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financial managerial accounting

Questions and Answers of Financial Managerial Accounting

C 4. The initiation banquet for new members of your business club is being held at an excellent restaurant. You are sitting next to two college students who are majoring in marketing. In discussing
LO1 Define cost behavior, and identify variable, fixed, and mixed costs.
LO2 Separate mixed costs into their variable and fixed components, and prepare a contribution margin income statement.
LO3 Define cost-volume-profit (C-V-P) analysis, and discuss how managers use it as a tool for planning and control.
LO4 Define breakeven point, and use contribution margin to determine a company’s breakeven point for multiple products.
LO5 Use C-V-P analysis to project the profitability of products and services.
SE 1. Dapper Hat Makers is in the business of designing and producing specialty hats. The material used for derbies costs $4.50 per unit, and Dapper pays each of its two full-time employees $360 per
SE 2. Identify the following as (a) fixed costs, (b) variable costs, or (c) mixed costs:1. Direct materials 4. Personnel manager’s salary 2. Electricity 5. Factory building rent 3. Operating
SE 3. Using the high-low method and the following information, compute the monthly variable cost per telephone hour and total fixed costs for Sadiko Corporation.Telephone Telephone Month Hours Used
SE 4. Prepare a contribution margin income statement if DeLuca, Inc., wants to make a profit of $20,000. It has variable costs of $8 per unit and fixed costs of$12,000. How much must it charge per
SE 5. How many units must Braxton Company sell to break even if the selling price per unit is $8.50, variable costs are $4.30 per unit, and fixed costs are$3,780? What is the breakeven point in total
SE 6. Using the contribution margin approach, find the breakeven point in units for Norcia Consumer Products if the selling price per unit is $11, the variable cost per unit is $6, and the fixed
SE 7. Compute the contribution margin ratio and the breakeven point in total sales dollars for Wailley Products if the selling price per unit is $16, the variable cost per unit is $6, and the fixed
SE 8. Using the contribution margin approach, find the breakeven point in units for Sardinia Company’s two products. Product A’s selling price per unit is $10,and its variable cost per unit is
SE 9. If Oui Watches sells 300 watches at $48 per watch and has variable costs of$18 per watch and fixed costs of $4,000, what is the projected profit?Monthly Costs and the High-Low Method
SE 10. Guy Spy, a private investigation firm, investigated 91 cases in December and had the following costs: direct labor, $190 per case; and service overhead of $20,840. Service overhead for October
E 1. Indicate whether each of the following costs of productive output is usually(a) variable or (b) fixed:1. Packing materials for stereo components 2. Real estate taxes 3. Gasoline for a delivery
E 2. Zero Time Oil Change has been in business for six months. The company pays $0.50 per quart for the oil it uses in servicing cars. Each job requires an average of 4 quarts of oil. The company
E 3. Whitehouse Company manufactures major appliances. Because of growing interest in its products, it has just had its most successful year. In preparing the budget for next year, its controller
E 4. When Jerome Company’s monthly costs were $75,000, sales were $80,000;when its monthly costs were $60,000, sales were $50,000. Use the high-low method to develop a monthly cost formula for
E 5. Senora Company manufactures a single product that sells for $110 per unit. The company projects sales of 500 units per month. Projected costs are as follows:Type of Cost Manufacturing
E 7. Identify the letter of the point, line segment, or area of the breakeven graph shown below that correctly completes each of the following statements:1. The maximum possible operating loss isa.
E 9. McLennon Company has a plant capacity of 100,000 units per year, but its budget for this year indicates that only 60,000 units will be produced and sold.The entire budget for this year is as
E 10. Saline Aquarium, Inc., manufactures and sells aquariums, water pumps, and air filters. The sales mix is 1:2:2 (i.e., for every one aquarium sold, two water pumps and two air filters are sold).
