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managerial accounting

Questions and Answers of Managerial Accounting

Grissom Company estimates that variable costs will be 60% of sales, and fixed costs will total $800,000.The selling price of the product is $4.Instructions(a) Prepare a CVP graph, assuming maximum
In 2010, Hadicke Company had a break-even point of $350,000 based on a selling price of $7 per unit and fixed costs of $105,000. In 2011, the selling price and the variable cost per unit did not
NIU Company has the following information available for September 2010.Unit selling price of video game consoles ........$ 400Unit variable costs ..................$ 270Total fixed costs
Lynn Company had $150,000 of net income in 2010 when the selling price per unit was$150, the variable costs per unit were $90, and the fixed costs were $570,000. Management expects per unit data and
Moran Company reports the following operating results for the month of August: Sales $350,000 (units 5,000); variable costs $210,000; and fixed costs $90,000. Management is considering the following
Polzin Company had sales in 2010 of $1,500,000 on 60,000 units. Variable costs totaled $840,000, and fixed costs totaled $500,000.A new raw material is available that will decrease the variable costs
Titus Equipment Company manufactures and distributes industrial air compressors. The following costs are available for the year ended December 31, 2010.The company has no beginning inventory. In
Cowell Corporation produces one product. Its cost includes direct materials ($10 per unit), direct labor ($8 per unit), variable overhead ($6 per unit), fixed manufacturing ($250,000), and fixed
Matt Reiss owns the Fredonia Barber Shop. He employs five barbers and pays each a base rate of $1,000 per month. One of the barbers serves as the manager and receives an extra $500 per month. In
Utech Company bottles and distributes Livit, a diet soft drink. The beverage is sold for 50 cents per 16-ounce bottle to retailers, who charge customers 75 cents per bottle. For the year 2010,
Gorham Manufacturing’s sales slumped badly in 2010. For the first time in its history, it operated at a loss. The company’s income statement showed the following results from selling 600,000
Alice Shoemaker is the advertising manager for Value Shoe Store. She is currently working on a major promotional campaign. Her ideas include the installation of a new lighting system and increased
Poole Corporation has collected the following information after its first year of sales. Net sales were $1,600,000 on 100,000 units; selling expenses $240,000 (40% variable and 60% fixed); direct
TLR produces plastic that is used for injection molding applications such as gears for small motors. In 2010, the first year of operations, TLR produced 6,000 tons of plastic and sold 5,000 tons. In
The McCune Barber Shop employs four barbers. One barber, who also serves as the manager, is paid a salary of $3,900 per month. The other barbers are paid $1,900 per month. In addition, each barber is
Huber Company bottles and distributes No-FIZZ, a fruit drink. The beverage is sold for 50 cents per 16-ounce bottle to retailers, who charge customers 70 cents per bottle. For the year 2010,
Keppel Manufacturing had a bad year in 2010. For the first time in its history it operated at a loss.The company's income statement showed the following results from selling 60,000 units of product:
Jane Greinke is the advertising manager for Payless Shoe Store. She is currently working on a major promotional campaign. Her ideas include the installation of a new lighting system and increased
Mortonsen Corporation has collected the following information after its first year of sales. Net sales were $2,000,000 on 100,000 units; selling expenses $400,000 (30% variable and 70% fixed); direct
Blanco Metal Company produces the steel wire that goes into the production of paper clips. In 2010, the first year of operations, Blanco produced 50,000 miles of wire and sold 45,000 miles. In 2011,
Gagliano Company has decided to introduce a new product. The new product can be manufactured by either a capital-intensive method or a labor-intensive method. The manufacturing method will not affect
The condensed income statement for the Terri and Jerri partnership for 2010 is as follows. A cost behavior analysis indicates that 75% of the cost of goods sold are variable, 50% of the selling
The Coca-Cola Company hardly needs an introduction. A line taken from the cover of a recent annual report says it all: If you measured time in servings of Coca-Cola, “a billion Coca- Cola’s ago
Ganong Bros. Ltd., located in St. Stephen, New Brunswick, is Canada’s oldest independent candy company. Its products are distributed worldwide. In 1885, Ganong invented the popular “chicken
Your roommate asks your help on the following questions about CVP analysis formulas.(a) How can the mathematical equation for break-even sales show both sales units and sales dollars?(b) How do the
Kenny Hampton is an accountant for Bartley Company. Early this year Kenny made a highly favorable projection of sales and profits over the next 3 years for Bartley’s hot-selling computer PLEX. As a
In the All About You feature in this chapter, you learned that cost-volumeprofit analysis can be used in making personal financial decisions. The purchase of a new car is one of your biggest personal
What steps are frequently involved in management’s decision-making process?
Your roommate, Matt Mikan, contends that accounting contributes to most of the steps in management’s decision- making process. Is your roommate correct? Explain.
Jerry Karr asks your help concerning the relevance of variable and fixed costs in incremental analysis. Help Jerry with his problem.
Define the term “opportunity cost.” How may this cost be relevant in a make-or-buy decision?
