Question: Lasky Manufacturing has two divisions: Carolinas

> The standard direct labor cost per call for Crescent Call Centers (CCC) is $5.25 (= $21 per labor hour ÷ 4 calls per hour). Actual direct labor costs during the period totaled $82,810. Also during the period, 4,180 labor-hours were worked, and 14,800 cal

> Oakman Accounting Partners is a small tax and accounting services firm. Each billable hour of partner time has a $960 budgeted price and $450 budgeted variable cost. Each billable hour of staff time has a budgeted price of $250 and a budgeted variable co

> Refer to the data in Exercise 17-38. Required Prepare a profit variance analysis for Kentford Associates like the one in Exhibit 16.5 of the previous chapter. Exercise 17-38:

> Refer to the data in Exercise 17-38. Required Prepare a sales activity variance analysis like the one in Exhibit 16.4 of the previous chapter. Exercise 17-38:

> Kentford Associates is a small professional services firm. Last month, Kentford billed more hours than expected, and profits reflected this. Required Prepare a flexible budget for Kentford. Use billable hours as the measure of output (that is, units prod

> Pembridge Burritos has two categories of direct labor: unskilled, which costs $16 per hour, and skilled, which costs $30 per hour. Management has established standards per “meal,” which has been defined as a typical me

> Casino Pest Control (CPC) provides services to residential households by an application of a special chemical mix that varies somewhat in proportion based on environmental factors. CPC mixes two chemicals, Red-10 and Blue-12, in proportions depending on

> Windward Chemicals produces a product using a process that allows for substitution between two materials, Sol-1 and Sol-2. The company has the following direct materials data for its product: The company had the following results in June: Required a. Com

> A rush order for a major customer has led to considerable overtime and an unfavorable variance for production costs. Is this variance the responsibility of the marketing manager, the production manager, both, neither, or someone else?

> Proctor Cleaning Products manufactures a product using a process that allows for substitution between two materials, X-1 and Y-7. The company has the following direct materials data for its product: The following results were reported for January: Procto

> Lee Lighting produces two models of floor lamps: Standard and Smart. The two differ primarily in the quality of the materials and the additional electronics required for the Smart lamp. At budget, Standard sells for $18 per unit and has a variable cost t

> Beatrice Math Tutors offers two tutoring models: individual and group. The individual model provides one-on-one tutoring, while the group model consists of groups of no more than four students. The individual model has a budgeted average price of $275. T

> Allonby Foods processes frozen meals for sale in grocery and other retail outlets. Two versions are produced: The FlavorPak version has a budgeted price of $16 per case and a standard variable cost of $9 per case. The Gourmet version has a budgeted price

> Olivet Devices sells two models of fitness devices. The budgeted price per unit for the wireless model is $38 and the budgeted price per unit for the wireless and cellular model is $83. The master budget called for sales of 40,000 wireless models and 10,

> Piper Products sold 406,000 units during the last period when industry volume totaled 2.8 million units. The company originally expected to sell 442,500 based on a budgeted market share of 15 percent. The budgeted selling price was $13 per unit. Budgete

> Logan Passport Services budgeted sales of 8,000 units of its Basic Visa Service (BVS). This was based on its estimated 5 percent share of this service in the relevant regional market. Actual sales of the BVS for Logan totaled 11,200 units on total indust

> Appoline Juices budgeted sales of 87,000 units of Grape, assuming that the company would have 30 percent of 290,000 units sold in a particular market. The actual results were 78,000 units sold by Appoline, which represented a 26 percent share of the tota

> Refer to the information in Exercise 17-24. Assume that Sheffer Systems had no beginning finished goods or direct materials inventory and only produced one product. Sheffer sold 27,720 units during the period. Required a. Assume Sheffer writes off all va

> The cost analyst for Sheffer Systems collected the following data concerning direct materials: Required Compute the direct materials cost variances. Prepare an analysis for management like the one in Exhibit 17.3.

> Consider a university setting with many colleges, such as the Engineering College, the Business College, Arts & Sciences College, and so on. The central administration is responsible for finance, personnel, legal, and other costs. Because the university

> The Faraday Plant of Hindle, Inc. shows the following overhead information for the current period: Required What are the variable overhead price and efficiency variances and the fixed overhead price variance?

