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business
managerial accounting

Questions and Answers of Managerial Accounting

Why is it more difficult to obtain positive financial leverage from preferred shares than from long-term debt?
Empire Labs Inc. was organized several years ago to produce and market several new miracle drugs. The company is small but growing, and you are considering the purchase of some of its common shares
Refer to the data in Problem 13–9. Although Empire Labs Inc. has been profitable since it was organized several years ago, the company is beginning to experience some difficulty in paying its bills
Weaver Company experiences a great deal of seasonal variation in its business activities. The company’s high point in business activity is in June; its low point is in January. During which month
Refer to the data in Problem 13–9. The president of Empire Labs Inc. is deeply concerned. Sales increased by $5 million from last year to this year, yet the company’s net income increased by only
Oxident Products is the manufacturer of a vitamin supplement. The changes that have taken place on the company?s balance sheet accounts as a result of the past year?s activities follow: The
With the economy in expansion, profits at Canada’s large corporations are high, and cash flowing in is at record levels. Management must decide what to do with the growing pool of cash. Should the
Give an example of a direct exchange, and explain how such exchanges are handled when preparing a cash flow statement.
How do absorption costing and variable costing differ in how they treat fixed manufacturing overhead costs?
A company purchased a new machine for $12,400. The expected useful life of this machine is six years with no salvage value. The new machine’s CCA rate is 17%. The company has a minimum after-tax
Bliny Corporation makes a product with the following standard costs for direct material and direct labour:Direct material: 2.00 metres at $3.25 per metre.................................$6.50Direct
The following data are available for Kenora Products for the month of March:Beginning inventory of finished goods.......................................................0 unitsUnits produced in
Genola Fashions, a U.S. company, began production of a new product on June 1. The company uses a standard costing system, establishing the following standards for one unit of the new
Lucido Products markets two computer games: Claimjumper and Makeover. A contribution margin income statement for a recent month for the two games appears as follows: Required: 1. Compute the
Manager: The use of absorption versus variable costing can significantly affect profitability of a company.Accountant: Not really. Before the accountant could explain the differences, the manager
Kramer Corporation is considering two investment projects, each of which would require $50,000. Cost and cash flow data concerning the two projects follow: The high-speed photocopier will have a
Candy Inc. wants to purchase a new brewing vat for $20,000, including $1,500 of installation costs. The old vat was bought five years ago and had an expected economic life of 10 years without salvage
Alpha Corporation produces two products, AA and BB. The following information is presented for the two products: Required: Compute the break-even point in dollars for Alpha Corporation if the ratio
Amalgam Corporation Ltd. (ACL) prepares external financial statements using absorption costing and internal financial statements using variable costing. You have the following information regarding
Vyasa Publishing Company hires students from the local university to collate pages on various printing jobs. This collating is all done by hand, at a cost of $60,000 per year. A collating machine has
A variance analysis investigating the purchase and use of direct materials and direct labour has been completed and the following results are known:Direct materials purchases:AQ × AP: 12,000 metres
Adam Corporation has recorded the following budgeted information for its first quarter: Required: 1. Compute the budgeted sales mix for the first quarter. 2. Compute the budgeted weighted-average
Fine Gadgets produces WiFi-enabled wrist watches. The following data is available for 2018:UnitsBeginning
A company is planning to purchase a new machine. The cost of the new machine is $800,000, and the company will incur a one-time cost of $90,000 to train new staff to operate it. Cash flows before tax
Overhead is applied to a single product using direct labour-hours. Fixed overhead cost should be $180,000 per year for a planned volume of production of 20,000 units of output. During the year, the
Connect Us Corporation sells four products. The products’ unit contribution margins are $42, $36, $50 and $20, and the sales mix ratio for the four products is 1:3:4:2. Quarterly fixed costs are
Olongapo Sports Corporation is the distributor in the Philippines of two premium golf balls?the Flight Dynamic and the Sure Shot. Monthly sales and the contribution margin ratios for the two products
A company is considering buying a higher-quality replacement machine at a cost of $950,000. The company will incur installation costs of $15,500. The new machine will also require $50,000 in training
Gold Star Rice, Ltd., of Thailand, exports Thai rice throughout Asia. The company grows three varieties of rice?Fragrant, White, and Loonzain. Budgeted sales by product and in total for the coming
A car manufacturer wants to replace a machine on its assembly line with a new high-tech machine. The new machine can be purchased for $1,249,000, which includes all installation costs. The production
Crocus Company has created a new type of bicyle for active senior citizens. It comes in two models?the Gold and the Silver. Cost and production data are as follows: Required: 1. Calculate the
Treat each part independently.Required:1. The Atlantic Medical Clinic can purchase a new computer system that will save $7,000 annually in billing costs. The computer system will last for eight years
Brock Company produces and sells an industrial product. The company has just opened a new plant to manufacture the product, and the following cost and revenue data have been provided for the first
A body lotion company can upgrade the quality of one of its products by purchasing new equipment at a cost of $155,000. The new equipment would replace old equipment that has a current market value
Island Novelties, Inc. of Palau makes two products?Hawaiian Fantasy and Tahitian Joy. Present revenue, cost, and sales data on the two products follow: Fixed expenses total $1,427,400 per year. The
Rapid Parcel Service has been offered an eight-year contract to deliver mail and small parcels between military installations. To accept the contract, the company would have to purchase several new
Kirchner Corporation produces three models of lawnmowers ? Economy, Standard and Fancy. The following data is available for 20X0. Fixed costs for the combined sales are $170.3 million. During the
My Best Friends Corporation (MBFC) produces electronic friends. Two such friends are Party Animal and Study Mate. The following information is available for them for the year 20X0: Required: The
A small discount perfume shop is available for sale at a nearby factory outlet centre. The business can be purchased from its current owner for $97,500. The following information relates to this
Ami Smith is the director of the canoe division of Watersport Inc. The actual net income and the total assets of the division are $500,000 and $2,500,000, respectively. Smith is evaluated by
Kootenay Vineyards is a large Canadian producer of red wines. The company needs to replace its wine-making equipment. The current equipment was purchased 18 years ago at a cost of $2,000,000, and was
Snoqualmie Inc. manufactures snowsuits. Snoqualmie is considering purchasing a new sewing machine at a cost of $2,500,000. Its existing machine was purchased five years ago at a price of $1,800,000,
What dangers lie in using standards as punitive tools?