How is the contribution margin per unit of limited resources computed?
Describe the process a company may use in screening and approving the capital expenditure budget.
Hector Ruiz is trying to understand the term “cost of capital.” Define the term, and indicate its relevance to the decision rule under the annual rate of return technique.
Pete Hetzel claims the formula for the cash payback technique is the same as the formula for the annual rate of return technique. Is Pete correct? What is the formula for the cash payback technique?
What are the advantages and disadvantages of the cash payback technique?
Two types of present value tables may be used with the discounted cash flow technique. Identify the tables and the circumstance(s) when each table should be used.
Identify the steps required in using the internal rate of return method.
Gillaspie Company uses the internal rate of return method. What is the decision rule for this method?
The steps in management’s decision-making process are listed in random order below.Indicate the order in which the steps should be executed.—Make a decision. .........—Review results of the
Ming Company is considering two alternatives. Alternative A will have sales of $150,000 and costs of $100,000. Alternative B will have sales of $180,000 and costs of $120,000. Compare Alternative A
In Karnes Company it costs $30 per unit ($20 variable and $10 fixed) to make a product that normally sells for $45. A foreign wholesaler offers to buy 4,000 units at $23 each. Karnes will incur
Bartley Manufacturing incurs unit costs of $8 ($5 variable and $3 fixed) in making a sub-assembly part for its finished product. A supplier offers to make 10,000 of the part at $5.30 per unit. If the
Stanton Inc. makes unfinished bookcases that it sells for $60. Production costs are $30 variable and $10 fixed. Because it has unused capacity, Stanton is considering finishing the bookcases and
Felton Company has a factory machine with a book value of $90,000 and a remaining useful life of 4 years. A new machine is available at a cost of $200,000. This machine will have a 4-year useful life
Derby, Inc. manufactures golf clubs in three models. For the year, the Eagle line has a net loss of $20,000 from sales $200,000, variable expenses $180,000, and fixed expenses $40,000. If the Eagle
In Nevitt Company, data concerning two products are: Contribution margin per unit—Product A $11, Product B $12; machine hours required for one unit—Product A 2, Product B 2.5. Compute the
Adler Company is considering purchasing new equipment for $300,000. It is expected that the equipment will produce annual net income of $10,000 over its 10-year useful life. Annual depreciation will
Engles Oil Company is considering investing in a new oil well. It is expected that the oil well will increase annual revenues by $130,000 and will increase annual expenses by $80,000 including
Harry Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $395,000, has an expected useful life of 10 years, a salvage value of zero, and is
Frost Company is evaluating the purchase of a rebuilt spot-welding machine to be used in the manufacture of a new product. The machine will cost $170,000, has an estimated useful life of 7 years, a
Horak Company accumulates the following data concerning a proposed capital investment: cash cost $225,000, net annual cash flow $34,000, present value factor of cash inflows for 10 years 6.71
Corn Company incurs a cost of $35 per unit, of which $20 is variable, to make a product that normally sells for $58. A foreign wholesaler offers to buy 6,000 units at $31 each. Corn will incur
Barney Company must decide whether to make or buy some of its components.The costs of producing 60,000 switches for its generators are as follows.Direct materials $30,000 Variable overhead
Lion Corporation manufactures several types of accessories. For the year, the gloves and mittens line had sales of $500,000, variable expenses of $375,000, and fixed expenses of $150,000.Therefore,
Beacon Company is considering purchasing new equipment for $350,000.The equipment has a 5-year useful life, and depreciation would be $70,000 (assuming straight-line depreciation and zero salvage
Maranantha Box Corporation is considering adding another machine for the manufacture of corrugated cardboard. The machine would cost $700,000. It would have an estimated life of 6 years and no
Pender has prepared the following list of statements about decision making and incremental analysis.1. The first step in management’s decision-making process is, “Determine and evaluate possible
Wyco Company manufactures toasters. For the first 8 months of 2011, the company reported the following operating results while operating at 75% of plant capacity.Sales (400,000 units) ...
Innova Company produces golf discs which it normally sells to retailers for $7 each. The cost of manufacturing 20,000 golf discs is:Materials .....$ 10,000Labor .......30,000Variable overhead
Shannon Inc. has been manufacturing its own shades for its table lamps. The company is currently operating at 100% of capacity. Variable manufacturing overhead is charged to production at the rate of
Stacy McGuire recently opened her own basketweaving studio. She sells finished baskets in addition to the raw materials needed by customers to weave baskets of their own. Stacy has put together a
Donkey Bikes could sell its bicycles to retailers either assembled or unassembled. The cost of an unassembled bike is as follows.Direct materials ............$150Direct labor ..............70Variable
Crone Enterprises uses a word processing computer to handle its sales invoices. Lately, business has been so good that it takes an extra 3 hours per night, plus every third Saturday, to keep up with
Judy Herzog, a recent graduate of Rolling’s accounting program, evaluated the operating performance of Klumpe Company’s six divisions. Judy made the following presentation to the Klumpe board of
Shatner Company makes three models of phasers. Information on the three products is given below.Fixed expenses consist of $300,000 of common costs allocated to the three products based on relative
Freese Company manufactures and sells three products. Relevant per unit data concerning each product are given below.Instructions(a) Compute the contribution margin per unit of the limited resource
Carleton Service Center just purchased an automobile hoist for $15,000.The hoist has a 5-year life and an estimated salvage value of $1,080. Installation costs were $2,900, and freight charges were
Suzaki Manufacturing Company is considering three new projects, each requiring an equipment investment of $22,000. Each project will last for 3 years and produce the following cash inflows.The
Rondello Company is considering a capital investment of $150,000 in additional productive facilities. The new machinery is expected to have a useful life of 5 years with no salvage value.
