What kind of firm would use a job order cost system?
> Which of the following graphs illustrates how total fixed costs behave with changes in total units produced? (a) (Ь), Total Units Produced Total Units Produced Total Cost Total Cost
> In cost analyses, how are mixed costs treated?
> Describe the behavior of (a) total fixed costs and (b) unit fixed costs as the level of activity increases.
> How would each of the following costs be classified if units produced is the activity base? a. Direct materials costs b. Direct labor costs c. Electricity costs of $0.09 per kilowatt-hour
> A chemical company has a commodity-grade and a premium-grade product. Why might the company elect to process the commodity-grade product further to the premium-grade product?
> Under what circumstances is it appropriate to use the target cost concept?
> Modern Living Inc. is a privately held diversified company with five separate divisions organized as investment centers. A condensed income statement for the Patio Division for the past year, assuming no service department c
> An examination of the accounting records of Larredo Company disclosed a high contribution margin ratio and production at a level below maximum capacity. Based on this information, suggest a likely means of improving operating income.
> Differentiate between a cost center and a profit center.
> A net present value analysis used to evaluate a proposed equipment acquisition indicated a $115,000 net present value. What is the meaning of the $115,000 as it relates to the desirability of the proposal?
> Why would the cash payback method understate the value of a project with a large residual value?
> What information does the cash payback period ignore that is included by the net present value method?
> What method can be used to place two capital investment proposals with unequal useful lives on a comparable basis?
> What provision of the Internal Revenue Code is especially important to consider in analyzing capital investment proposals?
> In a decentralized company in which the divisions are organized as investment centers, how could a division be considered the least profitable, even though it earned the largest amount of operating income?
> Why should the factors under the control of the investment center manager (revenues, expenses, and invested assets) be considered in computing the return on investment?
> Weyerhaeuser developed a system that assigns service department expenses to user divisions on the basis of actual services consumed by the division. Here are a number of Weyerhaeuser’s activities in its central Financial Services Department: • Payroll •
> The Laser Division of FOX Technologies Inc. has been experiencing revenue and profit growth during the years 20Y6–20Y8. The divisional income statements are provided below. Assume that there are no charges from service
> For what decisions is the manager of a cost center not responsible?
> In what major respect would budget performance reports prepared for the use of plant managers of a manufacturing business with cost centers differ from those prepared for the use of the various department supervisors who report to the plant managers?
> Differentiate between a profit center and an investment center.
> Why would standard cost be a more appropriate transfer cost between cost centers than actual cost?
> When would a company use zero-based budgeting?
> What behavioral problems are associated with establishing conflicting goals within the budget?
> What behavioral problems are associated with setting a budget too loosely?
> Give an example of budgetary slack.
> What is the manager’s role in a responsibility center?
> How can standards be used by management to help control costs?
> The three divisions of Dixie Foods are Cereal, Produce, and Snacks. The divisions are structured as investment centers. The following responsibility reports were prepared for the three divisions for the prior year: 1. Which division is making the best
> How does a schedule of collections from sales assist in preparing the cash budget?
> In preparing the budget for the cost of goods sold, what are the three budgets from which data on relevant estimates of quantities and costs are combined with data on estimated inventories?
> What is the first step in preparing a master budget?
> How are standards used in budgetary performance evaluation?
> How often should standards be revised?
> What is meant by reporting by the “principle of exceptions,” as the term is used in reference to cost control?
> Why might the use of ideal standards in applying the cost-plus approach to product pricing lead to setting product prices that are too low?
> What does operating leverage measure, and how is it computed?
> How can activity-based costing be used in service companies?
> It was reported that Exabyte Corporation, a fast- growing Colorado marketer of computer devices has decided to purchase key components of its product from other suppliers. A former chief executive officer of Exabyte stated, “If we’d tried to build our ow
> The Customer Service Department of Bragg Inc. asked the Publications Department to prepare a brochure for its training program. The Publications Department delivered the brochures and charged the Customer Service Department a rate that was 15% higher tha
> Both Gouda Company and Cheddar Company had the same sales, total costs, and operating income for the current fiscal year; yet Gouda Company had a lower break-even point than Cheddar Company. Explain the reason for this difference in break-even points.
> If insurance rates are increased, what effect will this change in fixed costs have on the break-even point?
> At the end of the fiscal year, there was a relatively minor balance in the factory overhead account. What procedure can be used for disposing of the balance in the account?
> a. What is (1) over applied factory overhead and (2) under applied factory overhead b. If the factory overhead account has a positive balance, was factory overhead under applied or over applied?
> If fixed costs increase, what would be the impact on the (a) contribution margin and (b) operating income?
> In applying the high-low method of cost estimation, how is the total fixed cost estimated?
> Describe the source of the data for increasing Work in Process for (a) direct materials, (b) direct labor, and (c) factory overhead.
> Which of the following graphs illustrates how unit variable costs behave with changes in total units produced? (a), (Ь) 0 Total Units Produced 0 Total Units Produced Unit Cost Unit Cost
> How does the use of the materials requisition help control the issuance of materials from the storeroom?
