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management and cost accounting
Questions and Answers of
Management And Cost Accounting
Inventories usually are an important asset for both manufacturing and merchandising firms. A proper balance of inventory quantities is desirable from several standpoints. Maintaining such a balance
The following data refer to various annual costs relating to the inventory of a singleproduct company:Required:What is the annual carrying cost per unit? Cost per Unit Transportation-in on
Expected annual usage of a particular raw material is \(2,000,000\) units, and the standard order size is 10,000 units. The invoice cost of each unit is \(\$ 500\), and the cost to place one purchase
Barter Corporation has been buying Product \(\mathrm{A}\) in lots of 1,200 units which represents a four months' supply. The cost per unit is \(\$ 100\); the order cost is \(\$ 200\) per order; and
Brady Sporting Goods Incorporated buys baseballs at \(\$ 20\) per dozen from its wholesaler. Brady will sell 36,000 dozen baseballs evenly throughout the year. Brady desires a \(10 \%\) return on its
The Polly Company wishes to determine the amount of safety stock that it should maintain for Product \(\mathrm{D}\) that will result in the lowest cost. The following information is
The Thornton Company has found that its ordering cost of a raw material is \(\$ 20\) and the carrying cost is \(\$ 1\) per average unit of inventory per year. The company uses 10,000 units of raw
The W \& S Department Store has a requirement for a product line that amounts to 40,000 units per year. The unit purchase cost of the product is \(\$ 4\). The manager of the store estimates the cost
The average lead time for delivery of a raw material used by the Nell Company is 10 days. The average use of the material is 18 units per day. The carrying cost per unit of average inventory is \(\$
The Green Grass Company uses \(\$ 1,000,000\) of widgets per year. The unit cost of the widgets is \(\$ 20\). The company's ordering cost is \(\$ 40\) per order and the carrying cost is \(\$ 1\) per
The Treasure Manufacturing Company uses 100,000 units of Material M a year. It costs the company \(\$ 2\) a year to carry a unit of the material, and \(\$ 20\) to process a purchase order. Material
The manager of the Old Dominion Company is considering an offer of quantity discounts on an item from its vendor. The company's requirement for the item is 8,000 units a year. Carrying cost is
The estimated demand for a product at the Little Jimmy Store is 4,000 units per year. The estimated ordering cost is \(\$ 30\) per order and the estimated carrying cost is \(\$ 5\) per unit per year.
The Robney Company is a restaurant supplier that sells a number of products to various restaurants in the area. One of their products is a special meat cutter with a disposable blade.The blades are
The Starr Company manufactures several products. One of its main products requires an electric motor. The management of Starr Company uses the economic-orderquantity formula (EOQ) to determine the
Determining Annual Inventory Expenses, Reorder Point, and Stockout Costs You have been engaged to install an accounting system for the Kaufman Corporation. Among the inventory control features
EDP Associates, a small data processing company, is a wholly owned subsidiary of Norbrook Inc. EDP Associates provides data processing services to the parent company and many small outside
TexTec Inc. is a manufacturer of computer disk drives. It currently operates a traditional factory which is divided into departments and allocates overhead based on direct labor hours.Recently, the
How are quality of design and quality of conformance related and distinguished?
Identify and discuss four quality cost components.
What quality costs are incurred before and after product is delivered to the customer?
Explain the difference between the traditional view and the modern view of optimal quality costs.
Explain the difference between the designed in and the inspected in product quality.
Identify typical sources of quality cost data.
Describe and illustrate Taguchi quality loss function.
Explain why successful applications of Taguchi quality loss function is dependent upon an accurate estimate of loss associated with the specification limit.
What are the key assumptions of Taguchi quality loss function?
What is the purpose of quality costs reports?
What are the purposes of current and total quality performance reports?
How is a trend analysis useful in quality improvement?
How is a pareto analysis useful in quality improvement?
Explain why all purchases orders should be inspected for quality assurance.
Explain why prevention costs and appraisal costs are related.
Classify each of the following items as prevention, appraisal, internal failure, and external failure costs:a. Product warranty costsb. Vendor survey and reviewc. Design of product test equipmentd.
Management of Top-Quality Company has set a goal of total quality control that specifies annual quality costs to be \(3 \%\) of total revenue and an equal balance between prevention costs and
During 20X5, Benson recorded the following quality costs when it had total sales of \(\$ 5,000,000\) :{Required:}1. Determine the relative distribution of Benson's quality costs by component.2.