Omega Company is considering three capital expenditure projects. Relevant data for the projects are as follows.Annual income is constant over the life of the project. Each project is expected to have
Vasquez Corporation is considering investing in two different projects. It could invest in both, neither, or just one of the projects. The forecasts for the projects are as follows.The minimum rate
Korte Company is currently producing 16,000 units per month, which is 80% of its production capacity. Variable manufacturing costs are currently $8.00 per unit. Fixed manufacturing costs are $56,000
The management of Martinez Manufacturing Company has asked for your assistance in deciding whether to continue manufacturing a part or to buy it from an outside supplier. The part, called Tropica, is
Deskins Manufacturing Company has four operating divisions. During the first quarter of 2010 the company reported total income from operations of $61,000 and the following results for the
Timmons Corporation is considering three long-term capital investment proposals.Relevant data on each project are as follows.Salvage value is expected to be zero at the end of each project.
Wendy Dobson is the managing director of the Wichita Day Care Center. Wichita is currently set up as a full-time child care facility for children between the ages of 12 months and 6 years. Wendy is
Aqua Tech Testing is considering investing in a new testing device. It has two options: Option A would have an initial lower cost but would require a significant expenditure for rebuilding after 5
Haslett Inc. manufactures basketballs for the National Basketball Association (NBA). For the first 6 months of 2011, the company reported the following operating results while operating at 90% of
The management of Finnigan Manufacturing Company is trying to decide whether to continue manufacturing a part or to buy it from an outside supplier. The part, called BIZBE, is a component of the
Tryon Manufacturing Company has four operating divisions. During the first quarter of 2011, the company reported aggregate income from operations of $135,000 and the divisional results shown on the
Bensen Corporation is considering three long-term capital investment proposals. Each investment has a useful life of 5 years. Relevant data on each project are as follows.Depreciation is computed by
Betty Dillman is an accounting major at a midwestern state university located approximately 60 miles from a major city. Many of the students attending the university are from the metropolitan area
Oklahoma Clinic is considering investing in new heart-monitoring equipment. It has two options: Option A would have an initial lower cost but would require a significant expenditure for rebuilding
Morganstern Company is considering the purchase of a new machine. The invoice rice of the machine is $170,000, freight charges are estimated to be $4,000, and installation costs are expected to be
Barone Company manufactures private-label small electronic products, such as alarm clocks, calculators, kitchen timers, stopwatches, and automatic pencil sharpeners. Some of the products are sold as
Founded in 1983, the Beverly Hills Fan Company is located in Woodland Hills, California. With 23 employees and sales of less than $10 million, the company is relatively small. Management feels that
Campbell Soup Company is an international provider of soup products. Management is very interested in continuing to grow the company in its core business, while “spinning off” those businesses
Refer back to E26-11 to address the following.InstructionsPrepare a memo to Angie Baden, your supervisor. Show your calculations from E26-11, parts (a) And (b). In one or two paragraphs, discuss
DeVito Company operates in a state where corporate taxes and workmen’s compensation insurance rates have recently doubled. DeVito’s president has assigned you the task of preparing an economic
Managerial accounting techniques can be used in a wide variety of settings. As we have frequently pointed out, you can use them in many personal situations. They also can be useful in trying to find
(a) “Managerial accounting is a field of accounting that provides economic information for all interested parties.” Do you agree? Explain.(b) Mary Barett believes that managerial accounting
Distinguish between managerial and financial accounting as to(a) Primary users of reports,(b) Types and frequency of reports, and(c) Purpose of reports.
How does the content of reports and the verification of reports differ between managerial and financial accounting?
In what ways can the budgeting process create incentives for unethical behavior?
Karen Fritz is studying for the next accounting mid-term examination. Summarize for Karen what she should know about management functions.
“Decision making is management’s most important function.” Do you agree? Why or why not?
What new rules were enacted under the Sarbanes-Oxley Act to address unethical accounting practices?
Stan Kaiser is studying for his next accounting examination. Explain to Stan what he should know about the differences between the income statements for a manufacturing and for a merchandising
Terry Lemay is unclear as to the difference between the balance sheets of a merchandising company and a manufacturing company. Explain the difference to Terry.

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