> Sisel Company has two divisions, the Optic Lens Division and the Camera Division. The Camera Division may purchase lenses from the Optic Lens Division or from outside suppliers. The Optic Lens Division sells products both internally and externally. The m
> How would each of the following costs be classified if units produced is the activity base? a. Salary of factory supervisor ($120,000 per year) b. Straight-line depreciation of plant and equipment c. Property rent of $11,500 per month on plant and equipm
> How is product cost information used by managers?
> For a company that produces desktop computers, would memory chips be considered a direct or an indirect materials cost of each computer produced?
> Bev Frazier is a cost accountant for Ocean Atlantic Apparel Inc. Jeff Rangel, vice president of marketing, has asked Bev to meet with representatives of Ocean Atlantic Apparel’s major competitor to discuss product cost data. Jeff indicates that the shari
> Kopecky Industries Inc. is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated income from operations, and net cash flow for each proposal are as follows:
> The investment committee of Iron Skillet Restaurants Inc. is evaluating two restaurant sites. The sites have different useful lives, but each requires an investment of $1,000,000. The estimated net cash flows from each site are as follows:
> The management of Heckel Communications Inc. is considering two capital investment projects. The estimated net cash flows from each project are as follows: The radio station requires an investment of $1,598,800, while the TV station requ
> Donahue Industries Inc. wishes to evaluate three capital investment projects by using the net present value method. Relevant data related to the projects are summarized as follows: Instructions: 1. Assuming that the desired rate of return is 20%, prepa
> McMorris Publications Inc. is considering two new magazine products. The estimated net cash flows from each product are as follows: Each product requires an investment of $400,000. A rate of 10% has been selected for the net present valu
> The capital investment committee of Overnight Express Inc. is considering two investment projects. The estimated income from operations and net cash flows from each investment are as follows: Each project requires an investment of $800,0
> Harmony Industries Inc. is a small manufacturer of electronic musical instruments. The plant manager received the following variable factory overhead report for the period: The plant manager is not pleased with the $29,800 unfavorable variable factory
> Birrell Scientific Inc. manufactures electronic products, with two operating divisions, GPS Systems and Communication Systems. Condensed divisional income statements, which involve no intra company transfers and which include a breakdown o
> The vice president of operations of Moab Bike Company is evaluating the performance of two divisions organized as investment centers. Invested assets and condensed income statement data for the past year ending October 31, 20Y9, for each division are as
> A condensed income statement for the Jet Ski Division of Amazing Rides Inc. for the year ended December 31, 20Y2, is as follows: Assume that the Jet Ski Division received no charges from service departments. The president of Amazing Rides has indicated
> High Country Foods Inc. is a diversified food products company with three operating divisions organized as investment centers. Condensed data taken from the records of the three divisions for the year ended June 30, 20Y7, are as follows:
> A-One Freight Inc. has three regional divisions organized as profit centers. The chief executive officer (CEO) evaluates divisional performance using operating income as a percent of revenues. The following quarterly income
> Sneed Industries Company sells vehicle parts to manufacturers of heavy construction equipment. The Crane Division is organized as a cost center. The budget for the Crane Division for the month ended August 31, 20Y6, is as follows (in thousands): During
> Seabury, Inc., a manufacturer of disposable medical supplies, prepared the following factory overhead cost budget for the Assembly Department for October. The company expected to operate the department at 100% of normal capacity of 25,000 hours. During
> The Radiology Department provides imaging services for Northeast Washington Medical Center. One important activity in the Radiology Department is transcribing digitally recorded analyses of images into a written report. The manager of the Radiology Depar
> Route 66 Tire Co. manufactures automobile tires. Standard costs and actual costs for direct materials, direct labor, and factory overhead incurred for the manufacture of 10,000 tires were as follows: Instructions: Determine (a) the price variance, quan
> Faucet Industries Inc. manufactures faucets in a small manufacturing facility. The faucets are made from zinc. Faucet Industries has 60 employees. Each employee presently provides 36 hours of labor per week. Information about a production week is as foll
> Christy Eisenbeis is a cost analyst with Nations Insurance Company. Nations Insurance is applying standards to its claims payment operation. Claims payment is a repetitive operation that could be evaluated with standards. Christy used time and motion stu
> The controller of Shoe Mart Inc. asks you to prepare a monthly cash budget for the next three months. You are presented with the following budget information: The company expects to sell about 20% of its merchandise for cash. Of sales on account, 75% a
> The budget director of Jupiter Helmets Inc., with the assistance of the controller, treasurer, production manager, and sales manager, has gathered the following data for use in developing the budgeted income statement for May: Estimated sales for May: B
> The budget director of Royal British Furniture Company requests estimates of sales, production, and other operating data from the various administrative units every month. Selected information concerning sales and production for March is summarized as fo
