Wolverine Valve and Fitting Company, located in southern Michigan, manufactures a variety of industrial valves and pipe fittings. Currently, the company is operating at about 70 percent capacity. Management has been approached by Glasgow Industries Ltd. of Scotland with an offer to buy 120,000 units of a pressure valve. Glasgow Industries manufactures a valve that is almost identical to Wolverine’s pressure valve; however, a fire in Glasgow Industries’ valve plant has shut down its manufacturing operations. Glasgow needs the 120,000 valves over the next four months to meet commitments to its regular customers. Glasgow is prepared to pay $28.50 each for the valves. Wolverine’s total product cost for the pressure valve is $30, calculated as follows: Direct material ....................................................................... $ 7.50 Direct labor ................................................................................ 9.00 Manufacturing overhead ......................................................... 13.50 Total product cost .................................................................. $30.00 Manufacturing overhead is applied to production at the rate of $27 per direct-labor hour. This overhead rate is made up of the following components. Variable manufacturing overhead ....................................... $ 9.00 Fixed manufacturing overhead (traceable ............................. 12.00 Fixed manufacturing overhead (allocated) ............................. 6.00 Applied manufacturing overhead rate .................................. $27.00 Additional costs incurred in connection with sales of the pressure valve include sales commissions of 5 percent and freight expense of $1.50 per unit. However, the company does not pay sales commissions on special orders that come directly to management. In determining selling prices, Wolverine adds a 40 percent markup to total product cost. This provides a $42.00 suggested selling price for the pressure valve. The Marketing Department, however, has set the current selling price at $40.50 in order to maintain market share. Production management believes that it can handle the Glasgow Industries order without disrupting its scheduled production. The order would, however, require additional fixed factory overhead of $18,000 per month in the form of supervision and clerical costs. If management accepts the order, 30,000 pressure valves will be manufactured and shipped to Glasgow Industries each month for the next four months. Glasgow’s management has agreed to pay the shipping charges for the valves. Required: 1. Determine how many direct-labor hours would be required each month to fill the Glasgow Industries order. 2. Prepare an analysis showing the impact of accepting the Glasgow Industries order. 3. Calculate the minimum unit price that Wolverine Valve and Fitting Company’s management could accept for the Glasgow Industries order without reducing net income. 4. Identify the factors, other than price, that Wolverine’s management should consider before accepting the Glasgow Industries order. 5. Build a spreadsheet: Construct an Excel spreadsheet to solve requirements (2) and (3) above. Show how the solution will change if the following information changes: the direct material and direct labor per unit are $6.90 and $9.10, respectively.
> Complete Mini Exercise 9, and then prepare a trial balance for Dennen, Inc., as of January 31.
> For each transaction in Mini Exercise 5 (including the sample), post the effects to the appropriate T-accounts and determine ending account balances. Beginning balances are provided. Cash Notes Receivable Equipment Beg. bal. 900 Beg. bal. 1,000 Beg.
> What transactions are classified as investing activities in a statement of cash flows? What transactions are classified as financing activities?
> For each transaction in Mini Exercise 5 (including the sample), write the journal entry in the proper form. Data from Mini Exercise 5: For each of the following transactions of Dennen, Inc., for the month of January, indicate the accounts, the amounts,
> For each of the following transactions of Dennen, Inc., for the month of January, indicate the accounts, the amounts, and the direction of the effects on the accounting equation. A sample is provided. a. (Sample) Borrowed $30,000 from a local bank. b. Le
> The following are the accounts of Rosa-Perez Company: (1) Accounts Payable (2) Accounts Receivable (3) Buildings (4) Cash (5) Common Stock (6) Land (7) Merchandise Inventory (8) Income Taxes Payable (9) Long-Term Investments (10) Notes Payable (due in th
> Calculate the current ratio for Sal’s Taco Company at the end of 2013 and 2014, based on the following data: What does the result suggest about the company over time? What can you say about Sal’s Taco Companyâ
> Which of the following is not a financing activity on the statement of cash flows? a. When the company lends money. b. When the company borrows money. c. When the company pays dividends. d. When the company issues stock to shareholders.
