Question: Turow Trailers assembles horse trailers. Two models

> A large corporation has a manufacturing division with 40 parts departments and 20 assembly departments. The parts departments manufacture most of the parts for the products, and the assembly departments assemble the parts (some of which are purchased out

> Vintage Cellars manufactures a 1,000-bottle wine storage system that maintains optimum temperature (55–57 °F) and humidity (50–80 percent) for aging wines. The system has a backup battery for power failures and can store red and white wines at different

> You work in the finance department of a telecommunications firm with a large direct sales force selling high-speed fiber optics access lines to companies wanting telephone and Internet access. Your firm uses a top-down budget that sets the sales quota fo

> Several years ago, your firm paid $25,000,000 for Clean Tooth, a small, high-technology company that manufactures laser-based tooth cleaning equipment. Unfortunately, due to extensive production line and sales resistance problems, the company is consider

> Tilist Golf is a premier producer of golf clubs and golf balls. The Ball Division makes two types of balls: a professional ball (the “Masters”) played by professional and top amateur players, and a mass market ball (th

> In March, a devastating ice storm struck Monroe County, New York, causing millions of dollars of damage. Mathews & Peat (M&P), a large horticultural nursery, was hit hard. As a result of the storm, $653,000 of additional labor and maintenance cos

> Two types of machine tools are available for performing a particular job in Apex Corporation. Tool A has an initial investment of $52,000, with operating costs of $26,000 per year, an economic service life of 12 years, and a salvage value of $6,000 at th

> The MedView brochure said, “Only 45 scans per month to cover the monthly equipment rental of $18,000.”* The footnote at the bottom of the brochure read: *“Assumes a reimbursable fee of $475 per scan.” The MedView brochure refers to a new radiology imagin

> Blue Sage Mountain produces hinged snowboards. The price charged affects the quantity sold. The following equation captures the relation between price and quantity each month: Selling price = $530 - .2 x Quantity sold In

> James, Inc., a large mail-order catalog firm, is thinking of expanding into Canada. The Buffalo district office would manage the expansion and must decide how much to spend on the advertising campaign. The expansion project will be either successful (S)

> Brighton Holdings owns private companies and hires professional managers to run its companies. One company in Brighton Holdings’ portfolio is Sunder Properties. Sunder owns and operates apartment complexes, and has the following operating statement. SUND

> The opening paragraph of an accounting textbook says, “Managers need accounting information and need to know how to use it.” Critically evaluate this statement.

> Faculty members at a leading business school receive a budget to cover research expenditures, software and hardware purchases, travel expenses, photocopying for classroom use, and so forth. The budget is increased $250 for each class taught (independent

> You work for a venture capitalist and have been asked to analyze a proposal from a group of investors interested in building a new ski area in Colorado, the Gold Mountain Ski Resort. The demand for skiing is growing. Existing ski resorts have raised pric

> Sue Koehler manages a revenue center of a large national manufacturer that sells office furniture to local businesses in Detroit. She has decision rights over pricing. Her compensation is a fixed wage of $23,000 per year plus 2 percent of her office’s to

> Jasper, Inc., is considering two mutually exclusive investments. Alternative A has a current outlay of $300,000 and returns $100,300 a year for five years. Alternative B has a current outlay of $150,000 and returns $55,783 a year for five years. Required

> A punch press currently in use has a book value of $1,800 and needs design modifications totaling $16,200, which would be capitalized at the present time and depreciated. The press can be sold for $2,600 now, but it could be used for three more years if

> Can opportunity costs be negative? Give an example.