> Twilight Lumina Company recently began production of a new product, the halogen light, which required an investment of $1,200,000 in assets. The costs of producing and selling 20,000 halogen lights are estimated as follows: Twilight Lumina Company is c
> The management of Dorsch Aluminum Co. is considering whether to process aluminum ingot further into rolled aluminum. Rolled aluminum can be sold for $4,100 per ton, and ingot can be sold without further processing for $2,400 per ton. Ingot is produced in
> Rocket Shoe Company is planning a one-month campaign for August to promote sales of one of its two shoe products. A total of $500,000 has been budgeted for advertising, contests, redeemable coupons, and other promotional activities. The following data ha
> Catalina Tooling Company is considering replacing a machine that has been used in its factory for two years. Relevant data associated with the operations of the old machine and the new machine, neither of which has any estimated residual value, are as fo
> Five Star is considering leasing a building and buying the necessary equipment to operate a public warehouse. Alternatively, the company could use the funds to invest in $900,000 of 4% U.S. Treasury bonds that mature in 15 years. The bonds could be purch
> Data related to the expected sales of kayaks and canoes for River Sports Inc. for the current year, which is typical of recent years, are as follows: The estimated fixed costs for the current year are $1,440,000. Instructions: 1. Determine the estimat
> Last year, Ridgecrest Inc. had sales of $3,200,000, based on a unit selling price of $400. The variable cost per unit was $240, and fixed costs were $1,088,000. The maximum sales within Ridgecrest Inc.’s relevant range are 10,000 units. Ridgecrest Inc. is
> The city of Rosebud has an annual budget cycle that begins on July 1 and ends on June 30. At the beginning of each budget year, an annual budget is established for each department. The annual budget is divided by 12 months to provide a constant monthly s
> For the coming year, Bernardino Company anticipates a unit selling price of $85, a unit variable cost of $15, and fixed costs of $420,000. Instructions: 1. Compute the anticipated break-even sales (units). 2. Compute the sales (units) required to realize
> Kearney Company, operating at full capacity, sold 400,000 units at a price of $246.60 per unit during 20Y5. Its income statement for 20Y5 is as follows: The division of costs between fixed and variable is as follows: Management is considering a plant
> Peak Apparel Co. manufactures a variety of clothing types for distribution to several major retail chains. The following costs are incurred in the production and sale of blue jeans: a. Shipping boxes used to ship orders b. Consulting fee of $200,000 paid
> Organic Health Care Products Inc. expects to maintain the same inventories at the end of 20Y8 as at the beginning of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. With this in mind, t
> R-Tunes Inc. is in the business of developing, promoting, and selling musical talent online and with compact discs (CDs). The company signed a new group, called Cyclone Panic, on January 1, 20Y8. For the first six months of 20Y8, the company spent $1,000,
> Summer Boards Company manufactures surf boards in a wide variety of sizes and styles. The following incomplete ledger accounts refer to transactions that are summarized for May: In addition, the following information is available: a. Materials and dir
> Hallmark Furniture Company refinishes and reupholsters furniture. Hallmark Furniture uses a job order cost system. When a prospective customer asks for a price quote on a job, the estimated cost data are inserted on an unnumbered job cost
> Waddell Equipment Company uses a job order cost system. The following data summarize the operations related to production for April 20Y4, the first month of operations: a. Materials purchased on account, $36,000. b. Materials requisitioned
> The following is a list of costs that were incurred in the production and sale of all-terrain vehicles (ATVs). a. Attorney fees for drafting a new lease for headquarters offices. b. Cash paid to outside firm for janitorial services for factory. c. Commis
> Domino’s Pizza LLC operates pizza delivery and carryout restaurants. The annual report describes its business as follows: We offer a focused menu of high-quality, value priced pizza with three types of crust (Hand-Tossed, Thin Crust, and Deep Dish), alon
> The following statement was made by the vice president of finance of Electro Inc.: “The managers of a company should use the same information as the shareholders of the firm. When managers use the same information in guiding their internal operations as sh
> Using the data from P11-2, determine the following for 20Y5. 1. Margin of safety for 20Y5. 2. Margin of safety under the proposed program assuming 20Y5 sales. Data from Problem 11-2: Kearney Company, operating at full capacity, sold 400,000 units at a p
> Use the data from E11-20, assume that 31,500 units of digital game players and 13,500 computer tablets were sold in the current year. Assuming no change in the sales mix, determine the following for Northwest Technology Inc. Round to one decimal place. 1
> a. If Go-Go Buggies Company, with a break-even point at $6,000,000 of sales, has actual sales of $8,000,000, what is the margin of safety expressed (1) in dollars and (2) as a percentage of sales? b. If the margin of safety for Beartooth Company was 15
> Costco Wholesale Corporation (COST) and Wal-Mart Stores Inc. (WMT) reported the following data (in millions) for a recent year: 1. Compute the return on total assets. Round to one decimal place. 2. Compute the return on stockholders’
> Using the answers to MBA 15-2 and MBA 15-3, compare and comment on the operations for Southwest Airlines (LUV) and Delta Air Lines (DAL). Data from MBA 15-2: Southwest Airlines Co. (LUV) reported the following data (in millions) for a recent year: Dat
> Delta Air Lines, Inc. (DAL) reported the following data (in millions) for a recent year: 1. Compute the return on total assets. Round to one decimal place. 2. Compute the return on stockholders’ equity. Round to one decimal place. 3.