> At the end of a recent year, The Gap, Inc., reported total assets of $7,422 million, current assets of $4,309 million, total liabilities of $4,667, current liabilities of $2,128 million, and stockholders’ equity of $2,755 million. What is its current rat
> Which of the following statements are true regarding the balance sheet? 1. One cannot determine the true fair market value of a company by reviewing its balance sheet. 2. Certain internally generated assets, such as a trademark, are not reported on a com
> The Cash T-account has a beginning balance of $21,000. During the year, $100,000 was debited and $110,000 was credited to the account. What is the ending balance of Cash? a. $11,000 debit balance b. $11,000 credit balance c. $31,000 credit balance d. $31
> Which of the following describes how assets are listed on the balance sheet? a. In alphabetical order b. In order of magnitude, lowest value to highest value c. From most liquid to least liquid d. From least liquid to most liquid
> The T-account is a tool commonly used for analyzing which of the following? a. Increases and decreases to a single account in the accounting system. b. Debits and credits to a single account in the accounting system. c. Changes in specific account balanc
> What is a T-account? What is its purpose?
> The dual effects concept can best be described as follows: a. When one records a transaction in the accounting system, at least two effects on the basic accounting equation will result. b. When an exchange takes place between two parties, both parties mu
> Total liabilities on a balance sheet at the end of the year are $150,000, retained earnings at the end of the year are $80,000, net income for the year is $60,000, common stock is $40,000, and additional paid-in capital is $20,000. What amount of total a
> Which of the following is not an asset? a. Investments b. Land c. Prepaid Expense d. Additional Paid-in Capital
> If a publicly traded company is trying to maximize its perceived value to decision makers external to the corporation, the company is most likely to understate which of the following on its balance sheet? a. Assets b. Common Stock c. Retained Earnings d.
> Penny Cassidy has decided to start her business, Penny’s Pool Service & Supply, Inc. (PPSS). There is much to do when starting a new business. Here are some transactions that have occurred in the business in March. a. Received $25,0
> Your best friend from home writes you a letter about an investment opportunity that has come her way. A company is raising money by issuing shares of stock and wants her to invest $20,000 (her recent inheritance from her great-aunt’s es
> Refer to Alternate Problem 3. Alternate Problem 3: Ethan Allen Interiors, Inc., is a leading manufacturer and retailer of home furnishings in the United States and abroad. The following is adapted from Ethan Allen’s recent annual finan
> The following is a list of important abbreviations used in the chapter. These abbreviations also are used widely in business. For each abbreviation, give the full designation. The first one is an example. Abbreviation ……………………….……………………
> Mark each item in the following list as an asset (A), liability (L), or stockholders’ equity (SE) item that would appear on the balance sheet or a revenue (R) or expense (E) item that would appear on the income statement. (1) Retained earnings (2) Accoun
> What two accounting equalities must be maintained in transaction analysis?
> Match each element with its financial statement by entering the appropriate letter in the space provided. Element Financial Statement (1) Expenses (2) Cash flow from investing activities (3) Assets (4) Dividends (5) Revenues A. Balance sheet B. Incom
> Recent balance sheets are provided for Twitter, Inc., a global platform for real-time public self-expression and conversation. Required: 1. Is Twitter a corporation, sole proprietorship, or partnership? Explain the basis of your answer. 2. Use the compa
> Frances Sabatier asked a local bank for a $50,000 loan to expand her small company. The bank asked Frances to submit a financial statement of the business to supplement the loan application. Frances prepared the following balance sheet. Required: The ba
> The Securities and Exchange Commission (SEC) regulates companies that issue stock on the stock market. It receives financial reports from public companies electronically under a system called EDGAR (Electronic Data Gathering and Retrieval Service). Using
> Adamson Incorporated is a small manufacturing company that makes model trains to sell to toy stores. It has a small service department that repairs customers’ trains for a fee. The company has been in business for five years. At the end
> According to a recent Form 10-K report of Mattel, Inc., the company “designs, manufactures, and markets a broad variety of toy products worldwide.” Mattel’s brands include Barbie, Hot Wheels, FisherPr
> Ethan Allen Interiors, Inc., is a leading manufacturer and retailer of home furnishings in the United States and abroad. The following is adapted from Ethan Allen’s recent annual financial report (fiscal year ending on June 30). Amounts
> A key factor that an auditor provides is independence. The AICPA Code of Professional Conduct states that “a member in public practice should be independent in fact and appearance when providing auditing and other attestation services.” Required: Do you
> You are one of three partners who own and operate Mary’s Maid Service. The company has been operating for seven years. One of the other partners has always prepared the company’s annual financial statements. Recently you proposed that the statements be a
> Performance Corporation was organized on January 1, 2015. At the end of 2015, the company had not yet employed an accountant; however, an employee who was “good with numbers” prepared the following statements at that d
> What is the fundamental accounting model?
