In its first year of operations, Utah Utility Trailers incurred the following costs: Variable production cost …………………………………………$ 2,800 per unit Variable selling and administrative cost ……………………….200 per unit Fixed production cost ……………………………………………………..$200,000 Fixed selling and administrative cost ………………………………….80,000 For the year, the company reported the following results: Sales ($5,000 per unit) ………………………………………$500,000 Cost of Goods Sold …………………………………………….(400,000) Gross Margin ……………………………………………………..$100,000 Selling and Administrative Cost ………………………….(100,000) Operating Income ……………………………………………………..$ 0 a. Using the contribution margin ratio approach, compute the break-even point for this company. b. How many units did the firm produce in its first year of operations? c. Provide an explanation that reconciles your result in (a) to the income statement provided above. d. Prepare a variable costing income statement for sales of 100 units. e. Assume that Utah Utility Trailers is in need of a bank loan. Would it be unethical to use the income statement above, rather than the income statement compiled in (d), to present to the loan officer? Explain.
> Natural Beauty Corp. uses a joint process to make two main products: Forever perfume and Fantasy lotion. Production is organized in two sequential departments: Combining and Heating. The products do not become separate until they have been through the he
> Read Joseph McCafferty’s article entitled “Misgivings” in CFO.com ( January 2007); http://www.cfo.com/article.cfm/8477078/c_8483311?f5singlepage&x51(lastaccessed 5/28/09). a. Discuss your thoughts about not-for-profits claiming to raise funds without inc
> Debra’s Diabetes Foundation was started by a family whose mother had died after suffering for many years with diabetes. A lecture that cost the foundation $360,000 was held on the fourth Tuesday in March, which is American Diabetes Alert Day. Advertiseme
> Choose a fairly common product that you believe would generate multiple by-products. a. Without doing any research, prepare a list of some items that you believe would be by-products from that product. b. After you have completed your list, use the Web t
> Choose a fairly common product that you believe would generate multiple by-products. a. Without doing any research, prepare a list of some items that you believe would be by-products from that product. b. After you have completed your list, use the Web
> Some waste, scrap, and by-product materials have little value. In fact, for many meat and poultry producers, animal waste represents a significant liability because it is considered hazardous and requires significant disposal costs. Some companies, such
> Buchan’s Junction Manufacturing Corporation uses a joint production process that produces three products at the split-off point. Joint production costs during March were $720,000. The company uses the sales-value method for allocating j
> DD’s Linens produces terrycloth products for hotels. The company buys fabric in 60-inch-wide bolts. In the first process, the fabric is set up, cut, and separated into pieces. Setup can be for either robes and beach towels, or bath towe
> During March 2010, the first month of operations, Oink Oink’s Pork Co. had the operating statistics shown in the following table. Costs of the joint process were direct material, $40,000; direct labor, $23,400; and overhead, $10,000. T
> Arguillo Inc. is a 5,000- acre farm that produces two products: Zilla and Corma. Zilla sells for $3.50 per bushel (assume that a bushel weighs 60 pounds). Without further processing, Corma sells for $30 per ton (a ton equals 2,000 pounds). If the Corma i
> Following are abbreviated income statements for two companies, Ainsley and Bard: Ainsley and Bard produce an identical product and both sell that product at $40. Both companies are searching for ways to increase operating income. Managers of both compan
> Tangy Fresh produces orange juice and orange marmalade from a joint process. Second-stage processing of the marmalade creates an orange pulp by-product that can be sold for $0.05 per gallon. Expenses to distribute pulp total $90. In May 2010, 140,000 pou
> Garrity Manufacturing has assembled the data appearing below pertaining to two products. Past experience has shown that the unavoidable fixed factory overhead included in the cost per machine hour averages $10. Direct labor is paid $18 per hour. Garrity
> Riedel Motors uses ten units of Part No. T305 each month in the production of large diesel engines. The cost to manufacture one unit of T305 is presented below: Direct material …………………………………………………………………...$ 2,000 Material handling (20% of direct material
> The officers of Bardwell Company are reviewing the profitability of the company’s four products and the potential effects of several proposals for varying the product mix. The following is an excerpt from the income statement and other
> Structural Steel Systems manufactures steel buildings for agricultural and home applications. Currently, managers are trying to decide between two alternatives regarding a major overhead door assembly for the company’s buildings. The alternatives are as
> Louisiana Luggage Components manufactures handles for suitcases and other luggage. Attaching each handle to the luggage requires, depending on the size of the luggage piece, between two and six standard fasteners, which the company has historically produ
> Tate Electronics manufactures computers and all required components. Its purchasing agent informed the company owner, Mervin Tate, that another the company had offered to supply keyboards for Tate computers at prices below the variable costs at which Tat
> Missouri River Energy Company provides electrical services to several rural counties in Nebraska and South Dakota. Its efficiency has been greatly affected by changes in technology. The company is currently considering the replacement of its main steam t
> Arizona Mechanical recently created a new product, a computer-controlled, laser-precise lathe, and Ohio Ornamental Metals is considering purchasing one. Ohio’s CFO received the following information from the accounting department regarding the company’s
