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financial managerial accounting

Questions and Answers of Financial Managerial Accounting

Assessing the magnitude of operating leverage The following budgeted income statement applies to Musso Company:Requireda. Use the contribution margin approach to calculate the magnitude of operating
Using a contribution margin format income statement to measure the magnitude of operating leverage Peak Company, a merchandising firm, reported the following operating results.Requireda. Reconstruct
Effect of cost structure on projected profits Oak and Riggs compete in the same market. The following budgeted income statements illustrate their cost structures.Requireda. Assume that Oak can lure
Mixed cost at different levels of activity Odom Hats Corporation uses workers in Indonesia to manually weave straw hats. The company pays the workers a daily base wage plus $0.10 per completed hat.
Graphing variable cost behavior Moore Computers purchases computers from a manufacturer for $500 per computer. The following graphs depict product cost on the vertical axes and activity level on the
Graphing fixed cost behavior Merkle Computers leases space in a mall at a monthly rental cost of $3,000. The following graphs depict rental cost on the vertical axes and activity level on the
Fixed versus variable cost behavior In the evenings, Lou Jordan works telling fortunes using his friend Jack Lovell’s booth at the city market. Mr. Lovell pays the booth rental, so Mr. Jordan has
Fixed versus variable cost behavior Lou Jordan needs extra money quickly because his mother’s sudden hospitalization has resulted in unexpected medical bills. Mr. Jordan has learned fortune-telling
Fixed versus variable cost behavior Vanity Chairs Corporation produces ergonomically designed chairs favored by architects. The company normally produces and sells from 5,000 to 8,000 chairs per
Fixed versus variable cost behavior Herrera Company’s production and total cost data for two recent months follow.Requireda. Separately calculate the depreciation cost per unit and the factory
Determining total variable cost The following variable manufacturing costs apply to goods produced by Garcia Manufacturing Corporation.Required Determine the total variable manufacturing cost if
Determining fixed cost per unit Dinga Corporation incurs the following annual fixed production costs:L.O. 1 L.O. 1 Item Cost Insurance cost $ 75,000 Patent amortization cost 1,000,000 Depreciation
Identifying cost behavior At the various sales levels shown, Hale Company incurred the following costs.Required Identify each of these costs as fixed, variable, or mixed.
Identifying cost behavior Perry Copies Company provides professional copying services to customers through the 20 copy stores it operates in the southwestern United States. Each store employs a
Estimating fixed and variable cost using the regression method Peters and Marvin Tax Services Company has 31 branch offices in the nation. Each office has about three to six professional accountants
Estimating fixed and variable cost Hind Woodcraft Company (HWC) manufactures “antique” wooden cabinets to house modern radio and CD players. HWC began operations in January of last year. James
Estimating fixed and variable cost Ubben Computer Services, Inc., has been in business for six months. The following are basic operating data for that period.Required:a. What is the average service
Identifying relevant issues for cost averaging Cliff Corporation, offers mountain-climbing expeditions for its customers, providing food, equipment, and guides. Climbs normally require one week to
Selecting the appropriate time period for cost averaging Ryan Cinemas is considering a contract to rent a movie for $1,600 per day. The contract requires a minimum one-week rental period. Estimated
Analyzing operating leverage Ken Ritch is a venture capitalist facing two alternative investment opportunities. He intends to invest$1 million in a start-up firm. He is nervous, however, about future
Effects of fixed and variable cost behavior on the risk and rewards of business opportunities East and West Universities offer executive training courses to corporate clients. East pays its
Effects of operating leverage on profitability Kapp Training Services (KTS) provides instruction on the use of computer software for the employees of its corporate clients. It offers courses in the
Context-sensitive nature of cost behavior classifications Betty Holland operates a sales booth in computer software trade shows, selling an accounting software package, Accountsoft. She purchases the
Context-sensitive nature of cost behavior classifications Elliott Bank’s start-up division establishes new branch banks. Each branch opens with three tellers. Total teller cost per branch is
Cost behavior and averaging Susan Clement has decided to start Clement Cleaning, a residential housecleaning service company.She is able to rent cleaning equipment at a cost of $600 per month. Labor
Identifying cost behavior Required Identify the following costs as fixed or variable.Costs related to plane trips between Portland, Oregon, and Charlotte, North Carolina, follow. Pilots are paid on a
Estimating fixed and variable costs using the high-low method Ahmed Boat Company makes inexpensive aluminum fishing boats. Production is seasonal, with considerable activity occurring in the spring
Averaging costs Sparta Camps, Inc., leases the land on which it builds camp sites. Sparta is considering opening a new site on land that requires $2,000 of rental payment per month. The variable cost
Assessing the magnitude of operating leverage The following income statement applies to Wong Company for the current year:Requireda. Use the contribution margin approach to calculate the magnitude of
Using contribution margin format income statement to measure the magnitude of operating leverage The following income statement was drawn from the records of Tucker Company, a merchandising firm.Cost
Using fixed cost as a competitive business strategy The following income statements illustrate different cost structures for two competing companies.Requireda. Reconstruct Sander’s income
Mixed cost at different levels of activity Pence Corporation paid one of its sales representatives $5,000 during the month of March. The rep is paid a base salary plus $15 per unit of product sold.
