Question: Refer to Brief Exercise 9-9. Required:

> Show in diagrams that if a speculator were to buy when price is high and sell when price is low, he would increase price fluctuations. Why would it be in his best interest not to do so? (Hint: Draw two supply-demand diagrams, one for the high-price perio

> The same rightward shift of the demand curve may produce a very small or a very large increase in quantity, depending on the slope of the supply curve. Explain this conclusion with diagrams.

> Consider an economy described by the following set of equations: Find the equilibrium level of GDP. Next, find the multipliers for government purchases and for fixed taxes. If full employment comes at Y = 1,800, what are some policies that would move GDP

> It is claimed in this chapter that either price floors or price ceilings reduce the actual quantity exchanged in a market. Use a diagram or diagrams to test this conclusion, and explain the common sense behind it.

> U.S. government price supports for milk led to an unceasing surplus of milk. In an effort to reduce the surplus about a decade ago, Congress offered to pay dairy farmers to slaughter cows. Use two diagrams, one for the milk market and one for the meat ma

> Discuss the likely effects of the following: a. Rent ceilings on the market for apartments b. A price floor in the market for wheat Use supply-demand diagrams to show what may happen in each case.

> How often do you rent videos? Would you do so more often if a rental cost half as much? Distinguish between your demand curve for home videos and your “quantity demanded” at the current price.

> Raising chickens requires several types of feed, such as corn and soy meal. Consider a farm in the former Soviet Union. Try to describe how decisions on the number of chickens to be raised, and the amount of each feed to use in raising them, were made un

> If you were to leave college, what things would change in your life? What, then, is the opportunity cost of your education?

> If you were president of your college, what would you change if your budget were cut by 10 percent? By 25 percent? By 50 percent?

> Discuss the resource limitations that affect a. the poorest person on earth b. the richest person in the United States c. a farmer in Kansas d. the government of Indonesia

> Why do you think per capita income in Maryland is nearly double that in Mississippi?

> What is the role of government in a mixed economy?

> You are given the following information about an economy: a. Find equilibrium GDP and the budget deficit. b. Suppose the government, unhappy with the budget deficit, decides to cut government spending by precisely the amount of the deficit you just found

> The following table presents the demand and supply curves for laptop computers in Japan and the United States. NOTE: Quantity is in thousands. a. Draw the demand and supply curves for the United States on one diagram and those for Japan on another one. b

> Nabors Company had actual quality costs for the year ended June 30, 20x5, as given below. At the zero-defect state, Nabors expects to spend $375,000 on prototype inspection, $75,000 on vendor certification, and $50,000 on process acceptance. Assume sales

> Kanumba Company implemented a quality improvement program and tracked the following for the five years: By cost category as a percentage of sales for the same period of time: Required: 1. Prepare a bar graph that reveals the trend in quality cost as a pe

> Davis, Inc., had the following quality costs for the years ended December 31, 20x4 and 20x5: At the end of 20x4, management decided to increase its investment in control costs by 50 percent for each category’s items with the expectation

> Evans Company had total sales of $3,000,000 for fiscal 20x5. The costs of quality-related activities are given below. Returns/allowances $150,000 Design changes 180,000 Prototype inspection 39,000 Downtime 120,000 Quality circles 6,000 Packaging inspecti

> Harmon Community Hospital developed the following series of if-then statements for its Balanced Scorecard strategy: • If employee turnover rate decreases and employee satisfaction increases, then the quality of health care service will improve. • If the

> Fontane, Inc., has provided the following information for one of its products for each hour of production: Actual velocity: 400 units (per hour) Move time: 25 minutes Inspection time: 5 minutes Rework time: 10 minutes Required: 1. Calculate MCE. Comme

> Bemidii Company has the following data for one of its production departments: Theoretical velocity: 400 units per hour Productive minutes available per year: 5,000,000 Annual conversion costs: $120,000,000 Actual velocity: 240 units per hour Required:

> Uchdorf Manufacturing just completed a study of its purchasing activity with the objective of improving its efficiency. The driver for the activity is number of purchase orders. The following data pertain to the activity for the most recent year: Activit

