Respond to each requirement independently. 1. Describe two decision-making contexts, one in which unit-level materials costs are avoidable and the other in which they are unavoidable. 2. Describe two decision-making contexts, one in which batch-level setup costs are avoidable and the other in which they are unavoidable. 3. Describe two decision-making contexts, one in which advertising costs are avoidable and the other in which they are unavoidable. 4. Describe two decision-making contexts, one in which rent paid for a building is avoidable and the other in which it is unavoidable. 5. Describe two decision-making contexts, one in which depreciation on manufacturing equipment is avoidable and the other in which it is unavoidable.
> Harper Electronics is considering investing in manufacturing equipment expected to cost $250,000. The equipment has an estimated useful life of four years and a salvage value of $25,000. It is expected to produce incremental cash revenues of $125,000 per
> Daryl Kearns saved $240,000 during the 30 years that he worked for a major corporation. Now he has retired at the age of 60 and has begun to draw a comfortable pension check every month. He wants to ensure the financial security of his retirement by inve
> Seth Fitch owns a small retail ice cream parlor. He is considering expanding the business and has identified two attractive alternatives. One involves purchasing a machine that would enable Mr. Fitch to offer frozen yogurt to customers. The machine would
> Dwight Donovan, the president of Donovan Enterprises, is considering two investment opportunities. Because of limited resources, he will be able to invest in only one of them. Project A is to purchase a machine that will enable factory automation; the ma
> Brett Collins is reviewing his company’s investment in a cement plant. The company paid $12,000,000 five years ago to acquire the plant. Now top management is considering an opportunity to sell it. The president wants to know whether th
> Antonio Melton, the chief executive officer of Melton Corporation, has assembled his top advisers to evaluate an investment opportunity. The advisers expect the company to pay $500,000 cash at the beginning of the investment and the cash inflow for each
> Swift Delivery is a small company that transports business packages between New York and Chicago. It operates a fleet of small vans that moves packages to and from a central depot within each city and uses a common carrier to deliver the packages between
> Gary Radio Corporation is a subsidiary of Salem Companies. Gary makes car radios that it sells to retail outlets. It purchases speakers for the radios from outside suppliers for $56 each. Recently, Salem acquired the Hyden Speaker Corporation, which make
> The Pillar Manufacturing Company has three identified levels of authority and responsibility. The organization chart as of December 31, Year 1, appears as follows. Pertinent expenses for Level 3 follow. Pertinent expenses for Level 2 follow. Pertinent ex
> Altoona Technologies Inc. (ATI) has three divisions. ATI has a desired rate of return of 12.5 percent. The operating assets and income for each division are as follows. ATI headquarters has $120,000 of additional cash to invest in one of its divisions. T
> Kerston Company has operating assets of $20,000,000. The company’s operating income for the most recent accounting period was $1,600,000. The Dannica Division of Kerston controls $8,000,000 of the company’s assets and earned $720,000 of its operating inc
> Helena Corporation operates three investment centers. The following financial statements apply to the investment center named Bowman Division. Table Summary: Income Statement of Bowman Division for the year ended December 31, year 2 shows 2 columns. Colu
> Sorrento Corporation’s balance sheet indicates that the company has $500,000 invested in operating assets. During Year 2, Sorrento earned operating income of $50,000 on $1,000,000 of sales. Required 1. Compute Sorrento’s profit margin for Year 2. 2. Comp
> Yalaha National Bank is a large municipal bank with several branch offices. The bank’s computer department handles all data processing for bank operations. In addition, the bank sells the computer department’s expertise in systems development and excess
> Amarillo Corporation has four divisions: the assembly division, the processing division, the machining division, and the packing division. All four divisions are under the control of the vice president of manufacturing. Each division has a manager and se
> Carol Morgan manages the production division of Casper Corporation. Ms. Morgan’s responsibility report for the month of August follows. The budget had called for 4,600 pounds of raw materials at $20 per pound, and 4,600 pounds were used
> Juan Rubio is the manager of the production department of Radison Corporation. Radison incurred the following costs during Year 2. Production department supplies $22,000 Administrative salaries 700,000 Production wages 1,160,000 Materials used 1,058,400
> Gepp Manufacturing Company produces a single product. The following data apply to the standard cost of materials and labor associated with making the product. Materials quantity per unit: 1 pound Materials price: $12.50 per pound Labor quantity per unit:
> Spiro Company manufactures molded candles that are finished by hand. The company developed the following standards for a new line of drip candles. Amount of direct materials per candle: 1.6 pounds Price of direct materials per pound: $1.50 Quantity of la
> Waldon Corporation’s balance sheet shows that the company has $600,000 invested in operating assets. During Year 2, Waldon earned $120,000 on $960,000 of sales. The company’s desired return on investment (ROI) is 12 pe
