Stylz Company, a recent start-up fashion retailer based in the United States, is deciding between opening its first sales presence in either Italy’s Tuscany Region or Spain’s Matarrana Region. Stylz’s financial group surveyed potential customers in both markets and has compiled a business plan that estimates the financial impact for the first 5 years. This 5-year financial plan estimates that entering Tuscany would generate $9,000,000 of operating income for Stylz in the first year, which would increase by 10% per year throughout the plan period. The plan also estimates that entering Matarrana would generate $5,000,000 of operating income for Stylz in the first year, which would increase by 50% per year throughout the plan period. In addition, after completing its 5-year financial plan focusing on operating income, Stylz’s management decided also to conduct a business sustainability analysis. Based on Stylz’s strategy, management identified the company’s four most important stakeholders for its initial sales region decision to be suppliers, employees, regulators, and the local community (in addition to investors and customers whose insights drove the results of the 5-year financial plan). The results of management’s stakeholder engagement analysis, including additional insights with respect to how each stakeholder is expected to impact Stylz’s performance measures, are as follows: Suppliers: Suppliers carry out the sourcing of Stylz’s products in the chosen sales region. The existing supplier network in Tuscany is mature and already works with other fashion companies in the region; thus, Stylz could connect with this supplier network at a negligible cost. However, the existing supplier network in Matarrana is much less established because there are fewer competing fashion retailers in the region. While less competition offers greater growth opportunities for Stylz, the Matarrana region’s less established supplier network will require Sytlz to spend approximately $5,000,000 during each of its first 2 years in the region in order to create adequate supply chain quality and reliability. Employees: Employees affect the existence and quality of Stylz’s workforce in the new sales region. The stakeholder engagement interaction revealed that the regions have a very similar cost of living (and, therefore, very similar wage rates), as well as sufficient numbers of potential hourly store employees. However, the Tuscany region has significantly fewer potential store managers. As a result, Stylz expects that choosing Tuscany would lead the company to spend an additional $2,000,000 annually to train and develop its store managers that it would not need to spend if it chose the Matarrana region. Regulators: Regulators affect the cost of Stylz complying with any applicable existing or new regulations. The stakeholder engagement sessions revealed an atmosphere of growing pressure on regulators to increase the number of environmental regulations for companies operating in the region. Stylz management estimates that it would need to spend $1,000,000 annually in the Tuscany region to comply with these fully expected new environmental regulations that it would not face in the Matarrana region. Alternately, stakeholder engagement sessions in the Matarrana region revealed a surprisingly lax atmosphere in which it is commonplace to pay bribes to secure deals and contracts with various necessary business partners in the region. As a result, Stylz management estimates that it would need to spend an additional $3,000,000 annually on training its own employees, as well as many of its business partners, on how to conduct business ethically and in compliance with the Foreign Corrupt Practices Act (FCPA, which is required for all U.S.-based companies). This training would help the company avoid intentional or unintentional unethical activity. Stylz management does not believe it would need to incur this additional FCPA training cost if it chose Tuscany. Local Community: The local community reflects the general attitude of the underlying population toward a particular company and its policies. Stakeholder engagement sessions suggested that Stylz generally would have the support of the Tuscan community. However, these sessions also revealed a strong undercurrent of resentment among many local residents in the Matarrana region from those residents who do not want a U.S.-based fashion retailer placing its economic, social, or environmental footprint within its community. However, Stylz management believes that its footprint will be significantly positive as it will hire and train local workers, give back to the community through various programs and new community parks, and employ state-of-the-art environmental policies throughout its value chain that will have a net-zero impact on the environment. Stylz management estimates that it would need to spend $1,500,000 each year to convince the Matarrana community of its significantly positive footprint. In addition, if the Matarrana region is chosen, Stylz management believes it would need to spend an additional $3,500,000 in the first year only in order to win the approval of the most influential activist group in the community. Required: 1. Considering only the results of Stylz financial group’s initial 5-year financial plan (i.e., ignore the business sustainability analysis for this requirement), estimate the operating income over the 5-year period for each sales region—Tuscany and Matarrana. Based solely on the operating income from this 5-year financial plan, which region should Stylz Company management select in order to maximize its estimated total operating income? Explain your answer. 2. Next consider only the results of Stylz management’s business sustainability analysis (i.e., ignore the 5-year financial plan for this requirement) that incorporated the findings from the stakeholder engagement sessions with Stylz’s four key stakeholders— suppliers, employees, regulators, and the local community. Based solely on this business sustainability analysis, estimate the impact that the four stakeholders would have on Stylz Company’s operating income over the 5-year period. Explain your answer. 3. Now considering both the initial 5-year financial plan AND the business sustainability analysis, estimate the total operating income over the 5-year period for each sales region. Based on this combined analysis, which region should Stylz Company management select in order to maximize its estimated total operating income over the 5-year period? Explain your answer. 4. Identify one important qualitative factor that you believe Stylz management should consider in making its initial sales region decision. Explain how this qualitative factor could potentially change your quantitative answer to Requirement 3.
