Sunshine Printing Company currently leases its only copy machine for $1,500 a month. The company is considering replacing this leasing agreement with a new contract that is entirely commission based. Under the new agreement, Sunshine would pay a commission for its printing at a rate of $10 for every 500 pages printed. The company currently charges $0.20 per page to its customers. The paper used in printing costs the company $0.08 per page and other variable costs, including hourly labor, amount to $0.07 per page. Required 1. What is the company’s breakeven point under the current leasing agreement? What is it under the new commission-based agreement? 2. For what range of sales levels will Sunshine prefer (a) the fixed lease agreement and (b) the commission agreement? 3. Do this question only if you have covered the chapter appendix in your class. Sunshine estimates that the company is equally likely to sell 30,000, 45,000, 60,000, 75,000, or 90,000 pages of print. Using information from the original problem, prepare a table that shows the expected profit at each sales level under the fixed leasing agreement and under the commission-based agreement. What is the expected value of each agreement? Which agreement should Sunshine choose?
> Young Bay Surfboards manufactures fiberglass surfboards. The standard cost of direct materials and direct manufacturing labor is $223 per board. This includes 40 pounds of direct materials, at the budgeted price of $2 per pound, and 10 hours of direct ma
> You have been invited to interview for an internship with an international food manufacturing company. When you arrive for the interview, you are given the following information related to a fictitious Belgian chocolatier for June 2020. The chocolatier m
> Andrew Scheid Ltd manufactures kitchen cabinets. The company’s budget for fixed costs per month is $7,500 and budgeted variable costs per cabinet are: The company had budgeted to make and sell 1,000 cabinets per month at a selling price
> Marcus McQueen has run In-A-Flash Car Detailing for the past 10 years. His static budget and actual results for June 2020 are provided next. Marcus has one employee who has been with him for all 10 years that he has been in business. In addition, at any
> Milan Statuary manufactures bust statues of famous historical figures. All statues are the same size. Each unit requires the same amount of resources. The following information is from the static budget for 2020: Standard quantities, standard prices, and
> Tyva makes a very popular undyed cloth sandal in one style, but in Regular and Deluxe. The Regular sandals have cloth soles and the Deluxe sandals have cloth-covered wooden soles. Tyva is preparing its budget for June 2021 and has estimated sales based o
> Roma Skincare manufactures and sells a face cream to small specialty stores in Victoria, Australia. It presents the monthly operating income statement shown here to Jacob Scott, a potential investor in the business. Help Mr. Scott understand Roma Skincar
> Angler Chemical Company currently operates three manufacturing plants in Colorado, Utah, and Arizona. Annual carbon emissions for these plants in the first quarter of 2021 are140,000 metric tons per quarter (or 560,000 metric tons in 2021). Angler manage
> Jayzee Company manufactures a variety of products in a variety of departments and evaluates departments and departmental managers by comparing actual cost and output relative to the budget. Departmental managers help create the budgets and usually provid
> Refer to the information in Problem 6-44. All purchases made in a given month are paid for in the following month, and direct material purchases make up all of the accounts payable balance and are reflected in the accounts payable balances at the beginni
> Butler, Inc., operates at capacity and makes wooden playground equipment. Although Butler’s swing sets and play forts are a matching set, they are sold individually and so the sales mix is not 1:1. Butler’s management
> Refer to the information in Problem 6-42. Budgeted balances at January 31, 2021, are as follows: Selected budget information for December 2020 follows: Customer invoices are payable within 30 days. From past experience, Skulas’s account
> Skulas, Inc., manufactures and sells snowboards. Skulas manufactures a single model, the Pipex. In late 2020, Skulas’s management accountant gathered the following data to prepare budgets for January 2021: Skulas’s CEO
> Refer to the information in Problem 6-40. Assume the following: Animal Gear (AG) does not make any sales on credit. AG sells only to the public and accepts cash and credit cards; 90% of its sales are to customers using credit cards, for which AG gets the
> Akanson Crafts Ltd. is an arts gallery that produces three different arts products namely: Akra, Omra, and Okore. The budgeted sales of the products for 2020 were as follow: Materials used in the production of the products are: Two types of labor are use
