In 2013, only 760,500 Mealman meals were produced and sold to the hospitals. Smith suspects that hospital controllers had systematically inflated their 2013 meal estimates. Required: 1 . Recall that Mealman uses the master-budget capacity utilization to allocate fixed costs and to price meals. What was the effect of production-volume variance on Mealman’s operating income in 2013? 2. Why might hospital controllers deliberately overestimate their future meal counts? 3. What other evidence should Cayzer’s president seek to investigate Smith’s concerns? 4. Suggest two specific steps that Smith might take to reduce hospital controllers’ incentives to inflate their estimated meal counts.
> The Split Banana, Inc., operates a chain of Italian gelato stores. Although the Split Banana charges customers the same price for all flavors, production costs vary, depending on the type of ingredients. Budgeted and actual operating data of its three Wa
> Chicago Infonautics’ senior vice president of marketing prepared his budget at the beginning of the third quarter assuming a 25% market share based on total sales. The total handheld-organizer market was estimated by Fool instead Research to reach sales
> Chicago Infonautics, Inc., produces handheld Windows CEâ„¢-compatible organizers. Chicago Infonautics markets three different handheld models: Palm Pro is a souped-up version for the executive on the go, Palm CE is a consumer oriented ver
> Bizzan Manufacturing makes a component called P14-31. This component is manufactured only when ordered by a customer, so Bizzan keeps no inventory of P14-31. The list price is $100 per unit, but customers who place“ largeâ€&#
> Dusty Rhodes, controller of Richfield Oil Company, is preparing a presentation to senior executives about the performance of its four divisions. Summary data (dollar amounts in millions) related to the four divisions for the most recent year are as follo
> Refer to the data for Problem 13-37. Assume the fabric costs $3.70 per yard in 2012 and $3.85 per yard in 2011. Required: 1. Compute Gerhart Company’s total factor productivity (TFP) for 2012. 2. Compare TFP for 2012 with a benchmark TFP for 2011 inputs
> Gerhart Company manufactures wallets from fabric. In 2011, Gerhart made 2,520,000 wallets using 2,000,000 yards of fabric. In 2011, Gerhart has capacity to make 3,307,500 wallets and incurs a cost of $9,922,500 for this capacity. In 2012, Gerhart plans t
> Lee Corporation manufactures various types of color laser printers in a highly automated facility with high fixed costs. The market for laser printers is competitive. The various color laser printers on the market are comparable in terms of features and
> Caltex, Inc., refines gasoline and sells it through its own Caltex Gas Stations. On the basis of market research, Caltex determines that 60% of the overall gasoline market consists of “service-oriented customers,” medi
> Refer to the information for Music Master Company in 13-31. Required: 1. Calculate the amount and cost of (a) unused manufacturing capacity and (b) unused selling and customer-service capacity at the beginning of 2011 based on actual production and act
> Lester Company makes metal products and has a forging department. In this department, materials are added at the beginning of the process and conversion takes place uniformly. At the start of November 2011, the forging department had 20,000 units in begi
> Suppose that during 2011, the market for MP3 players grew 3%. All decreases in the selling price of the Mini and increases in market share (that is, sales increases greater than 3%) are the result of Music Master’s strategic actions. Required: Calculate
> Refer to Problem 13-30. As a result of the actions taken, quality has significantly improved in 2011 while rework and unit costs of the Mini have decreased. Music Master has reduced manufacturing capacity because capacity is no longer needed to support r
> Music Master Company manufactures an MP3 player called the Mini. The company sells the player to discount stores throughout the country. This player is significantly less expensive than similar products sold by Music Master’s competitor
> Apex Art has been requested to prepare a bid on 500 pieces of framed artwork for a new hotel. Winning the bid would be a big boost for sales representative Jason Grant, who works entirely on commission. Sonja Gomes, the cost accountant for Apex, prepares
