Question: John Mendenhall seeks your advice on revising

> As a result of the actions taken, quality has significantly improved in 2017 while rework and unit costs of the Orlicon have decreased. Scott has reduced manufacturing capacity because capacity is no longer needed to support rework. Scott has also lowere

> Della Simpson, Inc., sells two popular brands of cookies: Della’s Delight and Bonny’s Bourbon. Della’s Delight goes through the Mixing and Baking departments, and Bonny’s Bourbon, a

> Nelson River Tours, a division of Old World Travel, offers two types of guided fishing tours, Beginner and Advanced. Operating income for each tour type in 2017 is as follows: The equipment has a zero disposal value. Guide wages, supplies, and vehicle f

> Ainsley Corporation has four operating divisions. The budgeted revenues and expenses for each division for 2017 follows: Further analysis of costs reveals the following percentages of variable costs in each division: Closing down any division would res

> Damon Furniture (DF) produces fiberglass doors in two processes: molding and finishing. DF is currently producing two models: Masoline and Aldernite. Production in the molding department is limited by the amount of materials available. Production in the

> Suppose that the market for silk-screened T-shirts grew by 10% during 2017. All increases in sales greater than 10% are the result of Gianni’s strategic actions. From exercise 21: Gianni & Sons buys T-shirts in bulk, applies its o

> Washington Industries manufactures electronic testing equipment. Washington also installs the equipment at customers’ sites and ensures that it functions smoothly. Additional information on the manufacturing and installation departments

> Gormley Precision Tools makes cutting tools for metalworking operations. It makes two types of tools: A6, a regular cutting tool, and EX4, a high precision cutting tool. A6 is manufactured on a regular machine, but EX4 must be manufactured on both the re

> Wechsler Company produces three products: A130, B324, and C587. All three products use the same direct material, Brac. Unit data for the three products are: The demand for the products far exceeds the direct materials available to produce the products.

> The Lexington Company produces gas grills. This year’s expected production is 20,000 units. Currently, Lexington makes the side burners for its grills. Each grill includes two side burners. Lexington’s management accou

> Denver Engineering manufactures small engines that it sells to manufacturers who install them in products such as lawn mowers. The company currently manufactures all the parts used in these engines but is considering a proposal from an external supplier

> The Wild Orchid Corporation is working at full production capacity producing 13,000 units of a unique product, Everlast. Manufacturing cost per unit for Everlast is: Direct materials………………………………….$10 Variable direct manufacturing labor………..2 Manufacturin

> Jason Wu operates Exclusive Limousines, a fleet of 10 limousines used for weddings, proms, and business events in Washington, D.C. Wu charges customers a flat fee of $250 per car taken on contract plus an hourly fee of $80. His income statement for May f

> Gavin Martin, the general manager of Oregano Software, must decide when to release the new version of Oregano’s spreadsheet package, Easyspread 2.0. Development of Easyspread 2.0 is complete; however, the diskettes, compact discs, and u

> Riverside Clippers Corp manufactures garden tools in a factory in Taneytown, Maryland. Recently, the company designed a collection of tools for professional use rather than consumer use. Management needs to make a good decision about whether to produce t

> Susan Smith manages the Wexford plant of Sanchez Manufacturing. A representative of Darnell Engineering approaches Smith about replacing a large piece of manufacturing equipment that Sanchez uses in its process with a more efficient model. While the repr

> Required: Refer to Exercise 12-21. 1. Calculate Gianni‘s operating income in both 2016 and 2017. 2. Calculate the growth, price-recovery, and productivity components that explain the change in operating income from 2016 to 2017. 3. C

> The Magill Repair Shop repairs and services machine tools. A summary of its costs (by activity) for 2017 is as follows: a. Materials and labor for servicing machine tools………….$1,100,000 b. Rework costs………………………………………………………………….90,000 c. Expediting costs

> Justin Anders is the management accountant for Carey Restaurant Supply (CRS). Sara Brinkley, the CRS sales manager, and Justin are meeting to discuss the profitability of one of the customers, Donnelly’s Pizza. Justin hands Sara the following analysis of

> Carl Hart decides that the simple regression analysis used in Problem 10-47 could be extended to a multiple regression analysis. He finds the following results for two multiple regression analyses: The coefficients of correlation between combinations of

> Perfect Fit operates a chain of 10 retail department stores. Each department store makes its own purchasing decisions. Carl Hart, assistant to the president of Perfect Fit, is interested in better understanding the drivers of purchasing department costs.