> Clint’s Stonework Corporation was organized on January 1, 2015. For its first two years of operations, it reported the following: Net income for 2015…………………………………………………….$ 31,000 Net income for 2016……………………………………………………….42,000 Dividends for 2015………………………
> Clay Corporation was organized on January 1, current year. At the end of the current year, the following financial data are available: Total revenues…………………………………………………………………..$299,000 Total expenses (excluding income taxes)………………………………184,000 Income tax
> Painter Corporation was organized by five individuals on January 1 of the current year. At the end of January of the current year, the following monthly financial data are available: Total revenues ……………………………………………….………….$305,000 Total expenses (excludi
> Review the chapter explanations of the income statement and the balance sheet equations. Apply these equations in each independent case to compute the two missing amounts for each case. Assume that it is the end of the first full year of operations for t
> Review the chapter explanations of the income statement and the balance sheet equations. Apply these equations in each independent case to compute the two missing amounts for each case. Assume that it is the end of the first full year of operations for t
> Neighborhood Realty, Incorporated, has been operating for three years and is owned by three investors. S. Bhojraj owns 60 percent of the total outstanding stock of 9,000 shares and is the managing executive in charge. On December 31, current year, the fo
> Walgreen Co. is one of the nation’s leading drugstore chains. Its recent income statement contained the following items (in millions). Prepare an income statement for the year ended August 31, current year. Cost of sales .…………………………………….……………...$51,692 P
> Carlos Ramirez and Camila Garza organized New World Book Store as a corporation; each contributed $80,000 cash to start the business and received 4,000 shares of common stock. The store completed its first year of operations on December 31, current year.
> Honda Motor Corporation of Japan is a leading international manufacturer of automobiles, motorcycles, all-terrain vehicles, and personal watercraft. As a Japanese company, it follows Japanese GAAP and reports its financial statements in billions of yen (
> Tootsie Roll Industries is engaged in the manufacture and sale of candy. Major products include Tootsie Roll, Tootsie Roll Pops, Tootsie Pop Drops, Tootsie Flavor Rolls, Charms, and Blow-Pop lollipops. The following items were listed on Tootsie Roll’s re
> Why are accounting assumptions necessary?
> Describe a typical business operating cycle.
> In December of 20x4, Memphis Plastics sold a forklift for $9,255. The machine was purchased in 20x1 for $50,000. Since then $38,845 in depreciation has been recorded on the forklift. Required: 1. What was the forklift’s book value at the time of sale? 2
> Serendipity Sound, Inc., manufactures home theater sound systems in its Minneapolis Division. The divisional sales manager has estimated the following demand-curve data. Quantity Sold per Month Unit Sal
> Manhattan Pharmaceuticals, Inc., specializes in packaging bulk drugs in standard dosages for local hospitals. Wyant Memorial Hospital has asked Manhattan Pharmaceuticals to bid on the packaging of one million doses of medication at total cost plus a retu
> Suburban Heating, Inc., installs heating systems in n e w homes built in suburban Philadelphia. Jobs are priced using the time and materials method. The following predictions pertain to the company’s operations for the next year. Labor rate, including fr
> Refer to the cost and production data for the Wave Darter in Exhibit 15–5. The target profit is $60,000. Exhibit 15-5: Required: Use the general formula for determining a markup percentage to compute the required markup percentages wi
> The following data pertain to Legion Lighting Company’s oak-clad, contemporary chandelier. Variable manufacturing cost ............................................................... $300 Applied fixed manufacturing cost .................................
