Why is a scattergraph useful?
> Classify each of the following as Prevention (P), Appraisal or Inspection (AI), Internal Failure (IF), or External Failure (EF) costs. 1. Cost of scrapped product. 2. Damage to company’s reputation. 3. Cost of rework. 4. Quality training. 5. Costs of the
> Briefly explain what happens to total variable costs when a product line is dropped.
> How might the decision to drop a product line affect a company’s remaining products?
> How do opportunity costs affect make-or-buy decisions? How are opportunity costs shown in a make-or-buy analysis?
> How do opportunity costs affect make-or-buy decisions? How are opportunity costs shown in a make-or-buy analysis?
> Briefly describe three problems that might result from a decision to buy a component part from an external supplier. For each problem, identify one way to avoid or correct it.
> Suppose that you are the manager of a local deli. Give an example of each of the following decisions that you might have to make and identify three factors that would be relevant to each decision: a. Special order. b. Make or buy. c. Keep or drop.
> How does excess capacity impact a special-order decision?
> How might the acceptance of a special order have negative consequences for a company?
> What is a special-order decision? Why can managers ignore fixed overhead costs when making special-order decisions?
> Briefly describe the five steps of the management decision making process.
> Your co-worker has come to you for help for several things the boss mentioned recently. Specifically, the boss was discussing the company’s move to a TQM approach for its manufacturing process and repeatedly mentioned multiple types of quality costs and
> Apple Company and Baker Company are competitors in the same industry. They have similar variable costs per unit and selling prices, but Baker has more fixed costs. Explain the impact of this on each company’s break-even point.
> Explain the difference between calculating the break-even point in units and in dollars. How can one be used to double-check the other?
> A company’s cost structure can have a high proportion of fixed costs or a high proportion of variable costs. Which cost structure is more vulnerable to decreases in demand? Why?
> Explain the difference between unit contribution margin and contribution margin ratio.
> Why is it important for a company to know its break-even point? What happens to the break-even point if variable cost per unit decreases? If total fixed cost increases?
> Your supervisor has requested that you prepare a CVP graph for your company’s product but does not understand its meaning or how changes would affect the graph. Explain to your supervisor how your graph would be affected by a. an increase in the selling
> When considering a CVP graph, how is the break-even point shown?
> What is the difference between the product mix and the sales mix?
> Why is the weighted-average contribution margin ratio approach commonly used in practice?
> How do you use the weighted-average contribution margin ratio in cost-volume-profit analysis?
> Majesty Company uses target costing to ensure that its products are profitable. Assume Majesty is planning to introduce a new product with the following estimates: Required: 1. Compute the target cost of this product. 2. Compute the target cost if Majest
> Why should managers create a CVP graph?
> What will happen to a company’s break-even point if the product mix shifts to favor a product with a lower contribution margin per unit?
> How is weighted-average unit contribution margin calculated?
> Why is sales mix important to multiproduct CVP analysis? Explain how sales mix is factored into CVP analysis.
> How does degree of operating leverage help managers predict changes in profit? In general, would you prefer a higher or lower degree of operating leverage?
> Explain degree of operating leverage and how it relates to fixed cost.
> Explain how a decision to automate a manufacturing facility would likely impact a company’s cost structure and its break-even point.
> Arrange a visit with a local business and interview the manager about the firm’s sustainability goals and initiatives. The objective of the interview is to gain an understanding of what the company is currently doing in the area of sustainability and to
> Give an example of a company to which margin of safety is particularly important and explain why.
> As discussed in the chapter, companies are often classified into one of three categories: service, merchandising, and manufacturing. Required: 1. Choose one well-known company from each category and explore that company’s website. On the website, find a
> 1. Assign each of the budgeted costs above to one of the following activity cost pools: ∙ Engineering ∙ Equipment setup ∙ Quality control ∙ Factory facilities ∙ Man
> Explain margin of safety. Why is it important for managers to know their margin of safety?
> In recent years, many companies have invested in equipment to automate processes that were once performed manually. A simple example is a drive-through car wash, where robots wash and dry the cars rather than people. Required: Think of another company th
> Explain the difference between break-even analysis and target profit analysis.
> Bert Company and Ernie Company are competitors in the same industry. The companies produce a similar product and have the same amount of fixed costs and the same selling price per unit. However, Bert has higher variable cost per unit. Compare the break-e
> Go to www.YouTube.com and search for How It’s Made, a television show produced by the Discovery Channel that shows how thousands of products and services are created. Find a product that interests you by browsing through the episode list or using search
> Identify and briefly describe the assumptions of CVP.