> Wetherbee Tech Services (WTS) is a chain of computer maintenance technicians for households and small businesses. The following data are available for last year’s services: ∙ WTS recorded 120,000 tech calls last year.

> Refer to the data in Exercise 16-46. Management would like to see results reported graphically. Required Prepare a graph like that shown in Exhibit 16.18. Exercise 16-46:

> Information on Grixdale Partner’s fixed overhead costs follows: Required What are the fixed overhead price and production volume variances? (Refer to Exhibit 16.17 for the format to use.)

> Information on Chicago Crafters direct materials costs follows: Chicago Crafters carries no materials inventories. Required a. What were Chicago Crafters’ direct materials price and efficiency variances? b. (Appendix) Prepare the journa

> The records of Heritage Home Supplies show the following for July: Required Compute the direct labor and variable overhead price and efficiency variances.

> Records at the Farnsworth Corporation contained the following data for the most recent period of activity: Variable overhead is applied based on standard direct labor-hours allowed. Required Compute the labor and variable overhead price and efficiency va

> The standard direct material cost per unit for Willis Group was $124 (= $31 per gallon × 4 gallons per unit). During the period, actual direct materials costs amounted to $1,635,480, materials used totaled 55,440 gallons, and 13,200 units were produced.

> Refer to the information in Exercise 16-38. The following is the actual income statement (in thousands of dollars) for the year for Golden Food Products: Required Prepare a profit variance analysis like the one in Exhibit 16.5. Exercise 16-38:

> Refer to the data in Exercise 16-32 and the analysis in Exercise 16-33. Required Prepare a profit variance analysis for Fournier Fixtures like the one in Exhibit 16.5. Exercise 16-32:

> Consider a company that leases a fleet of aircraft for passenger service. Because the planes often fly with room in the cargo area, the company adds a new business shipping timesensitive freight. The company organizes into two profit centers—Passenger Se

> Refer to the data in Exercise 16-32. Required Prepare a sales activity variance analysis for Fournier Fixtures like the one in Exhibit 16.4. Exercise 16-32:

> Fournier Fixtures produces a variety of manufactured items for the home and building industry. The company produces only when it receives orders and, therefore, has no inventories. The following information is available for the current month: Required Pr

> The following graph is from Floyd & Company. Required Label (a) and (b) in the graph and give the number of units sold for each.

> The following graph is from Welton Associates. Required Find the missing amounts for (a) and (b).

> Refer to the data in Exercises 16-26 and 16-27. Required Prepare a profit variance analysis like the one in Exhibit 16.5. Exercise 16-26: The master budget at Cherrylawn Corporation at the beginning of the year was based on sales of 275,000 units with r

> Refer to the data in Exercise 16-26. Required Prepare a sales activity variance analysis like the one in Exhibit 16.4. Exercise 16-26: The master budget at Cherrylawn Corporation at the beginning of the year was based on sales of 275,000 units with reve

> The master budget at Monroe Manufacturing last period called for sales of 42,000 units at $42 each. The costs were estimated to be $26 variable per unit and $524,000 fixed. During the period, actual production and actual sales were 45,000 units. The sell

> Eastlawn Travel has two operating divisions, Tours and Resorts. The two divisions meet the requirements for segment disclosures. Before transactions between the two divisions are considered, revenues and costs are as follows: The two divisions have an ar

> Southfield Division offers its product to outside markets for $115. It incurs variable costs of $40 per unit and fixed costs of $139,000 per month based on monthly production of 22,000 units. Northfield Division can acquire the product from an alternate

> The Street Division of Labrosse Logistics just started operations. It purchased depreciable assets costing $36 million and having a four-year expected life, after which the assets can be salvaged for $7.2 million. In addition, the division has $36 millio

> The chapter identified four techniques used for forecasting sales (market researchers, Delphi technique, trend analysis, and econometric models). What are some factors that would lead you in preparing a sales forecast to rely on one or two of these techn

> Refer to the facts in Exercise 14-43, but assume that Veach has been leasing the machine for $7,200 annually. Assume also that the machine generates income of $2,940 annually after the lease payment. Veach can cancel the lease on the machine without pena

> Veach Division has total assets (net of accumulated depreciation) of $462,000 at the beginning of year 1. One of the assets is a machine that has a net book value of $42,000. Expected divisional income in year 1 is $55,440 including $2,940 in income gene