The auto repair shop of Quality Motor Company uses standards to control the labour time and labour cost in the shop. The standard labour cost for a motor tune-up follows: The record showing the
The following standard costing data, per unit, are for Black Ltd. for January: Direct materials..............................................45 kilograms at $8 per kilogramDirect labour 6 hours
Privack Corporation has a standard costing system in which it applies overhead to products on the basis of the standard direct labour-hours allowed for the actual output of the period. Data
Canuck Maple makes maple syrup. It is based in a small town between Montreal and Quebec City. The owner uses a special recipe handed down through several generations in his family to make the highly
Dawson Toys, Ltd. produces a toy called the Maze. The company has recently established a standard costing system to help control costs with the following standards for the Maze toy:Direct materials:
During the 2016 Republican primary race to be the nominee of the Republican Party for president in the general election for president of the United States, Donald Trump was accused by his opponents
You are employed by Olster Company, which manufactures products for the health and nutrition market. As a rising executive in the company, you are scheduled to make a presentation in a few hours to
Erie Company manufactures an MP3 player called the Jogging Mate. The company uses standards to control its costs. The labour and variable overhead standards that have been set for one Jogging Mate
Logistics Solutions provides order-fulfillment services for online merchants. The company maintains warehouses that stock items carried by its online clients. When a client receives an order from a
Refer to the data in Exercise 11–2. Assume that instead of producing 2,000 units during the month, the company produced only 1,500 units, using 6,500 kilograms of material in the production
AirCooks, Inc. prepares in-flight meals for a number of major airlines. One of the company’s products is grilled salmon in dill sauce with new baby potatoes and spring vegetables. During the most
Huron Company produces a commercial cleaning compound known as Zoom. The direct materials and direct labour standards for one unit of Zoom follow: The budgeted fixed overhead cost is $15,800 per
Bandar Industries Berhad of Malaysia manufactures sporting equipment. One of the company’s products, a football helmet for the North American market, requires a special plastic. During the quarter
Chennai Manufacturing Company (CMC) is a small manufacturer based in southern India. CMC?s controller, Asha Pandey, recently implemented a standard costing system and has decided to use it as a
Martin Company manufactures a powerful cleaning solvent. The main ingredient in the solvent is a raw material called Echol. Information on the purchase and use of Echol follows:Purchase of Echol:
Victoria Chocolates, Ltd. makes premium handcrafted chocolate confections in Victoria, British Columbia. The owner of the company is setting up a standard costing system and has collected the
What is meant by variance?
Joe Swanson has an opportunity to acquire a franchise from The Yogurt Place, Inc. to dispense frozen yogurt products under the name The Yogurt Place. Swanson has assembled the following information
The Wrongway Ad Agency provides cars for its sales staff. In the past, the company has always purchased its cars from a dealer and then sold the cars after three years of use. The company’s present
Dr. Helen Floss is the managing partner of the Crestwood Dental Clinic. Floss is trying to determine whether the clinic should move patient files and other items out of a spare room in the clinic and
“As the discount rate increases, the present value of a given future cash flow also increases.” Do you agree? Explain your answer.
Kadalai Company makes metal blanks which it sells to metal fabrication and stamping companies. The sales forecasts for the next four years are 500,000 bars a year. The president estimates that he can
Manufacturing Division has recommended the purchase of a new model of equipment to save operating costs. Relevant information is shown below:Equipment
Explain how the cost of capital serves as a screening tool when dealing with the NPV method.
A $100,000 investment is expected to generate $27,740 in cash savings at the end of each year for five years.Required:What is the approximate internal rate of return?