> Hunt Inc. intends to invest in one of two competing types of computer-aided manufacturing equipment: CAM X and CAM Y. Both CAM X and CAM Y models have a project life of 10 years. The purchase price of the CAM X model is $3,600,000, and it has a net annua
> Refer to the information above for Tico Inc. on the previous page Required: Calculate the labor rate and efficiency variances using the columnar and formula approaches.
> Bradshaw Company provided the following data: Standard fixed overhead rate (SFOR) ……………$5 per direct labor hour Actual fixed overhead costs …………………………………………………$301,680 Standard hours allowed per unit ……………………………………………4 hours Actual production ………………………
> Why should the incremental cost of a risk response alternative be considered when deciding how best to respond to an important risk?
> Refer to the information for Aztec Inc. on the previous page. Required: 1. Calculate the equivalent units for July. 2. Calculate the unit cost. (Note: Round to two decimal places.) 3. Assign costs to units transferred out and EWIP using the FIFO method.
> Rath Company provided the following information: Standard variable overhead rate (SVOR) per direct labor hour ……$3.75 Actual variable overhead costs……………………………………………….$222,816 Actual direct labor hours worked (AH) ………………………………………57,200 Actual productio
> Manzer Inc. manufactures bicycle frames in two departments: cutting and welding. Manzer uses the weighted average method. Manufacturing costs are added uniformly throughout the process. The following are cost and production data for the cutting departmen
> Clearsound uses Alpha Electronics and La Paz Company to buy two electronic components used in the manufacture of its cell phones: Component 125X and Component 30Y. Consider two activities: testing components and reordering components. After the two compo
> Sleepeze Company produces mattresses for 20 retail outlets. Of the 20 retail outlets, 19 are small, separately owned furniture stores and one is a retail chain. The retail chain buys 60% of the mattresses produced. The 19 smaller customers purchase mattr
> Snow Inc. has just completed development of a new cell phone. The new product is expected to produce annual revenues of $1,400,000. Producing the cell phone requires an investment in new equipment, costing $1,500,000. The cell phone has a projected life
> Perkins National Bank has collected the following information for four activities and two types of credit cards: There are 7,500 holders of Classic cards and 30,000 holders of Gold cards. Required: Calculate the unit cost (rounded to the nearest cent)
> Gardner Company produces 18-ounce boxes of a wheat cereal in three departments: mixing, cooking, and packaging. During August, Gardner produced 250,000 boxes with the following costs: Required: 1. Calculate the costs transferred out of each department.
