What is the objective of activity-based management and how does it differ from activity-based costing?
> For the month of January, Remco International’s direct labor rate variance was $16,000 unfavorable, and its direct labor efficiency variance was $11,000 favorable. Actual direct labor costs during January were $500,000. What standard direct labor amount
> Spotty Corporation applied $12,600 of manufacturing overhead to production during the month. Its actual overhead costs for the month were $14,700. The cost accountant reports that Spotty’s unfavorable spending variance for the month was $2,800. Did Spott
> Environmental Services, Inc., performs various tests on wells and septic systems. A few of the company’s business transactions occurring during August are described as follows. 1. On August 1, the company billed customers $2,500 on account for services
> The production manager at Branford Industries is investigating the cause of unfavorable materials and labor variances that occurred in the previous month. Standards are based on normal or expected production of 400 units per month at Bramford. The manage
> Electro Systems manufactures relays and currently sells 200,000 units annually to producers of electronic equipment. Mac Scott, president of the company, anticipates a 20 percent increase in the cost per unit of direct labor on January 1 of next year. He
> The president of Cold Moo Ice Cream Company, a chain of ice cream stores in the Midwest, was unhappy with the actual six-month profit figures for the company recently prepared by the CFO. The president asked the CFO for a profit breakdown, by store, of t
> For each of the following costs associated with a chain of bicycle stores, decide if the cost is common or traceable to (1) the store departments (repairs and sales), (2) each store, or (3) the company. a. $25,000 in rent paid for store space. b. Store m
> Hilgen Hotel & Spa is located in beautiful Sydney, Australia. Hilgen operates three profit centers: the hotel, a restaurant, and a spa. The complex occupies 100,000 square feet and has 250 employees. The complex’s general upkeep costs (e.g., insurance, u
> What is an activity base and why is it important in analyzing cost behavior?
> Categorize the following transfer prices as being market based, negotiated, or cost based. a. The market price of a widget is $25, the cost is $15, and the actual transfer price is $22, the market price less cost of sales commissions. b. The manager of t
> The contribution margin ratio of the Parts Department of Buffalo Valley Repair is 40 percent. Traceable fixed costs of the Parts Department average $80,000 per year, and the department’s projected revenue for the upcoming year is $300,000. What is the de
> Glide Behind Corporation manufactures and sells small cargo trailers. The Wheel Division creates parts that are both sold externally and transferred internally to the Assembly Division. Variable production costs of wheel set #102 are $80, and each set se
> Nelson Chemical consists of seven divisions. Divisions One through Five make products that are sold in the competitive market. Divisions Two and Three make their own investment and transfer pricing decisions. Twenty-five percent of Division Two’s output
> ordahl’s grocery store has a small bakery that sells a variety of baked goods. Sales from the bakery average less than 5 percent of the store’s total revenue and is considered a cost center. As a means of attracting customers, the bakery manager has deci
> Walt’s Used Cars sells late-model used cars and offers an optional 12-month service agreement. Walt’s estimates that the cost of the service agreement will be approximately 5 percent of the total sales price of the vehicle. During the month of April, Wal
> Explain why it is necessary to distinguish between cash budget estimates and operating budget estimates.
> Janice Black, manager of the Produce Department at Spanky’s Grocery, has a monthly responsibility margin of $4,000. The store manager has decided to allocate storewide common costs to each department. After the allocation, Ms. Black’s responsibility marg
> Assume a store’s Clothing Department has a lower contribution margin ratio but a higher responsibility margin ratio than its Sporting Goods Department. If $15,000 in advertising is expected to increase the sales of either department by $45,000, in which
> The following equivalent unit figures were taken from the December production cost report of the Distillation Department of Oil City Lubricants. If the Distillation Department’s ending inventory on December 31 is comprised of 12,000 eq
> On June 1, the Grinding Department of Precision Lenses had costs carried forward from May totaling $400,000. Resources consumed to complete the beginning inventory totaled $80,000. The total cost of units started by the Grinding Department in June was $1
> Milton Corporation had 15,000 units of beginning inventory in its Cutting Department on May 1. The units were 100 percent complete with respect to direct materials requirements but only 80 percent complete with respect to conversion requirements. On May
> Why is it so important that target costing procedures focus on the customer?
