieve this goal?
> Think about the process of registering for classes at your college or university. What additional information would you like to have before you register? How would it help you? What sort of information might create information overload for you?
> Piedmont Industries currently manufactures 40,000 units of part JR63 each month for use in production of several of its products. The facilities now used to produce part JR63 have a fixed monthly cost of $165,000 and a capacity to produce 74,000 units pe
> Can managerial accounting play an important role in a nonprofit organization? Explain your answer.
> Distinguish between marginal and average costs.
> Managerial accounting is an important part of any enterprise’s management information system. Name two other information systems that supply information to management.
> Define the terms sunk cost and differential cost.
> A car rental agency rents subcompact, compact, and full-size automobiles. What assumptions would be made about the agency’s sales mix for the purpose of a cost-volume-profit analysis?
> What is meant by the term non-value-added costs?
> Suggest an appropriate activity base (or cost driver) for each of the following organizations: (a) hotel, (b) hospital, (c) computer manufacturer, (d) computer sales store, (e) computer repair service, and (f) public accounting firm.
> Several costs incurred by Cape Cod Hotel and Restaurant are given in the following list. For each cost, indicate which of the following classifications best describe the cost. More than one classification may apply to the same cost item. Cost Classificat
> Briefly explain what is meant by each of the following ethical standards for managerial accountants: competence, confidentiality, integrity, and credibility.
> Which of the following costs are likely to be controllable by the chief of nursing in a hospital? a. Cost of medication administered. b. Cost of overtime paid to nurses due to scheduling errors. c. Cost of depreciation of hospital beds.
> Toledo Toy Company incurred the following costs during 20x4. The company sold all of its products manufactured during the year. Direct material .................................................................... $4,500,000 Direct labor ................
> Define and explain the significance of the term CMA.
> List three costs that are likely to be controllable by a city’s airport manager. List three costs that are likely to be uncontrollable by the manager.
> The Department of Natural Resources is responsible for maintaining the state’s parks and forest lands, stocking the lakes and rivers with fish, and generally overseeing the protection of the environment. Several costs incurred by the agency are listed b
> Evaluate the following statement: “If a resource has unused capacity, that capacity is lost forever.”
> What does the term sales mix mean? How is a weighted-average unit contribution margin computed?
> List three direct costs of the food and beverage department in a hotel. List three indirect costs of the department.
> Define the following terms, and explain the relationship between them: (a) cost estimation, (b) cost behavior, and (c) cost prediction.
> Refer to Exhibit 2–3, and answer the following questions. Required: 1. List the major differences between the income statements shown for Caterpillar, Walmart, and Southwest Airlines. 2. Explain how cost-accounting data were used to pr
> Explain the following terms: practical capacity, cost of resources supplied, cost of resources used, and cost of resources unused.
> Would each of the following characteristics be a volume-based or an operations-based cost driver in a college: a. Number of students b. Number of disciplines offered for study c. Urban versus rural location?
> Nantucket Tee manufactures T-shirts and decorates them with custom designs for retail sale on the premises. Several costs incurred by the company are listed below. For each cost, indicate which of the following classifications best describe the cost. Mor
> What is the chief difference between manufacturing and service industry firms?
> Distinguish between volume-based and operations based cost drivers in the airline industry.
> Air Frame Technology, Inc. incurs a variable cost of $16 per kilogram for raw material to produce a special alloy used in manufacturing aircraft. Required: 1. Draw a graph of the firm’s raw material cost, showing the total cost at the following product
> What is meant by the following statement? “Managerial accounting often serves an attention-directing role.”
> How does the variable cost per unit change as the level of activity (or cost driver) increases? Why?
> What is the difference between a manufacturing company’s gross margin and its total contribution margin?
> Describe the importance of cost behavior patterns in planning, control, and decision making.