> Shawnee Manufacturing Company produces a component part of a top secret military communication device. Standard production and cost data for the part, Product X, follow. Planned production: 30,000 units Per unit direct materials: 2 pounds @ $1.80 per pou
> Bonnie’s Doll Company produces handmade dolls. The standard amount of time spent on each doll is 2.0 hours. The standard cost of labor is $20 per hour. The company planned to make 8,000 dolls during the year but actually used 17,500 hours of labor to mak
> Caribou Fruit Drink Company planned to make 200,000 containers of apple juice. It expected to use two cups of frozen apple concentrate to make each container of juice, thus using 400,000 cups of frozen concentrate. The standard price of one cup of apple
> The following data were drawn from the records of Quentin Corporation. Planned volume for year (static budget): 6,000 units Standard direct materials cost per unit: 3.1 pounds @ $3.00 per pound Standard direct labor cost per unit: 2 hours @ $8.00 per hou
> In addition to other costs, Grosha Telephone Company planned to incur $600,000 of fixed manufacturing overhead in making 500,000 telephones. Grosha actually produced 508,000 telephones, incurring actual overhead costs of $599,400. Grosha establishes its
> Use the standard price and cost data supplied in Problem 8-20A. Assume that Narcisco actually produced and sold 32,000 books. The actual sales price and costs incurred follow. Required 1. Determine the flexible budget variances. 2. Indicate whether each
> Narcisco Publications established the following standard price and costs for a hardcover picture book that the company produces. Standard price and variable costs Sales price $ 90.00 Materials cost 18.00 Labor cost 9.00 Overhead cost 12.60 Selling, gen
> The Redmond Management Association held its annual public relations luncheon in April Year 2. Based on the previous year’s results, the organization allocated $25,290 of its operating budget to cover the cost of the luncheon. To ensure
> Howard Cooper, the president of Glacier Computer Services, needs your help. He wonders about the potential effects on the firm’s net income if he changes the service rate that the firm charges its customers. The following basic data pertain to fiscal Yea
> Camden Company is a retail company that specializes in selling outdoor camping equipment. The company is considering opening a new store on October 1, Year 1. The company president formed a planning committee to prepare a master budget for the first thre
> A widely recognized financial trick known as the “big bath” occurs when a company makes huge unwarranted asset write-offs that drastically overstate expenses. Outside auditors (CPAs) permit companies to engage in the practice because the assets being wri
> Jasper Fruits Corporation wholesales peaches and oranges. Barbara Jasper is working with the company’s accountant to prepare next year’s budget. Ms. Jasper estimates that sales will increase 5 percent for peaches and 1
> Top executive officers of Tildon Company, a merchandising firm, are preparing the next year’s budget. The controller has provided everyone with the current year’s projected income statement. Cost of goods sold is usual
> Fayette Medical Clinic has budgeted the following cash flows. Fayette Medical had a cash balance of $16,000 on January 1. The company desires to maintain a cash balance of $10,000. Funds are assumed to be borrowed, in increments of $2,000, and repaid on
> Malcolm is a retail company specializing in men’s hats. Its budget director prepared the list of expected operating expenses that follows. All items are paid when incurred except sales commissions and utilities, which are paid in the mo
> Humboldt Inc. sells fireworks. The company’s marketing director developed the following cost of goods sold budget for April, May, June, and July. Humboldt had a beginning inventory balance of $1,800 on April 1 and a beginning balance in
> Spalding Pointers Corporation expects to begin operations on January 1, Year 1; it will operate as a specialty sales company that sells laser pointers over the Internet. Spalding expects sales in January Year 1 to total $120,000 and to increase 5 percent
> Amherst Corporation has three divisions, each operating as a responsibility center. To provide an incentive for divisional executive officers, the company gives divisional management a bonus equal to 15 percent of the excess of actual net income over bud
> The following information applies to the products of Corbett Company. Required Identify the product that should be produced or sold under each of the following constraints. Consider each constraint separately. 1. One unit of Product A requires two hours
> Frank Moran manages the cutting department of Greene Timber Company. He purchased a tree-cutting machine on January 1, Year 2, for $200,000. The machine had an estimated useful life of five years and zero salvage value, and the cost to operate it is $45,
> Bain Corporation makes and sells state-of-the-art electronics products. One of its segments produces The Math Machine, an inexpensive calculator. The company’s chief accountant recently prepared the following income statement showing an
> Green Lawn Mower Inc. recently acquired Hallit Engines, a small engine manufacturing company. Green’s president believes in decentralization and intends to permit Hallit to continue to operate as an independent entity. However, she has instructed the man
> The following transactions pertain to Year 1, the first year of operations of the Barlett Company. All inventory was started and completed during Year 1. Assume that all transactions are cash transactions. 1. Acquired $2,000 cash by issuing common stock.
