Question: Hatch Manufacturing produces multiple machine

> Income statements for two different companies in the same industry are as follows: Required: 1. Compute the degree of operating leverage for each company. 2. Compute the break-even point for each company. Explain why the break-even point for Hobart, Inc.

> Nail Glow, Inc., produces novelty nail polishes. Each bottle sells for $5.90. Variable unit costs are as follows: Acrylic base $0.86 Pigments 0.57 Other ingredients 0.43 Bottle, packing material $1.15 Selling commission 0.14 Fixed overhead costs are $34,

> Golding Bank provided the following data about its resources and activities for its checking account process: • Computers are used only by the issuing (30 percent) and processing transaction (70 percent) activities. •

> Choose the best answer for each of the following multiple-choice questions. 1. Cost-volume-profit analysis includes some simplifying assumptions. Which of the following is not one of these assumptions? a. Cost and revenues are predictable. b. Cost and re

> Carmichael Corporation is in the process of preparing next year’s budget. The pro forma income statement for the current year is as follows: Required: 1. What is the break-even sales revenue (rounded to the nearest dollar) for Carmichae

> Sara Pacheco is a sophomore in college and earns a little extra money by making beaded key ring accessories. She sells them on Saturday mornings at the local f lea market. Sara charges $5 per unit and has unit variable costs (beads, wire rings, etc.) of

> Helmet-Pro Company produces helmets for bicycle racing. Currently, Helmet-Pro charges a price of $240 per helmet. Variable costs are $96 per helmet, and fixed costs are $1,255,800. The tax rate is 25 percent. Last year, 14,000 helmets were sold. Required

> Campbell Company manufactures and sells adjustable canopies that attach to motor homes and trailers. The market covers both new unit purchases as well as replacement canopies. Campbell developed its business plan for the year based on the assumption that

> Sports-Reps, Inc., represents professional athletes and movie and television stars. The agency had revenue of $12,345,000 last year, with total variable costs of $5,678,700 and fixed costs of $2,192,400. Required: 1. What is the contribution margin ratio

> Big Red Motors, Inc., employs 15 sales personnel to market its line of luxury automobiles. The average car sells for $75,000, and a 6 percent commission is paid to the salesperson. Big Red Motors is considering a change to the commission arrangement wher

> Jonah Graham owns and operates The Green Thumb Company (GTC), which provides live plants and f lower arrangements to professional offices. Jonah has fixed costs of $3,240 per month for office/greenhouse rent, advertising, and a delivery van. Variable cos

> Reagan, Inc., has developed a chew-proof dog bed—the Tuff-Pup. Fixed costs are $204,400 per year. The average price for the Tuff-Pup is $36, and the average variable cost is $22 per unit. Currently, Reagan produces and sells 20,000 Tuff-Pups annually. Re

> Schylar Pharmaceuticals, Inc., plans to sell 130,000 units of antibiotic at an average price of $22 each in the coming year. Total variable costs equal $1,086,800. Total fixed costs equal $8,000,000. (Round all ratios to four significant digits, and roun

> Davis Company produces two hair dryers: regular and deluxe. The company has four activities: machining, engineering, receiving, and inspection. Information on these activities and their drivers is given below. Overhead costs: Machining $24,000,000 Engine

> A value stream has three activities and two products. The units produced and shipped per week are 50 of the deluxe model (Model A) and 200 of the basic model (Model B). The cycle time for Model A is four hours and that of Model B is three hours. The reso

> Henderson, Inc., has just created five order fulfillment value streams, two focused and three that produce multiple products. The size of the plant in which the value streams are located is 100,000 square feet. The facility costs total $1,000,000 per yea

> Bienestar, Inc., implemented cellular manufacturing as recommended by a consultant. The production f low improved dramatically. However, the company was still faced with the competitive need to improve its cycle time so that the production rate is one bo

> Bienestar Inc., has the following departmental structure for producing a well-known multivitamin: A consultant designed the following cellular manufacturing structure for the same product: The times above the processes represent the time required to proc

> Helix, Inc., formed the following matrix for its five products: Required: Using the information in the matrix, identify the value streams.

