Question: Equity Corp. paid a consultant to study

> Bio Labs is a genetic engineering firm manufacturing a variety of gene-spliced, agricultural-based seed products. The firm has five separate laboratories producing different product lines. Each lab is treated as a profit center and all five labs are loca

> Woodley Furniture is a small boutique manufacturer of high quality contemporary wood tables. They make two models: end tables and coffee tables in a variety of different woods and finishes. Current annual production of end tables is 8,000 units that sell

> Madigan produces a single high-speed modem. The following table summarizes the current month’s budget for Madigan’s modem production: Projected production and sales ………………………. 4,000 units Variable costs ………………………………………………… $ 640,000 Fixed costs ………………………

> A Wall Street Journal article (December 26, 1996) describes a series of changes at the Pratt & Whitney plant in Maine that manufactures parts for jet engines. In 1993 it was about to be closed because of high operating costs and inefficiencies. A new pla

> At the beginning of year 1, Northern Sun, Inc., a food processing concern, is considering a new line of frozen entrees. The accompanying table shows projected cash outflows and inflows. Assume that all inflows and outflows are end-of-period payments. Req

> Golf World is a 1,000-room luxury resort with swimming pools, tennis courts, three golf courses, and many other resort amenities. The head golf course superintendent, Sandy Green, is responsible for all golf course maintenance and conditioning. Green als

> Brehm Vineyards grows a unique white pinot noir grape that they use to produce a white wine that is in high demand. Brehm uses all the grapes they can grow to produce their own white pinot noir wine. Brehm pinot noir wine contains 100 percent Brehm-grown

> The keyboard division of XBT, a personal computer manufacturing firm, fabricates 50-key keyboards for both XBT and non-XBT computers. Keyboards for XBT machines are included as part of the XBT personal computer and are also sold separately. The keyboard

> Turow Trailers assembles horse trailers. Two models are manufactured: G7 and V8. While labor intensive, the production process is not very complicated. The single plant produces all the trailers with 48 work teams of two or three workers. Sixteen supervi

> Golf Specialties (GS), a Belgian company, manufactures a variety of golf paraphernalia, such as head covers for woods, embroidered golf towels, and umbrellas. GS sells all its products exclusively in Europe through independent distributors. Given the pop

> Diagnostic Imaging Software (DIS) is the leading producer of imaging software for the health sciences. DIS develops, writes, produces, and sells its software through two direct selling organizations: North America and South America. Each of these direct

> Critically evaluate the statement: The step-down method is better than the direct allocation method because at least the step-down method captures on average half of the service flows between service departments. By comparison, the direct allocation meth

> Background Economists and managers have long recognized the importance of productivity in determining an organization’s success. Productivity is the relation between the firm’s output of goods and services and the inpu

> A proposed cost-saving device has an installed cost of $59,400. It will be depreciated for tax purposes on a straight-line basis over three years (zero salvage), although its actual life will be five years. The tax rate is 34 percent and the required rat

> Background Artisans Shirtcraft manufactures and sells hand-painted shirts of original design. The company was founded in 1999 by three sisters: Cathy, Linda, and Valerie Montgomery. Shirtcraft started out as a means of financing a hobby; profits from shi

> Flat Images develops and manufactures large, state-of-the-art flat-panel television screens that consumer electronic companies purchase and incorporate into a complete TV unit by adding the case, mounting brackets, tuner, amplifier, other electronics, an

> Exotic Roses, owned by Margarita Rameriz, provides a variety of rare rose bushes to local nurseries that sell Rameriz’s roses to the end consumer (landscapers and retail customers). Rameriz grows the roses from cuttings that she has spe

> Frames, Inc., manufactures two types of metal frames: large and small. Steel angle iron is first cut to the appropriate sizes; the pieces are then welded together to form the frames. The process involves a high degree of automation. There is considerable

> In 1995 Global Oil Corporation’s Marketing and Refining (M&R) Division was the fifth largestU.S. refiner with 7,700 Global-branded service stations selling about 23 million gallons per day, or 7 percent of the nation’s gasoline. All the service stations

