Question: The budget director for Kanosh Cleaning Services

> Tobin Company manufactures a product that has a variable cost of $38 per unit and a sales price of $78 per unit. The company’s annual fixed costs total $720,000. It had net income of $360,000 in the previous year. In an effort to increase the company’s m

> Arnold Company currently produces and sells 10,000 units of a telephone per year that has a variable cost of $10 per unit and a fixed cost of $500,000. The company currently earns a $200,000 annual profit. Assume that Arnold has the opportunity to invest

> As discussed in the Curious Accountant, Target Corporation believed it could increase the company’s profits by closing its stores in Canada. Other companies have also tried to improve their financial performance by downsizing. In Novem

> Use Exhibit 3.3 in this chapter to answer the following questions. Required 1. Determine the mix of sales volume, fixed cost, and variable cost per unit required to produce a desired profit of $82,000. 2. Determine the expected profit if Bright Day proje

> Vogel Company manufactures scanners that sell for $150 each. The company pays $60 per unit for the variable costs of the product and incurs fixed costs of $1,800,000. Vogel expects to sell 60,000 scanners. Required Determine Vogel’s margin of safety expr

> Trent, a 10-year-old boy, wants to sell lemonade on a hot summer day. He hopes to make enough money to buy a new iPad. Joe, his older brother, tries to help him compute his prospect of doing so. The following is the relevant information. Variable costs

> Ziegler Corporation manufactures products that it sells for $32 each. Variable costs are $18 per unit, and annual fixed costs are $840,000. Ziegler desires to earn a profit of $140,000. Required 1. Use the equation method to determine the break-even poin

> Parry Computers leases space in a mall at a monthly rental cost of $3,000. The following graph setups depict rental cost on the vertical axes and activity level on the horizontal axes. Required 1. Draw a line that depicts the relationship between the tot

> In the evenings, Shawn Corder works telling fortunes using his friend Fred Molloy’s booth at the city market. Mr. Molloy pays the booth rental, so Mr. Corder has no rental cost. As a courtesy, Mr. Corder provides each customer a soft drink. The drinks co

> Shawn Corder needs extra money quickly to help cover some unexpected school expenses. Mr. Corder has learned fortune-telling skills through his long friendship with Fred Molloy, who tells fortunes during the day at the city market. Mr. Molloy has agreed

> Nielsen Chairs Corporation produces ergonomically designed chairs favored by architects. The company normally produces and sells from 2,000 to 5,000 chairs per year. The following cost data apply to various production activity levels. Required 1. Complet

> Russell Company’s production and total cost data for two recent months follow. Required 1. Separately calculate the depreciation cost per unit and the factory supplies cost per unit for both January and February. 2. Identify which cost

> The following variable manufacturing costs apply to goods produced by Bure Manufacturing Corporation. Required Determine the total variable manufacturing cost if Bure produces 4,000, 6,000, or 8,000 units.

> Beasley Company makes three types of exercise machines. Data have been accumulated for four possible overhead drivers. Data for these four possible drivers are shown in rows 4 to 7 of the following spreadsheet. Required Construct a spreadsheet that will

> Tameron Corporation incurs the following annual fixed production costs. Required Determine the total fixed production cost per unit if Tameron produces 10,000, 20,000, or 50,000 units.

> At the various sales levels shown, Parsons Company incurred the following costs. Required Identify each of these costs as fixed, variable, or mixed.

> Pettit Ice Cream Company produces various ice cream products for which demand is highly seasonal. The company sells more ice cream in warmer months and less in colder ones. Last year, the high point in production activity occurred in August when Pettit p

> Century Entertainment Company operates a movie theater that has monthly fixed expenses of $4,000. In addition, the company pays film distributors $1.00 per ticket sold. The following chart shows the number of tickets Century expects to sell in the coming

> The following budgeted income statement applies to Johnson Company. Required 1. Use the contribution margin approach to calculate the magnitude of operating leverage. 2. Use the operating leverage measure computed in Requirement a to determine the amount

> Nagano Company, a merchandising firm, reported the following operating results. Required 1. Reconstruct the income statement using the contribution margin format. 2. Calculate the magnitude of operating leverage. 3. Use the measure of operating leverage