> Christa Schuller owns an outlet of a popular chain of restaurants in the southern part of Germany. One of the chain’s popular lunch items is the cheeseburger. It is a hamburger topped with cheese. On demand, purchasing agents from each outlet orders the
> Spin Cycle Company is a manufacturer of commercial- grade exercise bikes that are sold to hotels and health clubs. Maintaining the bikes is an important area of customer satisfaction. Because of increased industry competition, Spin Cycleâ€
> Consider the following details of the income statement of Fountain Pen Ltd, a Swedish company that produces special pens, for the last year: An analysis of Fountain Pen Ltd’s costs reveals that its fixed manufacturing costs were 2,400,0
> John Dawling Brothers is a company that produces two well-known domestic appliance models, the Tablefrig and Tablefrez. The following details have been estimated for 2021 for the sales and production of the appliances: Total cost estimates for Tablefrig
> EverGreen Store, Singapore, manufactures plain white and solid-colored T-shirts. Budgeted inputs include the following: Budgeted sales and selling price per unit are as follows: EverGreen has the opportunity to switch from using its current dye to using
> Woodechuck’s manufactures, among other things, jerseys for the girls’ football teams in two high schools in Australia. The company uses fabric to create the jerseys and sews on a logo patch purchased from a licensed st
> Main Street Books and Café (MSBC) is a large city bookstore that sells books and music CDs and has a café. MSBC operates at capacity and allocates selling, general, and administration (S, G, & A) costs to each product line u
> Plum Electronics, a division of Berry Corporation, manufactures two large-screen television models: the Mammoth, which has been produced since 2016 and sells for $990, and the Maximum, a newer model introduced in early 2018 that sells for $1,254. Based o
> Whitewater Adventures manufactures two models of kayaks, Basic and Deluxe, using a combination of machining and hand finishing. Machine setup costs are driven by the number of setups. Indirect manufacturing labor costs increase with direct manufacturing
> Adamac Clinic is a specialist healthcare provider which operates in Lagos, Nigeria. Output is defined as patient days. The clinic uses ABC in its accounting system and provides the following three services to patients. Note all costs are presented using
> Phoenix Medical Associates operates a walk-in medical clinic in Tempe, Arizona. The clinic includes two different departments, Urgent Care, which serves patients with minor to moderate acute illnesses and injuries, and Living Well, which administers vacc
> Shades & Hues (S&H) is a designer of high-quality curtains and bedsheets. Each design is made in small batches. Each spring, S&H comes out with new designs for the curtains and for the bedsheets. The company uses these designs for a year and
> Pharmassist, Inc., a distributor of special pharmaceutical products, operates at capacity and has three main market segments: a. General supermarket chains b. Drugstore chains c. Mom-and-pop single-store pharmacies Rick Flair, the new controller of Pharm
> Essential College Supplies (ECS) is a store on the campus on a large Midwestern university. The store has both an apparel section (t-shirts with the school logo) and a convenience section. ECS reports revenues for the apparel section separately from the
> Yahama Ltd makes several spare parts for motorbikes including Suzuka and Yahama parts. The company has recently switched from the traditional absorption costing to the activity-based costing system. The following details relate to the manufacturing of th
> Marshall’s Devices uses activity-based costing to allocate overhead costs to customer orders for pricing purposes. Many customer orders are won through competitive bidding. Direct material and direct manufacturing labor costs are traced
> Bradley has two classifications of professional staff: partners and associates. Harrington asks his assistant to examine the relative use of partners and associates on the recent Campa Coal and St. Edith’s jobs. The Campa job used 50 pa
> Harrington asks his assistant to collect details on those costs included in the $25,000 indirect-cost pool that can be traced to each individual job. After analysis, Bradley is able to reclassify $15,000 of the $25,000 as direct costs: Harrington decides
> Bradley Associates is a recently formed law partnership. Emmit Harrington, the managing partner of Bradley Associates, has just finished a tense phone call with Martin Omar, president of Campa Coal. Omar strongly complained about the price Bradley charge
> Eware Ltd, a bakery, records the following trans- actions in its books for the month of August. a. Raw materials of $182,000 were purchased on credit. b. The total of stores requisitions for direct materials issued for the period was $165,000. c. The tot
> Beth Bledsoe joined Baker Brothers, Inc. as controller in October 2019. Baker Brothers manufactures and installs custom kitchen countertops. The company uses a normal-costing sys- tem with two direct-cost pools, direct materials and direct manufacturing