E 11. Hamburgers and More, Inc., sells hamburgers, drinks, and fries. The sales mix is 1:3:2 (i.e., for every one hamburger sold, three drinks and two fries are sold).Using the contribution margin
E 12. Ella Mae Simpson is the owner of a hairdressing salon in Palm Coast, Florida.Her salon provides three basic services: shampoo and set, permanents, and cut and blow dry. The following are its
E 13. Target Systems, Inc., makes heat-seeking missiles. It has recently been offered a government contract from which it may realize a profit. The contract purchase price is $130,000 per missile,
E 14. Short-term automobile rentals are the specialty of ASAP Auto Rentals, Inc.Average variable operating costs have been $12.50 per day per automobile. The company owns 60 automobiles. Fixed
E 15. Luke Ricci, CPA, is the owner of a firm that provides tax services. The firm charges $50 per return for the direct professional labor involved in preparing standard short-form tax returns. In
P 1. Power Brite Painting Company specializes in refurbishing exterior painted surfaces that have been hard hit by humidity and insect debris. It uses a special technique, called pressure cleaning,
P 3. Icon Industries is considering a new product for its Trophy Division. The product, which would feature an alligator, is expected to have global market appeal and to become the mascot for many
P 4. Write Company has a maximum capacity of 200,000 units per year. Variable manufacturing costs are $12 per unit. Fixed overhead is $600,000 per year. Variable selling and administrative costs are
P 5. Lending Hand Financial Corporation is a subsidiary of Gracey Enterprises.Its main business is processing loan applications. Last year, Bettina Brent, the manager of the corporation’s loan
P 7. At the beginning of each year, the Accounting Department at Moon Glow Lighting, Ltd., must find the point at which projected sales revenue will equal total budgeted variable and fixed costs. The
P 8. Garden Marbles manufactures birdbaths, statues, and other decorative items, which it sells to florists and retail home and garden centers. Its design department has proposed a new product, a
C 1. Lesley Chomski is the supervisor of the New Product Division of MCO Corporation.Her annual bonus is based on the success of new products and is computed on the number of sales that exceed each
C 2. Visit a local fast-food restaurant. Observe all aspects of the operation and take notes on the entire process. Describe the procedures used to take, process, and fill an order and deliver the
C 3. Based in Italy, Datura, Ltd., is an international importer-exporter of pottery with distribution centers in the United States, Europe, and Australia. The company was very successful in its early
C 5. As noted in C 3, Datura, Ltd., sold 15,000 sets of pottery in 2010. As noted in C 4, in 2011, Datura’s strategic planning team targeted sales of 15,000 sets of pottery, reduced the selling
C 5. Software development companies frequently have a problem: When is “good enough” good enough? How many hours should be devoted to developing a new product? The industry’s rule of thumb is
C 4. Kevin Rogers, the production manager of Stitts Metal Products Company, entered the office of controller Ed Harris and asked, “Ed, what gives here?I was charged for 330 direct labor hours on
C 3. Many businesses accumulate costs for each job performed. Examples of businesses that use a job order costing system include print shops, car repair shops, health clinics, and kennels.Visit a
C 2. Refer to the information in C 1. Jordan Smith, the president of Eagle Manufacturing, wants to improve the quality of the company’s operations and products. She believes waste exists in the
P 9. Locust Lodge, a restored 1920s lodge located in Alabama, caters and serves special events for businesses and social occasions. The company earns 60 percent of its revenue from weekly luncheon
P 8. Laurence Norton is the chief financial officer of Rotham Industries, a company that makes special-order sound systems for home theaters. His records for February revealed the following
P 7. Rhile Industries, Inc., produces colorful and stylish nursing uniforms. During September, 2011 Rhile Industries completed the following transactions:Sept. 1 Purchased direct materials on
P 6. Hard Core Enterprises makes peripheral equipment for computers. Emily Vit, the company’s new controller, can find only the following partial information for the past two
E 10. Wild Things, Inc., manufactures custom-made stuffed animals. Last month the company produced 4,540 stuffed bears with stethoscopes for the local children’s hospital to sell at a fund-raising
E 9. Using job order costing, determine the product unit cost based on the following costs incurred during March: liability insurance, manufacturing,$2,500; rent, sales office, $2,900; depreciation,
E 8. In January, the Cabinet Company worked on six job orders for specialty kitchen cabinets. It began Job A-62 for Zeke Cabinets, Inc., on January 10, 2011 and completed it on January 24, 2011.