> The Plastics Division of Minock Manufacturing currently earns $2.87 million and has divisional assets of $35.0 million. The division manager is considering the acquisition of a new asset that will add to profit. The investment has a cost of $5,400,000 an

> Refer to the data in Exercise 14-37. Required Evaluate the performance of the two divisions assuming Houghton Chemicals uses residual income. Exercise 14-37:

> Refer to the information in Exhibits 13.20 and 13.21 that are part of the test of zero-based budgeting at Rainy Days Umbrellas. Information concerning the funding requests for PDG Areas 2 and 3 are as follows: Required As a result of the loss of a major

> Houghton Chemicals, which started operations one year ago, has two divisions: Alloys and Petro. Both divisions invest heavily in R&D, which is assumed to generate benefits for five years. R&D spending is made uniformly throughout the year. Hought

> Refer to the data in Exercise 14-33. Required Evaluate the performance of the two divisions assuming Lasky Manufacturing uses residual income. Exercise 14-33:

> Albany Division is considering the acquisition of a new asset that will cost $540,000 and have a cash flow of $180,000 per year for each of the four years of its life. Depreciation is computed on a straight-line basis with no salvage value. Ignore taxes.

> The Custodial Division of Clark’s Corporate Services (CCS) has assets of $1.2 million. During the past year, the division had profits of $216,000. CCS has a cost of capital of 7.5 percent. Ignore taxes. Required a. Compute the divisional ROI for the Cust

> Your boss asks for your estimate on the costs of a major project for which you have responsibility. Your future with the company depends on your performance relative to this budget. Your best guess is, for example, $1,000,000. What will you say? Why?

> Describe four methods used to estimate sales for budgeting purposes.

> Exeter Division of Wetherby Labs acquired an asset with a cost of $800,000 and a four-year life. The cash flows from the asset, considering the effects of inflation, were scheduled as follows: The cost of the asset is expected to increase at a rate of 5

> Refer to the information in Exercise 14-45. In computing ROI, this division uses end-of-year asset values. Assume that all cash flows increase 10 percent at the end of each year. This has the following effect on the assets’ replacement

> Mansfield Information Systems (MIS) is an IT support firm. Managers and staff are billed to clients on an hourly basis. The senior administrative staff does not directly provide client support. Because of the clientele of MIS, there is significant fluctu

> Felch Tacos is a drive-thru restaurant in a coastal town with significant seasonal changes in business. The owners are trying to decide whether to remain open during the fourth quarter of the year (October through December) given the reduced business. Th

> Cymbal E-Motors is a fast-growing start-up firm that manufactures electric motors for bicycles. The following income statement is available for April: Sales volume is expected to increase by 30 percent in May, but the sales price is expected to fall 5 pe

> Refer to the data in Exercise 13-42. Cornwall estimates that the number of members in July should increase 20 percent above June levels, and the number of additional washes per member should increase by an estimated 12.5 percent. The following informatio

> Refer to data for Dill Shipyards in Exercise 12-41. Required What is the cost allocation if fixed Payroll costs of $5.6 million are allocated on the basis of number of employees and the remaining costs (all variable) are allocated on the basis of total p

> Refer to the data in Exercise 14-40. The division manager learns that there is an option to lease the asset on a year-to-year lease for $1,162,000 per year. All depreciation and other tax benefits would accrue to the lessor. Required What is the division

> Refer to data for Kentfield Advisory Services in Exercise 12-39. Required What is the cost allocation if fixed IT costs of $22.4 million are allocated on the basis of utilization and the remaining costs (all variable) are allocated on the basis of group

> Evergreen Furniture, a retailing company, is preparing the cash budget for August. The following inventory information is available: Required What are the estimated cash disbursements in August?

> Our cash budget shows a surplus for the quarter so we do not have to think about arranging any bank financing.” Comment on this statement.

