Throughout your college career, you have been employed on a part-time basis by the Center for Entrepreneurship of your business college. The Center for Entrepreneurship provides executive training and consulting for a fee to individuals and organizations located throughout the state. For 2010, the condensed income statement that follows summarizes the operating results of the center. Fees …………………………………………………………….$ 2,625,000 Faculty and staff salaries ……………………………….(1,050,000) Facilities cost …………………………………………………..(550,000) Training materials ……………………………………………(375,000) Marketing and promotions ………………………………(400,000) Other costs of operations ………………………………….(500,000) Net operating loss …………………………………………$ (250,000) Given that the center operated at a loss in 2010, the dean of the business college has asked the director to provide a justification for not closing the center. As the dean Internet stated, “We’re charged with a fundamental obligation of being good stewards of the state’s resources. We cannot justify spending net resources to subsidize educational programs to corporations and other profit-oriented organizations.” The center director has made the dean’s comments known to all employees and faculty of the center and all are concerned about losing their employment should the center be closed. Having just completed a chapter in your accounting course addressing joint products, you become curious as to whether the preceding income statement fairly reflects the value of all outputs of the center. Particularly, you believe that the center plays a crucial role in the generation of contributions made to the college by alumni and friends of the business college and university. a. Discuss how the existence of joint products of the Center for Entrepreneurship would potentially modify the preceding income statement. b. Discuss how you could use the concepts of joint products and joint cost allocation to demonstrate to the dean that the Center for Entrepreneurship is not consuming “net resources” of the state or college and that the center should continue its operations.
> Terry Travers is the manufacturing supervisor of the Aurora Manufacturing Company, which produces a variety of plastic products. Some of these products are standard items that are listed in the company’s catalog, whereas others are made to customer speci
> The Mergers & Acquisitions Division (M&A) of Global Financial Services is evaluated by corporate management based on a comparison of budgeted and actual pre-tax income. For 2010, M&A’s budgeted income statement was as follows: Sales ……………………………………………$ 36
> Cardiff Sports sells footballs and shoulder pads. For 2010, company management budgeted the following: At the end of 2010, management was told that actual sales of footballs were 21,000 units and the sales price variance was $63,000 unfavorable. Sales o
> Many companies provide on-site child care facilities for employees’ children. In some situations, this service is provided free of charge; in other situations, employees are charged, usually on a sliding scale basis relative to pay, for such services. a.
> Organizational spending on outsourced contact centers (previously referred to as call centers) continues to increase. Contact centers are critical to organizational success because these units often have primary responsibility for interactions with custo
> Tennessee Tonic makes a high-energy protein drink. The selling price per gallon is $7.20, and variable cost of production is $4.32. Total fixed cost per year is $316,600. The company is currently selling 125,000 gallons per year. a. What is the margin of
> The accounting department at Kerrville College has decided to offer a three-day ethics workshop for local CPAs in March 2010. Rose Morris, a tenured professor, will supervise the seminar’s planning process and has submitted the followin
> Swimmingly Corp. buys raw fish, cooks and processes it, and then cans it in single-portion containers. The canned fish is sold to several wholesalers, who specialize in providing food to school lunch programs in the northwest United States and western Ca
> To respond to increased competition and a reduction in profitability, the nationwide law firm of O’Brien New & Cave recently instituted a responsibility accounting system. One of the several responsibility centers established was th
> Hippolito Inc. manufactures industrial tools and has annual sales of approximately $3.5 million with no evidence of cyclical demand. R&D is very important to Hippolito because its market share expands only in response to product innovation. The compa
> APAs are determined in advance of the time in which they are used. Discuss problems that may be generated in a recessionary business climate for companies that have preapproved APAs.