> Louisville Jar Co. has processing plants in Kentucky and Pennsylvania. Both plants use recycled glass to produce jars that a variety of food processors use in food canning. The jars sell for $10 per hundred units. Budgeted revenues and costs for the year
> Cellular Communications manufactures cell phones and two cell phone accessories: ear buds and a 12-volt (automotive) battery charger. (Each ear bud package contains a set of ear buds.) The ear buds and charger are compatible only with the Matrix cell pho
> You have been hired to assist the management of Great Bend Office Systems in resolving certain issues. The company has its home office in Montana and leases facilities in Montana, Idaho, and North Dakota, where it produces a high-quality bean bag chair d
> Gilfeather Food Service sells high-quality ice cream and steaks via overnight delivery. Income statements showing revenues and costs of fiscal year 2010 for each product line are as follows. Management is concerned about profitability of steaks and is c
> Leather Accessories produces leather belts and key fobs that sell for $40 and $10, respectively. The company currently sells 100,000 units of each type with the following operating results: Corporate management has expressed its disappointment with the
> In November 2005, Microsoft introduced its highly anticipated new video game player, the Xbox 360. In early July 2007, Microsoft announced it was extending the warranty on its Xbox 360 to three years for a certain type of malfunction indicated by three f
> Kantrovitz Company is a manufacturer of industrial components. One of its products that is used as a subcomponent in appliance manufacturing is AP110. This product has the following information per unit: Selling price ……………………………….…………………………………..$150 Cos
> Janet Cosgrove is the manager of Saratoga Sporting Goods, a division of Global Sports. Cosgrove’s division sells a variety of sporting goods and supplies to wholesalers and retail chains throughout the Pacific Northwest and Latin America. Saratoga Sporti
> Upstate Leisure makes three outdoor leisure products: chairs, tables, and umbrellas. The company has significant demand for all three products but must manage certain constraints in its operations. Following are sales price and cost information for each
> Clean-N-Brite is a multiproduct company with several manufacturing plants. The Cincinnati plant manufactures and distributes two household cleaning and polishing compounds, regular and heavy-duty, under the HouseSafe label. The forecasted operating resul
> Classic Clothes is a retail organization in the Northeast that sells upscale clothing. Each year, store managers in consultation with their supervisors establish financial goals, and then a monthly reporting system captures actual performance. One of the
> Atlantic Fish Company is a wholesale distributor of cod. The company services restaurants in the Boston area. Small but steady growth in sales has been achieved by Atlantic Fish Company over the past few years, while cod prices have been increasing. The
> One product produced and sold by Outback Outfitters is an ATV gun rack for which 2010 projections are as follows: Projected volume in units ……………………………………………120,000 Sales price per unit ……………………………………………………………$60 Variable production cost per unit …………………
> You were talking to your roommate one day about CVP analysis and the approaches that are used to calculate the break-even point. You also described the assumptions that underlie this type of analysis. Your roommate proclaimed, “Wow, you people in account
> Following is information pertaining to Dayton Co.’s operations of the first and second quarter of 2010: Additional Information • There were no finished goods at January 1, 2010. • Dayton Co. writes of
> Layton Ironworks manufactures a variety of industrial valves and pipe fittings sold primarily to customers in the United States. Currently, the company is operating at 70 percent of capacity and is earning a satisfactory return on investment. Prince Ind
> Calypso Canvas makes canvas window awnings. You have been asked to predict the potential effects of some proposed company changes. The following information is available: Variable cost per unit Direct material …………………………………$18.40 Direct labor ……………………………
> Fairbanks Express is a luxury passenger carrier in Alaska. All seats are first class, and the following data are available: Number of seats per passenger train car ……………………60 Average load factor (percentage of seats filled) …………75% Average full passenger
> Ted Tyner owns Sixth Man Hotel, a luxury hotel with 60 two-bedroom suites for coaches and their players. Capacity is 10 coaches and 50 players. Each suite is equipped with extra-long king-sized beds, super-tall and extended shower heads, extra-tall bathr
> Nature’s Own makes three types of wood flooring: Oak, Hickory, and Cherry. The company’s tax rate is 40 percent. The following costs are expected for 2011: Per-square-yard expected selling prices are as follows: Oak,
> The Pink Flamingo, Inc., manufactures plastic lawn ornaments. Currently the firm manufactures three items: reindeer, snowmen, and flamingos. For each reindeer, two snowmen and four flamingos are sold. The firm is in a 40 percent tax bracket. a. What is
> The Glass Menagerie makes small pressed resin ducks and ducklings. For every duck sold, the company sells five ducklings. The following information is available about the company’s selling prices and cost: a. What is the average contri
> Yard Bird manufactures commercial and residential riding lawnmowers. The company sells one commercial mower per three residential mowers sold. Selling prices for the commercial and residential mowers are, respectively, $5,600 and $1,800, and variable sel
> Golf Glider makes gasoline-powered golf carts. The selling price is $5,000 each, and costs are as follows: Golf Glider’s income is taxed at a 40 percent rate. a. How many golf carts must Golf Glider sell to earn $600,000 after tax? b.