> Lenox Manufacturing Co. produces and sells specialized equipment used in the petroleum industry. The company is organized into three separate operating branches: Division A, which manufactures and sells heavy equipment; Division B, which manufactures and
> Western Boot Co. sells men’s, women’s, and children’s boots. For each type of boot sold, it operates a separate department that has its own manager. The manager of the men’s departme
> Sturdy Bike Company makes the frames used to build its bicycles. During Year 2, Sturdy made 20,000 frames; the costs incurred follow. Unit-level materials costs (20,000 units × $35.00) $700,000 Unit-level labor costs (20,000 units × $42.50) 850,000 Unit-
> Townsend Chemical Company makes a variety of cosmetic products, one of which is a skin cream designed to reduce the signs of aging. Townsend produces a relatively small amount (15,000 units) of the cream and is considering the purchase of the product fro
> Dalton Quilting Company makes blankets that it markets through a variety of department stores. It makes the blankets in batches of 1,000 units. Dalton made 20,000 blankets during the prior accounting period. The cost of producing the blankets is summariz
> Continent Construction Company is a building contractor specializing in small commercial buildings. The company has the opportunity to accept one of two jobs; it cannot accept both because they must be performed at the same time and Continent does not ha
> The following quality cost report came from the records of Willoughby Company. Table Summary: A table has 3 columns. Column 1 has entries. Column 2 has year 2. Column 3 has year 1. Columns 2 and 3 are divided into amount and percentage. Required 1. Expla
> Silva Chairs Inc. makes two types of chairs. Model Diamond is a high-end product designed for professional offices. Model Gold is an economical product designed for family use. Jane Silva, the president, is worried about cut-throat price competition in t
> Bismarck Cameras Inc. manufactures two models of cameras. Model ZM has a zoom lens; Model DS has a fixed lens. Bismarck uses an activity-based costing system. The following are the relevant cost data for the previous month. Bismarck’s f
> Obtain Berkshire Hathaway’s (Berkshire) Form 10-K for the year ended December 31, 2019, and complete the following requirements. To obtain the Form 10-K, you can use the EDGAR system (see Appendix A at the back of this text for instructions), or it can b
> Horten Sporting Goods Corporation makes two types of racquets, tennis and badminton. The company uses the same facility to make both products even though the processes are quite different. The company has recently converted its cost accounting system to
> Apple Academy is a profit-oriented education business. Apple provides remedial training for high school students who have fallen behind in their classroom studies. It charges its students $750 per course. During the previous year, Apple provided instruct
> Compton Information Services Inc. has two service departments: human resources and billing. Compton’s operating departments, organized according to the special industry each department serves, are health care, retail, and legal services
> Clement Manufacturing Company uses two departments to make its products. Department I is a cutting department that is machine intensive and uses very few employees. Machines cut and form parts and then place the finished parts on a conveyor belt that car
> Harper Chicken Corporation processes and packages chicken for grocery stores. It purchases chickens from farmers and processes them into two different products: chicken drumsticks and chicken steak. From a standard batch of 12,000 pounds of raw chicken t
> Russell Department Stores Inc. has three departments: women’s, men’s, and children’s. The following are the indirect costs related to its operations: Vacation pay Payroll taxes Sewer bill Paper rolls for cash registers Staples Medical insurance Natural g
> Hannah Ortega is considering expanding her business. She plans to hire a salesperson to cover trade shows. Because of compensation, travel expenses, and booth rental, fixed costs for a trade show are expected to be $7,500. The booth will be open 30 hours
> Velez Corporation estimated its overhead costs would be $50,000 per month except for January when it pays the $30,000 annual insurance premium on the manufacturing facility. Accordingly, the January overhead costs were expected to be $80,000 ($30,000 + $
> Camp Manufacturing Company makes tents that it sells directly to camping enthusiasts through a mail-order marketing program. The company pays a quality control expert $80,000 per year to inspect completed tents before they are shipped to customers. Assum