Graphing variable cost behavior The following graphs depict the dollar amount of variable cost on the vertical axes and the level of activity on the horizontal axes.78 Chapter 2 L.O. 1 L.O. 1 L.O. 1,
Graphing fixed cost behavior The following graphs depict the dollar amount of fixed cost on the vertical axes and the level of activity on the horizontal axes.Requireda. Draw a line that depicts the
Fixed versus variable cost behavior Joyner Entertainment sells souvenir T-shirts at each rock concert that it sponsors. The shirts cost $8 each. Any excess shirts can be returned to the manufacturer
Fixed versus variable cost behavior Joyner Entertainment sponsors rock concerts. The company is considering a contract to hire a band at a cost of $50,000 per concert.Requireda. What are the total
Fixed versus variable cost behavior Bradford Trophies makes and sells trophies it distributes to little league ballplayers. The company normally produces and sells between 10,000 and 13,000 trophies
Fixed versus variable cost behavior Franklin Company’s cost and production data for two recent months included the following:March April Production (units) 50 100 Rent $2,000 $2,000 Utilities $ 800
Determining total variable cost The following variable production costs apply to goods made by Anchor Manufacturing Corporation.Item Cost per Unit Materials $5.00 Labor 2.80 Variable overhead 0.40
Determining fixed cost per unit Loehman Corporation incurs the following annual fixed costs:76 Chapter 2 L.O. 1 L.O. 1 L.O. 1 Item Cost Depreciation $110,000 Officers’ salaries 240,000 Long-term
Identifying cost behavior At the various activity levels shown, Warren Company incurred the following costs.Units sold 20 40 60 80 100a. Total salary cost $1,200.00 $1,600.00 $2,000.00 $2,400.00
Identifying cost behavior Sugarland’s Kitchen, a fast-food restaurant company, operates a chain of restaurants across the nation.Each restaurant employs eight people; one is a manager paid a salary
Verna Salsbury tells you that she thinks the terms fixed cost and variable cost are confusing. She notes that fixed cost per unit changes when the number of units changes. Furthermore, variable cost
Because of seasonal fluctuations, Norel Corporation has a problem determining the unit cost of the products it produces. For example, high heating costs during the winter months causes per unit cost
The president of Bright Corporation tells you that he sees a dim future for his company. He feels that his hands are tied because fixed costs are too high. He says that fixed costs do not change and
Sam’s Garage is trying to determine the cost of providing an oil change. Why would the average cost of this service be more relevant information than the actual cost for each customer?
How is the relevant range of activity related to fixed and variable cost? Give an example of how the definitions of these costs become invalid when volume is outside the relevant range.
Use the high-low method, scattergraphs, and regression analysis to estimate fixed and variable costs.
Select an appropriate time period for calculating the average cost per unit.
Demonstrate how the relevant range and decision context affect cost behavior.
Demonstrate how the magnitude of operating leverage affects profitability.
Prepare an income statement using the contribution margin approach.
Demonstrate the effects of operating leverage on profitability.
Identify and describe fixed, variable, and mixed cost behavior.
LO6 Explain how variances are used to evaluate managers’performance.
LO5 Compute and analyze overhead variances.
LO4 Compute and analyze direct labor variances.
LO3 Compute and analyze direct materials variances.
LO2 Prepare a flexible budget, and describe how managers use variance analysis to control costs.
LO1 Define standard costs, explain how standard costs are developed, and compute a standard unit cost.
