Question: Lilly Company is planning to buy a

> Sharon Glessing, controller for Janson Company, has noticed that the company faces a 75 percent learning rate for its specialty design line. In planning the cost of the latest design, Sharon assumed that the first set of units would take 1,000 direct lab

> Bordner Company manufactures HVAC (heating, ventilation, and air conditioning) systems for commercial buildings. For each new design, Bordner faces a 90 percent learning rate. On average, the first unit of a new design takes 600 hours. Direct labor is pa

> Last calendar year, Ellerson recognized revenue of $1,312,000 and had selling and administrative expenses of $204,600. Required: 1. What is the cost of goods sold for last year? 2. Prepare an income statement for Ellerson for last year. 3. Ellerson’s chi

> Ellerson Company provided the following information for the last calendar year: Beginning inventory: Direct materials $68,000 Work in process 29,400 Finished goods 43,200 Ending inventory: Direct materials $70,400 Work in process 40,000 Finished goods 42

> Jazon Manufacturing produces two different models of cameras. One model has an automatic focus, whereas the other requires the user to determine the focus. The two products are produced in batches. Each time a batch is produced, the equipment must be con

> Millennium Pharmaceuticals, Inc. (MPI), designs and manufactures a variety of drugs. One new drug, Glaxane, has been in development for seven years. FDA approval has just been received, and MPI is ready to begin production and sales. Required: Which cost

> Now assume that the spoilage was due to the inherently fragile nature of the piece of stone picked out by the Flores family. Stanley had warned them that the chosen piece could require much more care and potentially additional work. As a result, Stanley

> Refer to Brief Exercise 2-2. Bob’s Bistro expects to produce 50,000 units and sell 50,500 units. Beginning inventory of finished goods is $13,000, and ending inventory of finished goods is expected to be $10,000. Required: 1. Prepare a

> Lakeesha Barnett owns and operates a package mailing store in a college town. Her store, Send It Packing, helps customers wrap items and send them via UPS, FedEx, and the USPS. Send It Packing also rents mailboxes to customers by the month. In May, purch

> Anglin Company, a manufacturing firm, has supplied the following information from its accounting records for the last calendar year: Required: 1. Prepare a cost of goods manufactured statement. 2. Prepare a cost of goods sold statement.

> Kildeer Company makes easels for artists. During the last calendar year, a total of 30,000 easels were made, and 31,000 were sold for $52 each. The actual unit cost is as follows: Direct materials $14.70 Direct labor 5.80 Variable overhead 3.25 Fixed ove

> LeMans Company produces specialty papers at its Fox Run plant. At the beginning of June, the following information was supplied by its accountant: Direct materials inventory $62,400 Work-in-process inventory 33,900 Finished goods inventory 55,600 During

> For each of the following independent situations, calculate the missing values: 1. The Belen plant purchased $78,300 of direct materials during June. Beginning direct materials inventory was $2,500, and direct materials used in production were $73,500. W

> Picante, Inc., provided the following information for the last calendar year: Beginning inventory: Direct materials $150,500 Work in process 95,300 Ending inventory: Direct materials $145,300 Work in process 91,400 During the year, direct materials p

> Three possible product cost definitions were introduced: (1) value chain, (2) operating, and (3) product or manufacturing. Identify which of the three product cost definitions best fits the following situations (justify your choice): a. Determining which

> Nizam Company produces speaker cabinets. Recently, Nizam switched from a traditional departmental assembly line system to a manufacturing cell in order to produce the cabinets. Suppose that the cabinet manufacturing cell is the cost object. Assume that a

> Consider the following data analytic types (1 through 4): 1. Descriptive 2. Diagnostic 3. Predictive 4. Prescriptive Required: Read the following brief descriptions (a through f ) of various cost management analyses. Classify each description into the da

> The following items are associated with a cost accounting information system: a. Usage of direct materials b. Assignment of direct materials cost to each product c. Direct labor cost incurrence d. Depreciation on production equipment e. Cost accounting p