> On October 1, Clifford Manufacturing had 10,000 units in its Mixing Department. These units were 75 percent complete with respect to direct materials requirements and 60 percent complete with respect to their conversion requirements. During October, the
> Dittmar Products has provided the following information pertaining to equivalent units of production in its Molding Department for the month of April. All direct materials used in the Molding Department are added at the beginning of the process. On Apri
> Faulk Corporation uses a process costing system for its two production departments: Mixing and Baking. The company provided the following manufacturing cost information for the month of June. a. Record the transfer of costs from the Mixing Department to
> For each of the four accounts listed, prepare an example of a journal entry that would cause the account to be (1) debited and (2) credited using a process costing system. Assume perpetual inventory records are maintained. Include written explanations wi
> Shepherd Industries had the following cash flows by major categories during the current year. a. Calculate the net amount of cash provided by or used for financing activities for the year. b. Briefly justify why you excluded any of these items in your c
> Healthy Times produces four types of frozen TV dinners that it sells to supermarkets and independent grocery stores. The company operates from two locations: a manufacturing plant and a refrigerated warehouse located a few blocks away. (Administrative of
> Match the business with the appropriate cost system(s) for that business using the number of the cost system where 1 = job order costing, 2 = process costing, and 3 = activity-based costing. a. Jensen, Needham, and Gruver, attorneys-at-law. b. Walmart In
> Temple Industrial’s production cost report for its Packaging Department reveals that the cost per equivalent unit started and completed in November was $165. The same report reveals that the cost per equivalent unit transferred out of the Packaging Depar
> Determine whether each of the following companies is best suited for a job order cost system, a process costing system, or both. a. C. Erickson & Sons, Inc. (a construction company with multiple job sites). b. Apple Inc. (a manufacturer of computers for
> For each of the accounts listed, prepare two summary journal entries. In the first entry, illustrate a transaction that would cause the account to be debited. In the second entry, illustrate a transaction that would cause the account to be credited. Assu
> Norton Industries purchased direct materials costing $900,000 during the current period. It actually used only $825,000 of direct materials on jobs during the period. a. Prepare the summary journal entry to record direct materials purchased during the p
> Needles Manufacturing pays its direct labor employees $20 per hour. During the current period, 500 direct labor hours were recorded on employee time cards, and the company actually paid its direct labor employees $8,500. a. Record the summary journal en
> List the assumptions that underlie cost-volume-profit analysis.
> Indicate whether job order costing is appropriate for each of the following businesses. Explain why. a. Let Them Eat Cake (a small bakery that makes wedding cakes unique to each customer). b. Baxter, Claxter, and Stone (a law firm specializing in malpr
> Morris Corporation applies manufacturing overhead to jobs at a rate of $50 per direct labor hour. During the current period, actual overhead costs totaled $240,000, and 5,000 direct labor hours were worked by the company’s employees. a. Record the journ
> Sorensen Company provides the following information related to its investing and financing activities for the current year. a. Calculate the net amount of cash provided by or used for investing activities for the year. b. What impact, if any, do the fol
> Fox Manufacturing applies manufacturing overhead at a rate of $32 per machine hour. a. When during the year was this rate computed? b. Describe briefly how this rate was computed. c. Identify the shortcomings of this rate that will cause overhead appl
> Glenn Grimes is the founder and president of Heartland Construction, a real estate development venture. The business transactions during February while the company was being organized are listed as follows. Instructions: a. Prepare journal entries to r
> Nicholes Corporation finished job no. 600 on June 1. On June 10, the company sold job no. 600 for $25,000 on account to a credit customer. Total manufacturing costs allocated to this job at the time of the sale amounted to $16,000. a. Record the transfer
> Lewis & Company applies manufacturing overhead to production using an activity-based costing system. The company’s utilities cost pool has accumulated $450,000, its maintenance cost pool has accumulated $600,000, and its set-up cost pool has accumulated
> Toole Corporation uses a job order costing system and allocates manufacturing overhead at a rate of $45 per machine hour. During the period, the company used 1,200 machine-hours and actually incurred manufacturing overhead costs of $55,000. a. Prepare a
> Star Repairs Co. does all the repair work for a medium-sized manufacturer of handheld computer games. The games are sent directly to Star, and after the games are repaired, Star bills the game manufacturer for cost plus a 20 percent markup. In the month
> The Work in Process Inventory account had a beginning balance of $16,200 on April 1. During April, the cost of direct materials used was $408,000 and direct labor cost assigned to production was $56,000. A total of $72,000 of overhead was assigned to pro
> Canterbury Pets, Inc., has three stores in the state. The owner, Ms. Perkins, is having trouble tracking inventory costs in the three pet stores. Ms. Perkins knows about your skill in tracking and understanding cost flows and asks you to find the followi
> During the current year, CF Manufacturing Co. incurred $370,000 of indirect labor costs, $15,000 of indirect materials costs, and $163,000 of other overhead costs. It also incurred $125,000 in rent costs on a warehouse for storing finished goods. What am
> Some managers believe machine performance is more important in a JIT environment than in a non-JIT environment. Do you agree or disagree? Explain your answer.
> Among the transactions of Marvel Manufacturing were the following. 1. Made payments on accounts payable to office suppliers. 2. Paid the principal amount of a mortgage to Seventh Bank. 3. Paid interest charges relating to a mortgage to Seventh Bank. 4. I
> What are performance obligations, and how do performance obligations relate to the principle of revenue recognition?