> Nandita Summers works at Modus, a store that caters to fashion for young adults. Nandita is responsible for the store’s online advertising and promotion budget. For the past year, she has studied search engine optimization and has been

> Inbee is concerned that she still does not understand the relationship between output and labor consumption. She consults with Jim Park, the head of engineering, and shares the results of her regression estimation. Jim indicates that the production of ne

> Hankuk Electronics started production on a sophisticated new smartphone running the Android operating system in January 2017. Given the razor-thin margins in the consumer electronics industry, Hankuk’s success depends heavily on being a

> After further discussion, Julie and Rhett wonder if they should view both the number of procedures and number of patient-hours as cost drivers in a multiple regression estimation in order to best understand Apollo’s medical supplies cos

> Apollo Hospital specializes in outpatient surgeries for relatively minor procedures. Apollo is a nonprofit institution and places great emphasis on controlling costs in order to provide services to the community in an efficient manner. Apolloâ&#128

> Assume the same information for the Pacific Boat Company as in Problem 10-40 with one exception. This exception is that Pacific Boat uses a 90% incremental unit-time learning model as a basis for predicting direct manufacturing labor-hours in its assembl

> The Pacific Boat 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

> Gianni & Sons buys T-shirts in bulk, applies its own trendsetting silk-screen designs, and then sells the T-shirts to a number of retailers. Gianni wants to be known for its trendsetting designs, and it wants every teenager to be seen in a distinctiv

> Spirit Freightways is a leader in transporting agricultural products in the western provinces of Canada. Reese Brown, a financial analyst at Spirit Freightways, is studying the behavior of transportation costs for budgeting purposes. Transportation costs

> Sleep Late, a large hotel chain, has been using activity-based costing to determine the cost of a night’s stay at their hotels. One of the activities, “Inspection,” occurs after a customer has checked

> Catherine McCarthy, sales manager of Baxter Arenas, is checking to see if there is any relationship between promotional costs and ticket revenues at the sports stadium. She obtains the following data for the past 9 months: She estimates the following re

> Market Thyme, a cooperative of organic family-owned farms, 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 produced food. Families pay a sea

> Fashion Fabrics makes pants from a special material. The fabric is special because of the way it fits many body types. The pants sell for $142. A well-known retail establishment has asked Fashion Fabrics to produce 3,000 shorts from the same fabric. The

> Diamond Corporation produces baseball bats for kids that it sells for $37 each. At capacity, the company can produce 54,000 bats a year. The costs of producing and selling 54,000 bats are as follows: Required: 1. Suppose Diamond is currently producing a

> Scott Company manufactures a DVD player called Orlicon. The company sells the player to discount stores throughout the country. This player is significantly less expensive than similar products sold by Scott’s competitors, but the Orlicon offers just DVD

> Precision Laboratories evaluates the reaction of materials to extreme increases in temperature. Much of the company’s early growth was attributable to government contracts, but recent growth has come from expansion into commercial markets. Two types of t

> Georgia Temps, a large labor contractor, supplies contract labor to building-construction companies. For 2017, Georgia 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

> C & S Mechanical sells and services plumbing, heating, and air-conditioning systems. C & S’s cost accounting system tracks two cost categories: direct labor and direct materials. C & S uses a time-and-materials pricing syste

> The TechGuide Company produces and sells 7,500 modular computer desks per year at a selling price of $750 each. Its current production equipment, purchased for $1,800,000 and with a five-year useful life, is only two years old. It has a terminal disposal

> Sweet Tastings makes candy bars for vending machines and sells them to vendors in cases of 30 bars. Although Sweet Tastings makes a variety of candy, the cost differences are insignificant, and the cases all sell for the same price. Sweet Tastings has a

