Oakwood Company produces maple bookcases to customer order. It received an order from a customer to produce 5,000 bookcases. The following information is available for the production of the bookcases. Process time . . . . . . . . . . 6.0 days Inspection time . . . . . . . . 0.8 days Move time . . . . . . . . . . . . . 3.2 days Wait time . . . . . . . . . . . . . 5.0 days Required 1. Compute the company’s manufacturing cycle time. 2. Compute the company’s manufacturing cycle efficiency. Interpret your answer. Analysis Component 3. Assume that Oakwood wishes to increase its manufacturing cycle efficiency to 0.75. What are some ways that it can accomplish this?
> USA Airlines uses the following performance measures. Classify each of the performance measures below into the most likely balanced scorecard perspective it relates to. Label your answers using C (customer), P (internal process), I (innovation and growth
> Is nonfinancial information ever useful in managerial decision making?
> Identify the five steps involved in the managerial decisionmaking process.
> Restaurants are often adding and removing menu items. Visit a restaurant and identify a new food item. Make a list of costs that the restaurant must consider when deciding whether to add that new item. Also, make a list of nonfinancial factors that the r
> Charlie Fyffe of Charlie’s Browniesmakes brownies and other sweets. Charlie must decideon the best sales mix for his products. Assume that his company has a capacity of 400 hours of processing time available each month and it makes two
> Break into teams and identify costs that an airline such as Delta Airlineswould incur on aflight from Green Bay to Minneapolis. (1) Identify the individual costs as variable or fixed. (2) Assume that Delta is trying to decide whether to drop this fligh
> Many companies must determine whether to internally produce their component parts or to outsource them. Further, some companies now outsource key components or business processes to international providers. Access the Website BizBrim.com and review the a
> Assume that you work for Greeble’s Department Store, and your manager requests that you outline the pros and cons of discontinuing its hardware department. That department appears to be generating losses, and your manager believes that discontinuing it w
> Bert Asiago, a salesperson for Convertco, received an order from a potential new customer for 50,000 units of Convertco’s single product at a price $25 below its regular selling price of $65. Asiago knows that Convertco has the capacity to produce this o
> Keggler’s Supply is a merchandiser of three different products. The company’s February 28 inventories are footwear, 20,000 units; sports equipment, 80,000 units; and apparel, 50,000 units. Management believes that exce
> Polaris and Arctic Cat sell several different products; most are profitable but some are not. Teams of employees in each company make advertising, investment, and product mix decisions. A certain portion of advertising for both companies is on a local ba
> What is a joint cost? How are joint costs usually allocated among the products produced from them?
> Access KTM’s 2011 annual report dated December 31, 2011, from its Website www.KTM.com. Identify and read the section in the Group Status Report—2011, section 12, regarding Sustainability. Required KTM reports that they developed a special KTM motorcyle
> Revenues for three of Polaris’s four segments for the year ending December 31, 2011 are reported below. Assume that Polaris reports operating expenses for each of its segments for that same year below. Required1. Compute operating inc
> Adria Lopez’s two departments, computer consulting services and computer workstation furniture manufacturing, have each been profitable. Adria has heard of the balanced scorecard and wants you to provide details on how it could be used to measure perform
> Refer to information in QS 9-11. If the Windshield division has excess capacity, what is the range of possible transfer prices that could be used on transfers between the Windshield and Assembly divisions? Explain. In QS 9-11 The Windshield division of
> The Windshield division of Fast Car Co. makes windshields for use in Fast Car’s Assembly division. The Windshield division incurs variable costs of $200 per windshield and has capacity to make 500,000 windshields per year. The market price is $450 per wi
> Fill in the blanks in the schedule below for two separate investment centers A and B. Round answers to the nearest whole percent. Investment Center A B Sales.. $10,400,000 $ 352,000 $1.400,000 Net income $. Average invested assets Profit margin Inve
> Compute return on assets for each of the divisions below (each is an investment center). Comment on the relative performance of each investment center. Investment Center Net Income Average Assets Return on Assets Cameras and camcorders .. $4,500,000
> Use the information in the following table to compute each department’s contribution to overhead (both in dollars and as a percent). Which department contributes the largest dollar amount to total overhead? Which contributes the highest
> For each of the following types of indirect expenses and service department expenses, identify one allocation basis that could be used to distribute it to the departments indicated. 1. Computer service expenses of production scheduling for operating depa
> Foyert Corp. requires a minimum $30,000 cash balance. If necessary, loans are taken to meet this requirement at a cost of 1% interest per month (paid monthly). Any excess cash is used to repay loans at monthend. The cash balance on October 1 is $30,000 a
> Refer to information from Exercise 7-8. Each transmission requires 0.80 pounds of a key raw material. Electro Company aims to end each quarter with an ending inventory of direct materials equal to 50% of next quarter’s budgeted materials requirements. Di
> Car Mart pays $130,000 rent each year for its two-story building. The space in this building is occupied by five departments as specified here. Paint department . . . . . . . . . . . . . . . 1,440 square feet of first-floor space Engine department . . .