> Air Eagle is about to introduce a daily round-trip flight from New York to Los Angeles and is determining how it should price its round-trip tickets. The market research group at Air Eagle segments the market into business and pleasure travelers. It prov
> New Life Metal Recycling and Salvage has just been given the opportunity to salvage scrap metal and other materials from an old industrial site. The current owners of the site will sign over the site to New Life at no cost. New Life intends to extract sc
> Florida Temps, a large labor contractor, supplies contract labor to building-construction companies. For 2012, Florida Temps has budgeted to supply 84,000 hours of contract labor. Its variable costs are $13 per hour, and its fixed costs are $168,000. Rog
> R & C Mechanical sells and services plumbing, heating, and air conditioning systems. R & C’s cost accounting system tracks two cost categories: direct labor and direct materials. R & C uses a time-and-materials pricing syste
> Vend-o-licious makes candy bars for vending machines and sells them to vendors in cases of 30 bars. Although Vend-o-licious makes a variety of candy, the cost differences are insignificant, and the cases all sell for the same price. Vend-o-licious has a
> Cutler Electronics makes an MP3 player, CE100, which has 80 components. Cutler sells 7,000 units each month for $70 each. The costs of manufacturing CE100 are $45 per unit, or $315,000 per month. Monthly manufacturing costs are as follows: Cutlerâ
> Ozumo’s Gardening makes several different kinds of mulch. Its busy period is in the summer months. In August, the controller suddenly quit due to a stress-related disorder. He took with him the standard costing results for Rose Bark, Oz
> The new CEO of Radco Manufacturing has asked for a variety of information about the operations of the firm from last year. The CEO is given the following information, but with some data missing: Required: 1. Find (a) total sales revenue, (b) selling pr
> Executive Suites operates a 100-suite hotel in a busy business park. During April, a 30-day month, Executive Suites experienced a 90% occupancy rate from Monday evening through Thursday evening (weeknights), with business travelers making up virtually al
> Jack Arnoldson is the management accountant for Valley Restaurant Supply (VRS). Bob Gardner, the VRS sales manager, and Jack are meeting to discuss the profitability of one of the customers, Franco’s Pizza. Jack hands Bob the following
> Belmont Corporation has four operating divisions. The budgeted revenues and expenses for each division for 2011 follows: Further analysis of costs reveals the following percentages of variable costs in each division: Closing down any division would r
> The following are the Class Company’s unit costs of manufacturing and marketing a high-style pen at an output level of 20,000 units per month: Required: The following situations refer only to the preceding data; there is no connection
> The Weaver Company produces gas grills. This year’s expected production is 20,000 units. Currently, Weaver makes the side burners for its grills. Each grill includes two side burners. Weaver’s management accountant rep
> Oxford Engineering manufactures small engines. The engines are sold to manufacturers who install them in such products as lawn mowers. The company currently manufactures all the parts used in these engines but is considering a proposal from an external s
> The Northern Division of Grossman Corporation makes and sells tables and beds. The following estimated revenue and cost information from the division’s activity-based costing system is available for 2011. Additional information includ
> Pendleton Engineering makes cutting tools for metalworking operations. It makes two types of tools: R3, a regular cutting tool, and HP6, a high-precision cutting tool. R3 is manufactured on a regular machine, but HP6 must be manufactured on both the regu
> The Wild Boar Corporation is working at full production capacity producing 13,000 units of a unique product, Rosebo. Manufacturing cost per unit for Rosebo is as follows: Manufacturing overhead cost per unit is based on variable cost per unit of $4 and
> Bob Moody manages the Knoxville plant of George Manufacturing. He has been approached by a representative of Darda Engineering regarding the possible replacement of a large piece of manufacturing equipment that George uses in its process with a more effi
> Why is customer-profitability analysis a vitally important topic to managers?