> Standard and Variant compete in the same market. The following budgeted income statements illustrate their cost structures. Required 1. Assume that Standard can lure all 150 customers away from Variant by lowering its sales price to $85 per customer. Rec

> Top Hats Corporation uses workers in Indonesia to manually weave straw hats. The company pays the workers a daily base wage plus $0.50 per completed hat. On Monday, workers produced 100 hats for which the company paid wages of $95. Required Calculate the

> Dillon Computers purchases computers from a manufacturer for $500 per computer. The following graph setups depict product cost on the vertical axes and activity level on the horizontal axes. Required 1. Draw a line that depicts the relationship between t

> Borris Copies Company provides professional copying services to customers through the 35 copy stores it operates in the southwestern United States. Each store employs a manager and four assistants. The manager earns $4,000 per month plus a bonus of 3 per

> Tameron Corporation produces video games in three market categories: commercial, home line, and miniature handheld. Tameron has traditionally allocated overhead costs to the three product categories using the companywide base of direct labor hours. The c

> Fastidious Vincent washed his hair at home and then went to a barbershop for a haircut. The barber explained that shop policy is to shampoo each customer’s hair before cutting, regardless of how recently it had been washed. Somewhat annoyed, Vincent subm

> Greg Madrid, a HealthSouth billing clerk, filed a suit under the False Claims Act charging that HealthSouth purchased computer equipment from a company owned by Richard Scrushy’s parents at prices two and three times the normal price. At the time, Richar

> The accounting records of Abbott Manufacturing Company (AMC) revealed that the company incurred $3 million of materials, $5 million of production labor, $4 million of manufacturing overhead, and $6 million of selling, general, and administrative expense

> Melinda’s Beauty Salon purchases inventory supplies from a variety of vendors, some of which require a four-week lead time before delivering inventory purchases. To ensure that she will not run out of supplies, Melinda Lowe, the owner, maintains a large

> Denise Jensen is the editor-in-chief of her school’s yearbook. The school has 1,200 students and 40 faculty and staff members. The firm engaged to print copies of the yearbook charges the school $20 per book and requires a 10-day lead time for delivery.

> In reviewing Fargo Company’s financial statements for the past two years, Lilian Stone, a bank loan officer, noticed that the company’s inventory level had increased significantly while sales revenue had remained constant. Such a trend typically indicate

> The following horizontal financial statements model shows the effects of recording the expiration of insurance in two different circumstances. Assume all financial statement data are prepared in accordance with GAAP. One circumstance represents the expir

> Because friends and neighbors frequently praise her baking skills, Susan Nazari plans to start a new business baking cakes for customers. She wonders how to determine the cost of her cakes. Assume financial statement data are prepared in accordance with

> During Year 1, Hutton Pharmaceutical Company incurred $35,000,000 of research and development (R&D) costs to develop a new hay fever drug called Allergone. In accordance with FASB standards, the entire R&D cost was recognized as expense in Year 1. Manufa

> Identify each of the items shown in the left column of the following table as being an upstream, a midstream, or a downstream cost by placing an X in the one of the columns to the right of the items column. The first item is shown as an example. Item Tel

> This case examines potential ethical issues faced by the dialysis clinic described in ATC 5-2. It is, however, an independent case that students may study in conjunction with or separately from ATC 5-2. The dialysis clinic provides two types of treatment

> Fuji Manufacturing Company began operations on January 1. During January, it started and completed 6,000 units of product. Assume all financial statement data are prepared in accordance with GAAP. The company incurred the following costs. 1. Raw material

> Mueller Electronics Company experienced the following events during its first accounting period. 1. Received $87,000 cash by issuing common stock. 2. Paid $30,000 cash for wages to production workers. 3. Paid $15,000 for salaries to administrative staff.

> In reviewing Larson Company’s September accounting records, Andy Miranda, the chief accountant, noted the following depreciation costs. Assume product costs are defined by GAAP. 1. Factory buildings—$75,000. 2. Computers used in manufacturing—$12,000. 3.