> Kitchen Works Ltd is a carpentry business that specializes in the production of kitchen cabinets. The company budgeted to produce 44,000 kitchen chairs for the month of January, but actually produced 48,800. Its sales were 40,800 units at a price of &Aci
> Brandon Company uses normal costing in its job-costing system. The company produces custom bikes for toddlers. The beginning balances (December 1) and ending balances (as of December 30) in their inventory accounts are as follows: Additional information
> Oregon Outfitters, a manufacturer of fly fishing flies, uses a normal-costing system with a single overhead cost pool and direct labor cost as the cost-allocation base. The following data are for 2020: Manufacturing overhead allocated data and the ending
> The following items appear as cost of a manufacturing company: A. Depreciation on plant and equipment B. Depreciation on delivery vans C. Insurance on plant and building D. Marketing manager’s salary E. Raw materials F. Manufacturing overheads G. Electri
> Premier Golf Carts makes custom golf carts that it sells to dealers across the Southeast. The carts are produced in two departments, fabrication (a mostly automated department) and custom finishing (a mostly manual department). The company uses a normal-
> Gordon Bros Ltd manufactures plastic products. The following details relates to Job #369: April 1, 2020: Direct materials of $420,000 and indirect materials of $17,000 were purchased. However, the company used direct materials costing $355,000 April 2, 2
> The Zaf Radiator Company uses a normal-costing system with a single manufacturing overhead cost pool and machine-hours as the cost-allocation base. The following data are for 2020: Machine-hours data and the ending balances (before proration of under- or
> Kidman has just completed a review of its job-costing system. This review included a detailed analysis of how past jobs used the firm’s resources and interviews with personnel about what factors drive the level of indirect costs. Manage
> Kidman & Associates is a law firm specializing in labor relations and employee-related work. It employs 30 professionals (5 partners and 25 associates) who work directly with its clients. The average budgeted total compensation per professional for 2020
> Daewoong Medicals, a healthcare company based in South Korea, uses a job-costing system at Hyangnam plant. The plant has a technology department and a finishing department. Daewoong uses normal costing with two direct-cost categories (direct materials an
> AgroPharm Corporation manufactures pharmaceutical products that are sold through a network of external sales agents. The agents are paid a commission of 18% of revenues. AgroPharm is considering replacing the sales agents with its own salespeople, who wo
> Carlisle Engine Company manufactures and sells diesel engines for use in small farming equipment. For its 2020 budget, Carlisle Engine Company estimates the following: The first-quarter income statement, as of March 31, reported that sales were not meeti
> TopHats operates a kiosk at a local mall, selling hats for $30 each. TopHats currently pays $900 a month to rent the space and pays three full-time employees to each work 160 hours a month at $12 per hour. The store shares a manager with a neighboring ma
> The Big Event (TBE) recently started a business organizing food and music at weddings and other large events. In order to better understand the profitability of the business, the owner has asked you for an analysis of costs—what costs are fixed, what cos
> Refer to requirement 3 of Problem 3-43. In this problem, assume the role of the owner of LadyStyle. Required 1. As owner, which sales compensation plan would you choose if forecasted annual sales of the new store were at least 25,000 units? What do you
> The LadyStyle sells women’s shoes across the country through its chain of shoe stores. It sells 20 different styles of shoes with identical unit costs and selling prices. A unit is defined as a pair of shoes. Each store has a store mana
> Mundial Nails produces a famous nail polish with a unique glossy feature and sells it for $25 per unit. The operating income for 2017 is as follows: Mundial Nails would like to increase its profitability over the next year by at least 20%. To do so, the
> J.T. Brooks and Company, a manufacturer of quality handmade walnut bowls, has had a steady growth in sales for the past 5 years. However, increased competition has led Mr. Brooks, the president, to believe that an aggressive marketing campaign will be ne
> Crestwood Ltd makes 200 wooden kitchen chairs every month and sells them for €50 each. Fixed monthly overheads are €3,000 and the standard cost of one chair is as follows: Required 1. Calculate the variable cost per mon
> Yahama Medical Centre operates a medical surgery in Japan that specializes in the diagnosis and treatment of hay fever allergies. The firm’s budget for next year is as follows: Required 1. Calculate the contribution margin ratio. 2. Co