E 5. On June 30, New Haven Company’s Work in Process Inventory account showed a beginning balance of $29,400. The Materials Inventory account showed a beginning balance of $240,000. Production
E 4. The three product cost elements—direct materials, direct labor, and overhead—flow through a job order costing system in a structured, orderly fashion. Specific accounts are used to verify
E 3. Which of the following products would typically be accounted for using a job order costing system? Which would typically be accounted for using a process costing system? (a) Standard nails, (b)
E 2. Which of the following products would typically be accounted for using a job order costing system? Which would typically be accounted for using a process costing system? (a) Paint, (b) jelly
E 1. Bell Printing Company specializes in wedding invitations. Bell needs information to budget next year’s activities. Write yes or no to indicate whether each of the following costs is likely to
SE 9. For each of the following transactions, state which account(s) would be debited and credited in a job order costing system for a desert landscaping business:1. Charged customer for landscape
SE 7. Write yes or no to indicate whether each of the following costs is included in a product unit cost. Then explain your answers.1. Direct materials costs 4. Fixed administrative costs 2. Fixed
SE 6. Identify the accounts in which each of the following transactions for Acorn Furniture, a custom manufacturer of oak tables and chairs, would be debited and credited:1. Issued oak materials into
SE 5. Enter the following transactions into T accounts:1. Incurred $34,000 of direct labor and $18,000 of indirect labor 2. Applied overhead based on 12,680 labor hours @ $6.50 per labor hour
SE 4. For each of the following transactions, state which account(s) would be debited and credited in a job order costing system:1. Purchased materials on account, $12,890 2. Charged direct labor to
SE 3. State whether a job order costing system or a process costing system would typically be used to account for the costs of the following:1. Manufacturing bottles of water 2. Manufacturing
SE 2. Write yes or no to indicate whether each of the following companies would typically use a job order costing system:1. Soft-drink producer 4. Office building contractor 2. Jeans manufacturer 5.
SE 1. Silly Putter Miniature Golf provides 36 holes of miniature golf. Dan, the owner of the golf course, must make several business decisions soon. Write yes or no to indicate whether knowing the
LO4 Prepare a job order cost card, and compute a job order’s product or service unit cost.
LO3 Explain the cost flow in a manufacturer’s job order costing system.
LO2 Distinguish between the two basic types of product costing systems, and identify the information that each provides.
LO1 Explain why unit cost is important in the management process.
C 6. In the “Cookie Company” case in the last chapter, you prepared a mission statement for your company. You also set its strategic, tactical, and operating objectives;decided on its name; and
C 5. Lake Weir Power Plant provides power to a metropolitan area of 4 million people. Sundeep Guliani, the plant’s controller, has just returned from a conference on the Environmental Protection
C 4. The H&W Pharmaceuticals Corporation manufactures most of its three pharmaceutical products in Indonesia. Inventory balances for March and April are as follows:March 31 April 30 Materials
C 3. As the manager of grounds maintenance for Latchey, a large insurance company in Missouri, you are responsible for maintaining the grounds surrounding the company’s three buildings, the six
C 1. Visit a local fast-food restaurant. Observe all aspects of the operation and take notes on the entire process. Describe the procedures used to take, process, and fill an order and deliver the
P 8. Fraser Products, Inc., which produces copy machines for wholesale distributors in the Pacific Northwest, has just completed packaging an order from Kent Company for 150 Model 14 machines. Direct
P 7. Lund Products, Inc., uses a predetermined overhead rate in its production, assembly, and testing departments. One rate is used for the entire company; it is based on machine hours. The rate is
P 6. Municipal Hospital relies heavily on cost data to keep its pricing structures in line with those of its competitors. The hospital provides a wide range of services, including intensive care,
P 5. Dillo Vineyards, a large winery in Texas, produces a full line of varietal wines.The company, whose fiscal year begins on November 1, has just completed a record-breaking year. Its inventory