> Larry Miller, the general manager of Basil Software, must decide when to release the new version of Basil’s spreadsheet package, Easy spread 2.0. Development of Easy spread 2.0 is complete; however, the diskettes, compact discs, and use
> Bernie’s Bears, Inc., manufactures plush toys in a facility in Cleveland, Ohio. Recently, the company designed a group of collectible resin figurines to go with the plush toy line. Management is trying to decide whether to manufacture t
> Louisville Corporation produces baseball bats for kids that it sells for $32 each. At capacity, the company can produce 50,000 bats a year. The costs of producing and selling 50,000 bats are as follows: Required: 1. Suppose Louisville is currently prod
> Barry Lee decides that the simple regression analysis used in Problem 10-40 could be extended to a multiple regression analysis. He finds the following results for two multiple regression analyses: Required: 1. Evaluate regression 4 using the criteria
> Fashion Bling operates a chain of 10 retail department stores. Each department store makes its own purchasing decisions. Barry Lee, assistant to the president of Fashion Bling, is interested in better understanding the drivers of purchasing department co
> Bebe Williams wonders if she should run a multiple regression with both number of setups and number of setup-hours, as cost drivers. Required: 1. Run a multiple regression to estimate the regression equation for setup costs using both number of setups a
> Tilbert Toys (TT) makes the popular Floppin’ Freddy Frog and Jumpin’ Jill Junebug dolls in batches. TT has recently adopted activity-based costing. TT incurs setup costs for each batch of dolls that it produces. TT use
> Assume the same information for the Nautilus Company as in Problem 10-36 with one exception. This exception is that Nautilus uses a 90% incremental unit-time learning model as a basis for predicting direct manufacturing labor-hours in its assembling oper
> The Nautilus Company, which is under contract to the U.S. Navy, assembles troop deployment boats. As part of its research program, it completes the assembly of the first of a new model (PT109) of deployment boats. The Navy is impressed with the PT109. It
> Brickman Apparel produces equipment for the extreme-sports market. It has four peak periods, each lasting two months, for manufacturing the merchandise suited for spring, summer, fall, and winter. In the off-peak periods, Brickman schedules equipment mai
> Jayne Barbour is working as a summer intern at Mode, a trendy store specializing in clothing for twenty-somethings. Jayne has been working closely with her cousin, Gail Hubbard, who plans promotions for Mode. The store has only been in business for 10 mo
> Fitzgerald Manufacturing has been using activity-based costing to determine the cost of product X-678. One of the activities, “Inspection,” occurs just before the product is finished. Fitzgerald inspects every 10th uni
> Anna Martinez, the financial manager at the Casa Real restaurant, is checking to see if there is any relationship between newspaper advertising and sales revenues at the restaurant. She obtains the following data for the past 10 months: She estimates t
> Local Harvest, a cooperative of organic familyowned farms outside of Columbus, Ohio, has recently started a fresh produce club to provide support to the group’s member farms, and to promote the benefits of eating organic, locally-produc
> Ken Howard, financial analyst at KMW Corporation, is examining the behavior of quarterly maintenance costs for budgeting purposes. Howard collects the following data on machine hours worked and maintenance costs for the past 12 quarters: Required: 1. E
> Cayzer Associates operates a chain of 10 hospitals in the Los Angeles area. Its central food-catering facility, Mealman, prepares and delivers meals to the hospitals. It has the capacity to deliver up to 1,300,000 meals a year. In 2012, based on estimate
> Required: 1. If EBL sells all 250,000 bulbs produced, what would be the effect on operating income of using each type of capacity as a basis for calculating manufacturing cost per unit? 2. Compare the results of operating income at different capacity lev
> Earth’s Best Light (EBL), a producer of energy-efficient light bulbs, expects that demand will increase markedly over the next decade. Due to the high fixed costs involved in the business, EBL has decided to evaluate its financial perfo
> Spirelli Company is about to enter the highly competitive personal electronics market with a new optical reader. In anticipation of future growth, the company has leased a large manufacturing facility, and has purchased several expensive pieces of equipm
> Carlisle Company is a manufacturer of precision surgical tools. It initiated standard costing and a flexible budget on January 1, 2011. The company president, Monica Carlisle, has been pondering how fixed manufacturing overhead should be allocated to pro
> Borkenstick makes a very popular undyed cloth sandal in one style, but in Regular and Deluxe. The Regular sandals have cloth soles and the Deluxe sandals have cloth covered wooden soles. Borkenstick is preparing its budget for June 2012, and has estimate
> Koshu Corporation is a manufacturer of computer accessories. It uses absorption costing based on standard costs and reports the following data for 2011: There are no price, spending, or efficiency variances. Actual operating costs equal budgeted operat
> Required: 1. If the plant manager of the Austin Brewery gets a bonus based on operating income, which denominator level capacity concept would he prefer to use? Explain. 2. What denominator-level capacity concept would Lucky Lager prefer to use for U.S.