> The Real Deal is a social organization that performs charitable work in its local community. The club has the following monthly cost and fee information: monthly membership fee per member, $60; monthly variable cost of service per member, $25; and monthl
> Mons Weatherby owns a sports brokerage agency and sells tickets to major league baseball, football, and basketball games. He also sells sports travel packages that include game tickets, airline tickets, and hotel accommodations. Revenues are commissions
> Aqua Gear, in business since 2008, makes swimwear for professional athletes. Analysis of the firm’s financial records for the current year reveals the following: Average swimsuit selling price …………………………………$70 Variable swimsuit expenses Direct mat
> Beantown Baseball Company makes baseballs that sell for $13.00 per two-pack. Current annual production and sales are 960,000 baseballs. Costs for each baseball are as follows: Direct material ………………………………………….$2.00 Direct labor ………………………………………………...1.25
> Casper Karts manufactures a three-wheeled shopping cart that sells for $60. Variable manufacturing and variable selling cost are, respectively, $35 and $10 per unit. Annual fixed cost is $975,000. a. What is the contribution margin per unit and the contr
> Forester Fashions is considering the purchase of computerized clothes-designing software. The software is expected to cost $320,000, have a useful life of 5 years, and have no salvage value at the end of its useful life. Assume that tax regulations permi
> The owner of Bolt’s Cold Storage is considering a $195,000 installation of a new refrigerated storage room. The storage room has an expected life of 20 years with no salvage value. The storage room is expected to generate net annual cash revenues (before
> Pete’s Paving provides custom paving of sidewalks and driveways. One of the most labor-intensive aspects of the paving operation is preparing and mixing materials. Sharon Guillon, corporate engineer, has found new computerized equipment to mix (and monit
> Shelly’s Tax Services prepares tax returns for individuals and small businesses. The firm employs four tax professionals. Currently, all tax returns are prepared on a manual basis. The firm’s owner, Shelly Foster, is considering purchasing a computer sys
> Pneu Shoe Company manufactures various types of athletic shoes. Several types require a built-in air pump. Presently, the company makes all air pumps it requires. However, management is evaluating an offer from Ram Air Co. to provide air pumps at a cost
> Best Bakery is considering the purchase of a new delivery truck to replace an existing unit. The truck would cost $45,000 and would have a life of 7 years with no salvage value. The existing truck could be sold currently for $4,000, but, if it is kept, i
> Holly’s Fashions is considering expanding\ its building so it can stock additional merchandise for travelers and tourists. Store z manager Jill Eliason anticipates that building expansion costs would be $190,000. The firm’s suppliers are willing to provi
> Candice Klammer was reprimanded by the home office for recommending a pollution abatement project because the project did not meet the standard financial criterion of a 12 percent rate of return. However, Klammer had concluded that the $600,000 piece of
> The management of Pittsburgh Pipe is evaluating a proposal to buy a new turning lathe as a replacement for a less efficient piece of similar equipment that would then be sold. The new lathe’s cost, including delivery and installation, i
> New England Metals is considering adding a new product line that has an expected life of 8 years. The product manufacturer would require the firm to incur setup costs of $6,400,000 to handle the new product line. All product line revenues will be collect
> Ten years ago, based on a pre-tax NPV analysis, Sante’s Sporting Goods decided to add a new product line. The data used in the analysis were as follows: Discount rate ………………………………………………….10% Life of product line ……………………………………10 years Annual sales increa
> CXI has formal policies and procedures to screen and approve capital projects. Proposed capital projects are classified as one of the following types: 1. expansion requiring new plant and equipment, 2. expansion by replacement of present equipment with m
> Dave’s Drilling is considering the acquisition of new manufacturing equipment that has the same capacity as the current equipment. The new equipment will provide $150,000 of annual operating efficiencies in direct and indirect labor, direct material usag
> Illinois Investments is considering purchasing a 50-room motel for sale outside of Atlanta as an investment. The current owners state that the motel’s occupancy rate averages 80 percent each of the 300 days per year the motel is open. Each room rents for
> LA Property Management is expanding operations, and the firm’s president, Mike Mayberry, is trying to make a decision about new office space. The following are the firm’s options: Maple Commercial Plaza 5,000 square feet; cost, $800,000; investment peri
> Use the information for Bill’s Cabinets in Exercise 9 and assume a tax rate for the company of 30 percent. Information given in Exercise 9: Bill’s Cabinets sells a product for $360 per unit. The company’s variable cost per unit is $60 for direct materia
> Although they should be considered independently, often the investing and financing decisions are considered together. Consider the following quote from personal finance guru Suze Orman: It drives me nuts to see all the money wasted on car leases. In my