> Finch Corporation recognized accrued compensation cost. Use the following model to show how this event would affect the company’s financial statements under the following two assumptions: (1) the compensation is for office personnel and

> Use the following table to classify each cost as a product cost or an SG&A cost. Also indicate whether the cost would be recorded as an asset or an expense. Assume product cost is defined by generally accepted accounting principles. The first item is sho

> Identifying product versus selling, general, and administrative (SG&A) costs Required Indicate whether each of the following costs should be classified as a product cost or as an SG&A cost in accordance with GAAP: 1. Direct materials used in a manufactur

> Identifying financial versus managerial accounting items Required Indicate whether each of the following items is representative of managerial or of financial accounting. 1. Information is factual and is characterized by objectivity, reliability, consist

> Parliament Company, which expects to start operations on January 1, Year 2, will sell digital cameras in shopping malls. Parliament has budgeted sales as indicated in the following table. The company expects a 10 percent increase in sales per month for F

> Jacob Long, the controller of Arvada Corporation, is trying to prepare a sales budget for the coming year. The income statements for the last four quarters follow. Historically, cost of goods sold is about 60 percent of sales revenue. Selling and adminis

> Lois Bragg owns a small restaurant in Boston. Ms. Bragg provided her accountant with the following summary information regarding expectations for the month of June. The balance in accounts receivable as of May 31 is $40,000. Budgeted cash and credit sale

> Lucy Sawyer, who owns and operates Sawyer Toy Company, is a perfectionist. She believes literally in the “zero-defects” approach to quality control. Her favorite saying is, “You can’

> The accountant for Jean’s Dress Shop prepared the following cash budget. Jean’s desires to maintain a cash balance of $10,000 at the end of each month. Funds are assumed to be borrowed and repaid on the last day of eac

> January budgeted selling and administrative expenses for the retail shoe store that Craig Shea plans to open on January 1, Year 1, are as follows: sales commissions, $50,000; rent, $30,000; utilities, $10,000; depreciation, $5,000; and miscellaneous, $2,

> Executive officers of Stoneham Company are wrestling with their budget for the next year. The following are two different sales estimates provided by two difference sources. Stoneham’s past experience indicates that cost of goods sold i

> Teresa Flanagan, the accountant, is a perfectionist. No one can do the job as well as she can. Indeed, she has found budget information provided by the various departments to be worthless. She must change everything they give her. She has to admit that h

> Hensely Company, which produces and sells a small digital clock, bases its pricing strategy on a 25 percent markup on total cost. Based on annual production costs for 25,000 units of product, computations for the sales price per clock follow. Unit-level

> Describe the qualitative factors that Katzev should consider before accepting the special order described in Exercise 6-7A. Data from Exercise 6-7A: Katzev Company manufactures a personal computer designed for use in schools and markets it under its own

> Katzev Company manufactures a personal computer designed for use in schools and markets it under its own label. Katzev has the capacity to produce 40,000 units a year but is currently producing and selling only 32,000 units a year. The computer’s normal

> Visburg Concrete Company pours concrete slabs for single-family dwellings. Lancing Construction Company, which operates outside Visburg’s normal sales territory, asks Visburg to pour 40 slabs for Lancing’s new development of homes. Visburg has the capaci

> Norman Dowd owns his own taxi, for which he bought a $10,000 permit to operate two years ago. Mr. Dowd earns $30,000 a year operating as an independent but has the opportunity to sell the taxi and permit for $36,500 and take a position as dispatcher for

> In June, 2020, The Volvo Group announced a recall of over 2 million vehicles worldwide, including more than 300,000 in the United States. Consumer Reports website has a good summary of this recall and the issue causing it. Use the following link to find

> Costs can be classified into one of four categories, including unit-level, batch-level, product-level, or facility-level costs. Required Classify each of the items listed below into one of the four categories listed previously. The first item has been ca

> Boyle Company makes fine jewelry that it sells to department stores throughout the United States. Boyle is trying to decide which of two bracelets to manufacture. Cost data pertaining to the two choices follow. Required 1. Identify the fixed costs and de