> Holbrook Company gathered the following data for the past two years: Required: 1. Prepare a productivity profile for each year. 2. Prepare partial income statements for each year. Calculate the total change in income. 3. Calculate the change in profits a

> Suppose the following input prices are provided for each year: Required: 1. Compute the profit-linked productivity measure. By how much did profits increase due to productivity? 2. Calculate the price-recovery component for 20x2. Explain its meaning.

> Helena Company needs to increase its profits and so has embarked on a program to increase its overall productivity. After one year of operation, Kent Olson, manager of the Columbus plant, reported the following results for the base period and its most re

> Bellamy Company produces handcrafted pottery that uses two inputs: materials and labor. During the past quarter, 36,000 units were produced, requiring 144,000 pounds of materials and 72,000 hours of labor. An engineering efficiency study commissioned by

> Listed below are several possible input combinations for producing 7,500 units of a pocket PC. Two of the input combinations are technically efficient. Required: 1. Identify the technically efficient input combinations. Explain your choices. 2. Which of

> Larsen, Inc., produces two types of electronic parts and has provided the following data: There are four activities: machining, setting up, testing, and purchasing. Required: 1. Calculate the activity consumption ratios for each product. 2. Calculate the

> Refer to Brief Exercise 2-1. For next year, Bob’s Bistro predicts that 50,000 units will be produced with the following total costs: Direct materials = ? Direct labor = $ 100,000 Variable overhead = 60,000 Fixed overhead = 260,000 Next

> The following Box Scorecard was prepared for a value stream: Required: 1. How many nonfinancial measures are used to evaluate performance? Why are nonfinancial measures used? 2. Classify the operational measures as time-based, quality-based, or efficienc

> Rivera Manufacturing, Inc., has implemented lean manufacturing in its Kansas City plant as a pilot program. One of its value streams produces a family of small electric tools. The value-stream team managers were quite excited about the results, as some o

> Lanman, Inc., estimates its hidden external failure costs using the Taguchi loss function. Lanman produces plastic sheets that vary in thickness and grade. For one of its large-volume products, it was determined that k = $40,000 and T = 0.31 inches in di

> Quality attributes such as performance and aesthetics are important to customers. Performance refers to how consistently and how well a product functions. Aesthetics is concerned with the appearance of tangible products as well as the appearance of the f

> Rachel Boyce, president of a company that manufactures electronic components, has a number of questions concerning quality and quality costs. She has heard a few things about quality and has asked you to respond to the following questions. Required: 1. W

> Suppose that Waurika’s manager decides to launch an environmental performance improvement program. First, efforts were made to reduce the amount of packaging. The demand for packaging materials was reduced by 10 percent. Second, a way was found to reuse

> Waurika Pharmaceuticals produces two organic chemicals (Org AB and Org XY) used in the production of two of its most wide-selling anti-cancer drugs. The controller and environmental manager have identified the following environmental activities and costs

> Suppose that the newly hired environmental manager examines the report and makes the following comment: “This report understates the total environmental costs. It fails to consider the costs we are imposing on the local community. For example, we have po

> At the end of 20x5, Bing Pharmaceuticals began to implement an environmental quality management program. As a first step, it identified the following costs in its accounting records as environmentally related for the calendar year just ended: Required: 1

> Classify the following environmental activities as prevention costs, detection costs, internal failure costs, or external failure costs. For external failure costs, classify the costs as societal or private. Also, label those activities that are compatib

> Lansing, Inc., provided the following data for its two producing departments: Machine hours are used to assign the overhead of the Molding Department, and direct labor hours are used to assign the overhead of the Polishing Department. There are 30,000 un

> Achieving sustainable development will likely require the cooperation of communities, governments, and businesses. The World Business Council for Sustainable Development (WBCSD) claims that ecoefficiency is “the business contribution to sustainable devel

> For years, companies dealt with pollution problems through compliance management (ensuring that a company follows environmental laws and regulations as cheaply as possible). No effort was made to improve environmental performance beyond the minimal perfo

> The controller of Willson Company has computed quality costs as a percentage of sales for the past five years (20x1 was the first year the company implemented a quality improvement program). This information is as follows: Required: 1. Prepare a trend gr