> Giza Farms in Cairo, Egypt, has a corporate headquarters staff and three operating divisions: consulting services, chemicals, and agricultural products. Giza is considering allocating 160 million Egyptian pounds of corporate overhead (which includes sala

> Beckett Manufacturing is a contract manufacturer that assembles products for other companies. Beckett has two service departments, Maintenance and Administration, and two operating divisions, Small Components and Large Components. The following data summ

> Plastic Chairs manufactures plastic lawn chairs using a combination of new and recycled plastic. Varying amounts of each type of plastic can be used to produce a batch of 100 chairs. The table below lists the various combinations of recycled and new plas

> ITI Technology designs and manufactures solid-state computer chips. In one of the production departments, employees fabricate a six-inch circular wafer by laying down successive layers of silicon and then etching the circuits into the layers. Each wafer

> R&D Inc. has the following financial data for the current year (millions): Earnings before R&D expenditures……………………………………. $21.5 Interest expense……………………………….………………………………. $0.0 R&D expenditures…………………………….………………………………. $6.0 Total invested capital (excl

> Blauvelt Products uses a flexible budget to set the overhead rate at the beginning of the year based on units produced. In year 1 budgeted fixed overhead is $1 million and budgeted variable overhead is $2 per unit. Direct material and direct labor togeth

> Is it preferable to use an accelerated depreciation method rather than the straight-line method for tax purposes?

> Robert S. Kaplan in “One Cost System Isn’t Enough” (Harvard Business Review, January–February 1988, pp. 61–66) states, No single system can adequately answer the demands made by diverse functions of cost systems. While companies can use one method to cap

> Commando Force is a new set of children’s action toys consisting of three separately sold pieces: Matt, Kim, and the multi-terrain vehicle (MTV). The MTV can be used by itself or it can hold Matt or Kim or both. With male and female act

> Madden International is a large ($7 billion sales), successful international pharmaceuticals firm operating in 23 countries with 15 autonomous subsidiaries. The corporate office consists of five vice presidents who oversee the operations of the subsidiar

> The Transfer Price Company has two divisions (Intermediate and Final) that report to the corporate office (Corporate). The two divisions are profit centers. Intermediate produces a proprietary product (called “intermedâ€&#157

> ICB has four manufacturing divisions, each producing a particular type of cosmetic or beauty aid. These products are then transferred to five marketing divisions, each covering a particular geographic region. Manufacturing and marketing divisions are fre

> Logical Solutions reports the following overhead variances for 2010: Spending variance …………………………………$100,000 F Efficiency variance …………………………………$100,000 F Volume variance …………………………………..$300,000 F In addition, actual overhead incurred in 2010 was $1 mill

> Repro Corporation is the leading manufacturer and seller of office equipment. Its most profitable business segment is the production and sale of large copiers. The company is currently organized into two divisions: manufacturing and sales. Manufacturing

> The Ogden plant makes Beanie Babies, small stuffed toys in a variety of animal shapes. The toys are so popular that they have become collectors’ items. The plant uses a flexible budget and predetermined overhead rates to assign overhead costs to the diff

> Geico is considering expanding an existing plant on a piece of land it already owns. The land was purchased 15 years ago for $325,000 and its current market appraisal is $820,000. A capital budgeting analysis shows that the plant expansion has a net pres

> You work for the strategy group of Adapt Inc., a firm that designs and manufactures memory cards for digital cameras. Your task is to gather intelligence about Adapt’s key competitor, DigiMem, a privately held company. Your boss has asked you to estimate

> Rothwell Inc. is the leader in computer-integrated manufacturing and factory automation products and services. The Rothwell product offering is segmented into 15 product categories, based on product function and primary manufacturing location. Rothwell’s

> Sunder manufactures hard rubber pet toys. The purple dog chewy has a variable cost of $3.00 per unit. It is produced on a machine that is leased. The three models of this machine have three different capacities. Maximum Daily Daily Lease Capacity (Units)

> Eastern Educational Services is considering the following proposal to sell its teaching machine and purchase a new, improved machine. The following data are presented by the department head: Additional information: 1. The company expects to produce 10,00

> JLE Electronics is an independent contract manufacturer of complex printed circuit board assemblies. Computer companies and other electronics firms engage JLE to assemble their boards. Utilizing computer-controlled manufacturing and test machinery and eq