> Lagoon is an amusement park that offers family-friendly entertainment and attractions. The park boasts more than 25 acres of fun. The admission price to enter the park, which includes access to all attractions, is $35. To earn the required rate of return

> Westerly Cosmetics manufactures and sells a variety of makeup and beauty products. The company has developed its own patented formula for a new anti-aging cream The company president wants to make sure the product is priced competitively because its purc

> The new CEO of Rusty Manufacturing has asked for information about the operations of the firm from last year. The CEO is given the following information, but with some data missing: Total sales revenue……………………………………………………….? Number of units produced and

> Refresh Resorts, Inc., operates health spas in Key West, Florida; Phoenix, Arizona; and Carmel, California. The Key West spa was the company’s first and opened in 1991. The Phoenix spa opened in 2004, and the Carmel spa opened in 2013.

> Zuzu is a large manufacturer of snack cakes. The company operates distribution centers in Chicago. The distribution center bakes and packages the snack cakes and ships them to grocery warehouses throughout the country. Because of the high standards set f

> The following data refer to Clear Panes, a division of Global Corporation. Clear Panes makes and sells residential windows that sell for $150 each. Clear Panes expects sales of 150,000 units in 2017. Clear Panes’ annual fixed costs are $2,750,000 and the

> Precision Equipment specializes in the manufacture of medical equipment, a field that has become increasingly competitive. Approximately 2 years ago, Pedro Mendez, president of Precision, decided to revise the bonus plan (based, at the time, entirely on

> Acme Company recently introduced a new bonus plan for its corporate executives. The company believes that current profitability and customer satisfaction levels are equally important to the company’s long-term success. As a result, the

> Janet’s Bakery is thinking about replacing the convection oven with a new, more energy-efficient model. Information related to the old and new ovens follows: Ignore the effect of income taxes and the time value of money. Required: 1.

> News Report Group has two major divisions: Print and Internet. Summary financial data (in millions) for 2016 and 2017 are as follows: The two division managers’ annual bonuses are based on division ROI (defined as operating income divi

> Newmann, Inc. has divisions in the United States, France, and Australia. The U.S. division is the oldest and most established of the three and has a cost of capital of 6%. The French division was started four years ago when the exchange rate for the Euro

> Appleton’s owns and operates a variety of casual dining restaurants in three cities: St. Louis, Memphis, and New Orleans. Each geographic market is considered a separate division. The St. Louis division includes four restaurants, each b

> Nature’s Juice Corporation operates three divisions that process and bottle natural fruit juices. The historical-cost accounting system reports the following information for 2017: Nature’s Juice estimates the useful l

> Sierra Inc. consists of a semiconductor division and a process-control division, each of which operates as an independent profit center. The semiconductor division employs craftsmen who produce two different electronic components: the new high performanc

> Compost Systems, Inc. (CSI) operates a composting service business and produces organic fertilizer that it sells to farmers in the Midwest. CSI operates with two divisions, collection and composting. The collection division contracts with universities, h

> Letang Company has three divisions (R, S, and T), organized as decentralized profit centers. Division R produces the basic chemical Ranbax, in multiples of 1,000 pounds, and transfers it to divisions S and T. Division S processes Ranbax into the final pr

> The Croydon division of CC Industries supplies the Hauser division with 100,000 units per month of an infrared LED that Hauser uses in a remote control device it sells. The transfer price of the LED is $8, which is the market price. However, Croydon does

> Cocoa Mill Chocolates manufactures specialty chocolates and sells them to fine candy stores. The company operates two divisions, cocoa and candy, as decentralized entities. The cocoa division purchases raw cacao beans and processes them into cocoa powder

> Beacon, a division of Libra Corporation, is located in the United States. Its effective income tax rate is 30%. Another division of Libra, Falcon, is located in Canada, where the income tax rate is 40%. Falcon manufactures, among other things, an interme

> Newbury Printers operates a printing press with a monthly capacity of 3,200 machine-hours. Newbury has two main customers: Wallace Corporation and Kimberly Corporation. Data on each customer for January are: Kimberly Corporation indicates that it wants