Kathy Myers frequently purchases shares and bonds, but she is uncertain how to determine the rate of return that she is earning. For example, three years ago she paid $20,000 for 200 common shares of
Digger Company is evaluating an investment of $330,000 in earth moving equipment. Management anticipates net cash savings of $100,000 in year 1. The savings will increase by 40% in year 2 and then
Oxford Company has limited funds available for investment and must ration the funds among five competing projects. Selected information on the five projects follows: The net present values above
A piece of labour-saving equipment has just come onto the market, which Mitsui Electronics Ltd. could use to reduce costs in one of its plants in Japan. Relevant data relating to the equipment follow
Raul Martinas, a professor of languages at Eastern University, owns a small office building adjacent to the university campus. He acquired the property 10 years ago at a total cost of $530,000?that
The management of Revco Products is exploring five different investment opportunities. Information on the five projects under study follows: The company?s required rate of return is 10%; thus, a
The management of Unter Corporation is considering an investment with the following characteristics: Required: 1. Determine the payback period of the investment. 2. Would the payback period be
Use an online directory, such as http://www.yellowpages.ca or http://www.411.ca, to find a manufacturer in your area that has a website. Make an appointment with the controller or chief financial
Bilboa Freightlines, S.A. of Panama has a small truck that it uses for local deliveries. The truck is in bad repair and must be either overhauled or replaced with a new truck. The company has
Labeau Products Ltd., of Perth, Australia, has $122,500 to invest. The company is trying to decide between two alternative uses for the funds. The alternatives follow: The company?s discount rate
Marlon Plastics purchased a new machine one year ago at a cost of $750,000. Although the machine operates well, the president of the company is considering replacing it with a new electronic machine
Windhoek Mines Ltd. of Namibia is contemplating the purchase of equipment to exploit a mineral deposit located on land to which the company has mineral rights. An engineering and cost analysis has
Tischler the Honey Man (THM) purchases honeycombs from beekeepers for $4.40 per kilogram. THM produces two main products from the honeycombs—honey and beeswax. Honey is drained from the honeycombs,
Javelin Cycling Vacations Ltd. offers cycling tours in Canada and France. Each year a single tour is offered. For 20X5, the company is offering a tour of the Continental Divide. Following is an
The Brain Teasers (TBT) specializes in creating and manufacturing board games for youth. Each game has a unique game board to accompany the other pieces of the game. The company is at the final
The Engine Guys produces specialized engines for “snow climber” buses. The company’s normal monthly production volume is 1,000 engines, whereas its monthly production capacity is 2,000 engines.
Cora Corporation produces refrigerator units. The company?s normal production and sales volume of Standard units is 3,000 units per month, and units sell for $800 each. The costs of manufacturing and
SpeedCar Corporation makes toy cars that it can sell for $25 per car. Production manager Alex Carvahllo is considering whether to refurbish or replace the moulds that SpeedCar uses in the
Anchor Company manufactures a variety of tool boxes. The firm is currently operating at 80% of its full capacity of 7,500 machine-hours per month. Each unit requires 30 minutes of machine time. Its
Hearty Dairy is trying to decide whether it should sell the milk that it processes “as is” or further process it into butter. Management has collected the following data pertaining to
Montreal Corporation (MC) has received an offer from an outside supplier to supply 10,000 units of parts used annually in the manufacture of its main product at $36 per unit. The following current
We Make Company has traditionally manufactured a number of different standard machine parts. It is now exploring an outsourcing decision for several of the parts that it currently produces. Cost
Your Retail Store?s accountant prepared the following income statement for the ladies? accessories product line: Management is concerned about the loss and is considering dropping the product line.
Standard Machine Parts Ltd. makes specialized machine parts for several customers, all of whom are major manufacturers. Standard is considering replacing one of the special machines used in the
The Hyatt Company is trying to decide whether it should purchase new equipment so that it can continue to make its engines, a key component of its final product, internally or whether production
“In my opinion, we ought to stop making our own drums and accept that outside supplier’s offer,” saidWim Niewindt, managing director of Antilles Refining, N.V., of Aruba. “At a price of 36
Golfers, Inc. (GI) manufactures golf related equipment including golf balls. This year?s expected production of golf balls is 100,000 packs (each consisting of four golf balls). Cost data are as
Soft and Cuddly Friends (SCF) produces soft dolls. Demand for the dolls is increasing, and management wants you to identify an economical sales and production mix for the coming year. The following
Barlow Company manufactures three products: A, B, and C. The selling price, variable costs, and contribution margin for one unit of each product follow: The same raw material is used in all three
Imperial Jewellers is considering a special order for 20 handcrafted gold bracelets for a major upscale wedding. The gold bracelets are to be given as gifts to members of the wedding party. The
Cora Limited’s normal monthly production output is 3,800 units of a product that sells for $30 per unit. Its total variable costs amount to $22 per unit and total monthly fixed costs amount to
Benoit Company produces three products, A, B, and C. Data concerning the three products follow (per unit): Demand for the company?s products is very strong, with far more orders each month than the

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