> In 20x4, Tru-Delite Frozen Desserts, Inc., instituted a quality improvement program. At the end of 20x5, the management of the corporation requested a report to show the amount saved by the measures taken during the year. The actual sales and quality cos

> Oaks Company has sales of $12 million and quality costs of $2,400,000. The company is embarking on a major quality improvement program. During the next three years, Oaks intends to attack failure costs by increasing its appraisal and prevention costs. Th

> Muskogee Company had sales of $60,000,000 in 20x1. In 20x5, sales had increased to $75,000,000. A quality improvement program was implemented at the beginning of 20x1. Overall conformance quality was targeted for improvement. The quality costs for 20x1 a

> Ming Company reported the following sales and quality costs for the past four years. Assume that all quality costs are variable and that all changes in the quality cost ratios are due to a quality improvement program. Required: 1. Compute the quality cos

> Kang Company reported sales of $3,240,000 in 20x5. At the end of the calendar year, the following quality costs were reported: Design review $162,000 Recalls 54,000 Reinspection 27,000 Materials inspection 21,600 Quality training 54,000 Process acceptanc

> Ivanov, Inc., produces two different generators and is concerned about their quality. The company has identified the following quality activities and costs associated with the two products: Required: 1. Calculate the quality cost per unit for each produc

> Classify the following quality costs as prevention costs, appraisal costs, internal failure costs, or external failure costs: 1. Inspection of reworked units 2. Inspecting and testing a newly developed product (not yet being sold) 3. Retesting a reworked

> Warner Company has the following data for the past year: Actual overhead $470,000 Applied overhead: Work-in-process inventory $100,000 Finished goods inventory 200,000 Cost of goods sold 200,000 Total $500,000 Warner uses the overhead control account

> Computador has a manufacturing plant in Des Moines that has the theoretical capability to produce 243,000 laptops per quarter but currently produces 91,125 units. The conversion cost per quarter is $7,290,000. There are 60,750 production hours available

> Consider the following list of scorecard measures: a. Product profitability b. Ratings from customer surveys c. Number of patents pending d. Strategic job coverage ratio e. Revenue per employee f. Quality costs g. Percentage of market h. Employee turnove

> Iron Mountain Outdoor Adventures is considering implementing the Balanced Scorecard to drive change within the company Iron Mountain management believes that performance evaluation is an integral part of this effort. More specifically, performance evalua

> A Balanced Scorecard expresses the complete story of a company’s strategy through an integrated set of financial and nonfinancial measures that are both predictive and historical and that may be measured subjectively or objectively.” Required: 1. Using t

> 1. For each numbered (1–10) performance measure characteristic, select the appropriate lettered (A–J) descriptor that best explains the characteristic. 1. Financial ______ A. Readily quantified 2. Internal ______ B. Monetary units 3. Mandatory ______ C.

> Suppose that Mandy communicates the following weights to her CEO: Perspective: Financial, 40%; Customer, 20%; Process, 20%; Learning & growth, 20% Financial objectives: Profits, 50%; Revenues, 25%; Costs, 25% Customer objectives: Customer satisfaction,

> Bannister Company, an electronics firm, buys circuit boards and manually inserts various electronic devices into the printed circuit board. Bannister sells its products to original equipment manufacturers. Profits for the last two years have been less th

> Consider the following quality improvement strategy as expressed by a series of if-then statements: • If real-time feedback information capabilities improve, then post-sales service time will improve. • If post-sales service time improves, then post-sale

> The following if-then statements were taken from a Balanced Scorecard: a. If employee capabilities increase, then process time decreases. b. If process time decreases, then customer retention will increase. c. If customer retention increases, then market

> Selected activities and other information are provided for Patterson Company for its most recent year of operations. Required: 1. Form reduced system cost pools for activities 7 and 8. 2. Assign the costs of the reduced system cost pools to Wafer A and W

> Assume that the company identifies poor plant layout as the root cause of wait time and move time. Required: 1. Express an improvement strategy as a series of if-then statements that will reduce the conversion cost per laptop. 2. Assume that you set an M

> Refer to Exercise 12-8. Required: Suppose that clerical error—either Thayne’s or the supplier’s—is the common root cause of the non-value-added activities. For each non-value-added a