Recently Kent Company instituted a quality improvement program. Kent's actual and budgeted quality costs for \(20 \times 5\) are summarized below: (The actual sales for \(20 \times 5\) are \(\$
Radford Manufacturing Company's specification states a target weight of \(10 \mathrm{oz}\). for its product. Based on past experience, management estimated that loss associated with the specification
Fine Product Company manufactures a product with a feature that has a target value of 18 grams. The company has set specification limits for the product equal to the target value plus or minus 0.5
Teresa Company has recently launched a product quality improvement program. For the current year 20X5, its goal is to reduce quality costs to \(10 \%\) of sales revenues. The company's actual and
Anderson Company reported sales of \(\$ 5,000,000\) in \(20 X 5\). During the year, Anderson included the following quality costs:Required:1. Compute the quality cost as a percentage of total quality
Calco Electronics Company's quality improvement program requires a trend analysis of its quality costs every year. At the end of \(20 \mathrm{X} 4\), Calco's records show the following quality costs
Terry Taylor's quality improvement program includes a pareto analysis each period to identify key quality cost components for management attention and action. For the past accounting period,
During November and December 20X7, Watella Company incurred the following costs of quality:{Required:}1. Calculate the following quality costs for each month:2. Total prevention costs.3. Total
Acadia Company manufactures and sells a special product. Based on the marketing manager's past experience, the target value of product quality characteristic is 0.10 and the average cost for warranty
Define capital budgeting.
What major factors must be considered in evaluating capital investment projects?
Why is one dollar today worth more than one dollar to be received a year from now?
Discuss the major advantage of the discounted cash flow method in evaluating capital investment projects.
Explain why depreciation is a tax shield against taxes.
How does depreciation affect capital investment decisions?
Explain how income taxes affect capital investment decisions.
Explain how inflation affects capital investment decisions.
Under what conditions can the payback reciprocal be used to approximate the internal rate of return?
Discuss how uncertainty affects capital budgeting analysis.
Why are accelerated methods of depreciation more desirable than the straight-line depreciation method? Discuss your answer from an income tax point of view.
Discuss the effect of each of the following cases on a capital investment proposed for a new machine. Consider each case separately.(1) An expected increase in interest rate on long-term debt.(2) A
Posa Co. is planning to invest \(\$ 40,000\) in a three-year project. Posa's expected rate of return is 10 percent. The present value of \(\$ 1\) at 10 percent for one year is .909 , for two years is
The Herb Company acquired a new machine for \(\$ 16,000\) which it will depreciate on a straight-line basis over a ten year period. A full year's depreciation was taken in the year of acquisition.
Freedom Corporation acquired a fixed asset at a cost of \(\$ 100,000\). The estimated life was four years, and there was no estimated salvage value. Assume a relevant interest rate of 8 percent and
Ranking Alternatives with NPV and IRR Given below is cash flow information pertaining to three alternative investment projects. The cost of capital is 12 percent.{Required:}(1) Rank these projects
A Company bought Machine M on March 5, 20X4 for \(\$ 5,000\) cash. The estimated salvage was \(\$ 200\) and the estimated life was eleven years. On March 5, 20X5, the company learned that it could
The Happy Valley Company is planning to purchase a new machine. The payback period is estimated to be six years. The cash flow from operations, net of income taxes, is estimated to be \(\$ 2,000\) a
A new machine costing \(\$ 60,000\) will result in the following net cash inflows. The desired rate of return on investment is 10 percent.{Required:}1) Compute the payback period for the investment
Two investment projects are being considered by the Gem Company. Project A, costing \(\$ 16,000\) with an estimated useful life of three years, will earn a net cash inflow of \(\$ 8,000\) per year.