> Lucky Lager has just purchased the Austin Brewery. The brewery is two years old and uses absorption costing. It will “sell” its product to Lucky Lager at $45 per barrel. Paul Brandon, Lucky Lager’s co
> University Press produces textbooks for college courses. The company recently hired a new editor, Leslie White, to handle production and sales of books for an introduction to accounting course. Leslie’s compensation depends on the gross
> Hinkle Company uses standard costing. Tim Bartina, the new president of Hinkle Company, is presented with the following data for 2012: Required: 1 . At what percentage of denominator level was the plant operating during 2012? 2. How much fixed manufact
> It is the end of 2011. The All-Fixed Company began operations in January 2010. The company is so named because it has no variable costs. All its costs are fixed; they do not vary with output. The All-Fixed Company is located on the bank of a river and ha
> The Mavis Company uses an absorption-costing system based on standard costs. Total variable manufacturing cost, including direct material cost, is $3 per unit; the standard production rate is 10 units per machine-hour. Total budgeted and actual fixed man
> Eco-Green Company manufactures cloth shopping bags that it plans to sell for $5 each. Budgeted production and sales for these bags for 2011 is 800,000bags, with a standard of 400,000 machine hours for the whole year. Budgeted fixed overhead costs are $47
> Supreme Canine Products produces high quality dog food distributed only through veterinary offices. To ensure that the food is of the highest quality and has taste appeal, Supreme has a rigorous inspection process. For quality control purposes, Supreme h
> The Beal Manufacturing Company’s costing system has two direct-cost categories: direct materials and direct manufacturing labor. Manufacturing overhead (both variable and fixed) is allocated to products on the basis of standard direct m
> Super Bookstore (SB) is a large city bookstore that sells books and music CDs, and has a café. SB operates at capacity and allocates selling, general, and administration (S, G & A) costs to each product line using the cost of merchandise
> The Mancusco Company uses a flexible budget and standard costs to aid planning and control of its machining manufacturing operations. Its costing system for manufacturing has two direct-cost categories (direct materials and direct manufacturing labor&aci
> Dawn Floral Creations, Inc., makes jewelry in the shape of flowers. Each piece is hand-made and takes an average of 1.5 hours to produce because of the intricate design and scrollwork. Dawn uses direct labor hours to allocate the overhead cost to product
> Jo Nathan Publishing Company specializes in printing specialty textbooks for a small but profitable college market. Due to the high setup costs for each batch printed, Jo Nathan holds the book requests until demand for a book is approximately 500. At tha
> Pointe’s Fleet Feet, Inc., produces dance shoes for stores all over the world. While the pairs of shoes are boxed individually, they are crated and shipped in batches. The shipping department records both variable direct batch-level cos
> Sarah Beth’s Art Supply Company produces various types of paints. Actual direct manufacturing labor hours in the factory that produces paint have been higher than budgeted hours for the last few months and the owner, Sarah B. Jones, is
> Nolton Products uses standard costing. It allocates manufacturing overhead (both variable and fixed) to products on the basis of standard direct manufacturing labor-hours (DLH). Nolton develops its manufacturing overhead rate from the current annual budg
> Consider the following two situations—cases A and B— independently. Data refer to operations for April 2012. For each situation, assume standard costing. Also assume the use of a flexible budget for control of variable
> Best Around, Inc., is a manufacturer of vacuums and uses standard costing. Manufacturing overhead (both variable and fixed) is allocated to products on the basis of budgeted machine-hours. In 2012, budgeted fixed manufacturing overhead cost was $17,000,0
> Required: 1. Prepare journal entries for variable and fixed manufacturing overhead (you will need to calculate the various variances to accomplish this). 2. Overhead variances are written off to the Cost of Goods Sold (COGS) account at the end of the fis
> Kitchen Whiz manufactures premium food processors. The following is some manufacturing overhead data for Kitchen Whiz for the year ended December 31, 2012: Budgeted number of output units: 888 Planned allocation rate: 2 machine-hours per unit Actual nu
> The Wellesley Corporation makes printed cloth in two departments: weaving and printing. Currently, all product first moves through the weaving department and then through the printing department before it is sold to retail distributors for $1,250 per rol
> Stuckey, Inc., manufactures industrial 55 gallon drums for storing chemicals used in the mining industry. The body of the drums is made from aluminum and the lid is made of chemical resistant plastic. Andy Jorgenson, the controller, is becoming increasin
> Iceland, Inc., is a fast-growing ice-cream maker. The company’s new ice-cream flavor, CherryStar, sells for $9 per pound. The standard monthly production level is 300,000 pounds, and the standard inputs and costs are as follows: Molly