> Chateau Napa purchased a small vineyard and is now producing magnum bottles (1.5 liters) of Redwood Cabernet Sauvignon. This wine is much sought after, and bottling the wine in larger bottles enhances its quality, prestige, and demand. Because of the lim

> Celtex is a large and very successful decentralized specialty chemical producer organized into five independent investment centers. Each of the five investment centers is free to buy products either inside or outside the firm and is judged based on resid

> Fuller Aerosols manufactures six different aerosol can products (room deodorants, hair sprays, furniture polish, and so forth) on its fill line. The fill line mixes the ingredients, adds the propellant, fills and seals the cans, and packs the cans in cas

> Amos Doral owns a small store that rents punchbowls, dishes, silverware, glassware, tables, and chairs to people having large parties. Amos runs the business by himself. He is considering adding power spray painters to his inventory of rentable items. A

> Communities are frequently concerned about whether or not police are vigilant in carrying out their responsibilities. Several communities have experimented with incentive compensation for police. In particular, some cities have paid members of the police

> A present investment of $50,000 is expected to yield receipts of $8,330 a year for seven years. What is the internal rate of return on this investment?

> Transmation, with sales of over $2.2 billion, builds and markets several of the world's leading brands of construction and agricultural equipment. Transmation has three operating divisions that are decentralized investment centers. While the three divisi

> Chris Maynard, one of Heath Metal Products’s three customer engineers, is reviewing the costs of the radar housings for Lingle Aerospace (LA). LA is one of Maynard’s largest accounts and the radar housing is a fabricated piece of sheet metal LA uses to a

> Republic Insurance has a direct sales force that sells life insurance policies. All salespeople at the beginning of the year forecast the number of policies they expect to sell that year. At the end of the year, they are evaluated based on how many polic

> Infantino Saab is a car dealership that has been in business for 40 years at the same 20-acre location selling and servicing new and “pre-owned” (used) Saabs. Two years ago Infantino Saab replaced its aging showroom an

> An investment project involves the purchase of equipment at a cost of $100 million. For tax purposes, the equipment has a life of five years and will be depreciated on a straight-line basis. Inflation is expected to be 5 percent and the real interest rat

> Astin Car Stereos manufactures and distributes four different car stereos. The accompanying table summarizes the unit sales, selling prices, and manufacturing costs of each stereo. Selling and distribution (S&D) expenses are $1,270,000. They are trea

> You are working on a special assignment as a financial analyst for the president of household products of RBB Brands. RBB Brands is a large $4 billion diversified consumer products firm. RBB has two divisions, household products and foods, each headed by

> Oppenheimer Visuals manufactures state-of-the-art flat-panel plasma display screens that large computer companies like Dell and Gateway assemble into flat-panel monitors. Oppenheimer produces just the display panels, not any of the electronics, cases, or

> Physicians practicing in Eastern University’s hospital have the following compensation agreement. Each doctor bills the patient (or Blue Cross Blue Shield) for his or her services. The doctor pays for all direct expenses incurred in the clinic, including

> The Linda Lion Co. has an investment opportunity that involves a current outlay of $1,000 for equipment. The investment will yield net cash inflows for four years. The net cash inflow at the end of the first year will be $400. Later years’ cash inflows g

> SnapOn makes snap-together button fasteners (a male top and female bottom) for designer clothes Each top and bottom consists of several metal parts that, when attached to the garment, allow the shirt, jacket, or pants to be closed without the use of a zi

> Hurst Mats manufactures custom replacement floor mats for automobiles. The floor mats are made of spun nylon on highly automated, expensive machinery. Hurst manufactures two mat styles: Plush and Deluxe. Hurst’s unionized work force mak

> The Lancaster Chamber Orchestra is a small community orchestra that offers two distinct concert series for its patrons. Series A is devoted entirely to the performance of a classical repertoire and offers 10 concerts throughout the year, while Series B c

> Littleton Medical Center (LMC) has three service departments (accounting, human resources, and Janitorial/maintenance) and two patient units: hospital and an outpatient clinic. The following table summarizes the operations of LMC for the last fiscal year

> Tax laws in Japan tie taxable income directly to the financial statements’ reported income. That is, to compute a Japanese firm’s tax liability, multiply the net income as reported to shareholders by the appropriate tax rate to derive the firm’s tax liab

> Roberts Machining specializes in fabricating metal racks that hold electronic equipment such as telephone switching units, power supplies, and so forth. Roberts designs and produces the metal stamping dies used to fabricate the racks. It is currently fab

> Rick’s Bags manufactures both golf bags and tennis totes. Fixed manufacturing overhead is budgeted to be $187,200, variable manufacturing overhead is budgeted to be $1.10 per direct labor hour, and fixed selling and administration costs are budgeted to b