> Wellington Vents Ltd operates and services snack vending machines located in restaurants, metro stations, canteens, etc. The machines are rented from the manufacturer. In addition, the company must rent the space occupied by its machines. The following e
> Central térmica, Inc., produces the same power gen- erator in two Spanish plants, a new plant in Los Barrios and an older plant in Ascó. The following data are available for the two plants. All fixed costs per unit are calculate
> Megaphone Corporation produces a molded plastic casing, M&M101, for many cell phones currently on the market. Summary data from its 2020 income statement are as follows: Joshua Kirby, Megaphone’s president, is very concerned about M
> The Garden Club is preparing for its annual meeting in which a magic show will be shown to its contributing members only. Last year, out of 1,500 members, only 600 contributed for the magic show. Tickets for the show were $30 per attendee. The profit rep
> The following data has been collected from Decent Waters Company for the year ended December 31, 2019. Required 1. Prepare a schedule for the cost of goods manufactured for the year 2019. 2. If the company produced 20,000 bottles of water in 2019, calcu
> Blackthorns Ltd produces a single product, which has a selling price of £10 per unit and a variable cost of production of £4 per unit. The fixed costs of production are £55,000. In addition, the company incurs distribution and selling costs of £1.90 per
> Romi Filters produces two types of water filters. One at- taches to the faucet and cleans all water that passes through the faucet; the other is a pitcher-cum-filter that only purifies water meant for drinking. The unit that attaches to the faucet is sol
> The Matrix Company has three product lines of belts—A, B, and C—with contribution margins of $7, $5, and $4, respectively. The president foresees sales of 400,000 units in the coming period, consisting of 40,000 units of A, 200,000 units of B, and 160,00
> An auditor for the Internal Revenue Service is trying to reconstruct some partially destroyed records of two taxpayers. Required For each case in the accompanying list, find the unknown elements designated by the letters A and B for Case 1 and C and D f
> The following data are for Mama Retail Outlet Stores. The account balances (in thousands) are for 2020. Required 1. Compute (a) the cost of goods purchased and (b) the cost of goods sold. 2. Prepare the income statement for 2020.
> A UK-based company Office Essentials manufactures and sells metal shelving. It began operations on January 1, 2020. Costs incurred for 2020 are as follows (V stands for variable; F stands for fixed): Variable manufacturing costs are variable with respect
> Sam Wright recently took over as the controller of Osborn Brothers Manufacturing. Last month, the previous controller left the company with little notice and left the accounting records in disarray. Sam needs the ending inventory balances to report first
> The following data are for Huang Wong Ping Retail Outlet Stores. The account balances (in thousands) are for 2021. Required 1. Compute (a) the cost of goods purchased and (b) the cost of goods sold. 2. Prepare the income statement for 2021.
> Granolla Mike works as an auditor in the audit firm of Alison Wonderland & Partners and charges £60 per hour for normal working hours. The firm pays him £90 per hour for unsociable hours, which includes weekends and overtime. During the month of December
> Chan’s manufacturing costing system uses a three-part classification of direct materials, direct manufacturing labor, and manufacturing overhead costs. The following items (in millions) pertain to Chan Corporation: Required Prepare an i
> Timi Company manufactures pens for schools. Summary data (in thousands) for the year ended December 31, 2019, are as follows: Required 1. For each cost item (A–I) from the records, identify the direct and indirect costs 2. Compute Timi
> Which of the following statement about contribution margin and gross margin is correct. a. Contribution margin indicates why the operating income changes as the number of units sold changes. b. Contribution margin indicates how much of a companyâ&#
> How would the answer to Problem 2-40 be modified if you were asked for a schedule of cost of goods manufactured and sold instead of a schedule of cost of goods manufactured? Be specific. 2. Would the sales manager’s salary (included in marketing, distrib
> The Howell Corporation has the following account balances (in millions): Required Prepare an income statement and a supporting schedule of cost of goods manufactured for the year ended December 31, 2020. (For additional questions regarding these facts
> The following information is available for the McCain Manufacturing Company for 2020. Required Assume that all raw materials are purchased on credit and all sales are credit sales. Compute the missing amounts above.