> Compute and interpret (a) manufacturing cycle time and (b) manufacturing cycle efficiency using the following information from a manufacturing company. Process time . . . . . . . . . . . 15 minutes Inspection time . . . . . . . . . 2 minutes Move time .
> For a recent year L’Orealreported operating profit of €3,385 (in millions) for its Cosmetics division. Total assets were €12,888 at the beginning of the year and €13,099 (in millions) at the end of the year. Compute return on investment for the year. Sta
> A company purchases a 10,020 square foot commercial building for $325,000 and spends an additional $50,000 to divide the space into two separate rental units and prepare it for rent. Unit A, which has the desirable location on the corner and contains 3,3
> Walt Disney reports the following information for its two Parks and Resorts divisions. Assume Walt Disney uses a balanced scorecard and sets a target of 90% occupancy in its resorts. Using Exhibit 9.22 as a guide, show how the company’
> Classify each of the performance measures below into the most likely balanced scorecard perspective it relates to. Label your answers using C (customer), P (internal process), I (innovation and growth), or F (financial). 1. Customer wait time 2. Number o
> A company’s shipping division (an investment center) has sales of $2,420,000, net income of $516,000, and average invested assets of $2,250,000. Compute the division’s profit margin and investment turnover.
> Refer to information in QS 9-5. Assume a target income of 12% of average invested assets. Compute residual income for each division. In QS 9-5 Investment Center Net Income Average Assets Return on Assets Cameras and camcorders. $4,500,000 $20,000,0
> In each blank next to the following terms, place the identifying letter of its best description. 1. Indirect expenses 2. Controllable costs 3. Direct expenses 4. Uncontrollable costs A. Costs not within a manager’s control or influence B. Costs that ca
> In each blank next to the following terms, place the identifying letter of its best description. 1. Cost center 2. Investment center 3. Departmental accounting system 4. Operating department 5. Profit center 6. Responsibility accounting system 7. Service
> What is a transfer price? Under what conditions is a marketbased transfer price most likely to be used?
> Karim Corp. requires a minimum $8,000 cash balance. If necessary, loans are taken to meet this requirement at a cost of 1% interest per month (paid monthly). Any excess cash is used to repay loans at month-end. The cash balance on July 1 is $8,400 and th
> What is the benefit of continuous budgeting?
> Rita and Rick Redding own and operate a tomato grove. After preparing the following income statement, Rita believes they should have offered the No. 3 tomatoes to the public for free and saved themselves time and money. In preparing this statement, Rit
> Britney Brown, the plant manager of LMN Co.’s Chicago plant, is responsible for all of that plant’s costs other than her own salary. The plant has two operating departments and one service department. The refrigerator
> Bonanza Entertainment began operations in January 2013 with two operating (selling) departments and one service (office) department. Its departmental income statements follow. The company plans to open a third department in January 2014 that will sell
> Harmon’s has several departments that occupy all floors of a two-story building that includes a basement floor. Harmon rented this building under a long-term lease negotiated when rental rates were low. The departmental accounting system has a single acc
> Best Ink produces ink-jet printers for personal computers. It received an order for 500 printers from a customer. The following information is available for this order. Process time . . . . . . . . . . 16.0 hours Inspection time . . . . . . . . . 3.5 ho
> Georgia Orchards produced a good crop of peaches this year. After preparing the following income statement, the company believes it should have given its No. 3 peaches to charity and saved its efforts. In preparing this statement, the company allocated
> Billie Whitehorse, the plant manager of Travel Free’s Indiana plant, is responsible for all of that plant’s costs other than her own salary. The plant has two operating departments and one service department. The campe
> Williams Company began operations in January 2013 with two operating (selling) departments and one service (office) department. Its departmental income statements follow. Williams plans to open a third department in January 2014 that will sell painting
> Suggest a reasonable basis for allocating each of the following indirect expenses to departments: (a) salary of a supervisor who manages several departments, (b) rent, (c) heat, (d) electricity for lighting, (e) janitorial services, (f) advertising, (g)
> National Bank has several departments that occupy both floors of a two-story building. The depart mental accounting system has a single account, Building Occupancy Cost, in its ledger. The types and amounts of occupancy costs recorded in this account for
> Why are many companies divided into departments?