> Bio Labs is a genetic engineering firm manufacturing a variety of gene-spliced, agricultural-based seed products. The firm has five separate laboratories producing different product lines. Each lab is treated as a profit center and all five labs are loca

> Woodley Furniture is a small boutique manufacturer of high quality contemporary wood tables. They make two models: end tables and coffee tables in a variety of different woods and finishes. Current annual production of end tables is 8,000 units that sell

> Madigan produces a single high-speed modem. The following table summarizes the current month’s budget for Madigan’s modem production: Projected production and sales ………………………. 4,000 units Variable costs ………………………………………………… $ 640,000 Fixed costs ………………………

> A Wall Street Journal article (December 26, 1996) describes a series of changes at the Pratt & Whitney plant in Maine that manufactures parts for jet engines. In 1993 it was about to be closed because of high operating costs and inefficiencies. A new pla

> At the beginning of year 1, Northern Sun, Inc., a food processing concern, is considering a new line of frozen entrees. The accompanying table shows projected cash outflows and inflows. Assume that all inflows and outflows are end-of-period payments. Req

> Golf World is a 1,000-room luxury resort with swimming pools, tennis courts, three golf courses, and many other resort amenities. The head golf course superintendent, Sandy Green, is responsible for all golf course maintenance and conditioning. Green als

> Brehm Vineyards grows a unique white pinot noir grape that they use to produce a white wine that is in high demand. Brehm uses all the grapes they can grow to produce their own white pinot noir wine. Brehm pinot noir wine contains 100 percent Brehm-grown

> The keyboard division of XBT, a personal computer manufacturing firm, fabricates 50-key keyboards for both XBT and non-XBT computers. Keyboards for XBT machines are included as part of the XBT personal computer and are also sold separately. The keyboard

> Golf Specialties (GS), a Belgian company, manufactures a variety of golf paraphernalia, such as head covers for woods, embroidered golf towels, and umbrellas. GS sells all its products exclusively in Europe through independent distributors. Given the pop

> Diagnostic Imaging Software (DIS) is the leading producer of imaging software for the health sciences. DIS develops, writes, produces, and sells its software through two direct selling organizations: North America and South America. Each of these direct

> Critically evaluate the statement: The step-down method is better than the direct allocation method because at least the step-down method captures on average half of the service flows between service departments. By comparison, the direct allocation meth

> Background Economists and managers have long recognized the importance of productivity in determining an organization’s success. Productivity is the relation between the firm’s output of goods and services and the inpu

> A proposed cost-saving device has an installed cost of $59,400. It will be depreciated for tax purposes on a straight-line basis over three years (zero salvage), although its actual life will be five years. The tax rate is 34 percent and the required rat

> Background Artisans Shirtcraft manufactures and sells hand-painted shirts of original design. The company was founded in 1999 by three sisters: Cathy, Linda, and Valerie Montgomery. Shirtcraft started out as a means of financing a hobby; profits from shi

> Flat Images develops and manufactures large, state-of-the-art flat-panel television screens that consumer electronic companies purchase and incorporate into a complete TV unit by adding the case, mounting brackets, tuner, amplifier, other electronics, an

> Exotic Roses, owned by Margarita Rameriz, provides a variety of rare rose bushes to local nurseries that sell Rameriz’s roses to the end consumer (landscapers and retail customers). Rameriz grows the roses from cuttings that she has spe

> Frames, Inc., manufactures two types of metal frames: large and small. Steel angle iron is first cut to the appropriate sizes; the pieces are then welded together to form the frames. The process involves a high degree of automation. There is considerable

> In 1995 Global Oil Corporation’s Marketing and Refining (M&R) Division was the fifth largestU.S. refiner with 7,700 Global-branded service stations selling about 23 million gallons per day, or 7 percent of the nation’s gasoline. All the service stations

> Giza Farms in Cairo, Egypt, has a corporate headquarters staff and three operating divisions: consulting services, chemicals, and agricultural products. Giza is considering allocating 160 million Egyptian pounds of corporate overhead (which includes sala