P 4. Byte Computer Company, a manufacturing organization, has just completed an order that Grater, Ltd., placed for 80 computers. Direct materials, purchased parts, and direct labor costs for the
P 3. Natural Cosmetics Company applies overhead costs on the basis of machine hours. The overhead rate is computed by analyzing data from the previous year to determine the percentage change in
P 2. Carola Industries, Inc., manufactures discs for several of the leading recording studios in the United States and Europe. Department 60 is responsible for the electronic circuitry within each
P 1. The following information is from the trial balance of Mills Manufacturing Company:Debit Credit Cash $ 34,000 Accounts Receivable 27,000 Materials Inventory, ending 31,000 Work in Process
E 15. At the end of this year, Compumatics had compiled a total of 89,920 labor hours worked. The actual overhead incurred was $1,143,400.1. Using the overhead rate computed in E 14, determine the
E 14. Compumatics specializes in the analysis and reporting of complex inventory costing projects. Materials costs are minimal, consisting entirely of operating supplies (DVDs, inventory sheets, and
E 13. The overhead costs that Lucca Industries, Inc., used to compute its overhead rate for the past year are as follows:Indirect materials and supplies $ 79,200 Repairs and maintenance 14,900
E 12. Walden Green provides custom farming services to owners of 5-acre wheat fields. In July, he earned $2,400 by cutting, turning, and baling 3,000 bales. In the same month, he incurred the
E 11. The Pattia Winery is one of the finest wineries in the country. One of its famous products is a red wine called Old Vines. Recently, management has become concerned about the increasing cost of
E 10. For each of the following activities, identify the inventory account (Materials Inventory, Work in Process Inventory, or Finished Goods Inventory), if any, that is affected. If an inventory
E 9. Waltz Company manufactures music boxes. Seventy percent of its products are standard items produced in long production runs. The other 30 percent are special orders with specific requests for
E 8. The data presented below are for a retail organization and a manufacturing organization.1. Fill in the missing data for the retail organization:First Second Third Fourth Quarter Quarter Quarter
E 7. Presented below are incomplete inventory and income statement data for Toliver Corporation. Determine the missing amounts.Beginning Ending Cost of Finished Finished Cost of Goods Goods Goods
E 6. Indicate whether each of the following is typical of a service organization(SER), a retail organization (RET), or a manufacturing organization (MANF):1. Maintains only one balance sheet
E 5. Treetop Corp. makes irrigation sprinkler systems for tree nurseries. Ramsey Roe, Treetop’s new controller, can find only the following partial information for the past year:Oak Loblolly Maple
E 4. During August, Radio Company’s purchases of direct materials totaled$139,000; direct labor for the month was 3,400 hours at $8.75 per hour. Radio also incurred the following overhead costs:
E 3. Indicate whether each of these equations applies to a service organization(SER), a retail organization (RET), or a manufacturing organization (MANF):1. Cost of Goods Sold Beginning Merchandise
E 1. Indicate whether each of the following activities takes place during the planning(PL), performing (PE), evaluating (E), or communicating (C) stage of the management process:1. Changing regular
SE 9. Calculate the amount of overhead costs applied to production if the predetermined overhead rate is $4 per direct labor hour and 1,200 direct labor hours were worked.Exercises The Management
SE 8. Compute the overhead rate per service request for the Maintenance Department if estimated overhead costs are $18,290 and the number of estimated service requests is 3,100.Allocation of Overhead
SE 7. At year end, records show that actual overhead costs incurred were $25,870 and the amount of overhead costs applied to production was $27,000. Identify the amount of under- or overapplied
E 6. What is the product unit cost for Job 14, which consists of 300 units and has total manufacturing costs of direct materials, $4,500; direct labor, $7,500; and overhead, $3,600? What are the
E 5. Dalston Lui, the accountant at Brightlight, Inc., must group the costs of manufacturing candles. Indicate whether each of the following items should be classified as direct materials (DM),
SE 4. Identify the document needed to support each of the following activities in a manufacturing organization:1. Placing an order for direct materials with a supplier 2. Recording direct labor time

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