> Ballantine Corp. produces and sells lead crystal glassware. The firm consists of two divisions, Commercial and Specialty. The Commercial division manufactures 300,000 glasses per year. It incurs variable manufacturing costs of $8 per unit and annual fixe

> Express Grow Inc., based in Ankeny, Iowa, sells high-end fertilizers. Express Grow has two divisions: â–  North Italy mining division, which mines potash in northern Italy â–  U.S. processing division, which uses potash

> Assume that Pat Borges, CEO of Cran Health, had mandated a transfer price equal to 225% of full cost. Now he decides to decentralize some management decisions and sends around a memo that states the following: “Effective immediately, ea

> Cran Health Products is a cranberry cooperative that operates two divisions, a harvesting division and a processing division. Currently, all of harvesting’s output is converted into cranberry juice by the processing division, and the ju

> Mountaineer, Inc., has two divisions, A and B, that manufacture expensive bicycles. Division A produces the bicycle frame, and division B assembles the rest of the bicycle onto the frame. There is a market for both the subassembly and the final product.

> The Slate Company manufactures and sells television sets. Its assembly division (AD) buys television screens from the screen division (SD) and assembles the TV sets. The SD, which is operating at capacity, incurs an incremental manufacturing cost of $65

> Saina Supplies leases and sells materials, tools, and equipment and also provides add-on services such as ground maintenance and waterproofing to construction and mining sites. The company has grown rapidly over the past few years. The owner, Saina Torra

> Doorchime Company makes doorbells. It has a weighted-average cost of capital of 6% and total assets of $5,690,000. Doorchime has current liabilities of $550,000. Its operating income for the year was $630,000. Doorchime does not have to pay any income ta

> Wonkies, Inc. is a large company that owns fast-food restaurants, has a soft drink division, and a snack division. Wonkies, Inc. corporate management gives its division managers considerable operating and investment autonomy in running their divisions. W

> Cora Manufacturing makes fashion products and competes on the basis of quality and leading-edge designs. The company has two divisions, clothing and cosmetics. Cora has $5,000,000 invested in assets in its clothing division. After-tax operating income fr

> Sanchez Corporation runs two convenience stores, one in Connecticut and one in Rhode Island. Operating income for each store in 2017 is as follows: The equipment has a zero disposal value. In a senior management meeting, Maria Lopez, the management acco

> The Seaside Corporation manufactures similar products in the United States and Norway. The U.S. and Norwegian operations are organized as decentralized divisions. The following information is available for 2017; ROI is calculated as operating income divi

> Ryan Alcoa, a new associate at Jonas Partners, has compiled the following data for a potential investment for the firm: Investment: $300,000 Annual sales revenues = $180,000 Annual cash costs = $80,000 4-year useful life, no salvage value Jonas Partner

> Performance Auto Company operates a new car division (that sells high- performance sports cars) and a performance parts division (that sells performance-improvement parts for family cars). Some division financial measures for 2017 are as follows: Require

> Comfy Corporation manufactures furniture in several divisions, including the patio furniture division. The manager of the patio furniture division plans to retire in two years. The manager receives a bonus based on the division’s ROI, which is currently

> Hamilton Corp. is a reinsurance and financial services company. Hamilton strongly believes in evaluating the performance of its stand-alone divisions using financial metrics such as ROI and residual income. For the year ended December 31, 2017, Hamilton’

> Excellent Motor Company makes electric cars and has two products, the Simplegreen and the Excellentgreen. To produce the Simplegreen, Excellent Motor employed assets of $10,500,000 at the beginning of 2017 and $14,450,000 of assets at the end of 2017. Ot

> The Sports Equipment Company produces a wide variety of sports equipment. Its newest division, Golf Technology, manufactures and sells a single product— AccuDriver, a golf club that uses global positioning satellite technology to improve the accuracy of

> Performance Aid, Inc. has two divisions: Test Preparation and Language Arts. Results (in millions) for the past three years are partially displayed here: Required: 1. Complete the table by filling in the blanks. 2. Use the DuPont method of profitabilit

> Return on investment (ROI) is often expressed as follows: Required: 1. What advantages are there in the breakdown of the computation into two separate components? 2. Fill in the blanks for the following table: After filling in the blanks, comment on t