> Refer to the information for Zapato Company given above. Required: 1. Calculate the consumption ratios for the four drivers (round to two decimal places). 2. Is there evidence of product diversity? Explain. Data for Exercise 21: Zapato Company produce
> Cooper Movie Studio Corp. makes movies and is interested in lowering its operating costs for the following year, while maintaining the high quality and appeal of its movies. Cooper’s management is concerned about the additional costs th
> A fire insurance policy on a manufacturing plant is an example of a risk reduction alternative that would reduce which component of the inherent risk of a plant fire? a. Likelihood only b. Impact only c. Both likelihood and impact d. Neither likelihood n
> Select the graph (A through L) that best matches the numbered (1 through 7) italicized descriptions of various cost behavior. For each graph, the vertical (y) axis represents total dollars of cost, and the horizontal (x) axis represents output units duri
> The percentage of accounts receivable that is uncollectible can be ignored for cash budgeting because a. no cash is received from an account that defaults. b. it is included in cash sales. c. it appears on the budgeted income statement. d. for most compa
> Define the fraud triangle.
> Refer to the information for Hickory Company above. Hickory’s management is deciding whether to keep or drop the parquet product line. Hickory’s parquet flooring product line has a contribution margin of $50,000 (sales
> Define forensic accounting.
> Jack Man Company produces die-cast metal bulldozers for toy shops. Jack Man estimated the following average costs per bulldozer: Direct materials …………………………………………..$8.65 Direct labor …………………………………………………….1.10 Manufacturing overhead ………………………………..0.95 P
> An advantage of the scattergraph method is that it a. is objective. b. is easier to use than the high-low method. c. is the most accurate method. d. removes outliers. e. is descriptive
> Why are units shipped used to calculate the value-stream cost?
> What is a segment?
> The use and importance of managerial accounting is growing in each of the following areas except for a. enterprise risk management. b. nanotechnology advancements. c. corporate sustainability reporting. d. quality accounting. e. lean accounting.
> What is overapplied overhead? When Cost of Goods Sold is adjusted for overapplied overhead, will the cost increase or decrease? Why?
> What is underapplied overhead? When Cost of Goods Sold is adjusted for underapplied overhead, will the cost increase or decrease? Why?
> Lean manufacturing seeks to achieve all of the following except for a. zero defects. b. maximizing customer value. c. zero inventories. d. waiting. When materials costs differ significantly among products in a value stream, the value stream product cost
> What is product diversity?
> Describe the two-stage process associated with plantwide overhead rates.
> The use and importance of managerial accounting is growing in each of the following areas except for a. enterprise risk management. b. nanotechnology advancements. c. corporate sustainability reporting. d. quality accounting. e. lean accounting.
> What is the difference between inherent risk and residual risk?
> Knitpix Products is a division of Parker Textiles Inc. During the coming year, it expects to earn income of $310,000 based on sales of $3.45 million. Without any new investments, the division will have average operating assets of $3 million. The division
> Leslie Blandings, division manager of Audiotech Inc., was debating the merits of a new product—a weather radio that would put out a warning if the county in which the listener lived were under a severe thunderstorm or tornado alert. The budgeted income o
> Refer to the information for Kepler Company on the previous page. Also, assume that for last year and for the current year, the market price per share of common stock is $2.98. In addition, for last year, assets and equity were the same at the beginning
> Refer to the information for Kepler Company above. Required: Note: Round all percentages to one decimal place. 1. Compute the percentage change for each item in the balance sheet and income statement. 2. Comment on any significant trends. Data for Prob
> Grammatico Company has just completed its third year of operations. The income statement is as follows: Selected information from the balance sheet is as follows: Required: Note: Round answers to two decimal places. 1. Compute the times-interest-earn
> The following balance sheets are taken from the records of Golding Company (numbers are expressed in thousands): Additional information is as follows: (a) equipment costing $10,000,000 was purchased at yearend; no equipment was sold; and (b) net income
> Refer to the information for Booth Manufacturing above. Required: 1. Calculate the cash flows from operations using the indirect method. 2. Prepare a statement of cash flows. 3. Search the Internet to find a statement of cash flows. Which method was use
> You have just opened your own printing business. A large sports franchise is beginning an important advertising campaign in order to attract more fans to the sport. The purchasing officer of the company calls and asks you to make a bid on printing 5,000