> Beckett Manufacturing is a contract manufacturer that assembles products for other companies. Beckett has two service departments, Maintenance and Administration, and two operating divisions, Small Components and Large Components. The following data summ

> Plastic Chairs manufactures plastic lawn chairs using a combination of new and recycled plastic. Varying amounts of each type of plastic can be used to produce a batch of 100 chairs. The table below lists the various combinations of recycled and new plas

> ITI Technology designs and manufactures solid-state computer chips. In one of the production departments, employees fabricate a six-inch circular wafer by laying down successive layers of silicon and then etching the circuits into the layers. Each wafer

> R&D Inc. has the following financial data for the current year (millions): Earnings before R&D expenditures……………………………………. $21.5 Interest expense……………………………….………………………………. $0.0 R&D expenditures…………………………….………………………………. $6.0 Total invested capital (excl

> Blauvelt Products uses a flexible budget to set the overhead rate at the beginning of the year based on units produced. In year 1 budgeted fixed overhead is $1 million and budgeted variable overhead is $2 per unit. Direct material and direct labor togeth

> Is it preferable to use an accelerated depreciation method rather than the straight-line method for tax purposes?

> Robert S. Kaplan in “One Cost System Isn’t Enough” (Harvard Business Review, January–February 1988, pp. 61–66) states, No single system can adequately answer the demands made by diverse functions of cost systems. While companies can use one method to cap

> Commando Force is a new set of children’s action toys consisting of three separately sold pieces: Matt, Kim, and the multi-terrain vehicle (MTV). The MTV can be used by itself or it can hold Matt or Kim or both. With male and female act

> Madden International is a large ($7 billion sales), successful international pharmaceuticals firm operating in 23 countries with 15 autonomous subsidiaries. The corporate office consists of five vice presidents who oversee the operations of the subsidiar

> The Transfer Price Company has two divisions (Intermediate and Final) that report to the corporate office (Corporate). The two divisions are profit centers. Intermediate produces a proprietary product (called “intermedâ€&#157

> ICB has four manufacturing divisions, each producing a particular type of cosmetic or beauty aid. These products are then transferred to five marketing divisions, each covering a particular geographic region. Manufacturing and marketing divisions are fre

> Logical Solutions reports the following overhead variances for 2010: Spending variance …………………………………$100,000 F Efficiency variance …………………………………$100,000 F Volume variance …………………………………..$300,000 F In addition, actual overhead incurred in 2010 was $1 mill

> Repro Corporation is the leading manufacturer and seller of office equipment. Its most profitable business segment is the production and sale of large copiers. The company is currently organized into two divisions: manufacturing and sales. Manufacturing

> The Ogden plant makes Beanie Babies, small stuffed toys in a variety of animal shapes. The toys are so popular that they have become collectors’ items. The plant uses a flexible budget and predetermined overhead rates to assign overhead costs to the diff

> Geico is considering expanding an existing plant on a piece of land it already owns. The land was purchased 15 years ago for $325,000 and its current market appraisal is $820,000. A capital budgeting analysis shows that the plant expansion has a net pres

> You work for the strategy group of Adapt Inc., a firm that designs and manufactures memory cards for digital cameras. Your task is to gather intelligence about Adapt’s key competitor, DigiMem, a privately held company. Your boss has asked you to estimate

> Rothwell Inc. is the leader in computer-integrated manufacturing and factory automation products and services. The Rothwell product offering is segmented into 15 product categories, based on product function and primary manufacturing location. Rothwell’s

> Sunder manufactures hard rubber pet toys. The purple dog chewy has a variable cost of $3.00 per unit. It is produced on a machine that is leased. The three models of this machine have three different capacities. Maximum Daily Daily Lease Capacity (Units)

> Eastern Educational Services is considering the following proposal to sell its teaching machine and purchase a new, improved machine. The following data are presented by the department head: Additional information: 1. The company expects to produce 10,00

> JLE Electronics is an independent contract manufacturer of complex printed circuit board assemblies. Computer companies and other electronics firms engage JLE to assemble their boards. Utilizing computer-controlled manufacturing and test machinery and eq