> Thayne Company has 30 clerks that work in its Accounts Payable Department. A study revealed the following activities and the relative time demanded by each activity: Required: Classify the four activities as value-added or non-value-added, and calculate

> For the following two activities, ask a series of “why” questions (with your answers) that reveal the root cause. Once the root cause is identified, use a “how” question to reveal how the activity can be improved (with your answer). Activity 1: Daily cle

> Whitaker Company produces two models of blenders for restaurants: the “Super Model” (priced at $1,600) and the “Special Model” (priced at $800). Recently, Whitaker has been losing ma

> For each of the following situations, two scenarios are described, labeled A and B. Choose which scenario is descriptive of a setting corresponding to activity-based responsibility accounting and which is descriptive of financial-based responsibility acc

> Jane Erickson, manager of an electronics division, was not pleased with the results that had recently been reported concerning the division’s activity-based management implementation project. For one thing, the project had taken eight months longer than

> Suppose that for 20x2, Sanford, Inc., has chosen suppliers that provide higher-quality parts and redesigned its plant layout to reduce material movement. Additionally, Sanford implemented a new setup procedure and provided training for its purchasing age

> Sanford, Inc., has developed value-added standards for four activities: purchasing parts, receiving parts, moving parts, and setting up equipment. The activities, the activity drivers, the standard and actual quantities, and the price standards for 20x1

> Rico Company produces custom-made machine parts. Rico recently has implemented an activity-based management (ABM) system with the objective of reducing costs. Rico has begun analyzing each activity to determine ways to increase its efficiency. Setting up

> Imprimo, Inc., produces two types of ink-jet printers: business and home. Imprimo uses a plantwide rate based on direct labor hours to assign its overhead costs. The company has the following estimated and actual data for the coming year: Estimated overh

> For Situations 1 through 6, provide the following information: a. An estimate of the non-value-added cost caused by each activity b. The root causes of the activity cost (such as plant layout, process design, and product design) c. The appropriate cost r

> Suppose that Thayne attacks the root cause of the non-value-added activities by establishing a totally different approach to procurement called electronic data interchange (EDI). EDI gives suppliers access to Thayne’s online database that reveals Thayne’

> Suppose that clerical error is the common root cause of the non-value added activities. Paying bills is a subprocess that belongs to the procurement process. The procurement process is made up of three subprocesses: purchasing, receiving, and paying bill

> Classify the following cost drivers as structural, executional, or operational. a. Number of plants b. Number of moves c. Degree of employee involvement d. Capacity utilization e. Number of product lines f. Number of distribution channels g. Engineering

> San Jose Goodwill Bank has been experiencing significant competition from nonbanking financial service providers such as mutual funds. As a result, interest rates were lower, and the bank found it more difficult to maintain or increase deposits. Profits

> Keith Golding has decided to purchase a personal computer. He has narrowed his choices to two: Brand A and Brand B. Both brands have the same processing speed, hard disk capacity, RAM, graphics card memory, and basic software support package. Both come f

> Rodriguez Company produces two types of glucose monitors (basic and advanced). Both pass through two producing departments: Fabrication and Assembly. Rodriguez also has an Inspection Department that is responsible for testing monitors to ensure that they

> Refer to Exercise 11-17. Required: 1. Prepare the journal entries for the month of May using backflush costing, assuming that Potter uses the completion of goods as the only trigger point. 2. Prepare the journal entries for the month of May using backflu

> Refer to Exercise 11-17. Required: Prepare the journal entries for the month of June using backflush costing, assuming that Potter uses the sale of goods as the second trigger point instead of the completion of goods. Data from Exercise 11-17: Potter Co

> Potter Company has installed a JIT purchasing and manufacturing system and is using back flush accounting for its cost f lows. It currently uses a two-trigger approach with the purchase of materials as the first trigger point and the completion of goods

> Pohlman Company makes aircraft engines. Pohlman has noticed that, in general, each new engine design is subject to an 80 percent learning rate. Assume that the first unit produced takes 500 hours, and direct labor is paid an average of $30 per hour. Requ