> Sweet Taste has the capacity to produce either 45,000 corncob pipes or 21,000 cornhusk dolls per year. The pipes cost $3.00 each to produce and sell for $7.50 each. The dolls sell for $10.00 each and cost $4.00 to produce. Required Assuming that Sweet Ta

> Because of rapidly advancing technology, Chicago Publications Corporation is considering replacing its existing typesetting machine with leased equipment. The old machine, purchased two years ago, has an expected useful life of six years and is in good c

> Kahn Company paid $240,000 to purchase a machine on January 1, Year 1. During Year 3, a technological breakthrough resulted in the development of a new machine that costs $300,000. The old machine costs $100,000 per year to operate, but the new machine c

> Kilgore Company makes and sells a single product. Kilgore incurred the following costs in its most recent fiscal year. Kilgore could purchase the products that it currently makes. If it purchased the items, the company would continue to sell them using i

> Mead Company is considering the replacement of some of its manufacturing equipment. Information regarding the existing equipment and the potential replacement equipment follows. The amounts shown for operating expenses are the cumulative total of all suc

> Tesla management are trying to decide whether to keep an older piece of machinery or buy a replacement. Management was presented with the following information to assist in their decision: - The old machine was purchased three years ago for $720,000 and

> Roadrunner Freight Company owns a truck that cost $42,000. Currently, the truck’s book value is $24,000, and its expected remaining useful life is four years. Roadrunner has the opportunity to purchase for $31,200 a replacement truck that is extremely fu

> Lake Corporation is considering the elimination of one of its segments. The segment incurs the following fixed costs. If the segment is eliminated, the building it uses will be sold. Required Based on this information, determine the amount of avoidable c

> A dialysis clinic provides two types of treatment for its patients. Hemodialysis (HD), an in-house treatment, requires that patients visit the clinic three times each week for dialysis treatments. Peritoneal dialysis (PD) permits patients to self-adminis

> Use the January 28, 2019, Form 10-K for Stanley Black & Decker, Inc. (Stanley), to complete the following requirements. To obtain the Form 10-K, you can use the EDGAR system following the instructions in Appendix A, or it can be found under “Corporate In

> Dudley Transport Company divides its operations into four divisions. A recent income statement for its West Division follows. Required 1. Should West Division be eliminated? Support your answer by explaining how the division’s eliminati

> Buckley Company operates three segments. Income statements for the segments imply that profitability could be improved if Segment A were eliminated. Required 1. Explain the effect on profitability if Segment A is eliminated. 2. Prepare comparative income

> Omron Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 10,000 containers follows. Unit-level materials $7,500 Unit-level labor 8,250 Unit-level overhead 5,250 Pr

> Kawai Corporation, which makes and sells 85,000 radios annually, currently purchases the radio speakers it uses for $8.00 each. Each radio uses one speaker. The company has idle capacity and is considering the possibility of making the speakers that it n

> Levesque Company makes and sells lawn mowers for which it currently makes the engines. It has an opportunity to purchase the engines from a reliable manufacturer. The annual costs of making the engines are shown here. Cost of materials (20,000 units × $2

> Steele Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-quality racing bikes with limited sales. Steele produces and sells only 10,000 bikes each year. Due to the low volume of activity, S

> Gayla Ojeda is trying to decide which of two different kinds of candy to sell in her retail candy store. One type is a name-brand candy that will practically sell itself. The other candy is cheaper to purchase but does not carry an identifiable brand nam

> Sheridan Publishing identified the following overhead activities, their respective costs, and their cost drivers to produce the three types of textbooks the company publishes. Deluxe textbooks are made with the finest-quality paper, six-color printing, a

> Vaulker Company produces commercial gardening equipment. Since production is highly automated, the company allocates its overhead costs to product lines using activity-based costing. The costs and cost drivers associated with the four overhead activity c

> Use the information in Exercise 5-6A to complete the following requirements. Assume that before shifting to activity-based costing, Snowden Industries allocated all overhead costs based on direct labor hours. Direct labor data pertaining to the two decod

> Hydraulic Hoses, Inc., produces specialized industrial hoses for applications such as high-pressure hydraulics and the transference of highly corrosive materials. The company has recently implemented an ABC system for three of its products, and is intere

> Snowden Industries produces two electronic decoders, P and Q. Decoder P is more sophisticated and requires more programming and testing than does Decoder Q. Because of these product differences, the company wants to use activity-based costing to allocate

> Evert Company makes two types of circuit boards. One is a high-caliber board designed to accomplish the most demanding tasks; the other is a low-caliber board designed to provide limited service at an affordable price. During its most recent accounting p

> Describe a set of circumstances in which the cost of painting could be classified as a unit-level, a batch-level, a product-level, or a facility-level cost.