> Should actual or budgeted service department costs be allocated? Why?
> Rosario Company produces a single product in its Buenos Aires plant, which currently sells for 7.50 p per unit. Fixed costs are expected to amount to 90,000 p for the year, and all variable manufacturing and administrative costs are expected to be incurr
> The following data pertain to LawnMate Corporation’s top-of-the-line lawn mower. Variable manufacturing cost ....................................................... $275 Applied fixed manufacturing cost ...................................................
> Refer to the data given in the preceding two exercises. 1. Prepare a table of Serendipity Sound’s revenue, cost, and profit relationships. For guidance refer to panel C of Exhibit 15–3. 2. Draw a graph similar to panel
> Refer to the preceding exercise. The divisional controller at Serendipity Sound’s Minneapolis Division has estimated the following cost data for the division’s sound systems. (Assume there are no fixed costs.) Quantit
> List the seven steps in the decision-making process
> Are the concepts underlying a relevant-cost analysis still valid in an advanced manufacturing environment? Are these concepts valid when activity-based costing is used? Explain.
> “Accounting systems should produce only relevant data and forget about the irrelevant data. Then I’d know what was relevant and what wasn’t!” Comment on this remark by a company president.
> Give two examples of sunk costs, and explain why they are irrelevant in decision making.
> There is an important link between decision making and managerial performance evaluation. Explain
> How is sensitivity analysis used to cope with uncertainty in decision making?
> Briefly describe the proper approach to making a production decision when limited resources are involved.
> What is a joint production process? Describe a special decision that commonly arises in the context of a joint production process. Briefly describe the proper approach for making this type of decision.
> Briefly describe the proper approach for making a decision about adding or dropping a product line.
> What behavioral tendency do people often exhibit with regard to opportunity costs?
> Define the term reciprocal services.
> Define the term opportunity cost, and give an example of one.
> Why might a manager exhibit a behavioral tendency to inappropriately consider sunk costs in making a decision?
> Is the book value of inventory on hand a relevant cost? Why?
> List and explain two important criteria that must be satisfied in order for information to be relevant.
> What is meant by each of the following potential characteristics of information: relevant, accurate, and timely? Is objective information always relevant? Accurate?
> Ontario Pump Company, a small manufacturing company in Toronto, Ontario, manufactures three types of pumps used in a variety of applications. For many years the company has been profitable and has operated at capacity. However, in the last two years pric
> All Sports Company’s production manager, Chris Adler, had requested to have lunch with the company president. Adler wanted to put forward his suggestion to add a new product line. As they finished lunch, Meg Thomas, the company presiden
> New Jersey Chemical Company manufactures two industrial chemical products, called z anide and kreolite. Two machines are used in the process, and each machine has 24 hours of capacity per day. The following data are available: The company can produce and
> Refer to the data given in the preceding exercise for Plato Corporation. Assume that the direct-labor rate is $12 per hour, and 11,000 labor hours are available per year. In addition, the company has a short supply of machine time. Only 9,000 hours are a
> Refer to the data given in Exercise 6. Breakfasttime Cereal Company has an opportunity to process its Crummies further into a mulch for ornamental shrubs. The additional processing operation costs $1.50 per kilogram, and the mulch will sell for $10.50 pe
> Plato Corporation manufactures two products, Alpha and Beta. Contribution margin data follow. Plato Corporation’s production process uses highly skilled labor, which is in short supply. The same employees work on both products and earn
> Global’s special order also requires 1,000 kilograms of genatope, a solid chemical regularly used in the company’s products. The current stock of genatope is 8,000 kilograms at a book value of 12.15 p per kilogram. If the special order is accepted, the f
> Global Chemical Company, located in Buenos Aires, Argentina, recently received an order for a product it does not normally produce. Since the company has excess production capacity, management is considering accepting the order. In analyzing the decision
> Juarez Corporation produces cleaning compounds and solutions for industrial and household use. While most of its products are processed independently, a few are related. Grit 337, a coarse cleaning powder with many industrial uses, costs $3.20 a pound to
> Thorpe Industries produces chemicals for the swimming pool industry. In one joint process, 10,000 gallons of GSX are processed into 7,000 gallons of xenolite and 3,000 gallons of banolide. The cost of the joint process, including the GSX, is $17,500. The
> College Town Pizza’s owner bought his current pizza oven two years ago for $10,500, and it has one more year of life remaining. He is using straight-line depreciation for the oven. He could purchase a new oven for $2,200, but it would last only one year.