> Refer to Exercise 22-24. Assume that division A can sell the 1,900 units to other customers at $137 per unit, with variable marketing cost of $2 per unit. Required: Determine whether Kelly-Elias will benefit if division C purchases the 1,900 units from

> The Denver Corporation manufactures filing cabinets in two operations: machining and finishing. It provides the following information: Each cabinet sells for $75 and has direct material costs of $35 incurred at the start of the machining operation. Denv

> The Kelly-Elias Corporation, manufacturer of tractors and other heavy farm equipment, is organized along decentralized product lines, with each manufacturing division operating as a separate profit center. Each division manager has been delegated full au

> Suppose that the U.S. division could sell as many chainsaws as it makes at $225 per unit in the U.S. market, net of all marketing and distribution costs. Required: 1. From the viewpoint of the Burton Company as a whole, would after-tax operating income

> The Burton Company manufactures chainsaws at its plant in Sandusky, Ohio. The company has marketing divisions throughout the world. A Burton marketing division in Lille, France, imports 200,000 chainsaws annually from the United States. The following inf

> Quest Motors, Inc., operates as a decentralized multidivision company. The Vivo division of Quest Motors purchases most of its airbags from the airbag division. The airbag division’s incremental cost for manufacturing the airbags is $90 per unit. The air

> Tech Friendly Computer, Inc., with headquarters in San Francisco, manufactures and sells a desktop computer. Tech Friendly has three divisions, each of which is located in a different country: a. China division—manufactures memory devi

> Calgary Lumber has a raw lumber division and a finished lumber division. The variable costs are as follows: ■ Raw lumber division: $125 per 100 board-feet of raw lumber ■ Finished lumber division: $145 per 100 board-feet of finished lumber Assume that

> Host Hotels, a small chain of business hotels in the MidAtlantic region, is interested in gaining access to the boutique lodging market by acquiring a hotel group in that sector. Host Hotels intends to operate the newly acquired hotels independently from

> Fenster Corporation manufactures windows with wood and metal frames. Fenster has three departments: glass, wood, and metal. The glass department makes the window glass and sends it to either the wood or metal department where the glass is framed. The win

> Quick Stop operates 1,000 convenience stores throughout the United States. The company’s slogan is “Best Stop of the Day,” and its mission is to make every customer a return customer. Quick Stop’s corporate strategy supports this mission by stressing the

> The Cook Company is a national portable building manufacturer. Its Benton plant will become idle on December 31, 2017. Mary Carter, the corporate controller, has been asked to look at three options regarding the plant: ■ Option 1: The plant, which has b

> Body Image, Inc., produces two basic types of weight-lifting equipment, Model 9 and Model 14. Pertinent data are as follows: The weight-lifting craze suggests that Body Image can sell enough of either Model 9 or Model 14 to keep the plant operating at f

> Ortel Telecom sells telecommunication products and services to a variety of small businesses. Two of Ortel’s key clients are Square and Cloudburst, both fast-growing technology start-ups located in New York City. Ortel has compiled info

> Klein Dermatology is contemplating purchasing new laser therapy equipment. This new equipment would cost $300,000 to purchase and $20,000 for installation. Klein estimates that this new equipment would yield incremental margins of $98,000 annually due to

> Walker Inc. is considering the purchase of new equipment that will automate production and thus reduce labor costs. Walker made the following estimates related to the new machinery: Cost of the equipment……………..$120,000 Reduced annual labor costs……...$40,

> Ella’s Bakery plans to purchase a new oven for its store. The oven has an estimated useful life of 4 years. The estimated pretax cash flows for the oven are as shown in the table that follows, with no anticipated change in working capit

> Laverty Clinic plans to purchase a new centrifuge machine for its New York facility. The machine costs $94,000 and is expected to have a useful life of 6 years, with a terminal disposal value of $9,000. Savings in cash operating costs are expected to be

> Andrews Construction is analyzing its capital expenditure proposals for the purchase of equipment in the coming year. The capital budget is limited to $5,000,000 for the year. Lori Bart, staff analyst at Andrews, is preparing an analysis of the three pro