Computing Payback Period, Net Present Value, Internal Rate of Return, and Accounting Rate of Return A machine costing \(\$ 50,000\) is expected to provide the following net cash flows:The expected
Jack, Jones, and Johnson, three franchised home appliance dealers, have requested short-term financing from their company. The dealers have agreed to repay the loans within three years, and to pay
The Aloha Company is considering the purchase of a piece of equipment. The following information is available:{Required:}(1) If the net present value method is used to evaluate the project, should
The Aloha Company is considering the purchase of a machine costing \(\$ 200,000\). The estimated net incomes from the machine are:The machine is to be depreciated on the sum-of-the-years'-digits
Vernon Enterprises designs and manufactures toys. Past experience indicates that the product life cycle of a toy is three years. Promotional advertising produces large sales in the early years, but
The Baxter Company manufactures short-lived fad-type items. The R \& D Department has developed an item that would be an interesting promotional gift for office equipment dealers. Aggressive and
Drexel Company is considering the purchase of a new machine costing \(\$ 15,000\). The new machine is to be depreciated on the sum-of-the-years'-digits method. The salvage value at the end of 5 years
Madisons, Inc. has decided to acquire a new machine either by an outright cash purchase at \(\$ 25,000\) or by leasing alternative of \(\$ 6,000\) per year for the life of the machine. Other relevant
Bart Mover, CPA, has been asked for advice by a client wishing to sell her home. The client has found a buyer who has agreed to the following terms of sale:However, the client's attorney has advised
The management of Essen Manufacturing Company is currently evaluating a proposal to purchase a new and innovative drill press as a replacement for a less efficient piece of similar equipment which
Amex Company is considering the introduction of a new product which will be manufactured in an existing plant; however, new equipment costing \(\$ 150,000\) with a useful life of five years (no
The Morton Company is planning to invest \(\$ 10,000,000\) in an expansion program which is expected to increase earnings before interest and taxes by \(\$ 2,500,000\). The company currently is
Thorne Transit, Inc. has decided to inaugurate express bus service between its headquarters city and a nearby suburb (one-way fare of \(\$ .50\) ) and is considering the purchase of either 32- or
The Gercken Corporation sells computer services to its clients. The company completed a feasibility study and decided to acquire an additional computer on January 2, 20X5. Information regarding the
Purchase, Lease, or Build Equipment The Edwards Corporation is considering adding a new stapler to one of its product lines. More equipment will be required to produce the new stapler. There are
The following transactions occurred during the month of January, 20X5:{Required}Prepare the journal entries for January, 20X5. 1. Raw materials costing $40,000 were purchased on account. 2. Raw
The president of Beth Corporation, which manufactures tape decks and sells them to producers of sound reproduction systems, anticipates a \(10 \%\) wage increase on January 1 of next year to the
Breakeven Point and Sales Needed for a Desired Profit All-Day Candy Company is a wholesale distributor of candy. The company services grocery, convenience and drug stores in a large metropolitan
What are the advantages of standard costs over historical costs for planning and control?
Distinguish between three approaches to setting standards. Which approach is preferable for control?
Describe the role of the cost accountant in the process of setting material and labor standards.
How do standard costs aid in assigning responsibility for variances disclosed in a responsibility accounting system?
What is meant by "standard hours allowed?" How is it used?
Who in an organization may be held responsible for a labor rate variance? A materials price variance?
Who in an organization may be held responsible for a labor usage variance? A materials quantity variance?
What is the significance of mix and yield variances for purposes of control?
Why is a cost flow assumption for work-in-process inventories (weighted average or FIFO) not required in a standard costing system?
What are two ways of recording raw materials inventory costs in a standard costing system? Which method is preferable for purposes of control? Why?
Excessive direct labor wages resulting from overtime premiums will be disclosed in what type of variance?
What is the significance of a debit balance in a labor efficiency variance account?
Information on Westcott Company's direct labor costs is as follows: Standard direct labor rate. ..$3.75 Actual direct labor rate. .$3.50 Standard direct labor hours.......... .10,000 Actual direct
Matt Company uses a standard cost system. Information for raw materials for Product RBI for the month of October is as follows:Calculate the following:(a) Material quantity variance, (b) Material
Home Company manufactures tables with vinyl tops. The standard material cost for the vinyl user per Type-R table is \(\$ 7.80\) based on six square feet of vinyl at a cost of \(\$ 1.30\) per square
Lion Company's direct labor costs for the month of January 20XX were as follows:Compute the labor usage (efficiency) variance. Actual direct labor hours... Standard hours allowed......... Labor rate
Information on Kennedy Company's direct material costs is as follows:Compute the actual purchase price per unit. Standard unit price......... Actual quantity purchased... Standard quantity allowed
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