> When a company participates in a stock buyback program, it means that the company is buying shares of its own stock and taking them off the market. With this simple definition in mind, how would a company’s stock buyback program affect its Earnings per S
> Custom Shutters, Inc., manufactures plantation shutters according to customer order. The company has a reputation for producing excellent quality shutters that fit virtually any size or shape of window. Sales are made in all 50 states. On July 1, Custom
> Paladin Company manufactures plain paper fax machines in a small factory in Minnesota. Sales have increased by 50% in each of the past 3 years, as Paladin has expanded its market from the United States to Canada and Mexico. As a result, the Minnesota fac
> Merkley Company, a manufacturer of machine parts, implemented lean manufacturing at the end of 20X1. Three value streams were established: one for new product development and two order fulfillment value streams. One of the value streams set a goal to inc
> Brasher Company is transitioning to a lean manufacturing system and has just finalized two order fulfillment value streams. One of the value streams has two products, and the other has four products. The two-product value stream produces precision machin
> In 20X1, Don Blackburn, president of Price Electronics, received a report indicating that quality costs were 31% of sales. Faced with increasing pressures from imported goods, Don resolved to take measures to improve the overall quality of the company&ac
> In 20X2, Clarkson Inc. initiated a full-scale, quality improvement program. At the end of the year, Tony Ming, the president, noted with some satisfaction that the defects per unit of product had dropped significantly compared to the prior year. He was a
> Danna Wise, president of Tidwell Company, recently returned from a conference on quality and productivity. At the conference, she was told that many American firms have quality costs totaling 20 to 30% of sales. The quality experts at the conference conv
> Dorsey Scott MU Company manufactures and bottles a collection of health-oriented fruity beverages. Dorsey’s CFO, Rozella, recently signed a series of new contracts with several dozen large universities to serve as the sole external beverage supplier on t
> Rocket Motors manufactures stern drive engines for pleasure craft boats. Rocket’s management is concerned about increasing competition in its industry, resulting from a very large international boat motor manufacturer that appears to be
> Fresh Foods, a large restaurant chain, needs to determine if it would be cheaper to produce 5,000 units of its main food ingredient for use in its restaurants or to purchase them from an outside supplier for $12 each. Cost information on internal product
> Botella Company produces plastic bottles. The unit for costing purposes is a case of 18 bottles. The following standards for producing one case of bottles have been established: Direct materials (4 lbs. @ $0.95) …………………..$ 3.80 Direct labor (1.25 hrs. @
> Phono Company manufactures a plastic toy cell phone. The following standards have been established for the toy’s materials and labor inputs: During the first week of July, the company had the following results: Units produced â
> The maternity wing of the city hospital has two types of patients: normal and cesarean. The standard quantities of labor and materials per delivery for 20X1 are: The standard price paid per pound of direct materials is $10.00. The standard rate for lab
> AudioMart is a retailer of radios, stereos, and televisions. The store carries two portable sound systems that have radios, tape players, and speakers. System A, of slightly higher quality than System B, costs $20 more. With rare exceptions, the store al
> Zanda Drug Corporation buys three chemicals that are processed to produce two types of analgesics used as ingredients for popular over-the-counter drugs. The purchased chemicals are blended for 2 to 3 hours and then heated for 15 minutes. The results of
> Louise McDermott, controller for the Galvin plant of Veromar Inc., wanted to determine the cost behavior of moving materials throughout the plant. She accumulated the following data on the number of moves (from 100 to 800 in increments of 100) and the to
> Refer to Problem 6-65. Required: 1. Using the FIFO method, prepare the following for Department A: (a) a physical flow schedule, (b) an equivalent unit calculation, (c) calculation of unit costs (Note: Round to three decimal places.), (d) cost of EWIP a
> Refer to the information for Farnsworth Company (p. 139) for the first 10 months of data on receiving orders and receiving cost. Now suppose that Tracy has gathered 2 more months of data: Note: For the following requirements, round the intercept terms
> Borques Company produces and sells wooden pallets that are used for moving and stacking materials. The operating costs for the past year were as follows: Variable costs per unit: Direct materials ……………………………………..$ 2.85 Direct labor ……………………………………………..$
> Seacrest Company uses a process-costing system. The company manufactures a product that is processed in two departments: A and B. As work is completed, it is transferred out. All inputs are added uniformly in Department A. The following summarizes the pr
> Define outsourcing, and discuss why companies may outsource various functions.