> Stanley Company installs granite countertops in customers’ homes. First, the customer chooses the particular granite slab, and then Stanley measures the countertop area at the customer’s home, cuts the granite to that shape, and installs it. The Flores j

> In general, systems are described by the following pattern: (1) interrelated parts, (2) processes, and (3) objectives. Operational models of systems also identify inputs and outputs. The dishwashing system of a college cafeteria consists of the following

> State University’s football team just received a bowl game invitation, and the students and alumni are excited. Holiday Travel Agency, located close to campus, decided to put together a bowl game package. For $50,000, a 737 jet could be chartered to take

> The job responsibilities of three employees of Ruido Speakers, Inc., are described as follows: Kaylin Hepworth, production manager, is responsible for production of the plastic casing in which the speaker components are placed. She supervises the line wo

> Sterling, Inc., is an export-import firm. On June 1, Sterling purchased goods from a British company costing £20,000. Payment is due in pounds on September 1. The spot rate on June 1 was $1.29 per pound, and on September 1, it was $1.34 per pound. Requir

> Pacific Rim, Inc., is considering opening a new warehouse to serve the northwest region. Darnell Florian, controller for Pacific Rim, has been reading about the advantages of FTZs. He wonders if locating in one would be of benefit to his company, which i

> Cajas, Inc., is considering opening a new warehouse to serve the Southwest region. Aaron Garcia, controller for Cajas, has been reading about the advantages of FTZs. He wonders if locating in one would be of benefit to his company, which imports about 90

> A close friend of yours is majoring in accounting and would like to work for an MNC upon graduation. Your friend is unsure just what courses would help prepare for that goal and wants your advice. Required: Advise your friend on the kind of courses that

> Yukon, Inc., has a division in Canada, the Exterior Stain Division, which makes long-lasting exterior wood stain. Yukon has another U.S. division, the Retail Division, which operates a chain of home improvement stores. The Retail Division would like to b

> Colorworld, Inc., has a division in Indonesia that makes dyestuff in a variety of colors used to dye denim for jeans and another division in the United States that manufactures denim clothing. The Dyestuff Division incurs manufacturing costs of $2.68 for

> Mitford Furniture Manufacturing, Inc., has a division in the United States that produces and sells furniture for discount furniture stores. One type of dining room set is made in the International Division in China. The dining room sets are sold external

> Reider Company is a job-order costing firm that uses activity-based costing to apply overhead to jobs. Reider identified three overhead activities and related drivers. Budgeted information for the year is as follows: Reider worked on four jobs in July. D

> Ariana Stratford, vice president for Newtronics, Inc., was reviewing the latest results for two divisions. The first, located in Baja California, Mexico, had posted income of $150,000 on assets of $1,500,000. The second, in Punt-on-Thames, England, showe

> Permian Company engages in many foreign currency transactions. Company policy is to hedge exposure to exchange gains and losses using forward contracts. On July 1, Permian bought merchandise from a Canadian company for 120,000 Canadian dollars, payable o

> Refer to Exercise 21-9. If Sterling paid for the purchase using the September 1 spot rate, what was the exchange gain or loss? Data from Exercise 21-9: Sterling, Inc., is an export-import firm. On June 1, Sterling purchased goods from a British company

> Bautista Company manufactures backpacks. A heavy-duty strap is one part that the company orders from an outside supplier. Information pertaining to the strap is as follows: Economic order quantity 6,300 units Average daily usage 315 units Maximum daily u

> Melchar Company uses 78,125 pounds of oats each year. The cost of placing an order is $18, and the carrying cost for one pound of oats is $0.45. Required: 1. Compute the economic order quantity for oats. 2. Compute the carrying and ordering costs for the

> Refer to the data in Exercise 20-6. Required: 1. Compute the economic order quantity. 2. Compute the ordering, carrying, and total costs for the EOQ. 3. How much money does using the EOQ policy save the company over the policy of purchasing 4,000 plastic

> Ottis, Inc., uses 640,000 plastic housing units each year in its production of paper shredders. The cost of placing an order is $30. The cost of holding one unit of inventory for one year is $15.00. Currently, Ottis places 160 orders of 4,000 plastic hou

> Duckstein, Inc., manufactures two types of aspirin: plain and buffered. It sells all it produces. Recently, Duckstein implemented a TOC approach for its Fort Smith plant. One binding constraint was identified, and the optimal product mix was determined.