> Refer to Exercise 8-8. Hart Company records standard costs in its accounts and its material variances in separate accounts when it assigns materials costs to the Goods in Process Inventory account. (1) Show the journal entry that both charges the direct
> Hart Company made 3,000 bookshelves using 22,000 board feet of wood costing $266,200. The company’s direct materials standards for one bookshelf are 8 board feet of wood at $12 per board foot. (1) Compute the direct materials variances incurred in manufa
> Refer to the information from Exercise 8-6. Compute and interpret the following. 1. Variable overhead spending and efficiency variances. 2. Fixed overhead spending and volume variances. 3. Controllable variance. In Exercise 8-6 Sedona Company set the fo
> Sedona Company set the following standard costs for one unit of its product for 2013. Direct material (20 Ibs. @ $2.50 per Ib.) . . . . . . . . . . . . . . . . . . $ 50.00 Direct labor (10 hrs. @ $8.00 per hr.) . . . . . . . . . . . . . . . . . . . . .
> After evaluating Null Company’s manufacturing process, management decides to establish standards of 3 hours of direct labor per unit of product and $15 per hour for the labor rate. During October, the company uses 16,250 hours of direct labor at a $247,0
> Bay City Company’s fixed budget performance report for July follows. The $647,500 budgeted expenses include $487,500 variable expenses and $160,000 fixed expenses. Actual expenses include $158,000 fixed expenses. Prepare a flexible budg
> Solitaire Company’s fixed budget performance report for June follows. The $315,000 budgeted expenses include $294,000 variable expenses and $21,000 fixed expenses. Actual expenses include $27,000 fixed expenses. Prepare a flexible budge
> Tempo Company’s fixed budget for the first quarter of calendar year 2013 reveals the following. Prepare flexible budgets following the format of Exhibit 8.3 that show variable costs per unit, fixed costs, and three different flexible bu
> JPAK Company manufactures and sells mountain bikes. It normally operates eight hours a day, five days a week. Using this information, classify each of the following costs as fixed or variable. If additional information would affect your decision, describ
> The following information describes production activities of Mercer Manufacturing for the year: Actual raw materials used . . . . . . . . . 16,000 lbs. at $4.05 per lb. Actual factory payroll . . . . . . . . . . . . . 5,545 hours for a total of $105,355
> Refer to information from Exercise 7-8. Each transmission requires 4 direct labor hours, at a cost of $12 per hour. Prepare a direct labor budget for the second quarter. In Exercise 7-8 Electro Company manufactures an innovative automobile transmission
> Presented below are terms preceded by letters a through j and a list of definitions 1 through 10. Enter the letter of the term with the definition, using the space preceding the definition. a. Fixed budget b. Standard costs c. Price variance d. Quantity
> Jasper Company has sales on account and sales for cash. Specifically, 70% of its sales are on account and 30% are for cash. Credit sales are collected in full in the month following the sale. The company forecasts sales of $525,000 for April, $535,000 fo
> How can the manager of snowmobile sales at Arctic Cat use flexible budgets to enhance performance?
> What are the relations among standard costs, flexible budgets, variance analysis, and management by exception?
> Polaris monitors its overhead. In an analysis of overhead cost variances, what is the controllable variance and what causes it?
> What is the predetermined standard overhead rate? How is it computed?
> KTM monitors its fixed overhead. In an analysis of fixed overhead cost variances, what is the volume variance?
> What is a price variance? What is a quantity variance?
> What department is usually responsible for a direct labor rate variance? What department is usually responsible for a direct labor efficiency variance? Explain.
> Prepare a flexible budget performance report title (in proper form) for Spalding Company for the calendar year 2013. Why is a proper title important for this or any report?
> Assume that Piaggio is budgeted to operate at 80% of capacity but actually operates at 75% of capacity. What effect will the 5% deviation have on its controllable variance? Its volume variance?
> Budgeting promotes good decision making by requiring managers to conduct ______ and by focusing their attention on the ______.
> Georgia Orchards produced a good crop of peaches this year. After preparing the following income statement, the company believes it should have given its No. 3 peaches to charity and saved its efforts. In preparing this statement, the company allocated
> Is it possible for a retail store such asApple to use variances in analyzing its operating performance? Explain.
> In general, variance analysis is said to provide information about _________ and _________ variances.
> What is the purpose of using standard costs?