> Prior to installing a JIT system, Buckner Company, a producer of automobile parts, used maintenance hours to assign maintenance costs to its three products (wheels, rims, and ball bearings). The maintenance costs totaled $12,000,000 per year. The mainten

> Assume that a company has recently switched to JIT manufacturing. Each manufacturing cell produces a single product or major subassembly. Cell workers have been trained to perform a variety of tasks. Additionally, many services have been decentralized. C

> The following series of statements or phrases are associated with product life-cycle viewpoints. Identify whether each one is associated with the marketing, production, or customer viewpoint. Where possible, identify the particular characteristic being d

> Huang Company sells small machine parts to heavy equipment manufacturers for an average price of $1.05 per part. There are two types of customers: those who place small, frequent orders and those who place larger, less frequent orders. Each time an order

> Jackson, Inc., manufactures motorcycles. Jackson produces all the components necessary for the production of the cycles except for one (a carburetor). This component is purchased from two local suppliers: Harvey Parts and Curtis, Inc. Harvey sells the co

> Grand Teton Inc. provides numerous back country tours to adventure-seeking outdoor enthusiasts. Grand Teton’s enterprise risk management team has chosen its particular risk response to each of its top eight inherent risks. The risk grap

> McConkie Company has decided to pursue a cost leadership strategy. This decision is prompted, in part, by increased competition from foreign firms. McConkie’s management is confident that costs can be reduced by more efficient managemen

> High drug costs are often in the news. Consumer groups contend that the pricing for some drugs (e.g., HIV anti-retrovirals, Betaseron for multiple sclerosis) is “too high” considering that the cost to manufacture each dose is so low. They talk of price g

> Washington, Inc., has a number of divisions around the world. Division US (in the United States) purchases a component from Division N (in the Netherlands). The component can be purchased externally for $24.50 each. The freight and insurance on the item

> On June 1, Marano, Inc., sold product for $50,000 to be delivered immediately to a Japanese customer and to be paid in yen on August 1. Marano is worried that the exchange rate of dollar for yen could change significantly within two months. In hopes of a

> The controller for McGarvey Manufacturing Company felt that the number of purchase orders alone did not explain the monthly purchasing cost. He knew that nonstandard orders (for example, one requiring an overseas supplier) took more time and effort. He c

> Goler Company, based in Illinois, sells its product at home and abroad. On March 1, Bondi Company, an Australian company, orders $30,000 worth of product to be delivered immediately and to be paid in Australian dollars (AUD$) on May 1. The selling price

> Chinook, Inc., purchases components from a Japanese company that requires payment in yen (¥); it sells finished product to a German company that pays in euros. On June 1, Chinook ordered components from the Japanese company costing ¥6,890,000 and sold fi

> Aranda Company is an import-export company that relocated earlier this year in a foreign trade zone (FTZ) in a southwestern city. The company imports $760,000 of fabric from overseas for resale to clothing companies located in the United States. Aranda p

> Fisher Company has three sequential processes: cutting, welding, and assembly. Assume that the optimal mix is Component A = 0 units per week; and Component B = 30 units per week. Demand is uniformly spread out over the five-day work week. Fisher requires

> Fisher Company produces two types of components for airplanes: A and B, with unit contribution margins of $400 and $600, respectively. The components pass through three sequential processes: cutting, welding, and assembly. Data pertaining to these proces

> Wetzel Company produces two types of machine parts: Part A and Part B, with unit contribution margins of $450 and $840 respectively. Assume initially that Wetzel can sell all that is produced of either component. Part A requires three hours of assembly,

> Perez Corporation has an EOQ of 5,000 units. The company uses an average of 500 units per day. An order to replenish the part requires a lead time of five days. Required: 1. Calculate the reorder point, using Equation 20.3. 2. Graphically display the reo

> Thomas Corporation produces heating units. The following values apply for a part used in their production (purchased from external suppliers): D = 12,500 Q = 250 P = $45 C = $4.50 Required: 1. For Thomas, calculate the ordering cost, the carrying cost, a

> Warren Company plans to open a new repair service center for one of its electronic products. The center requires an investment in depreciable assets costing $480,000. The assets will be depreciated on a straight-line basis, over four years, and have no e