> Wade Paving Company has a sealcoating activity and wants to develop a flexible budget formula for the activity. The following resources are used by the activity: • Five truck-mounted sealing units, with a lease cost of $15,000 per year per unit • Ten sea

> Gordon Company produces custom-made machine parts. A setup activity is required for the batches of parts that it produces. Activity output is measured using setup hours. The value added standard (SQ) for this activity is zero. On July 1, at the beginning

> Callie’s Gym is a complete fitness center. Owner Callie Ducain employs various fitness trainers who are expected to staff the front desk and to teach fitness classes. While on the front desk, trainers answer the phone, handle walk-ins and show them aroun

> Assume that at the beginning of 20x2, Cicleta trained the assembly workers in a new approach that had the objective of increasing the efficiency of the assembly process. Cicleta also began moving toward a JIT purchasing and manufacturing system. When JIT

> Cicleta Manufacturing has four activities: receiving materials, assembly, expediting products, and storing goods. Receiving and assembly are necessary activities; expediting and storing goods are unnecessary. The following data pertain to the four activi

> Hepworth Company has implemented a JIT system and is considering the use of backf lush costing. Hepworth had the following transactions for the current fiscal year: 1. Purchased raw materials on account for $600,000. 2. Placed all materials received into

> Kagle design engineers are in the process of developing a new “green” product, one that will significantly reduce impact on the environment and yet still provide the desired customer functionality. Currently, two desig

> Deeds Company sells custom-made machine parts to industrial equipment manufacturers by bidding cost plus 40 percent, where cost is defined as manufacturing cost plus order processing cost. There are two types of customers: those who place small, frequent

> Tulsa Company is a car brake repair and replacement company operating in the after-sales market. Tulsa’s purchasing manager uses two suppliers (Stridulo and Fallimento) for the source of its passenger car brakes. Data relating to brake

> Woodruff Company is currently producing a snowmobile that uses five specialized parts. Engineering has proposed replacing these specialized parts with commodity parts, which will cost less and can be purchased in larger order quantities. Current activity

> Alejandro’s Moab Grill features authentic Mexican dishes delivered in a relaxing Western motif. Given the short summer tourist season, Alejandro (the owner) decided to identify his top risk. Alejandro is most concerned that his restaura

> Refer to Brief Exercise 10-4. Required: 1. If Carreker, Inc., has a transfer pricing policy that requires transfer at full product cost, what would the transfer price be? Do you suppose that Alamosa and Tavaris divisions would choose to transfer at that

> Carreker, Inc., has a number of divisions, including the Alamosa Division, producer of surgical blades, and the Tavaris Division, a manufacturer of medical instruments. Alamosa Division produces a 2.6 cm steel blade that can be used by Tavaris Division i

> Jean and Tom Perritz own and manage Happy Home Helpers, Inc. (HHH), a house-cleaning service. Each cleaning (cleaning one house one time) takes a team of three house cleaners about 1.5 hours. On average, HHH completes about 15,000 cleanings per year. The

> Ignacio, Inc., had after-tax operating income last year of $1,196,500. Three sources of financing were used by the company: $2 million of mortgage bonds paying 4 percent interest, $4 million of unsecured bonds paying 6 percent interest, and $9 million in

> Refer to Brief Exercise 10-1. Forchen, Inc., requires an 8 percent minimum rate of return. Required: 1. Calculate residual income for the Small Appliances Division. 2. Calculate residual income for the Cleaning Products Division. 3. What if the minimum r

> Forchen, Inc., provided the following information for two of its divisions for last year: Required: 1. For the Small Appliances Division, calculate: a. Average operating assets b. Margin c. Turnover d. ROI 2. For the Cleaning Products Division, calculate

> Mangia Pizza Company makes frozen pizzas that are sold through grocery stores. Mangia developed the following standard mix for spreading on premade pizza shells to produce 16 giant-size sausage pizzas. Mangia put a batch of 2,000 pounds of direct materia

> Standish Company manufactures consumer products and provided the following information for the month of February: Units produced 131,000 Standard direct labor hours per unit 0.20 Standard fixed overhead rate (per direct labor hour) $2.50 Budgeted fixed o