> The following selected data were taken from the accounting records of Manitoba Manufacturing Company. The company uses direct-labor hours as its cost driver for overhead costs. June’s costs consisted of machine supplies ($153,000), depr
> Lone Mountain Extraction, which mines ore in Idaho, uses a calendar year for both financial-reporting and tax purposes. The following selected costs were incurred in December, the low point of activity, when 1,400 tons of ore were extracted: Peak activit
> Liberty Bell Fitness, Inc. operates a chain of fitness centers in Philadelphia. The firm’s controller is accumulating data to be used in preparing its annual profit plan for the coming year. The cost behavior pattern of the firmâ&
> The Piedmont School of Music has hired you as a consultant to help in analyzing the behavior of the school’s costs. Use the account-classification method of cost estimation to classify each of the following costs as variable, fixed, or semivariable. Befo
> For each of the following cost items (1 through 11), choose the graph (a through l) that best represents it. 1. The cost of utilities at a university. For low student enrollments, utility costs increase with enrollment, but at a decreasing rate. For larg
> Working in a group, use the Internet to identify a company that has been the subject of significant public discussion due to one or more ethical lapses in the last decade. Required: As a group, research what happened and then make a presentation to the
> Jefferson County Airport handles several daily commuter flights and many private flights. The county budget officer has compiled the following data regarding airport costs and activity over the past year. /\ Required: 1. Draw a scatter diagram of the ai
> Randolph Dana owns a catering company that prepares banquets and parties for business functions throughout the year. Dana’s business is seasonal, with a heavy schedule during the summer months and the year-end holidays. During peak peri
> Shortly after being hired as a cost analyst with Florida International Airlines, Kim Williams was asked to prepare a report that focused on passenger ticketing cost. The airline writes most of its own tickets, makes little use of travel agents, and has s
> The controller of Saratoga Auto Cylinder Company believes that the identification of the variable and fixed components of the firm’s costs will enable the firm to make better planning and control decisions. Among the costs the controlle
> Shenandoah Valley Golf Association is a nonprofit, private organization that operates three 18-hole golf courses in Virginia. The organization’s financial director has just analyzed the course maintenance costs incurred by the golf asso
> Refer to the data and accompanying information in the preceding case. Required: 1. Use the high-low method to estimate the cost behavior for the clinic’s administrative costs. Express the cost behavior in formula form (Y 5 a 1 bX). What is the variable
> “I don’t understand this cost report at all,” exclaimed Jeff Mahoney, the newly appointed administrator of Valley General Hospital. “Our administrative costs in the new pediatrics c
> Outside Environment, Inc. provides commercial landscaping services in San Diego. Sasha Cairns, the firm’s owner, wants to develop cost estimates that she can use to prepare bids on jobs. After analyzing the firm’s cost
> Give an example of a customer-value-added activity and a business-value-added activity in a hotel.
> What is a customer profitability profile?
> Why are product costs also called inventoriable costs?
> Explain the relationship between customer profitability analysis and activity-based costing.
> How could the administration at Delaware Medical Center’s Primary Care Unit use the activity-based costing information developed by the ABC project team?
> What is the role of activity dictionary in an ABC project?
> Explain the concept of a pool rate in activity-based costing. (Refer to Exhibit 5–6 .) Exhibit 5-6: INFORMATION SUPPLIED BY ABC PROJECT TEAM Activity Cost driver quantity for each product line; drivers add column G to get total in
> Distinguish between an activity’s trigger and its root cause. Give an example of each.
> What is meant by the term activity analysis? Give three criteria for determining whether an activity adds value.
> Explain the concept of two-dimensional ABC. Support your explanation with a diagram.
> Explain a key difference in the interpretation of the ABC data in Exhibit 5–7 (Patio Grill Company) and Exhibit 5–16 (Delaware Medical Center). Exhibit 5-7: Exhibit 5-16: E Microsoft Excel - Activity-Based Costing
> Explain why the maintenance of the medical-services provider network is treated as a product-sustaining level activity by Pennsylvania Blue Shield.
> Are activity-based costing systems appropriate for the service industry? Explain.
> Kaleidoscope Cutlery manufactures kitchen knives. One of the employees, whose job is to cut out wooden knife handles, worked 49 hours during a week in January. The employee earns $14 per hour for a 40-hour week. For additional hours the employee is paid