> Salespeople at a particular firm forecast what they expect to sell next period. Their supervisors then review the forecasts and make revisions. These forecasts are used to set production and purchasing plans. In addition, salespeople receive a fixed bonu

> The Mopart Division produces a single product. Its standard cost system uses a flexible budget to assign indirect costs on the basis of standard direct labor hours. At the budgeted volume of 4,000 direct labor hours, the standard cost per unit is as foll

> The standard cost sheet calls for 80 pounds of zinc per batch of 70 faucets. Zinc has a standard price of $5.10 per pound. One thousand pounds of zinc are purchased for $5,530. Ten batches of the faucets are produced, and 840 pounds of zinc are used. The

> Kitchen Rite is considering outsourcing the production of a steel chassis that is used in a kitchen appliance. Two thousand chassis are produced per month. An outside vendor will supply an identical chassis for $9.90. The chassis is manufactured in two s

> A firm has four service centers, S1, S2, S3, and S4, which provide services to each other, as well as to three operating divisions, A, B, and C. The distribution of each service center’s output as well as its cost (in millions) is given

> Employees at White’s Department Store are observed engaging in the following behavior: (1) They hide items that are on sale from the customers and (2) they fail to expend appropriate effort in designing merchandise displays. They are also uncooperative w

> The Mowerson Division of Brown Instruments manufactures testing equipment for the automobile industry. Mowerson’s equipment is installed in several places along an automobile assembly line for component testing and is also used for reco

> Assuming the firm sells everything it produces and assuming that variable cost per unit does not change with volume, total profits are higher as volume increases because fixed costs are spread over more units. Required: a. True or false? b. Explain your

> Fast Photo operates four film developing labs in upstate New York. The four labs are identical: They employ the same production technology, process the same mix of films, and buy raw materials from the same companies at the same prices. Wage rates are al

> Equity Corp. paid a consultant to study the desirability of installing some new equipment. The consultant recently submitted the following analysis: Cost of new machine………………………………………………………. $100,000 Present value of after-tax revenues from operation ………

> Employee satisfaction is a major performance measure used at American Inter Connect (AI), a large communications firm. All employees receive some bonus compensation. The lower-level employees receive a bonus that averages 20 percent of their base pay whe

> The Chicago Omni Hotel is a 750-room luxury hotel offering guests the finest facilities in downtown Chicago. The hotel is organized into four departments: lodging, dining, catering, and retail stores. Each of these departments is treated as a profit cent

> One MBA student was overheard saying to another, “Accounting is baloney. I worked for a genetic engineering company and we never looked at the accounting numbers and our stock price was always growing.” “I agree,” said the other. “I worked in a rust buck

> City Hospital is a city government-owned and -operated hospital providing basic health care to low income people. Most of the hospital’s revenues are from federal, state, county, and city governments. Some patients covered by private insurance are also a

> Savannah Products, a small integrated wood and lumber products company with substantial timber holdings, has two divisions: Forest and Lumber. Forest Division manages the timber holdings, maintains the land, and plants and harvests trees. It acquired its

> Background Woodhaven Service is a small, independent filling station located in the Woodhaven section of Queens. The station has three gasoline pumps and two service bays. The repair facility specializes in automotive maintenance (oil changes, tune-ups,

> Secure Servers Inc. (SSI) is one of the largest software and service providers directed at providing high levels of backup and security for computer servers to the financial community, military, and other clients requiring off-site backup and security sy

> Sanchez Gadgets purchases innovative home kitchen gadgets from around the world (such as kitchen torch, a pasta maker, and an automatic salad spinner) and sells them to specialty cooking retail stores. Sanchez has a marketing department that locates and

> Phonetex is a medium-size manufacturer of telephone sets and switching equipment. Its primary business is government contracts, especially defense contracts, which are very profitable. The company has two plants: Southern and Westbury. The larger plant,

> Jason Rocks is small rock quarry that produces five different sizes of stones, from small crushed stones (#1 stones) to large (3-inch) rocks (#5 stones). The stones are first mined and sorted into the five grades. Once the stones are mined and sorted, th