> Refer to Brief Exercise 9-6. Required: 1. Calculate the variable overhead spending variance using the formula approach. (If you compute the actual variable overhead rate, carry your computations out to five significant digits and round the variance to th

> Standish Company manufactures consumer products and provided the following information for the month of February: Units produced 131,000 Standard direct labor hours per unit 0.20 Standard variable overhead rate (per direct labor hour) $3.40 Actual variab

> Yohan Company has the following balances in its direct materials and direct labor variance accounts at year-end: Unadjusted Cost of Goods Sold equals $1,500,000, unadjusted Work in Process equals $236,000, and unadjusted Finished Goods equals $180,000. R

> Kavallia Company set a standard cost for one item at $328,000; allowable deviation is ± $14,500. Actual costs for the past six months are as follows: June $330,500 July 343,000 August 346,800 September $314,000 October 332,000 November 323,000 Required:

> Guillermo’s Oil and Lube Company provided the following information for the production of oil changes during the month of June: Actual number of oil changes performed: 980 Actual number of direct labor hours worked: 386 hours Actual rate paid per direct

> Jean and Tom Perritz own and manage Happy Home Helpers, Inc. (HHH), a house-cleaning service. Each cleaning (cleaning one house one time) takes a team of three house cleaners about 1.5 hours. On average, HHH completes about 15,000 cleanings per year. The

> Guillermo’s Oil and Lube Company provided the following information for the production of oil changes during the month of June: Actual number of oil changes performed: 980 Actual number of quarts of oil used: 6,020 quarts Actual price paid per quart of o

> Mangia Pizza Company makes frozen pizzas that are sold through grocery stores. Mangia uses two types of direct labor: machine operators and packers. Mangia developed the following standard mix for spreading on premade pizza shells to produce 16 giant-siz

> Guillermo’s Oil and Lube Company is a service company that offers oil changes and lubrication for automobiles and light trucks. On average, Guillermo has found that a typical oil change takes 24 minutes and 6.2 quarts of oil are used. In June, Guillermo’

> Green Earth Landscaping Company provides monthly and weekly landscaping and maintenance services to residential customers in the tri-city area. Green Earth has no variable administrative expense. Fixed administrative expenses for June, July, and August i

> The external auditors for Heart Health Procedures (HHP) are currently performing the annual audit of HHP’s financial statements. As part of the audit, the external auditors have prepared a representation letter to be signed by HHP’s chief executive offic

> Emery Manufacturing Company produces component parts for the farm equipment industry and has recently undergone a major computer system conversion. Samson Achebe, the controller, has established a troubleshooting team to alleviate accounting problems tha

> Silverado, Inc., is a closely held brokerage firm that has been very successful over the past five years, consistently providing most members of the top management group with 50 percent bonuses. In addition, both the chief financial officer and the chief

> Emily Henson, controller of an oil exploration division, has just been approached by Tim Wilson, the divisional manager. Tim told Emily that the projected quarterly profits were unacceptable and that expenses need to be reduced. He suggested that a clean

> John Rodriguez and Patty Jorgenson are both cost accounting managers for a manufacturing division. During lunch yesterday, Patty told John that she was planning on quitting her job in three months because she had accepted a position as controller of a sm

> Jade Shultz is a junior majoring in hotel and restaurant management. She wants to work for a large hotel chain with the goal of eventually managing a hotel. She is considering the possibility of taking a course in either financial accounting or cost mana

> Timothy Donaghy has developed a unique formula for growing hair. His proprietary lotion, used regularly for 45 days, will grow hair in bald spots (with varying degrees of success). Timothy calls his lotion Hair-Again and is selling it via the telephone a

> The U.S. division of MegaBig, Inc., has excess capacity. MegaBig’s European division, located in Lisbon, has offered to buy a component that would increase the U.S. division’s utilization of capacity from 70 to 80 percent. The component has an outside ma

> The following are the exchange rates of various currencies for $1 on July 1 and on October 1. Required: 1. Indicate whether the dollar has strengthened or weakened against the euro, the Canadian dollar, and the yen. 2. A U.S. company purchases merchandis