> Refer to data for Giardin Outdoors in Exercise 12-37. Required Determine the cost allocation if $3.8 million of the F&A costs are fixed and allocated on the basis of revenues, and the remaining costs, which are variable, are allocated on the basis of

> Dawes Designs buys T-shirts for clubs, teams, and other organizations. Dawes takes the shirts and adds the organization’s logo. Because of the uncertainty in the timing of the sales and to avoid stock outages, Dawes tries to maintain an

> Refer to data for Mackenzie Mining in Exercise 12-35. Required Determine the cost allocation if $9.5 million of the HR costs are fixed and allocated on the basis of employees, and the remaining costs, which are variable, are allocated on the basis of the

> Mackenzie Mining has two operating divisions, Northern and Southern, that share the common costs of the company’s human resources (HR) department. The annual costs of the HR department total $14,000,000 a year. You have the following se

> Evergreen Transportation is a domestic logistics company offering warehousing and transportation services. It is organized along product lines with three sectors: Agricultural, Manufactured Goods, and Petro-Chemicals. Each of the three sectors is further

> Consider the Business Application, “Centralizing as a Cost-Cutting Approach.” Required What best describes the cost(s) Pernod Ricard SA likely hoped to reduce by removing some of the authority of local managers to sour

> Refer to the data in Exercises 14-24 and 14-28. Lauderdale Corporation has a cost of capital of 8.6 percent. Required Compute residual income for the three regions. Ignore taxes. How have these regions performed? Exercise 14-24: Exercise 14-28:

> Dolson Appliances makes coffee machines for offices and homes. For next year, the production budget is 125,000 units. Beginning inventories will be 10,000 units and the desired ending inventory will be 8,000 units. Required What is the sales budget for t

> Kirby Soups has just made its sales forecasts, and its marketing department estimates that the company will sell 3,900,000 units of its vegetable soup during the coming year. In the past, management has maintained inventories of finished goods at approxi

> My company is unique. We can’t use benchmarking.” How would you respond?

> When might the master budget start with a forecast of something other than sales— production, for example? Why?

> I know how to satisfy customers—give the product away.” How does a system with multiple measures of performance address this concern with evaluating managers in part on customer satisfaction?

> Consider the number of customer complaints as a measure of customer satisfaction. How does this measure customer satisfaction? How does it fail to measure customer satisfaction?

> Again, consider a class you are taking (or have taken). Did the instructor use solely objective measures (scores on numerical exams, for example) or did they use a mix of objective and subjective (short-essay questions, for example). Why do you think bot

> Consider your campus bookstore. Who do you think are the stakeholders? What do you think are its critical success factors? How would they differ from those of a retail bookstore in a city without a college?

> “A process control chart will tell managers when to investigate variances.” Do you agree?

> A computer company always sells the processing unit and monitor together as a bundled package. Is there any benefit to computing a sales mix variance under these circumstances?

> Many companies argue that they do not pay their managers a bonus because they believe their employees will work hard for a “fair” wage and do not need to be motivated with a bonus. Why would managers in such a system work hard? Is there a financial incen

> Actual revenues are greater than budgeted for December, so our revenue variance is favorable.” Give an example of when this would be “good” news and when it could be “bad” news.

> Refer to the Business Application item “Transfer Pricing at Weyerhaeuser.” Why might the company use market prices instead of costs for product transfers?

> Refer to Question 15-14. What type of responsibility center would you recommend the company make Alpha Division? Beta Division? Explain your reasons.

> What is the difference between the planning and the control functions of the budget? What problems do these differences create?

> In some organizations (firms, universities, government agencies), spending appears to increase as the end of the budgeting period approaches, even if there are no seasonal differences. What might cause this?

> Government agencies are limited in spending by budget categories, not just by an overall spending limit. What purpose does this serve? What problems does it create?

> Would the budgeting plans for a company that uses a just-in-time (JIT) inventory system be different from those for a company that does not? Why?

> Is the CEO ever an agent in the principal–agent relationship as discussed in the chapter? Is a division president ever a principal in the principal–agent relationship as discussed in the chapter? Explain.

> Salespeople are often paid a commission based on sales revenue. How might that incentive system lead to dysfunctional consequences?

> The management control system collects information from local managers for planning purposes. It then uses the plan to evaluate the local managers. What are the advantages of this? What are the disadvantages?

> Preparing a budget is a waste of time. The strategic plan is what we work to accomplish.” How would you respond to this comment?

> How could a professional sports firm use the mix variance to analyze its total stadium revenues?

> What is contingent compensation?

> What is relative performance evaluation (RPE)?

> The Treadway Commission indicated that bonus plans based on achieving short-run financial results have been a factor in financial frauds, particularly when the bonus is a large component of an individual’s compensation. Why is this so?

> What is the controllability concept?

> What is goal congruence? How is it different from behavioral congruence?

> What are the five basic kinds of decentralized units in a responsibility accounting system?