> Patz Company makes three types of stainless steel frying pans. Each of the three types of pans requires the use of a special machine that has total operating capacity of 273,000 hours per year. Information on each of the three products is as follows: The

> Many companies have viewed JIT as a panacea—a knight in shining armor that promises rescue from sluggish profits, poor quality, and productive inefficiency. It is often lauded for its beneficial effects on employee morale and self-esteem. Yet, JIT may al

> Refer to Brief Exercise 5-1 for data. Required: 1. Calculate the balance in Work in Process as of June 30. 2. Calculate the balance in Finished Goods as of June 30. 3. Calculate the cost of goods sold for June. 4. Calculate the price charged for Job 39.

> Hales Company produces a product that requires two processes. In the first process, a subassembly is produced (subassembly A). In the second process, this subassembly and a subassembly purchased from outside the company (subassembly B) are assembled to p

> Eyring Manufacturing produces a component used in its production of washing machines. The time to set up and produce a batch of the components is two days. The average daily usage is 800 components, and the maximum daily usage is 875 components. Required

> Assume the economic lot size for small casings is 120,000 and that of the large casings is 40,000. Morrison Manufacturing sells an average of 9,600 small casings per workday and an average of 3,200 large casings per workday. It takes Morrison two days to

> Refer to Exercise 20-10. Required: 1. Compute the number of large casings that should be produced per setup to minimize total setup and carrying costs for this product. 2. Compute the setup, carrying, and total costs associated with the economic order qu

> Morrison Manufacturing produces casings for sewing machines: large and small. To produce the different casings, equipment must be set up. The setup cost per production run is $18,000 for either casing. The cost of carrying small casings in inventory is $

> The first two scenarios are independent. All cash f lows are after-tax cash f lows. Required: 1. Patz Corporation is considering the purchase of a computer-aided manufacturing system. The cash benefits will be $800,000 per year. The system costs $4,000,0

> The following cases are each independent of the others. Required: 1. Sam Lilliam places $5,000 in a savings account that pays 3 percent. Suppose Sam leaves the original deposit plus any interest in the account for two years. How much will Sam have in sav

> Each of the following scenarios is independent. All cash f lows are after-tax cash f lows. Required: 1. Michael Kimathi has purchased a tractor for $93,750. He expects to receive a net cash flow of $31,250 per year from the investment. What is the paybac

> Postman Company is considering two independent projects. One project involves a new product line, and the other involves the acquisition of forklifts for the Materials Handling Department. The projected annual operating revenues and expenses are as follo

> Perrin Company designs industrial prototypes for outside companies. Budgeted overhead for the year was $242,000, and budgeted direct labor hours were 20,000. The average wage rate for direct labor is expected to be $22 per hour. During June, Perrin Compa

> Covington Pharmacies has decided to automate its insurance claims process. Two networked computer systems are being considered. The systems have an expected life of two years. The net cash flows associated with the systems are as follows. The cash benefi

> Gina Ripley, president of Dearing Company, is considering the purchase of a computer-aided manufacturing system. The annual net cash benefits and savings associated with the system are described as follows: Decreased waste $300,000 Increased quality 400,

> Consider each of the following independent cases. Required: 1. Hal’s Stunt Company is investing $120,000 in a project that will yield a uniform series of cash inf lows over the next four years. If the internal rate of return is 14 percent, how much cash

> Buena Vision Clinic is considering an investment that requires an outlay of $600,000 and promises a net cash inf low one year from now of $810,000. Assume the cost of capital is 10 percent. Required: 1. Break the $810,000 future cash inf low into three c

> Refer to Exercise 19-11. 1. Compute the payback period for each project. Assume that the manager of the clinic accepts only projects with a payback period of three years or less. Offer some reasons why this may be a rational strategy even though the NPV