> Salespeople at a particular firm forecast what they expect to sell next period. Their supervisors then review the forecasts and make revisions. These forecasts are used to set production and purchasing plans. In addition, salespeople receive a fixed bonu

> The Mopart Division produces a single product. Its standard cost system uses a flexible budget to assign indirect costs on the basis of standard direct labor hours. At the budgeted volume of 4,000 direct labor hours, the standard cost per unit is as foll

> The standard cost sheet calls for 80 pounds of zinc per batch of 70 faucets. Zinc has a standard price of $5.10 per pound. One thousand pounds of zinc are purchased for $5,530. Ten batches of the faucets are produced, and 840 pounds of zinc are used. The

> Kitchen Rite is considering outsourcing the production of a steel chassis that is used in a kitchen appliance. Two thousand chassis are produced per month. An outside vendor will supply an identical chassis for $9.90. The chassis is manufactured in two s

> A firm has four service centers, S1, S2, S3, and S4, which provide services to each other, as well as to three operating divisions, A, B, and C. The distribution of each service center’s output as well as its cost (in millions) is given

> Employees at White’s Department Store are observed engaging in the following behavior: (1) They hide items that are on sale from the customers and (2) they fail to expend appropriate effort in designing merchandise displays. They are also uncooperative w

> The Mowerson Division of Brown Instruments manufactures testing equipment for the automobile industry. Mowerson’s equipment is installed in several places along an automobile assembly line for component testing and is also used for reco

> Assuming the firm sells everything it produces and assuming that variable cost per unit does not change with volume, total profits are higher as volume increases because fixed costs are spread over more units. Required: a. True or false? b. Explain your

> Fast Photo operates four film developing labs in upstate New York. The four labs are identical: They employ the same production technology, process the same mix of films, and buy raw materials from the same companies at the same prices. Wage rates are al

> Employee satisfaction is a major performance measure used at American Inter Connect (AI), a large communications firm. All employees receive some bonus compensation. The lower-level employees receive a bonus that averages 20 percent of their base pay whe

> The Chicago Omni Hotel is a 750-room luxury hotel offering guests the finest facilities in downtown Chicago. The hotel is organized into four departments: lodging, dining, catering, and retail stores. Each of these departments is treated as a profit cent

> One MBA student was overheard saying to another, “Accounting is baloney. I worked for a genetic engineering company and we never looked at the accounting numbers and our stock price was always growing.” “I agree,” said the other. “I worked in a rust buck

> City Hospital is a city government-owned and -operated hospital providing basic health care to low income people. Most of the hospital’s revenues are from federal, state, county, and city governments. Some patients covered by private insurance are also a

> Savannah Products, a small integrated wood and lumber products company with substantial timber holdings, has two divisions: Forest and Lumber. Forest Division manages the timber holdings, maintains the land, and plants and harvests trees. It acquired its

> Background Woodhaven Service is a small, independent filling station located in the Woodhaven section of Queens. The station has three gasoline pumps and two service bays. The repair facility specializes in automotive maintenance (oil changes, tune-ups,

> Secure Servers Inc. (SSI) is one of the largest software and service providers directed at providing high levels of backup and security for computer servers to the financial community, military, and other clients requiring off-site backup and security sy

> Sanchez Gadgets purchases innovative home kitchen gadgets from around the world (such as kitchen torch, a pasta maker, and an automatic salad spinner) and sells them to specialty cooking retail stores. Sanchez has a marketing department that locates and

> Phonetex is a medium-size manufacturer of telephone sets and switching equipment. Its primary business is government contracts, especially defense contracts, which are very profitable. The company has two plants: Southern and Westbury. The larger plant,

> Jason Rocks is small rock quarry that produces five different sizes of stones, from small crushed stones (#1 stones) to large (3-inch) rocks (#5 stones). The stones are first mined and sorted into the five grades. Once the stones are mined and sorted, th

> It is often argued that private country clubs tend to have low-quality food operations because the members do not join or frequent their clubs for the food but rather for the golf and fellowship. (Note: A private country club charges an initiation fee an