> Langford Woodworks, Inc., manufactures custom window shutters on a job-order basis. Langford has invested heavily in precision woodworking equipment. As a result, the company has a reputation for producing excellent quality interior shutters. Sales are m

> Paladin Company manufactures plain-paper fax machines in a small factory in Minnesota. Sales have increased by 50 percent in each of the past three years, as Paladin has expanded its market from the United States to Canada and Mexico. As a result, the Mi

> Bountiful Manufacturing produces two types of bike frames (Frame X and Frame Y). Frame X passes through four processes: cutting, welding, polishing, and painting. Frame Y uses three of the same processes: cutting, welding, and painting. Each of the four

> Pratt Company produces two replacement parts for a popular line of Blu-ray disc players: Part A and Part B. Part A is made up of two components, one manufactured internally and one purchased from external suppliers. Part B is made up of three components,

> Middleton Company produces two different metal components used in medical equipment (Component X and Component Y). The company has three processes: molding, grinding, and finishing. In molding, molds are created, and molten metal is poured into the shell

> Calen Company manufactures and sells three products in a factory of three departments. Both labor and machine time are applied to the products as they pass through each department. The nature of the machine processing and of the labor skills required in

> Desayuno Products, Inc., produces cornf lakes and branf lakes. The manufacturing process is highly mechanized; both products are produced by the same machinery by using different settings. For the coming period, 200,000 machine hours are available. Manag

> Patz Company produces two industrial cleansers that use the same liquid chemical input: Regular Strength and Heavy Duty. Regular Strength uses two quarts of the chemical for every unit produced, and Heavy Duty uses five quarts. Currently, Patz has 6,000

> Refer to Brief Exercise 8-6. Required: 1. Calculate the total budgeted cost of units produced for Play-Disc for the coming year. Show the cost of direct materials, direct labor, and overhead. 2. Prepare a cost of goods sold budget for Play-Disc for the y

> Rahimi Company produces two types of gears: Model 12 and Model 15. Market conditions limit the number of each gear that can be sold. For Model 12 no more than 15,000 units can be sold, and for Model 15 no more than 40,000 units. Each gear must be notched

> Bateman Company produces helmets for drivers of motorcycles. Helmets are produced in batches according to model and size. Although the setup and production time vary for each model, the smallest lead time is six days. The most popular model, Model HA2, t

> Ashley Thayn, president and owner of Orangeville Metal Works, has just returned from a trip to Europe. While there, she toured several plants that use robotic manufacturing. Seeing the efficiency and success of these companies, Ashley became convinced th

> Jonfran Company manufactures three different models of paper shredders including the waste container, which serves as the base. While the shredder heads are different for all three models, the waste container is the same. The number of waste containers t

> Mallette Manufacturing, Inc., produces washing machines, dryers, and dishwashers. Because of increasing competition, Mallette is considering investing in an automated manufacturing system. Since competition is most keen for dishwashers, the production pr

> Okmulgee Hospital (a large metropolitan for-profit hospital) is considering replacing its MRI equipment with a new model manufactured by a different company. The old MRI equipment was acquired three years ago, has a remaining life of five years, and will

> Friedman Company is considering installing a new IT system. The cost of the new system is estimated to be $2,250,000, but it would produce after-tax savings of $450,000 per year in labor costs. The estimated life of the new system is 10 years, with no sa

> Kent Tessman, manager of a Dairy Products Division, was pleased with his division’s performance over the past three years. Each year, divisional profits had increased, and he had earned a sizable bonus. (Bonuses are a linear function of

> Ron Vargas, the CEO for Sunders Manufacturing, was wondering which of two pollution control systems he should choose. The firm’s current production process produces a gaseous and a liquid residue. A recent state law mandated that emissi

> Sweeney Manufacturing has a plant where the equipment is essentially worn out. The equipment must be replaced, and Sweeney is considering two competing investment alternatives. The first alternative would replace the worn-out equipment with traditional p

> Play-Disc makes Frisbee-type plastic discs. Each 12-inch diameter plastic disc has the following manufacturing costs: Direct materials $1.67 Direct labor 0.56 Variable overhead 0.72 Fixed overhead 1.80 Total unit cost $4.75 For the coming year, Play-Disc