> Des Moines Industries consists of eight divisions that are evaluated as profit centers. All transfers between divisions are made at market price. I-O-WoW, a division of Des Moines, sells approximately 20 percent of its output externally. The remaining 80
> Rowling Inc. is a decentralized company, and each investment center has its own sales force and production facilities. Top management uses return on investment (income divided by assets) for performance evaluation. Potter Division has just been awarded a
> Eekaydo Inc. is organized on a divisional basis with considerable vertical integration. Mary Sue Oehlke is the new controller of the CarryOn! Division of Eekaydo. CarryOn! Division makes a variety of leather products, including a portfolio. Product sales
> Tobias & Barfield LLC has three revenue departments: litigation (Lit.), family practice (FP), and legal consulting (LC). In addition, the company has two support departments, administration and EDP. Administration costs are allocated to the three rev
> The president of Charlottetown Inc. has given the managers of the company’s three decentralized divisions (O’Leary, Alberton, and Summerside) the authority to decide whether to sell externally or internally at a transfer price the division managers deter
> Racine Tire Co. manufactures tires for all-terrain vehicles. The tires sell for $60 and variable cost per tire is $30; monthly fixed cost is $450,000. a. What is the break-even point in units and sales dollars? b. If Ronnie Rice, the company’s CEO, wants
> Because of a monumental error committed by its purchasing department, Corner Grocery ordered 5,000 heads of lettuce rather than the 1,000 that should have been ordered. The company paid $0.65 per head for the lettuce. Although management is confident tha
> Cookie Delight Company has two divisions: Plain Cookies and Decorated Cookies. Lars Linden is the manager of Plain Cookies Division and Theresa Davis is the manager of Decorated Cookies Division. Company president Marie Strauss wants to develop a transfe
> Worldly Traveler’s Roll-Em-On Division makes computer bags. The bags are sold to another internal division, SkyWheels, for inclusion in a luggage set and to external buyers. During the month just ended, SkyWheels acquired 4,000 bags from the Roll-Em-On D
> Although centralization and decentralization are commonly discussed in the context of business organizations and distinct, often “far-flung” subunits, the concepts are also applicable within a single building! Consider that, in the 1970s, most hospitals
> Ludmilla Corp. has two divisions: Engine and Mobile Systems. The Engine Division produces engines used by both the Mobile Systems Division and a variety of external industrial customers. External sales orders are generally produced in 50-unit lots. Using
> In each of the following cases, the Speaker Division can sell all of its production of audio speakers externally or some internally to the Sound System Division and the remainder to outside customers. The Speaker Division’s production c
> Kensington Corporation is a diversified manufacturing company with corporate headquarters in Easton, Massachusetts. The three operating divisions are Kennedy Division, Consumer Products Division, and Outerspace Products Division. Much of Kennedy Division
> Management at C. Pier Press has decided to allocate costs of the paper’s two support departments (administration and human resources) to the two revenue-generating departments (advertising and circulation). Administration costs are to b
> Leyh Management Co. classifies its operations into three departments: commercial sales, residential sales, and property management. The owner, Ellen Leyh, wants to know the full cost of operating each department. Direct departmental costs and several all
> Management of Shreveport Community Hospital has decided to allocate the budgeted costs of its three support departments (administration, public relations, and maintenance) to its three operating programs (surgery, in-patient care, and out-patient service
> Folsom Fashions sells a line of women’s dresses. Folsom’s performance report for November 2010 is shown below. The company uses a flexible budget to analyze its performance and measure the effect on operating income of
> Sid Simon wants to cash in on the increased demand for ethanol. Accordingly he purchased a corn farm in Iowa. Simon believes his corn crop can be sold to an ethanol plant for $4.80 per bushel. Variable cost associated with growing and selling a bushel of
> Kessla Taub manages the marketing department at Electronic Village. Company management has been concerned about the sales of three products and has informed Taub that, regardless of other sales, her performance in 2010 will be evaluated on whether she ha
> A large U.S. corporation participates in a highly competitive industry. Company management has decided that decentralization will best allow the company to meet the competition and achieve profit goals. Each responsibility center manager is evaluated on
> Laura Thompson, newly appointed controller of Allied Networking Services Inc. (ANSI), a rapidly growing company, has just been asked to serve as lead facilitator of a team charged with designing a cost management system (CMS) at ANSI. Also serving on the
> In August 2007, Heelys, a Texas-based maker of wheeled shoes, reported quarterly profits that beat the street estimates by three cents per share. Upon receiving the news, the market price of Heelys dropped 48 percent. Why? Although the profit reported fo