> Suppose that Kicker had the following sales and cost experience (in thousands of dollars) for May of the current year and for May of the prior year: In May of the prior year, Kicker started an intensive quality program designed to enable it to build
> FunTime Company produces three lines of greeting cards: scented, musical, and regular. Segmented income statements for the past year are as follows: Kathy Bunker, president of FunTime, is concerned about the financial performance of her firm and is s
> Candyland Inc. produces a particularly rich praline fudge. Each 10-ounce box sells for $5.60. Variable unit costs are as follows: Pecans ………………………………………..$0.70 Sugar ……………………………………………0.35 Butter ……………………………………………1.85 Other ingredients ………………………….0.34 Bo
> Alard Company produces blenders and coffee makers. During the past year, the company produced and sold 65,000 blenders and 75,000 coffee makers. Fixed costs for Alard totaled $340,000, of which $184,000 can be avoided if the blenders are not produced and
> Refer to the information for Farnsworth Company on the previous page. Required: 1. Prepare a scattergraph based on the 10 months of data. Does the relationship appear to be linear? 2. Using the high-low method, prepare a cost formula for the receiving a
> Basu Company produces two types of sleds for playing in the snow: basic sled and aerosled. The projected income for the coming year, segmented by product line, follows: The selling prices are $30 for the basic sled and $60 for the aerosled. (Round brea
> Willow Company produces lawnmowers. One of its plants produces two versions of mowers: a basic model and a deluxe model. The deluxe model has a sturdier frame, a higher horsepower engine, a wider blade, and mulching capability. At the beginning of the ye
> Ramsey Company produces speakers (Model A and Model B). Both products pass through two producing departments. Model A’s production is much more labor-intensive than that of Model B. Model B is also the more popular of the two speakers.
> Xania Inc. uses a normal job-order costing system. Currently, a plantwide overhead rate based on machine hours is used. Xania’s plant manager has heard that departmental overhead rates can offer significantly better cost assignments tha
> Hayward Company, a manufacturing firm, has supplied the following information from its accounting records for the month of May: Required: 1. Prepare a statement of cost of goods manufactured. 2. Prepare a statement of cost of goods sold. Direct l
> What is a foreign trade zone, and what advantages does it offer U.S. companies?
> Laworld Inc. manufactures small camping tents. Last year, 200,000 tents were made and sold for $60 each. Each tent includes the following costs: Direct materials ………………………………………………$18 Direct labor ………………………………………………………12 Manufacturing overhead ……………………
> Heurion Company is a job-order costing firm that uses a plantwide overhead rate based on direct labor hours. Estimated information for the year is as follows: Overhead …………&
> Newmarge Products Inc. is evaluating a new design for one of its manufacturing processes. The new design will eliminate the production of a toxic solid residue. The initial cost of the system is estimated at $860,000 and includes computerized equipment,
> Pop’s Drive-Thru Burger Heaven produces and sells quarter-pound hamburgers. Each burger is wrapped and put in a “burger bag,” which also includes a serving of fries and a soft drink. The price for the
> I know that it’s the thing to do,” insisted Pamela Kincaid, vice president of finance for Colgate Manufacturing. “If we are going to be competitive, we need to build this completely automated plant.” “I’m not so sure,” replied Bill Thomas, CEO of Colgate
> Leakam Company’s product engineering department has developed a new product that has a 3-year life cycle. Production of the product requires development of a new process that requires a current $100,000 capital outlay. The $100,000 will be raised by issu
> Foster Company wants to buy a numerically controlled (NC) machine to be used in producing specially machined parts for manufacturers of trenching machines (to replace an existing manual system). The outlay required is $3,500,000. The NC equipment will la
> Ondi Airlines is interested in acquiring a new aircraft to service a new route. The route will be from Tulsa to Denver. The aircraft will fly one round-trip daily except for scheduled maintenance days. There are 15 maintenance days scheduled each year. T
> Techno Inc. has two divisions: Auxiliary Components and Audio Systems. Divisional managers are encouraged to maximize ROI and EVA. Managers are essentially free to determine whether goods will be transferred internally and what the internal transfer pric
> Dr. Whitley Avard, a plastic surgeon, had just returned from a conference in which she learned of a new surgical procedure for removing wrinkles around eyes, reducing the time to perform the normal procedure by 50%. Given her patient-load pressures, Dr.