> As one of the division managers for Premier Inc., your performance is evaluated primarily on a single measure: after-tax divisional segment income less the cost of capital invested in divisional assets. The fair value of invested capital in your division
> Miami Marine uses ROI to evaluate the performance of both its Powerboat and Sailboat Division managers. The following estimates of relevant measures have been made for the upcoming year: Both division managers have the autonomy to make decisions regardi
> Morton Industrial produces stamping machinery for manufacturers. In 2009, the company expanded vertically by acquiring a supplier, Lancaster Company. Lancaster is now operated as a divisional investment center. Morton monitors its divisions on the basis
> Imelda Sanchez, manager of the Arias Division of Poncé Chemical, is evaluated based on the division’s return on investment and residual income. Near the end of November 2010, she was reviewing the division’s financial information as well as some activiti
> Fashion Fabrics sells sewing and craft materials to specialty retail and department stores. For 2010, the company’s New York Division had the following performance targets: Asset turnover ………………………………….3.0 Profit margin ………………………………….5.5% Actual informa
> Indicate whether each of the following statements constitutes a potential disadvantage (D), or neither (N) of using transfer prices for support department costs. a. Can put all support departments on an equal footing b. Can cause certain services to be u
> Go to your university’s Web site and review the various organizational units within the university. Assuming no transfer pricing exists, make a list of the units that you believe would be classified as cost centers and profit centers.
> Indicate whether each of the following is a potential advantage (A) or disadvantage (D) of decentralization. If an item is neither an advantage nor a disadvantage, use N. a. Provision of increased job satisfaction b. Development of leadership qualities c
> Eastgate Electronics is considering a new product line that would require an investment of $140,000 in equipment and $180,000 in working capital. Store managers expect the following pattern of net cash inflows from the new product line over the life of t
> Use the information for Sheridan Shacks in Exercise and assume a tax rate for the company of 35 percent. Information given in Exercise 8: Sheridan Shacks makes portable garden sheds that sell for $1,800 each. Costs are as follows: a. If Sheridan Shacks
> Tasty Beverages began business in 2010 selling bottles of a thirst-quenching drink. Production for the first year was 104,000 bottles, and sales were 98,000 bottles. The selling price per bottle was $3.10. Costs incurred during the year were as follows:
> The great global recession has claimed many victims. 51 In many countries, unemployment is at near-historic highs, and even those who have managed to keep their jobs have often been asked to accept reduced work hours or pay cuts. Another consequence of t
> Describe a situation where your perception turned out to be wrong. What perceptual errors did you make that might have caused this to happen?
> Some researchers—psychologist Paul Ekman may be the best known—have studied whether facial expressions reveal true emotions. 185 These researchers have distinguished real smiles (so-called Duchenne smiles, named after French physician Guillaume Duchenne)
> Samantha Parks is the owner and CEO of Sparks, a small agency that develops advertising, promotions, and marketing materials for high-fashion firms. 119 Parks has tended to keep a tight rein on her business, overseeing most projects from start to finish.
> What are employee involvement programs? How might they increase employee motivation?
> What are the three alternative work arrangements of flextime, job sharing and telecommuting? What are the advantages and disadvantages of each?
> What are the main ways that jobs can be redesigned? In your view, in what situations would one of the methods be favoured over the others?
> What is the job characteristics model? How does it motivate employees?
> What are the characteristics of a matrix organization?
> How can flexible benefits motivate employees?
> What are the six key elements that define an organization’s structure?
> What is variable pay? What variable-pay programs are used to motivate employees? What are their advantages and disadvantages?
> How can motivation theories be used to create more motivating work environments?
> How might the job of student be redesigned to make it more motivating?
> One of the members of your team continually arrives late for meetings and does not turn drafts of assignments in on time. In general this group member is engaging in social loafing. What can the members of your group do to reduce social loafing?
> What are the motivational benefits of intrinsic rewards?
> How does group size affect group performance?
> What characteristics contribute to the effectiveness of a team?
> What are the five stages of group development?
> How do group norms influence an individual’s behaviour?
> What are the characteristics of a bureaucracy, and how does it differ from a simple structure?
> What are some examples of impression management techniques?
> Do role requirements change in different situations? If so, how?