> After graduating last year from an Ivy League university, Joe Tyler was hired as a stock analyst. Wanting to make his mark on the industry, Tyler issued a scathing report on a major discount department store retailer, Smart-Mart. The basis of his attack
> Ohio Steel produces steel products for a variety of customers. One division of the company is the Garage Door Division, created in the late 1940s. Since that time, this division’s principal products have been galvanized steel components used in garage do
> Companies sometimes experience difficult financial times —often so drastic that bankruptcy is declared. If a firm does not invest sufficient resources in its growth, then at some point it will experience diminishing revenues as its product revenues decli
> In 1993, Procter & Gamble (P&G) management tried to control costs by eliminating many of its brands’ coupons while increasing print advertising. Only a miniscule portion of the hundreds of billions of coupons distributed annually by P&G were ever redeeme
> You are the product manager at a silicone chip manufacturer. One of your products is a commodity chip that the electronics industry widely uses in cell phones, printers, digital cameras, and computers. As product manager, you have full profit responsibil
> New England Bottling was founded in the late 1800s and was owned by the same family until 1960 when the firm went public. Throughout its life as a public firm, the company has been continuously profitable and recorded slow, but steady, growth. Historical
> Mean Machine makes three types of electric scooters. The company’s total fixed cost is $1,080,000,000. Selling prices, variable cost, and sales percentages for each type of scooter follow: a. What is Mean Machine’s br
> Through its three sets of elements (motivational, informational, and reporting), a CMS focuses the attention of a given decision maker on the data and information that are crucial to that decision maker’s responsibilities in the organization. However, th
> The value of an oil and gas company is tied to two fundamental facts. The first is the amount of oil and gas the company is presently producing. This amount, along with unit prices, determines the revenue and cash inflow that the company generates. The s
> In many organizations, the operating budget is the primary control tool. The use of a budget to control activities is more appropriate in some circumstances than in others, and always a key criterion in evaluating the efficacy of a control is whether tha
> GetAhead provides personal training services for, and sells apparel products to, its clients. GetAhead also generates a limited amount of revenue from the sale of protein drinks. The net realizable value from drink sales is accounted for as a reduction i
> Fredericksburg Vegetable is a fruit packing business. The firm buys peaches by the truckload in season and separates them into three categories: premium, good, and fair. Premium peaches can be sold as is to supermarket chains and to specialty gift stor
> Refer to the information in Problem 4. a. Calculate the sales price per gallon for skim milk and cream. b. Using relative sales value, allocate the joint cost to the joint production. c. Calculate ending Finished Goods Inventory cost, Cost of Goods Sold,
> Refer to the information in Problem 3. a. Assume the net realizable values of the joint products are as follows: Soybean oil ……………………………………….$0.50 per pound Soybean meal ……………………………………$0.20 per pound Allocate the joint cost incurred in March on the bas
> Powisett Farms Dairy began operations at the start of May 2010. Powisett Farms operates a fleet of trucks to gather whole milk from local farmers. The whole milk is then separated into two joint products: skim milk and cream. Both products are sold at th
> Illinois Soybeans operates a processing plant in which soybeans are crushed to create soybean oil and soybean meal. The company purchases soybeans by the bushel (60 pounds). From each bushel, the normal yield is 11 pounds of soybean oil, 44 pounds of soy
> Mel’s Male Accessories sells wallets and money clips. Historically, the firm’s sales have averaged three wallets for every money clip. Each wallet has an $8 contribution margin, and each money clip has a $6 contribution margin. Mel’s incurs fixed cost in
> Natural Beauty Corp. uses a joint process to make two main products: Forever perfume and Fantasy lotion. Production is organized in two sequential departments: Combining and Heating. The products do not become separate until they have been through the he
> Read Joseph McCafferty’s article entitled “Misgivings” in CFO.com ( January 2007); http://www.cfo.com/article.cfm/8477078/c_8483311?f5singlepage&x51(lastaccessed 5/28/09). a. Discuss your thoughts about not-for-profits claiming to raise funds without inc
> Debra’s Diabetes Foundation was started by a family whose mother had died after suffering for many years with diabetes. A lecture that cost the foundation $360,000 was held on the fourth Tuesday in March, which is American Diabetes Alert Day. Advertiseme
> Choose a fairly common product that you believe would generate multiple by-products. a. Without doing any research, prepare a list of some items that you believe would be by-products from that product. b. After you have completed your list, use the Web t
> Choose a fairly common product that you believe would generate multiple by-products. a. Without doing any research, prepare a list of some items that you believe would be by-products from that product. b. After you have completed your list, use the Web