> If Toon Town Toy Company closes its Packaging Department, the department manager will be appointed manager of the Cutting Department. The Packaging Department manager m a kes $51,000 per year. To hire a new Cutting Department manager will cost Toon Town
> Toon Town Toy Company is considering the elimination of its Packaging Department. Management has received an offer from an outside firm to supply all Toon Town’s packaging needs. To help her in making the decision, Toon Town’s president has asked the con
> Day Street Deli’s owner is disturbed by the poor pr o fit performance of his ice cream counter. He has prepared the following profit analysis for the year just ended. Required: Criticize and correct the owner’s analys
> Refer to the data given in the preceding exercise. Data given in preceding exercise: Breakfasttime Cereal Company manufactures two breakfast cereals in a joint process. Cost and quantity information is as follows: Required: Use the relative-sales-valu
> Redo Exhibit 14–4 without the irrelevant data. Exhibit 14-1: 1. Clarity the decision problem 2. Specity the oriterion Managerial accountant participates as part of cross-functional Quantitative Analysis 3 Identify the alternatives m
> Choose an organization and a particular decision situation. Then give examples, u s ing that decision context, of each step illustrated in Exhibit 14–1. Exhibit 14-1: 1. Clarify the decision problem 2. Specify the criterion Manager
> Contemporary Trends sells paint and paint supplies, carpet, and wallpaper at a single-store location in suburban Baltimore. Although the company has been very profitable over the years, management has seen a significant decline in wallpaper sales and ear
> CoffeeTime, Inc., manufactures two types of electric coffeemakers, Regular and Deluxe. T h e major difference between the two appliances is capacity. Both are considered top-quality units and sell for premium prices. Both coffeemakers pass through two ma
> Galaxy Candy Company manufactures two popular candy bars, the Eclipse bar and the Nova bar. Both candy bars go through a mixing operation where the various ingredients are combined, and the Coating Department where the bars from the Mixing Department are
> Time Saver Meals, Inc., offers monthly service plans providing prepared meals that are delivered to the customers’ homes. The target market for these meal plans includes double-income families with no children and retired couples in upper income brackets
> Oceana Corporation manufactures and sells three products, which are manufactured in a factory with four departments. Both labor and machine time are applied to the products as they pass through each department. The machines and labor skills required in e
> Excalibur, Inc., received an order for a piece of special machinery from Rex Company. J ust as Excalibur completed the machine, Rex Company declared bankruptcy, defaulted on the order, and forfeited the 10 percent deposit paid on the selling price of $21
> In addition to fine chocolate, International Chocolate Company also produces chocolate-covered pretzels in its Savannah plant. This product is sold in five-pound metal canisters, which also are manufactured at the Savannah facility. The plant manager, Ma
> Milwaukee Specialty Chemical Company (MSCC) is a diversified chemical processing company. The firm manufactures swimming pool chemicals, chemicals for metal processing, specialized chemical compounds, and pesticides. Currently, the Noorwood plant is prod
> Breakfasttime Cereal Company manufactures two breakfast cereals in a joint process. Cost and quantity information is as follows: Required: Use the physical-units method to allocate the company’s joint production cost between Yummies a