> Explain what a post audit is and how it can provide useful input for future capital
> GreenWorld Inc. is a nursery products firm. It has three divisions that grow and sell plants: the Western Division, the Southern Division, and the Canadian Division. Recently, the Southern Division of GreenWorld acquired a plastics factory that manufactu
> Suppose that Larimer Company sells a product for $24. Unit costs are as follows: Direct materials …………………………………………………………$4.98 Direct labor …………………………………………………………………..2.10 Variable factory overhead ……………………………………………..1.00 Variable selling and administrat
> Saludable Company produces two types of get-well cards: scented and regular. Drivers for the four activities are as follows: The following activity data have been collected: Inspecting products ……â€&b
> Crazy Fan Guard Company provides security services to popular live sporting event venues. Crazy Fan management has identified one of its top risks as the possibility that restrictions on premium close seating options will severely decrease its sales reve
> Each of the following scenarios is independent. Assume that all cash flows are after-tax cash flows. a. Campbell Manufacturing is considering the purchase of a new welding system. The cash benefits will be $480,000 per year. The system costs $2,700,000 a
> Each of the following scenarios is independent. Assume that all cash flows are after-tax cash flows. a. Cobre Company is considering the purchase of new equipment that will speed up the process for extracting copper. The equipment will cost $3,600,000 an
> Bryce Company manufactures pet supplies. However, Bryce’s electronic accounting system recently crashed and, unfortunately, only a partial recovery of the company’s year-end accounting records (which included several profitability ratios) was possible. A
> Refer to the information for Oliver Company above and on the previous page. Required: Prepare a schedule that provides operating cash flows for the year 20X2 using the direct method. Data for Exercise 40: Oliver Company provided the following informat
> Refer to the information for Oliver Company above and on the previous page. Required: 1. Calculate the change in cash flows that serves as the control figure for the statement of cash flows. 2. Prepare a schedule that provides operating cash flows for t
> During 20X1, Craig Company had the following transactions: a. Purchased $300,000 of 10-year bonds issued by Makenzie Inc. b. Acquired land valued at $105,000 in exchange for machinery. c. Sold equipment with original cost of $810,000 for $495,000; accumu
> What are the advantages of the scattergraph method over the high-low method? The high-low method over the scattergraph method?
> Consider each of the following situations. Is there a potential problem? Which part of the fraud triangle is involved, if any? A. Susan is an accounts payable clerk. She sets up creditors in a financial database and pays invoices as they come in. Last ye
> A Box Scorecard was prepared for a value stream: Required: 1. How many nonfinancial measures are used to evaluate performance? Why are nonfinancial measures used? 2. Classify the operational measures as time-based, quality-based, or efficiency-based. D
> A value stream has three activities and two products. The units produced and shipped per week are 50 of the limited model (Model K), characterized by special additional features, and 150 of the regular model (Model R), with only basic features. The conve
> Erba Inc. has the following departmental layout for producing an herbal supplement: After a detailed study, the head of the plant’s industrial engineering department recommended that the following cellular manufacturing layout replace
> The controller of Emery, Inc. has computed quality costs as a percentage of sales for the past 5 years (20X1 was the first year the company implemented a quality improvement program). This information is as follows: Required: 1. Prepare a trend graph f