C 6. As we continue with this case, assume that your cookie store is now part of a national chain. The store has been consistently profitable, and sales remain satisfactory despite a temporary
C 2. Wood4Fun makes wooden playground equipment for the institutional and consumer markets. The company strives for low-cost, high-quality production because it operates in a highly competitive
P 10. Micanopy Company makes replicas of Indian artifacts. The balance sheet for the Arrowhead Division showed that the company had invested assets of$300,000 at the beginning of the year and
P 7. Interior designers often use the deluxe carpet products of Lux Mills, Inc.The Maricopa blend is the company’s top product line. In March, Lux produced and sold 174,900 square yards of Maricopa
P 5. The balance sheet for the New Products Division of NuBone Corporation showed invested assets of $200,000 at the beginning of the year and $300,000 at the end of the year. During the year, the
P 2. Roofing tile is the major product of the Tops Corporation. The company had a particularly good year, as shown by its operating data. It sold 88,400 cases of tile.Variable cost of goods sold was
E 14. Dynamic Consulting is advising Solid Industries on the short-term and long-term effectiveness of cash bonuses, awards, profit sharing, and stock as performance incentives. Prepare a chart
E 12. Momence Associates is evaluating the performance of three divisions: Maple, Oaks, and Juniper. Using the following data, compute the return on investment and residual income for each division,
E 11. Archer, LLC, owns a blueberry processing plant. Last month, the plant generated the following information: blueberries processed, 50,000 pounds;direct materials, $50,000; direct labor, $10,000;
E 9. Vegan, LLC, owns a chain of gourmet vegetarian take-out markets. Last month, Store Q generated the following information: sales, $890,000; direct materials, $220,000; direct labor, $97,000;
E 8. Jackie Jefferson, a new employee at Handown, Inc., is learning about the various types of performance reports. Describe the typical contents of a performance report for each type of
E 7. Happy Industries wants to formalize its management structure by designing an organization chart. The company has a president, a board of directors, and two vice presidents. Four discretionary
E 5. Identify the most appropriate type of responsibility center for each of the following organizational units:1. A manufacturing department of a large corporation 2. An eye clinic in a community
E 4. Sam Yu wants to measure customer satisfaction within his region. Link an appropriate performance measure with each balanced scorecard perspective.LO1 Customer Satisfaction Possible Performance
E 3. Beva Washington wants to measure her division’s product quality. Link an appropriate performance measure with each balanced scorecard perspective.LO1 Product Quality Possible Performance
E 2. Valient Online Products is considering adopting the balanced scorecard and has compiled the following list of possible performance measures. Select the balanced scorecard perspective that best
E 1. Biggs Industries is considering adopting the balanced scorecard and has compiled the following list of possible performance measures. Select the balanced scorecard perspective that best matches
SE 10. One of your college’s goals is customer satisfaction. In view of that goal, identify each of the following as a linked objective, a measure, or a performance target:1. To have successful
SE 3. Ha Kim is the manager of the Paper Cutting Department in the Northwest Division of Striking Paper Products. Identify each of the following costs as either controllable or not controllable by
SE 2. Identify each of the following as a cost center, a discretionary cost center, a revenue center, a profit center, or an investment center:1. The manager of center A is responsible for generating
SE 1. One of your college’s overall goals is customer satisfaction. In light of that goal, match each of the following stakeholders’ perspectives with the appropriate objective:Perspective
LO5 Explain how properly linked performance incentives and measures add value for all stakeholders in performance management and evaluation.
LO4 Prepare performance reports for investment centers using the traditional measures of return on investment and residual income and the newer measure of economic value added.
LO3 Prepare performance reports for cost centers using flexible budgets and for profit centers using variable costing.
LO2 Define responsibility accounting, and describe the role that responsibility centers play in performance management and evaluation.
LO1 Define a performance management and evaluation system, and describe how the balanced scorecard aligns performance with organizational goals.
C 6. In this segment of our continuing case, you have decided to open a store where you will sell your company’s cookies, as well as coffee, tea, and other beverages.You believe that the store will
C 5. Refer to our development of Framecraft Company’s master budget in this chapter. Suppose that because of a new customer in Canada, the company’s management has decided to increase budgeted
C 3. The nature of a company’s business affects its need to budget for cash flows.H&R Block is a service company whose main business is preparing tax returns.Most tax returns are prepared after
C 1. Hector Corporation is a manufacturing company with annual sales of $25 million. Its budget committee has created the following policy that the company uses each year in developing its master
P 10. Stillwater Video Company, Inc., produces and markets two popular video games, High Range and Star Boundary. The closing account balances on the company’s balance sheet for last year are as
P 8. Located in Telluride, Colorado, Wellness Centers, Inc., emphasizes the benefits of regular workouts and the importance of physical examinations. The corporation operates three fully equipped
P 6. The principal product of Waterworks, Inc., is a metal water bottle that carries a lifetime guarantee. Listed here are cost and production data for the water bottle.Direct materials Stainless
P 5. Moontrust Bank has asked the president of Wishware Products, Inc., for a budgeted income statement and budgeted balance sheet for the quarter ended June 30. These pro forma financial statements
P 3. Felasco Nurseries, Inc., has been in business for six years and has four divisions.Ethan Poulis, the corporation’s controller, has been asked to prepare a cash budget for the Southern Division
P 1. The principal product of Yangsoo Enterprises, Inc., is a multipurpose hammer that carries a lifetime guarantee. Listed next are cost and production data for the Yangsoo hammer.Direct materials
E 15. Delft House, Inc., a multinational company based in Amsterdam, organizes and coordinates art shows and auctions throughout the world. Its budgeted and actual costs for last year are as
E 14. Tex Kinkaid’s dream was to develop the biggest produce operation with the widest selection of fresh fruits and vegetables in northern Texas. Within three years of opening Minigarden Produce,
E 13. SABA Enterprises needs a cash budget for the month of June. The following information is available:a. The cash balance on June 1 is $4,000.b. Sales for May and June are $50,000 and $40,000,
E 12. XYZ Company collects payment on 50 percent of credit sales in the month of sale, 40 percent in the month following sale, and 5 percent in the second month following the sale. Its sales budget

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