> Enter the account names and dollar amounts from the comparative balance sheets in Exhibit 13-1 into a worksheet in a spreadsheet file. Create a second copy of the worksheet in the same spreadsheet file. Required: 1. To the right of the comparative number
> Why is a contribution margin income statement more useful to managerial decision makers than the income statement intended for external users?
> Speedy Company uses the double-declining-balance method to depreciate its property, plant, and equipment and Turtle Company uses the straight-line method. The two companies are exactly alike except for the difference in depreciation methods. Required: 1.
> What does the R square value measure?
> Turtle Inc. has developed a new and improved widget. The company plans to sell the product through an existing website. Turtle’s marketing department believes the product will sell for $80. Turtle’s goal is a 40 percent profit margin on the widget. Requi
> Cotton White, Inc., makes specialty clothing for chefs. The company reported the following costs for 2018: Required: Compute the following for Cotton White: 1. Direct materials. 2. Direct labor. 3. Manufacturing overhead. 4. Total manufacturing cost. 5.
> Capital Investments Corporation (CIC) requested a sizable loan from First Federal Bank to acquire a large piece of land for future expansion. CIC reported current assets of $1,900,000 (including $430,000 in cash) and current liabilities of $1,075,000. Fi
> Describe the three methods used to estimate cost behavior. What are the strengths and weaknesses of each method? Will these methods always yield exactly the same results?
> As a team, select an industry to analyze. Using your web browser, each team member should access the annual report or 10-K for one publicly traded company in the industry, with each member selecting a different company. Required: 1. On an individual basi
> Lumber Liquidators, Inc., competes with Lowe’s in product lines such as hardwood flooring, moldings, and noise-reducing underlay. The two companies reported the following financial results in fiscal 2016: Required: 1. Calculate the diff
> The formula for estimating cost behavior is y = a + bx. Explain what each term represents.
> Compute the following three ratios for The Home Depot’s year ended January 29, 2017: (i) fixed asset turnover, (ii) days to sell, and (iii) debt-to-assets. To calculate the ratios, use the Fiscal 2016 financial statements of The Home Depot in Appendix A
> What is the relevant range and why is it important?
> Change the amounts for selected balance sheet accounts in the spreadsheets created for either S12–7 or S12–8 to calculate the net cash flows from operating activities if, just before the current year-end, the company’s management took the actions listed
> Explain the difference between discretionary and common fixed costs. Give an example of each.
> A number of manufacturers recently have moved to a JIT inventory system. JIT systems have a number of potential benefits but also can have negative consequences for a company whose suppliers are not dependable. Required: 1. Discuss the reasons a company
> Refer to the information presented in S12–7. Required: Complete the same requirements, except use the direct method only. Data from S12-7: You’ve recently been hired by B2B Consultants to provide financial advisory services to small business managers. B
> Explain what happens to the following when activity level decreases: a. Total fixed cost. b. Total variable cost. c. Total mixed cost. Explain what happens to the following when activity level decreases: a. Total fixed cost. b. Total variable cost. c. T
> You’ve recently been hired by B2B Consultants to provide financial advisory services to small business managers. B2B’s clients often need advice on how to improve their operating cash flows and, given your accounting background, you’re frequently called
> How does profit change under full absorption costing versus variable costing due to an increase in finished goods inventory? Due to a decrease in finished goods inventory?
> QuickServe, a chain of convenience stores, was experiencing some serious cash flow difficulties because of rapid growth. The company did not generate sufficient cash from operating activities to finance its new stores, and creditors were not willing to l
> When will variable costing show the same profit as full absorption costing?
> This case is available online in the Connect eBook. To complete this case, you will evaluate two alternatives for increasing a sports club’s reported operating cash flows
> What is the critical item that is treated differently in full absorption versus variable costing? Explain how each method treats it.
> Explain the difference between absorption costing and variable costing. Why do internal users need variable costing information?
> This case is based on a cash flow reporting fraud at Enron. The case is available online in the Connect eBook. To complete this case, you will evaluate the statement of cash flow effects of misclassifying a loan as a s
> Corey Hart has just opened an interior design business. Corey is targeting customers in established neighborhoods who want to restore and update their homes. Corey Hart’s staff of interior designers performs the following activities on
> When activity level increases, explain what happens to: a. Contribution margin per unit. b. Contribution margin ratio. c. Total contribution margin. d. Total fixed cost. e. Profit.