> DVDS manufactures and sells DVD players in two countries. It manufactures two models—Basic and Custom—in the same plant. The Basic DVD has fewer options and provides lower-quality output than the Custom DVD. The basic

> Farmers in a valley are subject to occasional flooding when heavy rains cause the river to overflow. They have asked the federal government to build a dam upstream to prevent flooding. The construction cost of this project is to be repaid by the farm own

> Measer Enterprises produces standardized telephone keypads and operates in a highly competitive market in which the keypads are sold for $4.50 each. Because of the nature of the production technology, the firm can produce only between 10,000 and 13,000 u

> UOP is a manufacturing firm that has depreciation as its only overhead expense (i.e., there are no indirect labor, indirect materials, property taxes, factory insurance, etc.). UOP uses a flexible budget at the beginning of the year to forecast overhead

> Videx is the premier firm in the security systems industry. Martha Rameriz is an account manager at Videx responsible for selling residential systems. She is compensated based on beating a predetermined sales budget. The last seven yearsâ€&#15

> Karsten Mills is one of the premier carpet manufacturers in the world. It manufactures carpeting for both residential and commercial applications. Home sales and commercial sales each account for about 50 percent of total revenue. The firm is organized i

> Golf ball manufacturer Trevino is generally regarded as the industry leader. It commands a 40 percent market share in its targeted channels of distribution and reported net profits of $31.5 million on sales of $171 million in the last fiscal year. A rece

> Warren City, with sales of $2 billion, produces and sells farm equipment. The manufacturing division produces some parts internally and purchases other parts from external suppliers and assembles farm equipment including tractors, combines, and plows. Wi

> The purchasing department at Feder buys all of its raw materials, supplies, and parts. This department is a cost center. It uses a flexible budget based on the number of different items purchased each month to forecast spending and as a control mechanism

> Cibo Leathers manufactures a line of designer purses and handbags, some selling for as much as $1,000 per bag. One particular style requires a hand-stitched shoulder strap of cow leather that has been predyed. Cibo purchases large sheets of predyed leath

> The admissions office of a large hospital has an annual operating budget of $700,000. These costs are distributed to inpatient departments (surgery, medicine, pediatrics, psychiatry) and to outpatient departments (drug treatment, prenatal care, and dialy

> You are working as a loan officer at TransPacific Bank and are analyzing a loan request for a client when you come across the following footnote in the client’s annual report: Inventories are priced at the lower of cost or market of materials plus other

> Massey Electronics manufactures heat sinks. Heat sinks are small devices attached to solid-state circuit boards that dissipate the heat from the circuit board components. Made of aluminum, the devices consist of many small fins cut in the metal to increa

> Navisky designs, manufactures, and sells specialized GPS (Global Positioning System) devices for commercial applications. For example, Navisky currently sells a system for environmental studies and is planning systems for private aviation and fleet manag

> Increased global competition has spurred most firms to take a hard look at their costs and become “lean and mean.” Rochco, a large industrial complex, has seen offshore competition erode its market share. This industrial site of over 100 functional depar

> Mat Machinery has received an order from Dewey Sales Corp. for special machinery. Dewey pays Mat Machinery a deposit of 10 percent of the sales price for the order. Just before the order is completed, Dewey Sales Corp. declares bankruptcy. Details of the

> Joe Bell, president and chief executive officer of Dyna Golf, has called a meeting of the executive committee of his board of directors. He is concerned about the price competition and declining sales of his golf wedge line of business. Bell summarizes t

> British Airways (BA) has implemented the balanced scorecard. Match the following performance indicators: Return on invested capital …….………..……On-time arrivals Earnings growth ……………………….…………Percent empty seats Lost baggage ……………………………………….Employee turnove

> Royal Holland is a cruise ship company. It currently has six ships and plans to add two more. It offers luxury passenger cruises in the Caribbean, Alaska, and the Far East. Management is currently addressing what to do with an existing ship, the S.S. Ams

> Magnetic resonance imaging (MRI) is a noninvasive medical diagnostic device that uses magnets and radio waves to produce a picture of an area under investigation inside the body. A patient is positioned in the MRI and a series of images of the area (say,