> Eagle Airlines is a small airline that occasionally carries overload shipments for the overnight delivery company Never-Fail Inc. Never-Fail is a multimillion-dollar company started by Wes Never immediately after he failed to finish his first accounting
> Bellco, a division of Becker International Corporation, is operated under the direction of Antoin Sedatt. Bellco is an independent investment center with approximately $72,000,000 of assets that generate approximately $8,640,000 in annual net income. Bec
> The Huffman School of Vocational Technology has organized the school training programs into three departments. Each department provides training in a different area as follows: nursing assistant, dental hygiene, and office technology. The schoolâ&#
> Yalland Manufacturing Company makes two different products, M and N. The company’s two departments are named after the products; for example, Product M is made in Department M. Yalland’s accountant has identified the f
> Kidd Company produces two products. Budgeted annual income statements for the two products are provided as follows. Table Summary: A table has 4 columns. Column 1 has entries. Column 2 has power. Column 3 has lite. Column 4 has total. Power is divided in
> Vaughn Corporation sells hammocks; variable costs are $75 each, and the hammocks are sold for $125 each. Vaughn incurs $240,000 of fixed operating expenses annually. Required 1. Determine the sales volume in units and dollars required to attain a $60,000
> Trevino Company makes and sells products with variable costs of $24 each. Trevino incurs annual fixed costs of $315,000. The current sales price is $87. Required The following requirements are interdependent. For example, the $252,000 desired profit intr
> Cahill Company is considering adding a new product. The cost accountant has provided the following data. Expected variable cost of manufacturing $57 per unit Expected annual fixed manufacturing costs $216,000 The administrative vice president has provide
> Hampton Company is considering the addition of a new product to its cosmetics line. The company has three distinctly different options: a skin cream, a bath oil, or a hair coloring gel. Relevant information and budgeted annual income statements for each
> Reid Company is considering the production of a new product. The expected variable cost is $27 per unit. Annual fixed costs are expected to be $810,000. The anticipated sales price is $72 each. Required Determine the break-even point in units and dollars
> Bauer Manufacturing Company reported the following data regarding a product it manufactures and sells. The sales price is $100. Variable costs Manufacturing $30 per unit Selling 12 per unit Fixed costs Manufacturing $360,000 per year Selling and administ
> Massey Company reported the following data regarding the product it sells. Sales price $25 Contribution margin ratio 40% Fixed costs $810,000 Required Use the contribution margin ratio approach and consider each requirement separately. 1. What is the
> The following excerpt is from Coca-Cola Company’s 2019 annual report filed with the SEC. Management evaluates the performance of our operating segments separately to individually monitor the different factors affecting financial perform
> Ritchie Manufacturing Company makes a product that it sells for $150 per unit. The company incurs variable manufacturing costs of $60 per unit. Variable selling expenses are $18 per unit, annual fixed manufacturing costs are $480,000, and fixed selling a
> Dean and Powell Tax Services Company has 31 branch offices in the nation. Each office has about three to six professional accountants and one to two secretaries. In a busy season, the office manager, who is also a professional accountant, can hire tempor
> Myrick Woodcraft Company (MWC) manufactures “antique” wooden cabinets to house modern televisions. MWC began operations in January of last year. Sidney Myrick, the owner, asks for your assistance. He believes that he n
> Thornton Computer Services, Inc., has been in business for six months. The following are basic operating data for that period. Table Summary: A table shows 2 columns. Column 1 has entries. Column 2 has months. The months are divided into July, August, Se
> Nepal Corporation offers mountain-climbing expeditions for its customers, providing food, equipment, and guides. Climbs normally require one week to complete. The company’s accountant is reviewing historical cost data to establish a pri
> Lakeshore Cinemas is considering a contract to rent a movie for $1,980 per day. The contract requires a minimum one-week rental period. Estimated attendance is as follows. /Required 1. Determine the average cost per person of the movie rental contract se