> A clinic is considering the possibility of two new purchases: new MRI equipment and new biopsy equipment. Each project requires an investment of $425,000. The expected life for each is five years with no expected salvage value. The net cash inf lows asso

> Sato Company is considering an investment in equipment that is capable of producing more efficiently than the current technology. The outlay required is $2,293,200. The equipment is expected to last five years and will have no salvage value. The expected

> Eastman, Inc., manufactures and sells three products: R, S, and T. In January, Eastman, Inc., budgeted sales of the following. At the end of the year, actual sales revenue for Product R and Product S was $3,075,000 and $3,254,000, respectively. The actua

> Data for Torleson Company are as follows: Budgeted price $15.00 Actual price $14.80 Budgeted quantity 1,450 Actual quantity sold 2,500 Required: 1. Calculate the sales price variance. 2. Calculate the sales volume variance. 3. Suppose that the product is

> During its first year of operations, Snobegon, Inc. (located in Lake Snobegon, Minnesota), produced 40,000 plastic snow scoops. Snow scoops are oversized shovel-type scoops that are used to push snow away. Unit sales were 38,200 scoops. Fixed overhead wa

> Patterson Company produces wafers for integrated circuits. Data for the most recent year are provided: Required: 1. Using the five most expensive activities, calculate the overhead cost assigned to each product. Assume that the costs of the other activit

> Flaherty, Inc., has just completed its first year of operations. The unit costs on a normal costing basis are as follows: Manufacturing costs (per unit): Direct materials (4 lbs. @ $1.50) $ 6.00 Direct labor (0.5 hr. @ $18) 9.00 Variable overhead (0.5 hr

> Mayfair Electric Utility has excess electrical generating capacity. In order to utilize its excess capacity, Mayfair entered into a five-year contract with the U.S. government to sell Mayfair’s generated excess power to the U.S. power grid. The contract

> Otero Fibers, Inc., specializes in the manufacture of synthetic fibers that the company uses in many products such as blankets, coats, and uniforms for police and firefighters. Otero has been in business since 1985 and has been profitable every year sinc

> Carina Franks operates a catering company in Austin, Texas. Carina provides food and servers for parties. She also rents tables, chairs, dinnerware, glassware, and linens. Estefan and Maria Montero have contacted Carina about plans for their daughter&aci

> Many different businesses employ markup on cost to arrive at a price. For each of the following situations, explain what the markup covers and why it is the amount that it is. a. Department stores have a markup of 100 percent of purchase cost. b. Jewelry

> Whang Construction Company is a general contractor that specializes in custom residential housing. Each job requires a bid that includes Whang’s direct costs and subcontractor costs as well as an amount referred to as â€&#156

> Foster Hancock is an accountant who is planning to open an accounting firm in his hometown. He has heard that established accountants in town charge $65 per hour. That amount sounds good to Foster. In fact, he believes that he should be able to charge $7

> Amy Chang wants to start a business supplying florists with field-grown f lowers. She has located an appropriate acreage and believes she can grow daisies, asters, chrysanthemums, carnations, and other assorted types during a nine-month growing period. B

> Janet Gordon and Phil Hopkins graduated several years ago with M.S. degrees in accounting and set up a full-service accounting firm. Janet and Phil have many small business clients and have noticed some pricing trends while compiling annual financial sta

> Wehner Company is currently manufacturing Part ABS-43, producing 55,000 units annually. The part is used in the production of several products made by Wehner. The cost per unit for ABS-43 is as follows: Direct materials $45.60 Direct labor 9.80 Variable

> Electan Company produces two types of printers. The company uses ABC, and all activity drivers are duration drivers. Electan Company is considering using DBC and has gathered the following data to help with its decision. A. Activities with duration drive

> Feinan Sports, Inc., manufactures sporting equipment, including weight-lifting gloves. A national sporting goods chain recently submitted a special order for 4,600 pairs of weight lifting gloves. Feinan Sports was not operating at capacity and could use