> Advanced Micro Processors (AMP) has designed a new dual-core microprocessor, dubbed DUALxl. DUALxl microprocessors are produced on silicon wafers with 100 chips per wafer. Once fabricated,the wafer is cut into individual microprocessors (also called &aci

> Vorma manufactures two proprietary all-natural fruit antioxidant food additives that are approved by the U.S. Food and Drug Administration. One is for liquid vitamins (LiqVita) and the other is used by dry cereal producers (Dry). Both of these products a

> Cogen’s Turbine Division manufactures gas-powered turbines for generating electric power and hot water for heating systems. Turbine’s variable cost per unit is $150,000 and its fixed cost is $1.8 million per month. It

> Adrian Power manufactures small power supplies for car stereos. The company uses flexible budgeting techniques to deal with the seasonal and cyclical nature of the business. The accounting department provided the accompanying data on budgeted manufacturi

> The city of Toledo has received a proposal to build a new multipurpose outdoor sports stadium. The expected life of the stadium is 20 years. It will be financed by a 20-year bond paying 8 percent interest annually. The stadium’s primary tenant will be th

> CJ Equity Partners is a privately held firm that buys small family-owned firms, installs professional managers to run the firms, and then sells them 3–5 years later, often for a substantial profit. CJ Equity is owned by four partners wh

> Wine Distributors is a wholesaler of wine, buying from wineries and selling to wine stores. Three different white wines are sold: Chablis, Chardonnay, and Riesling. Here are budgeted and actual sales data for the month of April. Required: Write a short m

> a. What is the difference between budget lapsing and line-item budgets? b. What types of organizations would you expect to use budget lapsing? c. What types of organizations would you expect to use line-item budgets?

> Winter Games manufactures a competitive line of skis and sells its skis to retailers at a price of $225 per pair. Based on an annual volume of 5,000 pairs, the cost per pair is $185: Sports Palace, a discount sporting goods store, currently purchases 500

> Employee bonuses at American InterConnect (AI), a large communications firm, depend on meeting a number of targets, one of which is a revenue target. Some bonus is awarded to the group if it meets or exceeds its target revenue for the year. The bonus is

> Using your knowledge of the relationship between inflation and nominal interest rates, and assuming that the savings were invested in government bills, comment briefly on the analysis presented in the following letter from the National Taxpayers Union: D

> Allied Adhesives (AA) manufactures specialty bonding agents for very specialized applications (electronic circuit boards, aerospace, health care, etc.). AA operates a number of small plants around the world, each one specializing in particular products f

> Home Auto Parts is a large retail auto parts store selling the full range of auto parts and supplies for do-it-yourself auto repair enthusiasts. The store is arranged with three prime displays in the store: front door, checkout counters, and ends of aisl

> a. Scottie Corporation has been offered a contract to produce 100 castings a year for five years at a price of $200 per casting. Producing the castings will require an investment in the plant of $35,000 and operating costs of $50 per casting produced. Fo

> Thermalloy makes extruded aluminum heat sinks that are small devices that help cool semiconductors and printed circuit boards. Thermalloy uses an absorption costing system whereby all fixed and variable manufacturing overhead is absorbed to manufactured

> Jan Vanderschmidt was the founder of a successful chain of restaurants located throughout Europe. He died unexpectedly last week at the age of 55. Jan was sole owner of the company’s common stock and was known for being very authoritarian. He made most o

> Tagway 4000 is a computer manufacturer based in Montana. One component of the computer is an internal battery that keeps track of the time and date while the computer is turned off. Tagway produces the batteries in-house. The division that produces the b

> Betterton Corporation manufactures automobile headlight lenses and uses a standard cost system. At the beginning of the year, the following standards were established per 100 lenses (a single batch). Expected volume per month is 5,000 direct labor hours

> Ed Koehler started Great Southern Furniture five years ago to assemble prefabricated bedroom furniture for large hotel chains. Hotels purchase furniture (beds, night stands, and chests of drawers) from manufacturers who ship the furniture to the hotels u

> You work in the Strategy Analysis department of On-Call, a worldwide paging firm offering satellite based digital communications through sophisticated pagers. On-Call is analyzing the possibility of acquiring AtlantiCom, an East Coast paging firm in Main