> Heaps Company produces jewelry that requires electroplating with gold, silver, and other valuable metals. Electroplating uses large amounts of water and chemicals, producing wastewater with a number of toxic residuals. Currently, Heaps uses settlement ta

> Pittsburgh-Walsh Company (PWC) is a manufacturing company whose product line consists of lighting fixtures and electronic timing devices. The Lighting Fixtures Division assembles units for the upscale and mid-range markets. The Electronic Timing Devices

> Shannon, Inc., has two divisions. One produces and sells paper party supplies (napkins, paper plates, invitations); the other produces and sells cookware. A segmented income statement for the most recent quarter is given below: On seeing the quarterly st

> Olin Company manufactures and distributes carpentry tools. Production of the tools is in the mature portion of the product life cycle. Olin has a sales force of 20. Salespeople are paid a commission of 7 percent of sales, plus expenses of $35 per day for

> Fred Morton has just purchased a life insurance policy from Porter with premiums equal to $1,500 per year. Required: 1. Assume Fred holds the policy for one year and then drops it. What is his contribution to Porter’s operating income? 2. Assuming Fred h

> Porter Insurance Company has three lines of insurance: automobile, property, and life. The life insurance segment has been losing money for the past five quarters, and Leah Harper, Porter’s controller, has done an analysis of that segment. She has discov

> Alydar, Inc., manufactures and sells automotive tools through three divisions: Eastern, Southern, and International. Each division is evaluated as a profit center. Data for each division for last year are as follows: Alydar, Inc., had corporate administr

> Dantrell Palmer has just been appointed manager of Kirchner Glass Products Division. He has two years to make the division profitable. If the division is still showing a loss after two years, it will be eliminated, and Dantrell will be reassigned as an a

> Bill Fremont, division controller and CMA, was upset by a recent memo he received from the divisional manager, Steve Preston. Bill was scheduled to present the division’s financial performance at headquarters in one week. In the memo, Steve had given Bil

> Dana Baird was manager of a new Medical Supplies Division. She had just finished her second year and had been visiting with the company’s vice president of operations. In the first year, the operating income for the division had shown a

> Johnston Company cleans and applies powder coat paint to metal items on a job-order basis. Johnston has budgeted the following amounts for various overhead categories in the coming year. In the coming year, Johnston expects to powder coat 120,000 units.

> Gasconia Company produces three models of a product. Actual results from last year are as follows: Gasconia had budgeted the following amounts: Required: 1. Calculate the contribution margin variance. 2. Calculate the contribution margin volume variance.

> Sulert, Inc., produces and sells gel-filled ice packs. Sulert’s performance report for April follows: Required: 1. Calculate the contribution margin variance and the contribution margin volume variance. 2. Calculate the market share var

> Haysbert Company provides management services for apartments and rental units. In general, Haysbert packages its services into two groups: basic and complete. The basic package includes advertising vacant units, showing potential renters through them, an

> San Mateo Optics, Inc., specializes in manufacturing lenses for large telescopes and cameras used in space exploration. As the specifications for the lenses are determined by the customer and vary considerably, the company uses a job-order costing system

> Jellison Company had the following operating data for its first two years of operations: Variable costs per unit: Direct materials 4.00 Direct labor $ 2.90 Variable overhead 1.50 Fixed costs per year: Overhead 180,000 Selling and administrative 70,350 Je

> The following information pertains to Vladamir, Inc., for last year: Beginning inventory, units 1,320 Units produced 100,000 Units sold 101,000 Variable costs per unit: Direct materials $ 8.00 Direct labor $ 9.50 Variable overhead $ 1.25 Variable selling

> Snyder Company produced 90,000 units during its first year of operations and sold 87,000 at $21.80 per unit. The company chose practical activity—at 90,000 units—to compute its predetermined overhead rate. Manufacturing costs are as follows: Direct mater

> Jorell, Inc., manufactures and distributes a variety of labelers. Annual production of labelers averages 340,000 units. A large chain store purchases about 30 percent of Jorell’s production. Several thousand independent retail office supply stores purcha