> Roxanne Morton owns a beauty shop with eight hair and nail professionals. Her shop is relatively large and has four rooms at the back, three of which are currently empty (the fourth is used to store supplies). Roxanne’s is popular and typically busy Mond

> Elliott, Inc., has four salaried clerks to process purchase orders. Each clerk is paid a salary of $25,750 and is capable of processing as many as 6,500 purchase orders per year. Each clerk uses a PC and laser printer in processing orders. Time available

> Six months ago, Lee Anna Carver purchased a fire-engine red, used LeBaron convertible for $10,000. Lee Anna was looking forward to the feel of the sun on her shoulders and the wind whipping through her hair as she zipped along the highways of life. Unfor

> Petoskey Electronics Company manufactures specialized products for boats and recreational vehicles using its newly introduced patented engine analytics device. The first-year revenues and costs for the product device are as follows: Selling price $500 pe

> Jem Hernandez owns Jem’s Special Event Planning Service, a full-service event planner. Jem does much of the work herself and hires additional help as needed. She plans corporate events, weddings, and special occasion parties. Each of th

> Jason Rogers works full-time for UPS and runs a lawn-mowing service part-time after work during the warm months of April through October. Jason has three men working with him, each of whom is paid $6 per lawn mowing. Jason has 30 residential customers wh

> Tony and Tina Roselli own and run TNT’s Pizza Restaurant. Tony is responsible for managing the day-to-day aspects, hiring workers, and overseeing the kitchen, building, and grounds. He is the chief cook and handles all purchasing. Tina is the hostess and

> Carleigh, Inc., is a pork processor. Its plants, located in the Midwest, produce several products from a common process: sirloin roasts, chops, spare ribs, and the residual. The roasts, chops, and spare ribs are packaged, branded, and sold to supermarket

> Nutterco, Inc., produces two types of nut butter: peanut butter and cashew butter. Of the two, peanut butter is the more popular. Cashew butter is a specialty line using smaller jars and fewer jars per case. Data concerning the two products follow: Annua

> Golding Bank provided the following data about its two checking account products and their associated resources and activities: At practical capacity, Golding uses 25,000 check processing hours. Required: 1. Calculate the capacity cost rate for the chec

> Ehrling, Inc., manufactures metal racks for hanging clothing in retail stores. Ehrling was approached by the CEO of Carly’s Corner, a regional nonprofit food bank, with an offer to buy 350 heavy-duty metal racks for storing canned goods

> Brees, Inc., a manufacturer of golf carts, has just received an offer from a supplier to provide 2,600 units of a component used in its main product. The component is a track assembly that is currently produced internally. The supplier has offered to sel

> Gelbart Company manufactures gas grills. Fixed costs amount to $16,335,000 per year. Variable costs per gas grill are $225, and the average price per gas grill is $600. Required: 1. How many gas grills must Gelbart Company sell to break even? 2. If Gelba

> Cheetah Company manufactures custom-designed skins (covers) for iPods® and other portable electronic devices. Variable costs are $9.20 per custom skin, the price is $19, and fixed costs are $104,860. Required: 1. What is the contribution margin for one c

> Busy-Bee Baking Company produces a variety of breads. The plant manager would like to expand production into sweet rolls as well. The average price of a loaf of bread is $1. Anticipated price for a package of sweet rolls is $1.50. Costs for the new level

> Busy-Bee Baking Company produces a variety of breads. The average price of a loaf of bread is $1. Costs are as follows: Other data: Total fixed costs (traditional) $140,000 Total fixed costs (ABC) 57,500 Required: 1. Compute the break-even point in uni

> X-Cee-Ski Company recently expanded its manufacturing capacity, which will allow it to produce up to 21,000 pairs of cross-country skis of the mountaineering model or the touring model. The Sales Department assures management that it can sell between 9,0

> Alo Company produces commercial printers. One is the regular model, a basic model that is designed to copy and print in black and white. Another model, the deluxe model, is a color printer-scanner-copier. For the coming year, Alo expects to sell 90,000 r

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

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

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

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

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

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

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

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