> Sonnet, Inc., has the following budgeted standards for the month of March 2011: Sales of 1,500,000 units are budgeted for March. The expected total market for this product was 7,500,000diskettes. Actual March results are as follows: Unit sales and prod
> You are a new junior accountant at Clearview Corporation, maker of lenses for eyeglasses. Your company sells generic-quality lenses for a moderate price. Your boss, the Controller, has given you the latest month’s report for the lens tr
> Shayna’s Smart Shawls, Inc., is a small business that Shayna developed while in college. She began hand-knitting shawls for her dorm friends to wear while studying. As demand grew, she hired some workers and began to manage the operation. Shayna’s shawls
> On May 1, 2012, Bovar Company began the manufacture of a new paging machine known as Dandy. The company installed a standard costing system to account for manufacturing costs. The standard costs for a unit of Dandy follow: The following data were obtai
> Morro Bay Surfboards manufactures fiberglass surfboards. The standard cost of direct materials and direct manufacturing labor is $225 per board. This includes 30 pounds of direct materials, at the budgeted price of $3 per pound, and 9 hours of direct man
> KatharineStanley is the owner of Better Bikes, a company that produces high quality cross-country bicycles. Better Bikes participates in a supply chain that consists of suppliers, manufacturers, distributors, and elite bicycle shops. For several years Be
> You are a student preparing for a job interview with a Fortune 100 consumer products manufacturer. You are applying for a job in the finance department. This company is known for its rigorous case-based interview process. One of the students who successf
> Styles, Inc., manufactures a full line of well-known sunglasses frames and lenses. Styles uses a standard costing system to set attainable standards for direct materials, labor, and overhead costs. Styles reviews and revises standards annually, as necess
> Snark Corporation manufactures a product called the snark, which it sells to merchandising firms such as Snark Republic (SR), Snarks-R-Us (SRU), Neiman Snark-us (NS), Snark Buy (SB), Snark-Mart (SM), and Wal-Snark (WS). The list price of a snark is $50,
> Stevie McQueen has run Lightning Car Detailing for the past 10 years. His static budget and actual results for June 2011 are provided next. Stevie has one employee who has been with him for all 10 years that he has been in business. In addition, at any g
> Tuscany Statuary manufactures bust statues of famous historical figures. All statues are the same size. Each unit requires the same amount of resources. The following information is from the static budget for 2011: Standard quantities, standard prices,
> Jag Meerkat owns three upscale hair salons: Hair Suite I, II, and III. Each of the salons has a manager and 10 stylists who rent space in the salons as independent contractors and who pay a fee of 10% of each week’s revenue to the salon as rent. In excha
> Delma Company manufactures a variety of products in a variety of departments, and evaluates departments and departmental managers by comparing actual cost and output relative to the budget. Departmental managers help create the budgets, and usually provi
> Follete Inc. operates at capacity and makes plastic combs and hairbrushes. Although the combs and brushes are a matching set, they are sold individually and so the sales mix is not 1:1. Follette Inc. is planning its annual budget for fiscal year 2011. In
> On December 1, 2011, the Itami Wholesale Co. is attempting to project cash receipts and disbursements through January 31, 2012. On this latter date, a note will be payable in the amount of $100,000. This amount was borrowed in September to carry the comp
> Retail outlets purchase snowboards from Slopes, Inc., throughout the year. However, in anticipation of late summer and early fall purchases, outlets ramp up inventories from May through August. Outlets are billed when boards are ordered. Invoices are pay
> Slopes, Inc., manufactures and sells snowboards. Slopes manufactures a single model, the Pipex. In the summer of 2011, Slopes’ management accountant gathered the following data to prepare budgets for 2012: Slopes’ CE
> Refer to the information in Problem 6-33. Assume the following: Pet Luggage (PL) does not make any sales on credit. PL sells only to the public, and accepts cash and credit cards; 90% of its sales are to customers using credit cards, for which PL gets th
> Pet Luggage Company makes two pet carriers, the Cat-allac and the Dog-eriffic. They are both made of plastic with metal doors, but the Cat-allac is smaller. Information for the two products for the month of April is given in the following tables: Pet L
> Unified Chemical Company has a joint production process that converts Zeta into two chemicals: Alpha and Beta. The company purchases Zeta for $12 per pound and incurs a cost of $30 per pound to process it into Alpha and Beta. For every 10 pounds of Zeta,
> Barney Briggs owns a restaurant franchise that is part of a chain of “southern homestyle” restaurants. One of the chain’s popular breakfast items is biscuits and gravy. Central Warehouse makes and freezes the biscuit dough, which is then sold to the fran