> In what sense can a variable cost be considered constant?
> What type of analysis does a flexible budget performance report help management perform?
> Identify the main purpose of a flexible budget for managers.
> What limits the usefulness to managers of fixed budget performance reports?
> Training employees to use standard amounts of materials in production is common. Typically large companies invest in this training but small organizations do not. One can observe these different practices in a trip to two different pizza businesses. Visi
> Folsom Custom Skis, as discussed in the chapter opener, uses a costing system with standard costs for direct materials, direct labor, and overhead costs. Two comments frequently are mentioned in relation to standard costing and variance analysis: “Varian
> Access iSixSigma’s Website (iSixSigma.com) to search for and read information about benchmarking to complete the following requirements. (Hint: Look in the “dictionary” link.) Required 1. Write a one-paragraph explanation (in layperson’s terms) of bench
> Billie Whitehorse, the plant manager of Travel Free’s Indiana plant, is responsible for all of that plant’s costs other than her own salary. The plant has two operating departments and one service department. The campe
> Kayak Co. budgeted the following cash receipts (excluding cash receipts from loans received) and cash disbursements (excluding cash disbursements for loan and interest payments) for the first three months of next year. According to a credit agreement w
> The reason we use the words favorable and unfavorable when evaluating variances is made clear when we look at the closing of accounts. To see this, consider that (1) all variance accounts are closed at the end of each period (temporary accounts), (2) a f
> Setting materials, labor, and overhead standards is challenging. If standards are set too low, companies might purchase inferior products and employees might not work to their full potential. If standards are set too high, companies could be unable to of
> The usefulness of budgets, variances, and related analyses often depends on the accuracy of management’s estimates of future sales activity. Required 1. Identify and record the prior three years’ sales (in dollars) for Polaris and for Arctic Cat using t
> Analysis of flexible budgets and standard costs emphasizes the importance of a similar unit of measure for meaningful comparisons and evaluations. When Polariscompiles its financial reports in compliance with GAAP, it applies the same unit of measurement
> Access the annual report of Piaggio (at www.piaggio.com) for the year ended December 31, 2011. The usefulness of its budgets, variances, and related analyses depends on the accuracy of management’s estimates of future sales activity. Required 1. Identif
> Many service industries link labor rate and time (quantity) standards with their processes. One example is the standard time to board an aircraft. The reason time plays such an important role in the service industry is that it is viewed as a competitive
> Adria Lopez expects second quarter 2014 sales of her new line of computer furniture to be thesame as the first quarter’s sales (reported below) without any changes in strategy. Monthly sales averaged 40 desk units (sales price of $1,250
> Refer to information in QS 7-23. In addition, sales are 40% cash and 60% on credit. All credit sales are collected in the month following the sale. The January 1 balance in accounts receivable is $15,000. Prepare a schedule of budgeted cash receipts for
> Zortek Corp. budgets production of 400 units in January and 200 units in February. Each finished unit requires five pounds of raw material Z, which costs $2 per pound. Each month’s ending inventory of raw materials should be 40% of the following month’s
> Williams Company began operations in January 2013 with two operating (selling) departments and one service (office) department. Its departmental income statements follow. Williams plans to open a third department in January 2014 that will sell painting
> Champ, Inc. predicts the following sales in units for the coming three months: Each month’s ending inventory of finished units should be 60% of the next month’s sales. The April 30 finished goods inventory is 50 unit
> Why is the sales budget so important to the budgeting process?
> Lexi Company forecasts unit sales of 1,040,000 in April, 1,220,000 in May, 980,000 in June, and 1,020,000 in July. Beginning inventory on April 1 is 280,000 units, and the company wants to have 30% of next month’s sales in inventory at the end of each mo
> Meyer Co. forecasts merchandise purchases of $15,800 in January, $18,600 in February, and $20,200 in March; 40% of purchases are paid in the month of purchase and 60% are paid in the following month. At December 31 of the prior year, the balance of Accou
> Refer to information from QS 7-10. Assume 60% of Grace’s sales are for cash. The remaining 40% are credit sales; these customers pay in the month following the sale. Compute the budgeted cash receipts for June. In QS 7-10 Grace sells miniature digital c
> Activity-based budgeting is a budget system based on expected activities. (1) Describe activity-based budgeting, and explain its preparation of budgets. (2) How does activity-based budgeting differ from traditional budgeting?
> Good management includes good budgeting. (1) Explain why the bottom-up approach to budgeting is considered a more successful management technique than a top-down approach. (2) Provide an example of implementation of the bottom-up approach to budgeting.