> Some waste, scrap, and by-product materials have little value. In fact, for many meat and poultry producers, animal waste represents a significant liability because it is considered hazardous and requires significant disposal costs. Some companies, such
> Buchan’s Junction Manufacturing Corporation uses a joint production process that produces three products at the split-off point. Joint production costs during March were $720,000. The company uses the sales-value method for allocating j
> DD’s Linens produces terrycloth products for hotels. The company buys fabric in 60-inch-wide bolts. In the first process, the fabric is set up, cut, and separated into pieces. Setup can be for either robes and beach towels, or bath towe
> During March 2010, the first month of operations, Oink Oink’s Pork Co. had the operating statistics shown in the following table. Costs of the joint process were direct material, $40,000; direct labor, $23,400; and overhead, $10,000. T
> Arguillo Inc. is a 5,000- acre farm that produces two products: Zilla and Corma. Zilla sells for $3.50 per bushel (assume that a bushel weighs 60 pounds). Without further processing, Corma sells for $30 per ton (a ton equals 2,000 pounds). If the Corma i
> Following are abbreviated income statements for two companies, Ainsley and Bard: Ainsley and Bard produce an identical product and both sell that product at $40. Both companies are searching for ways to increase operating income. Managers of both compan
> Tangy Fresh produces orange juice and orange marmalade from a joint process. Second-stage processing of the marmalade creates an orange pulp by-product that can be sold for $0.05 per gallon. Expenses to distribute pulp total $90. In May 2010, 140,000 pou
> Garrity Manufacturing has assembled the data appearing below pertaining to two products. Past experience has shown that the unavoidable fixed factory overhead included in the cost per machine hour averages $10. Direct labor is paid $18 per hour. Garrity
> Riedel Motors uses ten units of Part No. T305 each month in the production of large diesel engines. The cost to manufacture one unit of T305 is presented below: Direct material …………………………………………………………………...$ 2,000 Material handling (20% of direct material
> The officers of Bardwell Company are reviewing the profitability of the company’s four products and the potential effects of several proposals for varying the product mix. The following is an excerpt from the income statement and other
> Structural Steel Systems manufactures steel buildings for agricultural and home applications. Currently, managers are trying to decide between two alternatives regarding a major overhead door assembly for the company’s buildings. The alternatives are as
> Louisiana Luggage Components manufactures handles for suitcases and other luggage. Attaching each handle to the luggage requires, depending on the size of the luggage piece, between two and six standard fasteners, which the company has historically produ
> Tate Electronics manufactures computers and all required components. Its purchasing agent informed the company owner, Mervin Tate, that another the company had offered to supply keyboards for Tate computers at prices below the variable costs at which Tat
> Missouri River Energy Company provides electrical services to several rural counties in Nebraska and South Dakota. Its efficiency has been greatly affected by changes in technology. The company is currently considering the replacement of its main steam t
> Arizona Mechanical recently created a new product, a computer-controlled, laser-precise lathe, and Ohio Ornamental Metals is considering purchasing one. Ohio’s CFO received the following information from the accounting department regarding the company’s
> Louisville Jar Co. has processing plants in Kentucky and Pennsylvania. Both plants use recycled glass to produce jars that a variety of food processors use in food canning. The jars sell for $10 per hundred units. Budgeted revenues and costs for the year
> Cellular Communications manufactures cell phones and two cell phone accessories: ear buds and a 12-volt (automotive) battery charger. (Each ear bud package contains a set of ear buds.) The ear buds and charger are compatible only with the Matrix cell pho
> You have been hired to assist the management of Great Bend Office Systems in resolving certain issues. The company has its home office in Montana and leases facilities in Montana, Idaho, and North Dakota, where it produces a high-quality bean bag chair d
> Gilfeather Food Service sells high-quality ice cream and steaks via overnight delivery. Income statements showing revenues and costs of fiscal year 2010 for each product line are as follows. Management is concerned about profitability of steaks and is c
> Leather Accessories produces leather belts and key fobs that sell for $40 and $10, respectively. The company currently sells 100,000 units of each type with the following operating results: Corporate management has expressed its disappointment with the
> In November 2005, Microsoft introduced its highly anticipated new video game player, the Xbox 360. In early July 2007, Microsoft announced it was extending the warranty on its Xbox 360 to three years for a certain type of malfunction indicated by three f
> Kantrovitz Company is a manufacturer of industrial components. One of its products that is used as a subcomponent in appliance manufacturing is AP110. This product has the following information per unit: Selling price ……………………………….…………………………………..$150 Cos
> Janet Cosgrove is the manager of Saratoga Sporting Goods, a division of Global Sports. Cosgrove’s division sells a variety of sporting goods and supplies to wholesalers and retail chains throughout the Pacific Northwest and Latin America. Saratoga Sporti