> Consider the following account balances (in thousands) for the Peterson Company: Required 1. Prepare a schedule for the cost of goods manufactured for 2020. 2. Revenues for 2020 were $310 million. Prepare the income statement for 2020.
> Stewart Tables’ selected data for March 2020 are presented here (in millions): Required Calculate the following costs: 1. Direct materials inventory, March 31, 2020 2. Fixed manufacturing overhead costs for March 2020 3. Direct manufac
> Phoenix Press produces consumer magazines. The house and home division, which sells home-improvement and home-decorating magazines, has seen a 15% reduction in operating income over the past 15 months, primarily due to an economic recession and a depress
> Discuss the core professional standards governing management accountants.
> Henry Maddox was recently promoted to Controller of Research and Development for Pharmex, a Fortune 500 pharmaceutical company that manufactures prescription drugs and nutritional supplements. The company’s total R&D cost for 2020 was expected (budgeted)
> Discuss the roles of the chief financial officer and the controller.
> For each of the following items, identify which of the management accounting guidelines applies: cost–benefit approach, behavioral and technical considerations, or different costs for different purposes. 1. Analyzing whether to avail an export order for
> Minnesota Office Products produces three different paper products at its Vaasa lumber plant: Supreme, Deluxe, and Regular. Each product has its own dedicated production line at the plant. It currently uses the following three-part classification for its
> Explain the three main management accounting guidelines.
> Consider the following series of independent situations in which a firm is about to make a strategic decision. Decisions a. Lactalis Foods is planning to come out with a special tetrazzini made. with seafood, mushrooms, cream, and cocktail sauce. b. Van
> Consider the following series of independent situations in which a firm is about to make a strategic decision. Decisions a. Stila Cosmetics is considering introducing an anti-aging facial cream with natural ingredients. b. Kontron Computers is deliberati
> Refresh Resorts, Inc., operates health spas in Key West, Florida; Phoenix, Arizona; and Carmel, California. The Key West spa was the company’s first and opened in 1994. The Phoenix spa opened in 2007, and the Carmel spa opened in 2016.
> Channels is a manufacturer of flatware that is grade-rolled rather than stamped. The flatware is sold in upscale stores as a high-quality item. The company sells the goods that are within specifications at regular prices to the stores. If a piece doesn’t
> Precision Equipment specializes in the manufacture of medical equipment, a field that has become increasingly competitive. Approximately 2 years ago, Pedro Mendez, president of Precision, decided to revise the bonus plan (based, at the time, entirely on
> Kroger Company recently introduced a new bonus plan for its corporate executives. The company believes that current profitability and customer satisfaction levels are equally important to the company’s long-term success. As a result, th
> Estancia, Inc. is a large company that owns restaurants and has a wine division and a frozen food division. Management of the company gives its division managers autonomy in running their divisions for both operating and investment decisions. Estancia is
> Isla Manufacturing makes fashion products and competes on the basis of quality and leading-edge designs. The company has two divisions, clothing and cosmetics. Isla has $2,500,000 invested in assets in its clothing division. After-tax operating income fr
> The Mountainside Corporation manufactures similar products in the United States and Norway. The U.S. and Norwegian operations are organized as de- centralized divisions. The following information is available for 2020; ROI is calculated as operating inco
> Compute the missing amounts. Required
> Accelerate Auto Company operates a new car division (that sells high-performance sports cars) and a performance parts division (that sells performance-improvement parts for family cars). Some division financial measures for 2020 are as follows: Required
> McCall Corporation manufactures furniture in several divisions, including the patio furniture division. The manager of the patio furniture division plans to retire in 2 years. The manager receives a bonus based on the division’s ROI, which is currently 1
> Mary Jane is an upscale retailer for women’s clothing with stores in many high-end shopping centers across the United States. In recent years, sales in most of the stores, especially the company’s flagship store in the
> Hamilton Corp. is a reinsurance and financial services company. Hamilton strongly believes in evaluating the performance of its stand-alone divisions using financial metrics such as ROI and residual income. For the year ended December 31, 2020, Hamilton&
> Fabulous Motor Company makes electric model cars and has two products, the Simplegreen and the Fabulousgreen. To produce the Simplegreen, Fabulous Motor employed assets of $11,250,000 at the beginning of 2020 and $4,790,000 of assets at the end of 2020.