> Freddy’s Furnaces, Inc., assigned $550,000 of direct labor costs to production during the current period but paid its employees only $500,000. What are the two journal entries used to record these transactions?
> Sonic, Inc., sells business software. Currently, all of its programs come on disks. Due to their complexity, some of these applications occupy as many as seven disks. Not only are the disks cumbersome for customers to load, but they are relatively expens
> Hefty-Lift, Inc., is a company that manufactures forklifts. During the year, Hefty purchased $1,250,000 of direct materials and placed $1,600,000 worth of direct materials into production. Hefty’s beginning balance in the Materials Inventory account was
> A company that assembles trucks produces 60 trucks during the current year and incurs $4.5 million of material, labor, and overhead costs. Fifty-three trucks were sold during the year and each is allocated the same amount of costs. How much of the $4.5 m
> During the current year, the cost of direct materials purchased by a manufacturing firm was $360,000, and the direct materials inventory increased by $80,000. What was the cost of direct materials used during the year?
> At the end of the year, Eskola Manufacturing had the following balances. Prepare a partial balance sheet for Eskola’s showing the given accounts.
> During the year, Newark Boat Yard has incurred manufacturing costs of $250,000 in building three large sailboats. At year-end, each boat is about 60 percent complete. How much of these manufacturing costs should be recognized as expenses in Newark Boat Y
> In 2016, Novartis AG agreed to pay the U.S. Securities and Exchange Commission $25 million as a result of its China-based subsidiaries engaging in pay-to-prescribe schemes to increase sales. Employees of these China-based subs gave money, gifts, and othe
> Bosor Corporation has a receivable denominated in British pounds and a payable in Brazilian reals resulting from imports from Brazil. Bosor recorded foreign exchange losses related to both its pound-related receivable and its real-denominated payable. Di
> Among the transactions of Salem, Inc., were the following. a. Made payments on accounts payable to merchandise suppliers. b. Paid the principal amount of a note payable to First State Bank. c. Paid interest charges relating to a note payable to First Sta
> When business transactions are conducted internationally, cultural differences must be taken into consideration. Geert Hofstede is a leading researcher on how cultural variables can affect such international arrangements. Hofstede has a website where he
> Computes is a U.S.-based multinational corporation. Foreign sales are made at prices set in U.S. dollars, but foreign purchases are often made at prices stated in foreign currencies. If the exchange rate for the U.S. dollar has risen against most foreign
> A regional airline and a furniture manufacturer each generate annual revenue of $120 million and earn net income of $10 million. Which company probably has the higher break-even point? Explain.
> Jefferson Mountain is a small ski resort located in central Pennsylvania. In recent years, the resort has experienced two major problems: (1) unusually low annual snowfalls and (2) long lift lines. To remedy these problems, management is considering two
> You are the purchasing agent for a U.S. business that purchases merchandise on account from companies in Mexico. The exchange rate for the Mexican peso has been falling against the U.S. dollar and the trend is expected to continue for at least several mo
> Explain how an increase in a foreign exchange rate will affect a U.S. company that makes: a. Credit sales to a foreign company at prices stated in the foreign currency. b. Credit purchases from a foreign company at prices stated in the foreign currency.
> A recent newspaper shows the exchange rate for the British pound at $1.4135 and the yen at $0.008843. Does this indicate that the pound is stronger than the yen? Explain.
> Assume that a U.S. company makes a purchase from a British company and agrees to pay a price of £2 million. a. How will the U.S. company determine the cost of this purchase for the purpose of recording it in its accounting records? b. Briefly explain how
> A U.S. company purchased a shipment of fabrics from Bahrain for 3,500,000 dinars. According to the current exchange rate, what is the value of this contract in U.S. dollars?
> Translate the following amounts of foreign currency into an equivalent number of U.S. dollars using the exchange rates in Exhibit 15–7. a. £800,000. b. ¥350,000. c. €50,000.
> The following data are taken from the income statement and balance sheet of Freeman Machinery, Inc. Using this information, prepare a partial statement of cash flows for the year ended December 31, 2021, showing the computation of net cash flows from op
> Flanders Company’s operating income for the current year was $475,000. The company’s average total assets for the same period were $3,500,000, and its total liabilities were $1,000,000. Calculate the company’s return on assets.
> Multi-Star, Inc., had sales of $890,000, cost of sales and operating expenses of $450,000 and $225,000, respectively, and 10,000 shares of common stock outstanding. Calculate the amount of earnings per share.
> Lone Star, Inc., reported sales of $560,000, cost of sales of $255,000, and operating expenses of $130,000 for the current year. Using this information, calculate the amount of net income and net income as a percentage of sales.