> As a team, select an industry to analyze. Using your web browser, each team member should access the annual report or 10-K for one publicly traded company in the industry, with each member selecting a different company. Required: 1. On an individual basi
> Explain how to calculate total contribution margin, contribution margin per unit, and contribution margin ratio. What is the meaning of each?
> Go to the Home Depot investor relations website (http://ir.homedepot.com) and download the 2016 annual report. Note: Fiscal 2016 for The Home Depot runs from February 1, 2016, to January 29, 2017. Required: 1. Which of the two basic reporting approaches
> Define each of the following terms: variable cost, fixed cost, step cost, and mixed cost. Give an example of each.
> Go to the Home Depot investor relations website (http://ir.homedepot.com) and download the 2016 annual report. Note: Fiscal 2016 for The Home Depot runs from February 1, 2016, to January 29, 2017. Required: 1. Which of the two basic reporting approaches
> Why must costs be classified into different categories for ABC? What is the basis for these categories?
> In this activity, you will be evaluating whether to purchase a 2018 Chevrolet Bolt EV (electric vehicle) LT or a 2018 Ford Fusion S Hybrid. Assume you plan on keeping your car for 10 years and at the end of 10 years, the resale value for the Bolt and Fus
> How do the ABC categories (hierarchy) in a service company differ from those in a manufacturing company?
> In the last several chapters, you have learned about many aspects of organizational structure, budgeting, and performance evaluation. None of these company characteristics operates in isolation. They all interrelate to form an organizationâ€&#
> Rosehut Olive Oil Company makes two grades of olive oil: standard and extra virgin. Rosehut has identified two activity cost pools, the related costs per pool, the cost driver for each pool, and the expected usage for each pool. Additional information ab
> Identify the categories (hierarchy) of activities in an activity-based costing system for a manufacturing company.
> This chapter discussed the use of the balanced scorecard for evaluating managerial and organizational performance. Many companies have adopted this performance measurement in recent years. Required: Research or visit a company that has implemented the ba
> Describe the two stages of activity-based costing.
> What types of business might use activity-based costing?
> To be able to use a standard costing system, a company must develop standards that will serve as the guide for the amount of a resource (e.g., direct materials, direct labor) that should be consumed in the production of a unit. One way to accomplish this
> How does activity-based costing differ from traditional costing systems?
> Suppose Acore Pharmaceuticals has four sales representatives assigned to the state of Arizona. These sales reps are responsible for visiting physicians in their assigned area, introducing the company’s current or upcoming products, prov
> Go to www.YouTube.com and search for How It’s Made, a television show produced by the Discovery Channel that shows how thousands of products and services are created. Find any product that interests you. Assume the company that makes this product uses a
> What are the potential negative consequences of a traditional volume-based costing system?
> Numerous personal financial planning or budgeting tools are available on the Internet, many of them free. Choose at least two different online budgeting sites and input information for a typical person of your age. (Note: You may either create a fictitio
> The University of Dental Health (UDH) is a state-run university focusing on the education and training of dentists, dental assistants, dental hygienists, and other dental professionals. The university provides both traditional undergraduate courses to 12
> Briefly discuss the advantages and disadvantages of activity-based costing and activity-based management.
> Explain the statement that traditional costing systems use volume-based allocation measures.
> Budgets can be used in almost any type of organization including large corporations, small businesses, government organizations, universities, churches, and student clubs. Required: Choose any local organization and interview two people who are involved
> Explain the concept of a just-in-time inventory system. What is its primary benefit?
> Outsourcing, particularly to overseas companies, is a hot-button topic that has garnered much attention in the academic, national, and local business media. Required: 1. Conduct an Internet search for articles about outsourcing. What are some of the majo
> What is target costing? How does activity-based management play a role in target costing?
> In January 2018, Walmart announced it would raise its starting wage from $9 to $11 and it would be firing 3,500 store co-managers, a salaried person who acts as a lieutenant underneath each store manager. Required: 1. Explain how the Walmart decision imp
> What are the four types of quality costs that comprise total quality management (TQM)?
> Due to budget cutbacks, colleges and universities across the country are struggling to cut expenses. Frequent casualties of these money-saving decisions are organized sports teams. Suppose that a fictional college, West Tennessee State (WTS), has identif
> What is a non-value-added activity? Considering the construction company in question 10, give an example of a value-added and a non-value-added activity.
> Julio produces two types of calculators, standard and deluxe. The company is currently using a traditional costing system with machine hours as the cost driver but is considering a move to activity-based costing. In preparing for the possible switch, Jul