> Arnold Vimka is a venture capitalist facing two alternative investment opportunities. He intends to invest $800,000 in a startup firm. He is nervous, however, about future economic volatility. He asks you to analyze the following financial data for the p
> Kenton and Denton Universities offer executive training courses to corporate clients. Kenton pays its instructors $5,000 per course taught. Denton pays its instructors $250 per student enrolled in the class. Both universities charge executives a $450 tui
> Franklin Training Services (FTS) provides instruction on the use of computer software for the employees of its corporate clients. It offers courses in the clients’ offices on the clients’ equipment. The only major expense FTS incurs is instructor salarie
> Rita Jekyll operates a sales booth in computer software trade shows, selling an accounting software package, Abacus. She purchases the package from a software company for $210 each. Booth space at the convention hall costs $8,400 per show. Required 1. Sa
> Wilkin Fruit Drink Company planned to make 400,000 containers of apple juice. It expected to use two cups of frozen apple concentrate to make each container of juice, thus using 800,000 cups (400,000 containers × 2 cups) of frozen concentrate. The standa
> Seattle Bank’s startup division establishes new branch banks. Each branch opens with three tellers. Total teller cost per branch is $96,000 per year. The three tellers combined can process up to 90,000 customer transactions per year. If a branch does not
> Vernon Company invented a new process for manufacturing ice cream. The ingredients are mixed in high-tech machinery that forms the product into small round beads. Like a bag of balls, the ice cream beads are surrounded by air pockets in packages. This de
> Ted Cowan is a model employee. He has not missed a day of work in the last five years. He even forfeits his vacation time to make sure that things run smoothly. Ted literally does the work of two people. He started out working as the purchasing agent in
> Campbell Manufacturing Company (CMC) was started when it acquired $80,000 by issuing common stock. During the first year of operations, the company incurred specifically identifiable product costs (materials, labor, and overhead) amounting to $75,000. CM
> CIA Review, Inc., provides review courses twice each year for students studying to take the CIA exam. The cost of textbooks is included in the registration fee. Text material requires constant updating and is useful for only one course. To minimize print
> Kenta Manufacturing Company obtains its raw materials from a variety of suppliers. Kenta’s strategy is to obtain the best price by letting the suppliers know that it buys from the lowest bidder. Approximately four years ago, unexpected increases in deman
> Wang Company began operations on January 1, Year 1, by issuing common stock for $70,000 cash. During Year 1, Wang received $88,000 cash from revenue and incurred costs that required $65,000 of cash payments. Required Prepare a GAAP-based income statement
> Power-To-Spare, Inc., makes a smartphone case that includes a battery that extends the operating life of an iPhone. The manufacturing costs per unit include $15 direct materials, $17 direct labor and $8 manufacturing overhead. These costs are based on a
> The following transactions pertain to Year 1, the first-year operations of Gibson Company. All inventory was started and completed during Year 1. Assume that all transactions are cash transactions. 1. Acquired $12,000 cash by issuing common stock. 2. Pai
> Sinclair Manufacturing Company experienced the following accounting events during its first year of operation. With the exception of the adjusting entries for depreciation, assume that all transactions are cash transactions and that financial statement d
> Irvine Publications established the following standard price and costs for a hardcover picture book that the company produces. Standard price and variable costs Sales price $48.00 Materials cost 12.00 Labor cost 6.00 Overhead cost 8.40 Selling, general,
> Stuart Manufacturing Company was started on January 1, Year 1, when it acquired $89,000 cash by issuing common stock. Stuart immediately purchased office furniture and manufacturing equipment costing $32,000 and $40,000, respectively. The office furnitur
> Use the following table to indicate whether the information is more representative of managerial versus financial accounting. The first item is shown as an example. Information Item: Estimates of future revenue GAAP-based product cost Salary of the man
> Janice Huffman has decided to start Janice Cleaning, a residential housecleaning service company. She is able to rent cleaning equipment at a cost of $600 per month. Labor costs are expected to be $50 per house cleaned and supplies are expected to cost $