> Jarman Company had current and noncurrent liabilities of $50,000 and $160,000, respectively. The company’s current assets were $76,000, out of a total asset figure of $457,000. Calculate the company’s debt ratio.
> Doctors Hanson, Dominick, and Borchard are radiologists living in Fargo, North Dakota. They realize that many of the state’s small rural hospitals cannot afford to purchase their own magnetic resonance imaging devices (MRIs). Thus, the
> Explain why the selection of cost drivers is an important part of identifying non–value-added activities.
> Foster Company had current assets and current liabilities as follows. Calculate the current and quick ratios using the information provided.
> Harrisonburg Company had current and total assets of $470,000 and $1,000,000, respectively. The company’s current and total liabilities were $267,000 and $600,000, respectively. Calculate the amount of working capital and the current ratio using this inf
> Moon, Inc., had the following income statement figures. Calculate component percentages for this information.
> Star, Inc., had depreciation expenses on its plant assets as follows for 2019, 2020, and 2021, respectively: $267,000, $289,000, and $368,000. Compute the trend percentages for these years, assuming 2019 is the base year.
> Wallace Company’s statement of cash flows for the current year is summarized as follows. a. Briefly explain what is included in each of the first three categories listed (i.e., the cash from operating, investing, and financing activiti
> Prince Company had net income of $45,500 in a year when its stockholders’ equity averaged $450,000 and its total assets averaged $2,500,000. Calculate the company’s return on equity for the period.
> Galaxy Company had net sales of $150,000 in its first year and $189,500 in its second year. Calculate the amount of change in terms of both dollars and percentage.
> Melcher, Inc., originally sold 100,000 shares of its $10 par value common stock at $25 per share. Several years later the company repurchased 10,000 of these shares at $45 per share. Melcher currently holds those shares in treasury. Prepare the company’s
> Smelling Company declared a 2-for-1 stock split on its common stock in order to intentionally reduce the market value of its stock so that it would be an attractive investment for a larger set of investors. The company’s common stock before the split is
> Franks, Inc., has preferred and common stock outstanding as follows. Calculate the book value on common stock, assuming preferred dividends are cumulative and are currently one year in arrears.
> Pathways Appliance Company is planning to introduce a built-in blender to its line of small home appliances. Annual sales of the blender are estimated at 12,000 units at a price of $35 per unit. Variable manufacturing costs are estimated at $15 per unit,
> A store using the retail inventory method takes its physical inventory by applying current retail prices as marked on the merchandise to the quantities counted. Does this procedure mean that the inventory will appear in the financial statements at retail
> Mensa Company has stockholders’ equity accounts as follows. Calculate the amount of book value per share for common stock and briefly describe what that figure means in relation to the current market value of the stock.
> Why does cost-volume-profit analysis focus on operating income instead of net income?
> Baker Company has common and preferred stock outstanding as follows. Dividends on preferred stock have not been paid for the last three years (in addition to the current year). If the company pays a total of $120,000 in dividends, how much will the comm
> Johnston, Inc., engaged in the following transactions involving treasury stock. a. Prepare general journal entries to record these transactions. b. Compute the amount of retained earnings that should be restricted because of the treasury stock still ow
> Mega, Inc., has common and 6 percent preferred stock outstanding as follows. The company declares a total dividend of $225,000. If the dividends on preferred stock are one year in arrears (in addition to the current year), how will the total dividend be
> Zeta Co. has outstanding 100,000 shares of $100 par value cumulative preferred stock, which has a dividend rate of 7 percent. The company has not declared any cash dividends on the preferred stock for the last three years. Calculate the amount of dividen
> Beta Co. sold 10,000 shares of common stock, which has a par value of $25, for $28 per share. The company also sold 1,000 shares of $100 par value preferred stock for $110. Assume the balance in retained earnings is $80,000. Prepare the stockholders’ equ
> Weller, Inc., sold 1,000,000 shares of $25 par value common stock at $32. It subsequently repurchased 100,000 of those shares at $50 per share and then sold 70,000 of those shares at $55. Calculate the total amount of stockholders’ equity given these tra
> Omega Co. sold 10,000 shares of common stock, which has a par value of $8, for $13 per share. The company’s balance in retained earnings is $75,000. Prepare the stockholders’ equity section of the company’s balance sheet.
> Joseph Max, Inc., sold 10-year, 5 percent bonds for $1,000,000 at 98. On the interest payment date at the end of the fifth year the bonds were outstanding, 40 percent ($400,000) of the bonds were retired by Max at 102 under an early retirement option tha
> Joseph Max, Inc., sold 10-year, 5 percent bonds for $1,000,000 at 98. On the interest payment date at the end of the fifth year the bonds were outstanding, 40 percent ($400,000) of the bonds were retired by Max at 102 under an early retirement option tha