> Anniston Manufacturing incurred the following costs during Year 2 to produce its high-quality precision instruments. The company used an activity-based costing system and identified the following activities: 1. Depreciation on manufacturing equipment. 2.

> Provide at least one example of an appropriate cost driver (allocation base) for each of the following activities: 1. Engineering drawings are produced for design changes. 2. Purchase orders are issued. 3. Products are labeled, packaged, and shipped. 4.

> The preceding graph depicts the relationships among the components of total quality cost. 1. Label the lines identified as A, B, and C. 2. Explain the relationships depicted in the graph.

> Blevins Boards produces two kinds of skateboards. Selected unit data for the two boards for the last quarter follow. Blevins allocates production overhead using activity-based costing. It allocates delivery expense and sales commissions, which amount to

> Wu Manufacturing produces two keyboards, one for laptop computers and the other for desktop computers. The production process is automated, and the company has found activity-based costing useful in assigning overhead costs to its products. The company h

> Tanner Manufacturing is developing an activity-based costing system to improve overhead cost allocation. One of the first steps in developing the system is to classify the costs of performing production activities into activity cost pools. Required Using

> Production workers for Chadwick Manufacturing Company provided 3,200 hours of labor in January and 2,800 hours in February. The company, whose operation is labor intensive, expects to use 48,000 hours of labor during the year. Chadwick paid a $120,000 an

> Phillips Paints manufactures three types of paint in a joint process: rubberized paint, rust-proofing paint, and aluminum paint. In a standard batch of 500,000 gallons of raw material, the outputs are 240,000 gallons of rubberized paint, 80,000 gallons o

> Production workers for Essa Manufacturing Company provided 300 hours of labor in January and 600 hours in February. Essa expects to use 5,000 hours of labor during the year. The rental fee for the manufacturing facility is $6,000 per month. Required Expl

> Fanya Construction Company expects to build three new homes during a specific accounting period. The estimated direct materials and labor costs are as follows. Assume Fanya needs to allocate two major overhead costs ($80,000 of employee fringe benefits a

> Willey Company makes three products in its factory: plastic cups, plastic tablecloths, and plastic bottles. The expected overhead costs for the next fiscal year include the following. Factory manager’s salary $ 210,000 Factory utility cost 70,000 Factory

> Tyson Hats Corporation manufactures three different models of hats: Vogue, Beauty, and Glamour. Tyson expects to incur $480,000 of overhead cost during the next fiscal year. Other budget information follows. Required 1. Use direct labor hours as the cost

> Ware Manufacturing Company produced 2,000 units of inventory in January Year 2. It expects to produce an additional 14,000 units during the remaining 11 months of the year. In other words, total production for Year 2 is estimated to be 16,000 units. Dire

> Rasmussen Corporation expects to incur indirect overhead costs of $80,000 per month and direct manufacturing costs of $12 per unit. The expected production activity for the first four months of the year are as follows. Required 1. Calculate a predetermin

> Beasley Services Company (BSC) has 50 employees, 28 of whom are assigned to Division A and 22 to Division B. BSC incurred $450,000 of fringe benefits cost during Year 2. Required Determine the amount of the fringe benefits cost to be allocated to Divisio

> Quinlan Trust Corporation has two service departments: actuary and economic analysis. Quinlan also has three operating departments: annuity, fund management, and employee benefit services. The annual costs of operating the service departments are $480,00

> Kirby Health Care Center Inc. has three clinics servicing the Seattle metropolitan area. The company’s legal services department supports the clinics. Moreover, its computer services department supports all of the clinics and the legal