> Upstate Leisure makes three outdoor leisure products: chairs, tables, and umbrellas. The company has significant demand for all three products but must manage certain constraints in its operations. Following are sales price and cost information for each
> Clean-N-Brite is a multiproduct company with several manufacturing plants. The Cincinnati plant manufactures and distributes two household cleaning and polishing compounds, regular and heavy-duty, under the HouseSafe label. The forecasted operating resul
> Classic Clothes is a retail organization in the Northeast that sells upscale clothing. Each year, store managers in consultation with their supervisors establish financial goals, and then a monthly reporting system captures actual performance. One of the
> Atlantic Fish Company is a wholesale distributor of cod. The company services restaurants in the Boston area. Small but steady growth in sales has been achieved by Atlantic Fish Company over the past few years, while cod prices have been increasing. The
> One product produced and sold by Outback Outfitters is an ATV gun rack for which 2010 projections are as follows: Projected volume in units ……………………………………………120,000 Sales price per unit ……………………………………………………………$60 Variable production cost per unit …………………
> You were talking to your roommate one day about CVP analysis and the approaches that are used to calculate the break-even point. You also described the assumptions that underlie this type of analysis. Your roommate proclaimed, “Wow, you people in account
> Following is information pertaining to Dayton Co.’s operations of the first and second quarter of 2010: Additional Information • There were no finished goods at January 1, 2010. • Dayton Co. writes of
> Layton Ironworks manufactures a variety of industrial valves and pipe fittings sold primarily to customers in the United States. Currently, the company is operating at 70 percent of capacity and is earning a satisfactory return on investment. Prince Ind
> Calypso Canvas makes canvas window awnings. You have been asked to predict the potential effects of some proposed company changes. The following information is available: Variable cost per unit Direct material …………………………………$18.40 Direct labor ……………………………
> Fairbanks Express is a luxury passenger carrier in Alaska. All seats are first class, and the following data are available: Number of seats per passenger train car ……………………60 Average load factor (percentage of seats filled) …………75% Average full passenger
> Ted Tyner owns Sixth Man Hotel, a luxury hotel with 60 two-bedroom suites for coaches and their players. Capacity is 10 coaches and 50 players. Each suite is equipped with extra-long king-sized beds, super-tall and extended shower heads, extra-tall bathr
> Nature’s Own makes three types of wood flooring: Oak, Hickory, and Cherry. The company’s tax rate is 40 percent. The following costs are expected for 2011: Per-square-yard expected selling prices are as follows: Oak,
> The Pink Flamingo, Inc., manufactures plastic lawn ornaments. Currently the firm manufactures three items: reindeer, snowmen, and flamingos. For each reindeer, two snowmen and four flamingos are sold. The firm is in a 40 percent tax bracket. a. What is
> The Glass Menagerie makes small pressed resin ducks and ducklings. For every duck sold, the company sells five ducklings. The following information is available about the company’s selling prices and cost: a. What is the average contri
> Yard Bird manufactures commercial and residential riding lawnmowers. The company sells one commercial mower per three residential mowers sold. Selling prices for the commercial and residential mowers are, respectively, $5,600 and $1,800, and variable sel
> Golf Glider makes gasoline-powered golf carts. The selling price is $5,000 each, and costs are as follows: Golf Glider’s income is taxed at a 40 percent rate. a. How many golf carts must Golf Glider sell to earn $600,000 after tax? b.
> The Real Deal is a social organization that performs charitable work in its local community. The club has the following monthly cost and fee information: monthly membership fee per member, $60; monthly variable cost of service per member, $25; and monthl
> Mons Weatherby owns a sports brokerage agency and sells tickets to major league baseball, football, and basketball games. He also sells sports travel packages that include game tickets, airline tickets, and hotel accommodations. Revenues are commissions
> Aqua Gear, in business since 2008, makes swimwear for professional athletes. Analysis of the firm’s financial records for the current year reveals the following: Average swimsuit selling price …………………………………$70 Variable swimsuit expenses Direct mat
> Beantown Baseball Company makes baseballs that sell for $13.00 per two-pack. Current annual production and sales are 960,000 baseballs. Costs for each baseball are as follows: Direct material ………………………………………….$2.00 Direct labor ………………………………………………...1.25
> Casper Karts manufactures a three-wheeled shopping cart that sells for $60. Variable manufacturing and variable selling cost are, respectively, $35 and $10 per unit. Annual fixed cost is $975,000. a. What is the contribution margin per unit and the contr
> In its first year of operations, Utah Utility Trailers incurred the following costs: Variable production cost …………………………………………$ 2,800 per unit Variable selling and administrative cost ……………………….200 per unit Fixed production cost ……………………………………………………..$20
